Halozyme Therapeutics Annual Report 2020

FY2020 Annual Report · Halozyme Therapeutics

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Annual Report 2020

2020 marked a year
of tremendous growth
and accomplishment
for Halozyme.

This performance sets us on the path for
long-term value creation as a company
focused on bringing disruptive solutions to
significantly improve patient experiences
and outcomes for emerging and
established therapies.

Despite the challenges faced in 2020,
Halozyme was able to deliver strong
execution across multiple fronts that
resulted in a very successful year for
the company. This performance was
only possible thanks to the hard work
and dedication of the entire Halozyme
team and our partners, who were able to
navigate and respond to the unique
challenges the COVID-19 global
pandemic brought.

Delivering on Our Commitments

We entered 2020 committed to
transforming Halozyme into a company
focused on our ENHANZE® technology.
As part of this transformation, we made
several financial commitments with
the goal of growing shareholder value:
to reduce our cost structure, achieve
sustainable profitability, and return
capital to investors.

We completed the restructuring and
successfully closed out non-essential
activities during 2020 and achieved the
expense structure we committed to.
We further achieved profitability in the
second quarter as guided and have
maintained profitability since then.

We also entered 2020 committed to
capital return through a $550 million
three-year share repurchase program
approved by the Halozyme Board of
Directors in November 2019. At the
outset of 2020, we targeted repurchasing
up to $150 million worth of Halozyme
shares during the year, bringing the total
since November 2019 to $350 million.
We successfully achieved our 2020
target, repurchasing $150 million worth
of shares at an average price of $23.05,
with the average repurchase price since
inception for the $350 million of $19.88.

Dear Fellow Shareholders:

Having delivered on these commitments,
our business is now well-positioned for
sustainable growth.

Delivering Progress with
Our Partners

Delivering Growth

We continued to deliver on the growth
potential of ENHANZE® in 2020 with record
financial results. Total revenues in 2020
were $267.6 million - up 37% from 2019.
Strong overall growth was largely driven by
two streams of revenue.

Record revenues of
$267.6 million, up 37%
from 2019

• Milestone revenues under collaborative

agreements more than doubled in
2020 to $123 million from 2019 driven by
milestones triggered by strong partner
progress in clinical development and
the signing of a new collaboration
partner associated with a large upfront
milestone.

• In addition, revenues from royalties

returned to growth in 2020, totaling $88.6
million, which represented 27% growth
over the prior year. This growth was
driven by strong uptake of subcutaneous
DARZALEX FASPRO® (daratumumab
and hyaluronidase-fihj) in the U.S. and
DARZALEX® SC (daratumumab) in the EU,
following regulatory approval.

First full year of
profitability with net
income of $129.1 million
or 91 cents per share

As a result, we exited 2020 with strong
momentum in revenues from royalties.

Our strong revenue growth translated into
our first full year of profitability with net
income of $129.1 million, or earnings per
share of $0.91.

We are excited to build on this growth in
2021 fueled by progress in our pipeline
of development programs and ongoing
royalty revenue growth from the new
product launches by our ENHANZE®
partners.

We now have ten marquee pharma
and biotech company ENHANZE®
collaboration partners with access to use
ENHANZE® with up to 57 different targets
or medicines with a unique mechanism
of action. We work closely with each
of our collaboration partners to support
them to successfully execute their clinical
development programs for products
utilizing ENHANZE® technology.

During 2020 we saw a number of
significant achievements and successes
related to our ENHANZE® technology
and partners. Among those significant
achievements and successes for
2020 were:

• U.S. Food and Drug Administration (FDA)

approval for Janssen Biotech, Inc.’s
DARZALEX FASPRO® utilizing Halozyme’s
ENHANZE® technology across multiple
indications in multiple myeloma.
Janssen initiated commercialization in
Q2 2020.

2 products approved by
FDA and EMA utilizing
ENHANZE® in 2020

• European Commission approval for
Janssen-Cilag International NV’s
subcutaneous form of DARZALEX®
utilizing Halozyme’s ENHANZE®
technology for all IV-approved
indications in multiple myeloma.
Janssen initiated commercialization
following the June 2020 approval.

• U.S. FDA approval for Roche’s Phesgo®

(pertuzumab, trastuzumab, and
hyaluronidase-zzxf) injection, the first
product approved combining two
monoclonal antibodies administered by
a single subcutaneous injection utilizing
Halozyme’s ENHANZE® technology,
for the treatment of eligible patients
with early and metastatic HER2-
positive breast cancer. Roche initiated
commercialization in Q3 2020.

• European Commission approval for
Roche’s Phesgo® injection utilizing
Halozyme’s ENHANZE® technology for
the treatment of patients with early and
metastatic HER2-positive breast cancer
in December 2020.

Our employees are the lifeblood of our
business and we take their development,
health, safety and well-being very
seriously. We believe it is important
to provide an environment where all
employees are respected and rewarded
for their contributions and can pursue their
career goals in a diverse, inclusive and
supportive team environment.

When the COVID-19 pandemic struck,
we took immediate and decisive actions
to protect the health and well-being
of our workforce. In preparation for
the potential impacts from COVID-19,
we developed a detailed work from
home plan that we were able to quickly
implement even in advance of the state
mandated lockdown issued in California.
By doing so we were able to protect
our employees while ensuring business
continuity, including supply of API for
our commercial partners, who were in
turn able to maintain supply of critical
therapies for patients. I am pleased to
report that we were able to seamlessly
operate our business with most employees
working remotely while maintaining the
high level of productivity that is apparent
in our strong 2020 financial results.

We believe 2020 is a terrific demonstration
of how we can act responsibly while
meeting the needs of employees,
shareholders, suppliers, our ENHANZE®
partners and their patients.

On behalf of Halozyme’s board of
directors, our senior leadership team,
and our employees, I thank you for your
continued support of our company and
the important work we do.

Best regards,

HELEN TORLEY, M.B. Ch. B., M.R.C.P.
PRESIDENT & CEO

Helen Torley, President and Chief Executive Officer

Today, Halozyme is a leader in the
conversion of intravenous biologics to
subcutaneous delivery with a strategy
centered around collaborating with our
pharmaceutical and biotechnology
partners to help them develop products
that combine our patented ENHANZE®
technology with their proprietary
compounds. ENHANZE® offers these
partners the potential to reduce the
treatment burden for patients, reduce the
cost to the healthcare system to deliver
the treatment and provide competitive
differentiation. Our attractive ENHANZE®
business model provides a long
growth runway.

Looking ahead, we see the opportunity
to leverage our commercialization and
partnering capabilities through the
acquisition of complementary platform
technologies that can enhance and
extend our revenue growth. With our
ENHANZE® technology still early in its growth
cycle, we have the opportunity to be
highly selective and find a technology that
fits well with our current business model.

Delivering Responsibly

Halozyme strives to have an outsized
impact in making the world a better place.
Halozyme is committed to achieving
our goal of improving patients’ lives
while operating in a sustainable, socially
responsible manner. This commitment
is consistent with our core values, which
provide us with a framework for how
we can deliver benefits for patients,
employees, the environment and
local communities.

While we have always been conscientious
in operating our business with regard to
environmental, social and governance
issues, in 2020 we substantially increased
our disclosures in this area. These
disclosures included additions to our web
site and the publication of our first
Annual ESG Report.

• Expansion of our collaboration and
license agreement with argenx SE
for three additional targets upon
nomination for a total of up to
six targets under the existing and
expanded collaboration.

New partnership
established with Horizon
Therapeutics plc for
TEPEZZA™ (teprotumumab)
in Thyroid Eye Disease

• A new collaboration and license

agreement with Horizon Therapeutics
plc granting Horizon exclusive access
to Halozyme’s ENHANZE® drug
delivery technology for subcutaneous
formulation of medicines targeting
IGF-1R resulting in an upfront milestone
payment of $30 million to Halozyme.

• The continued advancement of our
ENHANZE-partners’ development
pipeline, including 2 products,
efgartigimod and atezolizumab
(TECENTRIQ®) advancing into Phase
3 development and 9 products in or
completing Phase 1 development.

2020 marked the first year that our
partners received 2 FDA approval and
2 European Commission approvals
for products utilizing our ENHANZE®
technology. Those were critical
developments in fueling our return to
growth in revenues from royalties.

The progress and expansion of our
ENHANZE® partner pipeline provides
confidence in the potential for our long-
term growth prospects as we anticipate
the potential for multiple waves of
product launches in the upcoming years.

Delivering on the Future

With two new product launches in
2020 representing our second wave of
ENHANZE® product launches, and line
of sight to potential Wave 3 and Wave 4
launches in the 2023-2025 and 2025-2027
timeframes respectively, we believe we
are well positioned for sustainable growth
in revenues, profitability, and cash flow
that will allow us to build an even brighter
future for Halozyme.

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, 2020
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)

88-0488686
(I.R.S. Employer Identification No.)

11388 Sorrento Valley Road
San Diego
CA
(Address of principal executive offices)

92121
(Zip Code)

(858) 794-8889
(Registrant’s telephone number, including area code)

Title of Each Class

Securities registered under Section 12(b) of the Act:
Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, $0.001 Par Value

HALO

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 every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller
reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer Accelerated filer

Non-accelerated filer

Smaller reporting company Emerging growth company

☒

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☒

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,
2020 was approximately $2.9 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.

The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 135,276,380 as of

February 17, 2021.

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 2021 Annual Meeting of Stockholders are incorporated by
reference into Part III of this Annual Report.

HALOZYME THERAPEUTICS, INC.

INDEX

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.

Item 10.

Item 11.

Item 12.

Item 13.

Item 14.

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

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 15.

Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 16. . . Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

Page

2
13
27
27
27
27

28
30
31
41
41
41
41
44

[This page intentionally left blank]

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, or may be deemed to be, forward-looking statements. Words such as “expect,”
“anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “think,” “may,” “could,” “will,” “would,” “should,”
“continue,” “potential,” “likely,” “opportunity,” “project” and similar expressions or variations of such words are intended
to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Annual
Report. Additionally, statements concerning future matters such as the development or regulatory approval of new partner
products, enhancements of existing products or technologies, timing and success of launch of new products by our
collaborators, third party performance under key collaboration agreements, revenue, expense, profitability and cash flow
levels, and expected trends 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., Halozyme
Switzerland GmbH and Halozyme Switzerland Holdings GmbH. References to “Notes” refer to the Notes to Consolidated
Financial Statements included herein (refer to Part II, Item 8).

PART I

Item 1.

Business

Overview

Halozyme Therapeutics Inc. is a biopharma technology platform company that provides innovative and disruptive
solutions with the goal of improving patient experience and outcomes. Our proprietary enzyme, rHuPH20, is used to facilitate
the delivery of injected drugs and fluids. We license our technology to biopharmaceutical companies to collaboratively develop
products that combine our ENHANZE® drug delivery technology with the collaborators’ proprietary compounds.

Our approved product and our collaborators’ approved products and product candidates are based on rHuPH20, our
patented recombinant human hyaluronidase enzyme. rHuPH20 is the active ingredient in our first commercially approved
product, Hylenex® recombinant (Hylenex), and it works by breaking down hyaluronan (or HA), a naturally occurring
carbohydrate that is a major component of the extracellular matrix in tissues throughout the body such as skin and cartilage.
This temporarily increases dispersion and absorption allowing for 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® drug delivery technology
(ENHANZE). We license the ENHANZE technology to form collaborations with biopharmaceutical companies that develop or
market drugs requiring or benefiting from injection via the subcutaneous route of administration. In the development of
proprietary intravenous (IV) drugs combined with our ENHANZE technology, data have been generated supporting the
potential for ENHANZE to reduce treatment burden, as a result of shorter duration of subcutaneous (SC) administration.
ENHANZE may enable fixed-dose SC dosing compared to weight-based dosing required for IV administration, and potentially
allow for lower rates of infusion related reactions. ENHANZE may enable more flexible treatment options such as home
administration by a healthcare professional or potentially the patient. Lastly, certain proprietary drugs co-formulated with
ENHANZE have been granted additional exclusivity, extending the patent life of the product beyond the one of the proprietary
IV drug.

We currently have ENHANZE collaborations with F. Hoffmann-La Roche, Ltd. and Hoffmann-La Roche, Inc. (Roche),
Baxalta US Inc. and Baxalta GmbH (now members of the Takeda group of companies, following the acquisition of Shire plc by
Takeda Pharmaceutical Company Limited in January 2019) (Baxalta), Pfizer Inc. (Pfizer), Janssen Biotech, Inc. (Janssen),
AbbVie, Inc. (AbbVie), Eli Lilly and Company (Lilly), Bristol-Myers Squibb Company (BMS), Alexion Pharma Holding
(Alexion), ARGENX BVBA (argenx) and Horizon Therapeutics plc. (Horizon). We receive royalties from three of these
collaborations, including royalties from sales of one product from the Baxalta collaboration, three products from the Roche
collaboration and one product from the Janssen collaboration. Future potential revenues from royalties and fees from
ENHANZE collaborations and the sales and/or royalties of our approved products 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 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.

Technology

rHuPH20 can be applied as a drug delivery platform to increase dispersion and absorption of other injected drugs and
fluids potentially reducing treatment burden. 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 transiently, with a tissue half-life of less
than 15 minutes. HA at the local site reconstitutes its normal density within a few days and, therefore, the effect of rHuPH20 on
the architecture of the subcutaneous space is temporary.

Strategy

We are a leader in converting IV biologics to subcutaneous delivery using our commercially-validated ENHANZE
technology. We collaborate with leading pharmaceutical and biotechnology companies to help them develop products that
combine our ENHANZE technology with their proprietary compounds. We target large, attractive markets, where ENHANZE-
enabled subcutaneous delivery has the potential to deliver competitive differentiation and other important benefits to our
partners, such as larger injection volumes administered rapidly, extended dosing intervals, and reduced treatment burden and
healthcare costs. In addition, ENHANZE has been demonstrated to enable the combination of two therapeutic antibodies in a
single injection, as well as the development of new co-formulation intellectual property. We leverage our strategic, technical,
regulatory and alliance management skills in support of our partners' efforts to develop new subcutaneously delivered products.
We currently have ten collaborations with five current product approvals and additional product candidates in development
using our ENHANZE technology. We intend to work with our existing collaborators to expand our collaborations to add new
targets and develop targets and product candidates under the terms of the operative collaboration agreements. We will also
continue our efforts to enter into new collaborations to further derive additional value from our proprietary technology.

Product and Product Candidates

We currently have one marketed proprietary product and five marketed partnered products. The following table
summarizes our proprietary product, marketed partnered products and product candidates under development with our
collaborators:

Proprietary Product

Hylenex Recombinant (hyaluronidase human injection)

Hylenex recombinant is a formulation of rHuPH20 that facilitates 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.

ENHANZE Collaborations

Roche Collaboration

In December 2006, we and Roche entered into a collaboration and license agreement under which Roche obtained a
worldwide license to develop and commercialize product combinations of rHuPH20 and up to thirteen Roche target compounds
(the Roche Collaboration). Under this agreement, Roche elected a total of eight targets, two of which are exclusive.

In September 2013, Roche launched a subcutaneous (SC) formulation of Herceptin (trastuzumab) (Herceptin SC) in
Europe for the treatment of patients with HER2-positive breast cancer followed by launches in additional countries. This
formulation utilizes our ENHANZE technology and is administered in two to five minutes, compared to 30 to 90 minutes with
the standard intravenous form. In September 2018, we announced that Roche received approval from Health Canada for
Herceptin SC for the treatment of patients with HER2-positive breast cancer. In February 2019, we announced that Roche
received approval from the U.S. Food and Drug Administration (FDA) for Herceptin SC under the brand name Herceptin
Hylecta™ (trastuzumab and hyaluronidase-oysk). In April 2019, Roche made Herceptin Hylecta available in the U.S.

Directed at the same target, Roche initiated a Phase 1 study of Perjeta® (pertuzumab) and Herceptin (trastuzumab) using
ENHANZE technology in patients with early breast cancer in March 2016. In June 2018, Roche initiated a global Phase 3 study
of a fixed-dose combination of Perjeta and Herceptin using ENHANZE technology in patients with HER2-positive early breast
cancer. In August 2019, the global phase 3 study met its primary endpoint. The study results demonstrated non-inferior levels of
Perjeta in the blood (pharmacokinetics) compared to standard intravenous (IV) infusion of Perjeta plus Herceptin and
chemotherapy in patients with HER2-positive early breast cancer. The study also demonstrated that the safety profile of the
fixed dose subcutaneous combination of Perjeta and Herceptin was consistent with the safety profile of Perjeta and
Herceptin administered intravenously. In June 2020, the FDA approved the fixed-dose combination of Perjeta and Herceptin for
subcutaneous injection utilizing ENHANZE technology (Phesgo®) for the treatment of patients with HER2-positive breast
cancer. In December 2020, the European Commission (EC) also approved Phesgo for the treatment of patients with early and
metastatic HER2-positive breast cancer.

In June 2014, Roche launched MabThera SC in Europe for the treatment of patients with common forms of non-Hodgkin
lymphoma (NHL) followed by launches in additional countries. This formulation utilizes our ENHANZE technology and is
administered in approximately five minutes compared to the approximately 1.5 to 4 hour intravenous infusion. In May 2016,
Roche announced that the European Medicines Agency (EMA) approved Mabthera SC to treat patients with chronic
lymphocytic leukemia (CLL). In June 2017, the FDA approved Genentech’s RITUXAN HYCELA™, a combination of
rituximab using ENHANZE technology (approved and marketed under the MabThera SC brand in countries outside the U.S.
and Canada), for CLL and two types of NHL, follicular lymphoma and diffuse large B-cell lymphoma. In March 2018, Health
Canada approved a combination of rituximab and rHuPH20 (approved and marketed under the brand name RITUXAN® SC) for
patients with CLL.

In September 2017, we and Roche entered into an agreement providing Roche the right to develop and commercialize one
additional exclusive target using ENHANZE technology. The upfront license payment may be followed by event-based
payments subject to Roche’s achievement of specified development, regulatory and sales-based milestones. In addition, Roche
will pay royalties to us if products under the collaboration are commercialized.

In October 2018, we entered into an agreement with Roche for the right to develop and commercialize one additional
exclusive target and an option to select two additional targets within four years using ENHANZE technology. The upfront
license payment may be followed by event-based payments subject to Roche’s achievement of specified development,
regulatory and sales-based milestones. In addition, Roche will pay royalties to us if products under the collaboration are
commercialized.

In December 2018, Roche initiated a Phase 1b/2 study in patients with non-small cell lung cancer for Tecentriq
(atezolizumab) using ENHANZE technology. In September 2020, Roche presented a poster with data from Part 1 of its Phase
1b study (IMscin001) evaluating atezolizumab (Tecentriq) for subcutaneous administration utilizing ENHANZE technology in
patients with locally advanced or metastatic non-small cell lung cancer at the ESMO Virtual Congress 2020. The poster
concluded that atezolizumab utilizing ENHANZE technology provided similar exposure as atezolizumab IV and that results
support further development of subcutaneous atezolizumab in IMscin001 Part 2, a confirmatory Phase 3 study. In December
2020, Roche initiated a Phase 3 study in patients with non-small cell lung cancer for Tecentriq using ENHANZE technology.

In August 2019, Roche initiated a Phase 1 study evaluating OCREVUS (ocrelizumab) with ENHANZE technology in

subjects with multiple sclerosis.

In October 2019, Roche nominated a new undisclosed target to be studied using ENHANZE technology, triggering a $10

million milestone payment.

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). HYQVIA is indicated for the treatment of primary immunodeficiency disorders
associated with defects in the immune system.

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.

In September 2014, HYQVIA was approved by the FDA for treatment of adult patients with primary immunodeficiency
in the U.S. HYQVIA is the first subcutaneous immune globulin (IG) treatment approved for adult primary immunodeficiency
patients with a dosing regimen requiring only one infusion up to once per month (every three to four weeks) and one injection
site per infusion in most patients, to deliver a full therapeutic dose of IG. The FDA’s approval of HYQVIA was a significant
milestone for us as it represented the first U.S. approved BLA which utilizes our rHuPH20 platform.

In May 2016, Baxalta announced that HYQVIA received a marketing authorization from the European Commission for a
pediatric indication, which was launched in Europe to treat primary and certain secondary immunodeficiencies. In September
2020, Takeda announced that the EMA approved a label update for HYQVIA broadening its use and making it the first and
only facilitated subcutaneous immunoglobulin replacement therapy in adults, adolescents and children with an expanded range
of secondary immunodeficiencies (SID).

Pfizer Collaboration

In December 2012, we and Pfizer entered into a collaboration and license agreement, under which Pfizer has the
worldwide license to develop and commercialize products combining our rHuPH20 enzyme with Pfizer proprietary biologics in
primary care and specialty care indications. Pfizer has elected five targets and has returned two targets.

Janssen Collaboration

In December 2014, we and Janssen entered into a collaboration and license agreement, under which Janssen has the
worldwide license to develop and commercialize products combining our rHuPH20 enzyme with Janssen proprietary biologics
directed to up to five targets. Targets may be selected on an exclusive basis. Janssen has elected CD38 as the first target on an
exclusive basis. Janssen has initiated seven Phase 3 studies, two Phase 2 study and one Phase 1 study of DARZALEX®
(daratumumab), directed at CD38, using ENHANZE technology in patients with amyloidosis, smoldering myeloma and
multiple myeloma.

In February 2019, Janssen’s development partner, Genmab, announced positive Phase 3 trial results from the COLUMBA
study evaluating subcutaneous DARZALEX in comparison to DARZALEX IV in patients with relapsed or refractory multiple
myeloma. DARZALEX SC (utilizing ENHANZE technology) was found to be non-inferior to Darzalex IV with regard the co-
primary endpoints of Overall Response Rate and Maximum Trough concentration. In May 2020, we announced that Janssen
received US FDA approval and launched the commercial sale of DARZALEX FASPRO in four regimens across five
indications in multiple myeloma patients, including newly diagnosed, transplant-ineligible patients as well as relapsed or
refractory patients. As a fixed-dose formulation, DARZALEX FASPRO can be administered over three to five minutes,
significantly less time than IV DARZALEX which requires multi-hour infusions. In June 2020, we announced that Janssen
received European marketing authorization and launched the commercial sale of DARZALEX SC utilizing ENHANZE in the
European Union. In April 2020, we announced the submission of a New Drug Application (NDA) to Japan's Ministry of
Health, Labour and Welfare (MHLW) by Janssen seeking approval of DARZALEX SC. In November 2020, Janssen announced
it submitted a Type II variation application to the EMA seeking European approval of DARZALEX SC to be used in the
treatment of patients with AL amyloidosis, a rare and potentially fatal disease for which there are no currently approved
therapies. In August 2020, Janssen announced that Health Canada approved DARZALEX SC in four regimens across five
indications in patients with multiple myeloma, most notably newly diagnosed, trans-plant-ineligible patients as well as relapsed
or refractory patients. In November 2020, Janssen filed for approval of DARZALEX FASPRO/Darzalex SC with
pomalidomide and dexamethasone for patients with relapsed or refractory multiple myeloma in the U.S. and EU. In January
2021, Janssen received FDA approval for DARZALEX FASPRO in combination with bortezomib, thalidomide, and
dexamethasone in newly diagnosed multiple myeloma patients who are eligible for autologous stem cell transplant. In January
2021, Janssen received accelerated approval from the FDA for DARZALEX FASPRO in combination with bortezomib,
cyclophosphamide and dexamethasone (D-VCd) for the treatment of adult patients with newly diagnosed AL amyloidosis (not

recommended for the treatment of patients with AL amyloidosis who have NYHA Class IIIB or Class IV cardiac disease or
Mayo Stage IIIB outside of controlled clinical trials).

In December 2019, Janssen elected targets EGFR and cMET on an exclusive basis as part of the bispecific antibody
(amivantamab), which is being studied in solid tumors. In November 2020, Janssen initiated a Phase 1 study of amivantamab
and ENHANZE.

AbbVie Collaboration

In June 2015, we and AbbVie entered into a collaboration and license agreement, under which AbbVie has the worldwide
license to develop and commercialize products combining our rHuPH20 enzyme with AbbVie proprietary biologics directed to
up to nine targets. Targets may be selected on an exclusive basis. AbbVie elected one target on an exclusive basis, TNF alpha,
for which it has discontinued development and returned the target.

Lilly Collaboration

In December 2015, we and Lilly entered into a collaboration and license agreement, under which Lilly has the worldwide
license to develop and commercialize products combining our rHuPH20 enzyme with Lilly proprietary biologics directed to up
to five targets. Targets may be selected on an exclusive basis. Lilly has elected two targets on an exclusive basis and one target
on a semi-exclusive basis. In August 2017, Lilly initiated a Phase 1 study of an investigational therapy in combination with
rHuPH20.

BMS Collaboration

In September 2017, we and BMS entered into a collaboration and license agreement, which became effective in
November 2017, under which BMS has the worldwide license to develop and commercialize products combining our rHuPH20
enzyme with BMS products directed at up to eleven targets. Targets may be selected on an exclusive basis. BMS has designated
multiple immuno-oncology targets including programmed death 1 (PD-1) and has an option to select additional targets within
five years from the effective date. In October 2018, BMS dosed the first patient in a Phase 1/2a study evaluating the safety,
pharmacokinetics and pharmacodynamics of BMS-986179, an investigational anti-CD-73 antibody alone and in combination
with nivolumab, using ENHANZE technology. BMS is also conducting a Phase 1/2 study of nivolumab using ENHANZE
technology in patients with solid tumors. In October 2019, BMS initiated a Phase 1 study for relatlimab in combination with
nivolumab using ENHANZE technology. In June 2020, BMS initiated a Phase 1/2 study of ipilimumab in combination with
nivolumab using ENHANZE technology, but has recently made a portfolio prioritization decision to not continue the study. In
June 2020, BMS selected 3 targets on an exclusive basis and exercised their option to convert a co-exclusive license to an
exclusive license. BMS has selected eight targets on an exclusive basis to-date.

Alexion Collaboration

In December 2017, we and Alexion entered into a collaboration and license agreement, under which Alexion has the
worldwide license to develop and commercialize products combining our rHuPH20 enzyme with Alexion’s portfolio of
products directed at up to four targets. Targets may be selected on an exclusive basis. Alexion elected two targets on an
exclusive basis, including a C5 complement inhibitor and has an option to select two additional targets within five years from
the effective date. In August 2018, Alexion announced that it initiated a Phase 1 trial to study a next-generation subcutaneous
formulation of ALXN1210 using ENHANZE technology (ALXN1810). In April 2020 Alexion announced it would no longer
proceed with a study of ALXN1810 in renal disease. Following a portfolio prioritization, Alexion has made the decision to not
proceed with further development of ALXN1810, subcutaneous ULTOMIRIS co-administered with ENHANZE technology.
Alexion is evaluating additional development options for ENHANZE.

argenx Collaboration

In February 2019, we and argenx entered into an agreement for the right to develop and commercialize one exclusive
target, the human neonatal Fc receptor FcRn, which includes argenx's lead asset efgartigimod (ARGX-113), and an option to
select two additional targets using ENHANZE technology. In May 2019, argenx nominated a second target to be studied using
ENHANZE technology, a human complement factor C2 associated with the product candidate ARGX-117, which is being
developed to treat severe autoimmune diseases.

In July 2019, argenx dosed the first subject in a phase 1 clinical trial evaluating the safety, pharmacokinetics and
pharmacodynamics of efgartigimod (ARGX-113), using ENHANZE technology. In December 2019, argenx reported that based
on data from the phase 1 study and internal company analysis, a one minute injection administered every 2 weeks may be
possible. In December 2020, argenx initiated a Phase 3 study of ARGX-113 using ENHANZE technology for patients with
immune thrombocytopenia (ITP), an immune disorder in which the blood does not clot normally. In January 2021, argenx
initiated a Phase 3 study of ARGX-113 using ENHANZE technology in pemphigus vulgaris and foliaceus (PV), a rare
autoimmune disease that causes painful blisters on the skin and mucous membranes. In February 2021, argenx initiated a Phase
3 study of ARGX-113 using ENHANZE technology for patients with chronic inflammatory demyelinating polyneuropathy
(CIDP) and initiated a Phase 3 study of ARGX-113 using ENHANZE technology in myasthenia gravis (MG), an autoimmune
disorder of the musculoskeletal system caused by IgG autoantibodies.

In October 2020, we and argenx entered into agreement to expand the collaboration relationship. Under the newly
announced expansion, argenx gained the ability to exclusively access our ENHANZE technology for three additional targets
upon nomination for a total of up to six targets under the existing and newly expanded collaboration.

Horizon Collaboration

In November 2020, we and Horizon entered into a global collaboration and license agreement that gives Horizon
exclusive access to Halozyme's ENHANZE technology for subcutaneous formulation of medicines targeting IGF-1R. Horizon
intends to use ENHANZE to develop a SC formulation of TEPEZZA (teprotumumab-trbw), indicated for the treatment of
thyroid eye disease, a serious, progressive and vision-threatening rare autoimmune disease, potentially shortening drug
administration time, reducing healthcare practitioner time and offering additional flexibility and convenience for patients.

NIH CRADA

In June 2019, we announced a Cooperative Research and Development Agreement (CRADA) with the National Institute
of Allergy and Infectious Diseases’ Vaccine Research Center (VRC), part of National Institute of Health (NIH), enabling the
VRC’s use of ENHANZE technology to develop subcutaneous formulations of broadly neutralizing antibodies (bnAbs) against
HIV for HIV treatment. The initiation of this study has been impacted by COVID-19 and is delayed.

CAPRISA

In September 2020, we entered into a collaboration with the Centre for the AIDS Programme of Research in South Africa
(CAPRISA), a non-profit company, to evaluate safety, tolerability and pharmacokinetics of a human monoclonal antibody
(CAP256V2LS) in HIV-negative and HIV-positive women in South Africa. In October 2020, we were notified that the first
patient was dosed with PH20 in a Phase I Dose-Escalation Study for CAP256V2LS.

For a further discussion of the collaboration agreements, refer to Note 2, Summary of Significant Accounting Policies -

Revenues under Collaborative Agreements.

Impact of COVID-19 to our Business

In March 2020, the World Health Organization declared a disease caused by a strain of novel coronavirus (“COVID-19”)
to be a pandemic. In an effort to contain COVID-19 or slow its spread, governments around the world have enacted various
measures, including orders to close all businesses not deemed “essential,” isolate residents to their homes or places of residence,
and practice social distancing when engaging in essential activities. In an effort to protect the health and safety of our
employees and in compliance with state regulations, we instituted working from home, limited the number of people that work
on site at any one time, and suspended employee travel. We anticipate that the global health crisis caused by COVID-19 will
continue to have an impact across the globe. As an organization we continue to effectively operate with the majority of our
employees working from home and not traveling, which we expect will continue for the foreseeable future. Importantly, our
suppliers continue to operate without interruption related to COVID-19. However, the duration of the pandemic and its
continued impact on the global economy as a whole is unknown at this time. We are not clear the extent to which near term and
long term operational and economic impacts of COVID-19, if any, will have on our business, including the effects on our
suppliers, collaborators, customers, employees, and prospects. We will continue to monitor the COVID-19 situation closely.
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 43 issued
patents in the U.S., more than 460 issued patents in Europe and other countries in the world and more than 50 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 2023 and 2035. While we recently abandoned a number of patents related to PEGPH20 as a
result of its failed Phase 3 clinical trial for the treatment of pancreatic cancer, we continue to file and prosecute patent
applications to strengthen and grow our patent portfolio pertaining to our recombinant human hyaluronidase. We have multiple
patents and patent applications throughout the world pertaining to our recombinant human hyaluronidase and methods of use
and manufacture, including an issued U.S. patent which expires in 2027 and an issued European patent which expires in 2024,
which we believe cover the products and product candidates under our existing collaborations and Hylenex recombinant. 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 product development, quality and
regulatory work required to maintain the ENHANZE platform, development and manufacturing of product candidates
performed on behalf of our partners, compensation and other expenses for research and development personnel, supplies and
materials, facility costs and amortization and depreciation. We charge all research and development expenses to operations as
they are incurred. Prior to our November 2019 restructuring, our research and development activities were primarily focused on
the development of PEGPH20.

Manufacturing

We do not have our own manufacturing facility for our product and our partners’ products and product candidates, or the

capability to package our products. We have engaged third parties to manufacture bulk rHuPH20 and Hylenex.

We have existing supply agreements with contract manufacturing organizations Avid Bioservices, Inc. (Avid) and
Catalent Indiana LLC (Catalent) to produce supplies of bulk rHuPH20. These manufacturers each produce bulk rHuPH20 under
current Good Manufacturing Practices (cGMP) for clinical and commercial uses. Catalent currently produces bulk rHuPH20 for
use in Hylenex 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. It is important for our
business for Catalent and Avid to (i) retain their status as cGMP-approved manufacturing facilities; (ii) 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 Catalent 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.

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 engage Integrated Commercialization 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 but also for the out-licensing of our
ENHANZE technology. Our ENHANZE technology may face increasing competition from alternate approaches and/or
emerging technologies to deliver medicines SC. 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 product,
Vitrase®, an ovine (ram) hyaluronidase, and Amphastar Pharmaceuticals, Inc.’s product, Amphadase®, a bovine (bull)
hyaluronidase.

Government Regulations

The FDA and comparable regulatory agencies in foreign countries regulate the manufacture and sale of the
pharmaceutical products that we or our partners have developed or that our partners 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.

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, through our collaborators, approval to market products and product candidates in
foreign countries, which may have regulatory processes that differ materially from those of the FDA. Our partners may 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 guarantee that approvals to
market any of our partners’ 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 partners’ 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.

Information about our Executive Officers

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.

Human Capital Management

The experience, expertise and dedication of our employees drive the progress and accomplishments of Halozyme.

As of February 17, 2021, we had 136 full-time employees. None of our employees are unionized and we believe our

employee relations to be good.

Recognizing the value of our employees and the contributions they make in achieving our business objectives and overall
success, we focus on creating and providing an inclusive and safe work environment where employees are respected and
rewarded for their contributions, work together as one team, have opportunities to grow and develop their careers, and support
the communities in which we work. We also believe this approach to human capital management is essential to attracting and
retaining employees in the highly competitive biotechnology and pharmaceutical labor market. To achieve this supportive
working environment, our human capital management efforts focus on:

Corporate Values and Ethics:

The foundation of our human capital management strategy is contained in our corporate values statement and our Code of
Conduct and Ethics (the “Code of Conduct”), both of which provide uniform guidance to all our employees regarding
expectations for proper workplace behavior. Our corporate values emphasize respecting and valuing fellow team members and
acting with integrity and honesty to uphold the highest ethical standards. We believe these values provide an environment in
which all employees can feel proud and motivated to contribute their valued talents to achieving corporate goals and objectives.
Our values also emphasize empowering employees and personal accountability as a means to fulfill our commitments to
patients, partners, shareholders and each other.

Our Board of Directors adopted and regularly reviews the Code of Conduct, which applies to all of our employees,
officers and directors. Adherence to the Code of Conduct helps ensure that all employees can feel a part of an organization that
emphasizes adherence to laws and policies covering the industry in which we work. Our Code of Conduct also emphasizes each
employee’s accountability for making decisions and taking actions in a highly ethical manner with a focus on honesty, fairness
and integrity and treating all fellow employees in a respectful and inclusive manner. We have established a reporting hotline
that enables employees to file anonymous reports of any suspected violations of the Code of Conduct. We believe that
providing an ethical environment in which to work is vital to our efforts to attract, retain and develop our employees.

Diversity and Inclusion:

We seek to build and maintain a diverse team of employees that is passionate about and committed to having a positive
impact on the lives of patients and their families. We value and celebrate the unique talents, backgrounds and perspectives each
employee contributes to achieving our mission and corporate objectives. In support of this philosophy, we adopted the
Biotechnology Innovation Organization’s principles on workforce development, diversity and inclusion. Our diverse and
inclusive culture is key to attract, develop and retain our talent pool within the globally competitive biotechnology industry. Our
dedication to these principles has resulted in a diverse and inclusive employee base consisting of 51% female and 40% non-
white/Caucasian employees as of February 17, 2021.

As an equal opportunity employer, we strive to attract and connect with diverse talent who best match our core values and
who will be successful and thrive at Halozyme. Our recruiting team partners with hiring managers and with our diverse
interview panels to provide support at every stage of the process. We strive to ensure we evaluate a diverse group of candidates
for every role with the goal of identifying the best possible candidate – whether internal or external – to fill open roles in the
company. We are also committed to providing a positive candidate experience and endeavor to be transparent and respect the
time each candidate gives us throughout the process. We evaluate our recruitment and retention efforts based on a variety of
metrics, including offer acceptance rate, time-to-hire, turnover and diversity of our employees.

Professional Development for Employees at All Levels:

We are firmly committed to employee development because it is essential to the future growth and overall success of
Halozyme. We understand that high performing employees are always searching for ways to broaden and develop their skills.
To support our employees, we conduct an individual development plan process to give employees the opportunity and
accountability to document their career goals and the actions necessary to achieve those goals. Our senior leader development
program is focused on advancing business acumen and leadership skills. Our talent development curriculum for the entire
organization is focused on professional, team and leadership development opportunities and grounded in our established
leadership attributes which identify the knowledge, skills, abilities and behaviors that contribute to individual and
organizational performance. In addition, we provide an online learning platform where employees can access training or
programs on a variety of topics whenever they choose. We offer education assistance for college and university courses,
training seminars and educational conferences to all employees.

To monitor progress, we review our succession plan for key senior management positions as part of our annual talent

review and identify development opportunities to help ensure potential successor readiness.

Employee Engagement:

In order to ensure we are delivering on our human capital initiatives and better understand our employees’ experience, we
regularly conduct employee engagement surveys. In 2019, we achieved a 97% response rate with our survey with more than
90% of our employees indicating:

•

•
•

They are aware of the company mission and vision and have a clear understanding of the goals and objectives of the
company;
Their team is committed to doing high quality work; and
Their manager treats them with respect and cares about them.

With the goal of continuous performance improvement we are focused on further strengthening cross-functional team
work including how team members communicate and hold each other accountable. Examples of specific actions we have taken
in response to employee survey feedback include institution of all-employee training on cross-functional teamwork and how to
have crucial conversations.

We hold frequent all-employee meetings that serve as a forum to share progress on strategy and corporate goals, celebrate
achievements, and share best practices and learnings. In 2020 and continuing in 2021 we have increased the frequency of our
all-employee meetings from monthly to every other week while implementing our work-from-home strategy in response to
COVID-19, in order to keep employees well-informed and connected and to addresses their questions.

Management tracks and assesses retention and attrition and interviews departing employees in order to identify any

addressable trends.

Compensation & Benefits:
Our compensation and benefits programs, with oversight from the Compensation Committee of our Board of Directors,
are designed to attract, retain and reward employees through competitive salaries, annual bonus eligibility, stock awards grants
to all employees, a 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off,
family leave, and employee assistance programs. Each year we conduct surveys to benchmark our salaries and benefits and
confirm we are satisfied with the competitiveness of our total compensation offering. We also provide a variety of peer-to-peer
and corporate recognition programs to celebrate and recognize our employees for their hard work and contributions.

Employee Health and Safety:

We are dedicated to promoting the health and safety of our employees because we believe it fosters employee
productivity and job performance. We have developed and implemented annual workplace safety training which is intended to
remind our employees of workplace safety procedures that may be useful in the event of emergency situations and to assist our
employees in helping to prevent workplace accidents. We have established a Safety Committee which meets on a quarterly
basis to review workplace safety and adherence to safety policies. Further, our Code of Conduct emphasizes our commitment
to preventing unlawful employment discrimination and workplace harassment including mandatory, on going sexual
harassment training and provides a mechanism for reporting any violations of this policy.

Our response to COVID-19:

Because we take the health and safety of our employees, their families and our local communities very seriously, we have
implemented the following actions to protect against the transmission of COVID-19 in our office and in the local community,
while ensuring that critical work continues:

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Restricted access to our office to only Halozyme personnel necessary to carry out essential activities. All other
employees are currently working from home.
Required self-health check, and on-site temperature screening for all on-site personnel.
Required virtual, rather than in-person, interactions to continue to meet the needs of our customers, partners and
contractors.
Restricted all air travel.

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• Disinfection of all common areas, door handles, restrooms, and kitchens multiple times daily, and regular after-hours

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disinfection of all non-laboratory areas with state-of-the-art electrostatic sanitization.
Upgraded all HVAC systems to MERV-13 filtration throughout our campus and introduction of supplementary HEPA
filtration in conference rooms and select open office areas.

Corporate Citizenship:

We believe in supporting the community in which we work and provide our employees multiple opportunities to

contribute to the community, including providing company-wide community service days/volunteerism supporting:

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STEM education;
Human services (e.g., food drives, home builds, meal services);
Environmental organizations (e.g., lagoon cleanup events, park restoration);
Children/Military (e.g., school supply drives, holiday adopt-a-family, playhouse builds, paracord builds);
Cultural/diversity relations; and
Patient/healthcare advocacy groups.

Item 1A.

Risk Factors

Risks Related To Our Business

Business interruptions resulting from the COVID-19 outbreak or similar public health crises could cause a disruption of
the development of our collaboration partners’ product candidates and commercialization of approved products, impede
our ability to supply bulk rHuPH20 to our partners or procure and sell Hylenex and otherwise adversely impact our
business and results of operations.

Public health crises such as pandemics or similar outbreaks could adversely impact our business and results of operations
by, among other things, disrupting the development of our collaboration partners’ product candidates and commercialization of
our partners’ approved products, disrupting our ability to enter into new ENHANZE collaborations with potential partners in a
timely manner, causing disruptions in the operations of our third party contract manufacturing organizations upon whom we
rely for the production and supply of our commercial product Hylenex and the bulk rHuPH20 we supply to our partners, and
causing other disruptions to our operations. For example, the outbreak of a coronavirus, which causes COVID-19, has rapidly
evolved into a global pandemic and has spread to most regions of the world including the city of San Diego, California where
our main office is located.

The COVID-19 pandemic is evolving, and to date has led to the implementation of various responses, including
government-imposed quarantines, travel restrictions and other public health safety measures. The extent to which COVID-19
and its variants impacts our operations and/or those of our collaboration partners will depend on future developments, which are
highly uncertain and unpredictable, including the duration or recurrence of the outbreak, additional or modified government
actions, new information that will emerge concerning the severity and impact of COVID-19 and the actions to contain
COVID-19 or address its impact in the short and long term, among others.

We have responded to the COVID-19 pandemic by taking a number of actions including closing our offices in San Diego
in March 2020, requesting that most of our personnel work remotely and restricting access to our facilities mostly to personnel
who perform critical activities that must be completed on-site in accordance with California’s initial statewide shelter-in-place
order and ongoing guidances. Increased reliance on personnel working from home may have a negative impact on productivity,
or disrupt, delay or otherwise adversely impact business, by, among other things, increasing cyber security risk, impeding
access to information that would be helpful to pursue our business objectives or disrupting our communications. We are
continuing to monitor the situation and currently do not have an estimate of the timing for all employees returning to the office
for work.

The business disruptions associated with a global pandemic could impact the business, product development priorities and
operations of our collaboration partners, including potential delays in manufacturing their product candidates or approved
products. For example, some of our collaboration partners are conducting or are planning to conduct clinical trials in
geographies affected by the COVID-19 pandemic. The progress or completion of these clinical trials could be adversely
impacted by the pandemic. Additionally, interruption or delays in the operations of the FDA, the EMA and other similar foreign
regulatory agencies, or changes in regulatory priorities to focus on the COVID-19 pandemic, may affect required regulatory
review, inspection, clearance and approval timelines. Disruptions such as these could result in delays in the development
programs of our collaboration products or impede the commercial efforts for approved products, resulting in potential
reductions or delays in our revenues from collaborator royalty or milestone payments. We do not know the extent to which our
collaboration partners’ development programs or product commercialization efforts will be impacted or delayed.

We rely on third party manufacturers to manufacture the bulk rHuPH20 that we supply to our collaboration partners for
their commercial products and product candidates, as well as our commercial product Hylenex. If any such third party
manufacturer is adversely impacted by the COVID-19 pandemic and related consequences, including staffing shortages,
production slowdowns and disruptions in delivery systems, availability of raw materials, reagents or components or if they
divert resources or manufacturing capacity to accommodate the development of coronavirus treatments or vaccines, our supply
chain may be disrupted, limiting our ability to sell Hylenex or supply bulk rHuPH20 to our collaboration partners. Any such
disruptions could result in reductions or delays in our revenues.

The effects of COVID-19 could worsen in countries that are already afflicted with the coronavirus which could further
adversely impact our ability to conduct our business and could have a material adverse impact on our operations, financial
condition and results. We do not yet know the full extent of the impact that COVID-19 may or will have on our business.

In addition, the trading prices for our common shares and other biopharmaceutical companies have been highly volatile as
a result of market and investor reactions to the COVID-19 pandemic and its potential consequences. As a result, access to
sources of financing, should those be needed, may be more difficult and/or expensive. In addition, a recession, depression or
other sustained adverse market event resulting from the spread of the coronavirus could materially and adversely affect our
business and the value of our common shares.

We have generated only limited revenues to date and we have a history of net losses and negative cash flows.

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. Through
December 31, 2020, we have incurred aggregate net losses of $474.6 million. Although we expect to maintain sustainable
profitability, unexpected declines in revenues and increases in expenses could inhibit our ability to sustain profitability.

If partners’ 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 partners’ 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 partners’ product candidates for failure to collect sufficient clinical or
animal safety data and require our collaborators to conduct additional clinical or animal safety studies which may cause lengthy
delays and increased costs to our partners’ development programs. Any such issues associated with rHuPH20 could have an
adverse impact on future development of our partners’ products which include rHuPH20, future sales of Hylenex recombinant,
or our ability to maintain our existing collaborations or enter into new collaborations.

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 collaboration product candidates may not receive regulatory approvals or
their development may be delayed for a variety of reasons, including delayed or unsuccessful clinical trials, regulatory
requirements or safety concerns” for additional information relating to the approval of product candidates.

Additionally, even with respect to products which have been approved for commercialization, in order to continue to
manufacture and market pharmaceutical products, we or our 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.

Use of Hylenex and the products and product candidates of our partners’ could be associated with side effects or adverse
events.

As with most pharmaceutical products, use of Hylenex and the products and product candidates of our collaborators could
be associated with side effects or adverse events which can vary in severity (from minor reactions to death) and frequency
(infrequent or prevalent). Side effects or adverse events associated with the use of Hylenex and the products or product
candidates of our collaborators may be observed at any time, including in clinical trials or when a product is commercialized,
and any such side effects or adverse events may negatively affect our or our collaborators’ ability to obtain or maintain
regulatory approval or market such products and product candidates. Side effects such as toxicity or other safety issues
associated with the use of Hylenex and the products and product candidates of our collaborators could require us or our
collaborators to perform additional studies or halt development or commercialization of these products and product candidates
or expose us to product liability lawsuits which will harm our business. For example, several years ago we experienced a
clinical hold on patient enrollment and dosing in our phase 2 study of PEGPH20 in patients with PDA (a discontinued
program), which was not resolved until we implemented steps to address an observed possible difference in TE event rates
between the arms of the study. We or our collaborators may be required by regulatory agencies to conduct additional animal or
human studies regarding the safety and efficacy of our pharmaceutical products or product candidates which we have not
planned or anticipated. Furthermore, there can be no assurance that we or our collaborators will resolve any issues related to
any product or product candidate side effects or adverse events to the satisfaction of the FDA or any regulatory agency in a
timely manner or ever, which could harm our business, prospects and financial condition.

If our contract manufacturers or vendors are unable to manufacture and supply to us bulk rHuPH20 or other raw
materials, reagents or components in the quantity and quality required by us or our collaborators for use in the
production of Hylenex or our partners’ products and product candidates, our Hylenex Commercialization efforts or our
partners’ product development and commercialization efforts could be delayed or stopped and our business and results of
operations and our collaborations could be harmed.

We have existing supply agreements with contract manufacturing organizations Avid Bioservices, Inc. (Avid) and
Catalent Indiana LLC (Catalent) to produce bulk rHuPH20. These manufacturers each produce bulk rHuPH20 under cGMP for
use in Hylenex recombinant, and for use in collaboration products and product candidates. We rely on their ability to
successfully manufacture bulk rHuPH20 according to product specifications. In addition to supply obligations, our contract
manufacturers also provide support for the chemistry, manufacturing and controls sections for FDA and other regulatory filings.

We also rely on vendors to supply us with raw materials to produce reagents and other materials for bioanalytical assays used to
support our partners’ clinical trials. We also have a commercial manufacturing and supply agreement with Patheon under which
Patheon provides the final fill and finishing steps in the production process of Hylenex recombinant. If any of our contract
manufacturers or vendors: (i) is unable to retain its status as an FDA approved manufacturing facility; (ii) is unable to otherwise
successfully scale up bulk rHuPH20 production to meet corporate or regulatory authority quality standards; (iii) is unable to
procure raw materials, reagents or components necessary to produce bulk rHuPH20, Hylenex recombinant or our bioanalytical
assays or (iv) fails to manufacture and supply bulk rHuPH20 in the quantity and quality required by us or our collaborators for
use in Hylenex 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 any of our contract manufacturers. Any delays, interruptions or other problems regarding the
ability of any of our contract manufacturers 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 our partners’
clinical trials or otherwise delay or prevent the regulatory approval of our partners’ product candidates; (ii) delay or prevent the
effective commercialization of Hylenex or collaboration products and product candidates; 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.
Additionally, we rely on third parties to manufacture, prepare, fill, finish, package, store and ship our product and partners’
product candidates on our behalf. If the third parties we identify fail to perform their obligations, the progress of partners’
clinical trials could be delayed or even suspended and the commercialization of our product and partner products could be
delayed or prevented.

If we or any party to a key collaboration agreement fail to perform material obligations under such agreement, or if a key
collaboration agreement, is terminated for any reason, our business could significantly suffer.

We have entered into multiple collaboration agreements under which we may receive significant future payments in the
form of milestone payments, target designation fees, maintenance fees and royalties. We are heavily dependent on our
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 clinical development plans, promotional efforts or simultaneously develop and commercialize
products in competition to those products we have licensed to them. Any of these actions could not be visible to us immediately
and could negatively impact our ability to forecast and our ability to achieve the benefits and revenue we receive from such
collaboration. In addition, in the event that a party fails to perform under a key collaboration agreement, or if a key
collaboration agreement is terminated, the reduction in anticipated revenues could negatively impact our operations. In addition,
the termination of a key collaboration agreement by one or more of our collaborators could have a material adverse 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.

Hylenex and our partners’ 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 any proprietary programs.

rHuPH20 is a key technological component of Hylenex and our ENHANZE technology and most of our collaboration
products and product candidates, including the current and future products and product candidates under our ENHANZE
collaborations. 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 proprietary product and our partners’ product and product candidates, there can be no
assurance that there will not be other such occurrences in the foregoing programs or that concerns regarding these antibodies
will not also be raised by the FDA or other health authorities in the future, which could result in delays or discontinuations of

our Hylenex commercialization activities, the development or commercialization activities of our partners, or deter our entry
into additional collaborations with third parties.

Our business strategy and our strategic focus is currently limited to only a few fields or applications of our technology
which may increase the risk for potential negative impact from adverse developments. Future expansion of our strategic
focus to additional applications of our technology may require the use of additional resources, result in increased expense
and ultimately may not be successful.

We routinely evaluate our business strategy, and may modify this strategy in the future in light of our assessment of unmet
medical needs, growth potential, resource requirements, regulatory issues, competition, risks and other factors. As a result of
these strategic evaluations, we may focus our resources and efforts on one or a few programs or fields and may suspend or
reduce our efforts on other programs and fields. For example, in the fourth quarter of 2019, we decided to focus our resources
on our ENHANZE technology and our commercial product, Hylenex. By focusing on these areas, we increase the potential
impact on us if one of those partner programs does not successfully complete clinical trials, achieve commercial acceptance or
meet expectations regarding sales and revenue. We may also expand our strategic focus by seeking new therapeutics
applications of our technology which may require the use of additional resources, increased expense and would require the
attention of senior management. There can be no assurance that any such investment of resources would ultimately result in
additional approved collaboration products or commercial success of new therapeutic applications of our technology.

Our collaboration product candidates may not receive regulatory approvals or their development may be delayed for a
variety of reasons, including delayed or unsuccessful clinical trials, regulatory requirements or safety concerns.

Clinical testing of pharmaceutical products is a long, expensive and uncertain process, and the failure or delay of a clinical
trial can occur at any stage, including the patient enrollment stage. Even if initial results of preclinical and nonclinical studies or
clinical trial results are promising, our collaborators may obtain different results in subsequent trials or studies that fail to show
the desired levels of dose safety and efficacy, or our collaborators may not, obtain applicable regulatory approval for a variety
of other reasons. Preclinical, nonclinical, and clinical trials for collaboration product candidates could be unsuccessful, which
would delay or preclude regulatory approval and commercialization of the product candidates. In the U.S. and other
jurisdictions, regulatory approval can be delayed, limited or not granted for many reasons, including, among others:

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during the course of clinical studies, the final data may differ from initial reported data, and clinical results may
not meet prescribed endpoints for the studies or otherwise provide sufficient data to support the efficacy of our
collaborators’ product candidates;
clinical and nonclinical test results may reveal inferior pharmacokinetics, side effects, adverse events or
unexpected safety issues associated with the use of our collaborators’ product candidates;
regulatory review may not find that the data from preclinical testing and clinical trials justifies approval;
regulatory authorities may require that our partners change their studies or conduct additional studies which may
significantly delay or make continued pursuit of approval commercially unattractive;
a regulatory agency may reject partner trial data or disagree with their interpretations of either clinical trial data or
applicable regulations;
a regulatory agency may require additional safety monitoring and reporting through Risk Evaluation and
Mitigation Strategies or conditions to assure safe use programs;
a partner may decide to not pursue regulatory approval for such a product;
a regulatory agency may not approve our manufacturing processes or facilities, or the processes or facilities of our
collaborators, 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 partner 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 collaboration product candidate is not approved in a timely fashion or obtained on commercially viable terms, or if
development of any product candidate is terminated due to difficulties or delays encountered in the regulatory approval process,
it could have a material adverse impact on our business, and we would become more dependent on the development of other
collaboration product candidates and/or our ability to successfully acquire other technologies. There can be no assurances that
any collaboration product candidate will receive regulatory approval in a timely manner, or at all. There can be no assurance
that partners will be able to gain clarity as to the FDA’s requirements or that the requirements may be satisfied in a
commercially feasible way, in which case our ability to enter into collaborations with third parties or explore other strategic
alternatives to exploit an opportunity will be limited or may not be possible.

We anticipate that certain 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.

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 our partners’ clinical trials or otherwise inhibit
our or partners’ ability to bring approved products to market, which would have a material adverse effect on our business and
financial condition. Likewise, if we, our 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:

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restrictions on our or our partners’ products or manufacturing processes;
warning letters;
withdrawal of our or our partners’ products from the market;
voluntary or mandatory recall;
fines;
suspension or withdrawal of regulatory approvals;
suspension or termination of any of our partners’ ongoing clinical trials;
refusal to permit the import or export of our or our partners’ products;
refusal to approve pending applications or supplements to approved applications that we submit;
product seizure;
injunctions; or
imposition of civil or criminal penalties.

We may need to raise additional capital in the future and there can be no assurance that we will be able to obtain such
funds.

We may need to raise additional capital in the future to fund our operations and for general corporate purposes if revenues
do not occur as expected. Our current cash reserves and expected revenues may not be sufficient for us to fund general
operations and conduct our business at the level desired. In addition, if we engage in acquisitions of companies, products or
technologies in order to execute our business strategy, we may need to raise additional capital. We may raise additional capital
in the future through one or more financing vehicles that may be available to us including (i) new collaborative agreements;
(ii) expansions or revisions to existing collaborative relationships; (iii) private financings; (iv) other equity or debt financings;
(v) monetizing assets; and/or (vi) the public offering of securities.

If we are required to raise additional capital in the future, it may not be available on favorable financing terms within the
time required, or at all. If additional capital is not available on favorable terms when needed, we will be required to raise capital
on adverse terms or significantly reduce operating expenses through the restructuring of our operations or deferral of strategic
business initiatives. If we raise additional capital through a public offering of securities or equity, a substantial number of
additional shares may be issued, which may negatively affect our stock price and these additional shares will dilute the
ownership interest of our current investors.

We currently have significant debt and may incur additional debt. Failure by us to fulfill our obligations under the
applicable debt agreements may cause the repayment obligations to accelerate.

The aggregate amount of our consolidated indebtedness, net of debt discount, as of December 31, 2020 was $397.2 million,
which includes $460.0 million in aggregate principal amount of 1.25% Convertible Senior Notes due 2024 (Convertible Notes)
net of unamortized debt discount of $62.8 million. We also may incur additional indebtedness in the future.

Our indebtedness may:

• make it difficult for us to satisfy our financial obligations, including making scheduled principal and interest payments

on our indebtedness;
limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general
corporate purposes;
limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures,
acquisitions, share repurchases or other general business purposes;
require us to use a portion of our cash flow from operations to make debt service payments;
limit our flexibility to plan for, or react to, changes in our business and industry;
place us at a competitive disadvantage compared to our less leveraged competitors; and
increase our vulnerability to the impact of adverse economic and industry conditions.

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Our ability to make payments on our existing or any future debt will depend on our future operating performance and
ability to generate cash and may also depend on our ability to obtain additional debt or equity financing. It will also depend on
financial, business or other factors affecting our operations, many of which are beyond our control. We will need to use cash to
pay principal and interest on our debt, thereby reducing the funds available to fund operations, strategic initiatives and working
capital requirements. If we are unable to generate sufficient cash to service our debt obligations, an event of default may occur
under any of our debt instruments which could result in an acceleration of such debt upon which we may be required to repay
all the amounts outstanding under some or all of our debt instruments. Such an acceleration of our debt obligations could harm
our financial condition. From time to time, we may seek to retire or repurchase our outstanding debt through cash purchases
and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Any such
repurchases or exchanges would be on such terms and at such prices as we determine, and will depend on current market
conditions, our liquidity needs, any restrictions in our contracts and other factors. The amounts involved in such transactions
could be material.

The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and
operating results.

In the event the conditional conversion feature of the Convertible Notes is triggered, holders of the Convertible Notes will
be entitled to convert the notes at any time during specified periods at their option. If one or more holders elect to convert their
notes, we would be required to settle a portion or all of our conversion obligation in cash, which could adversely affect our
liquidity. Even if holders of the Convertible Notes do not elect to convert their notes, we are required under applicable
accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability
when the conditional conversion feature is triggered, which results in a material reduction of our net working capital. For
example, as of December 31, 2020, the conditional conversion feature was triggered and our notes are classified as a current
liability.

Conversion of our Convertible Notes may dilute the ownership interest of existing stockholders or may otherwise depress
the price of our common stock.

The conversion of some or all of our Convertible Notes, to the extent we deliver shares upon conversion, will dilute the
ownership interests of existing stockholders. Any sales in the public market of the Convertible Notes or our common stock
issuable upon conversion of the Convertible Notes could adversely affect prevailing market prices of our common stock. In
addition, the existence of the Convertible Notes may encourage short selling by market participants because the conversion of
the Convertible Notes could be used to satisfy short positions, or anticipated conversion of the Convertible Notes into shares of
our common stock could depress the price of our common stock.

The accounting method for the Convertible Notes could have a material effect on our reported financial results.

Pursuant to Financial Accounting Standards Board Accounting Standards Codification Subtopic 470-20, Debt with
Conversion and Other Options (“ASC 470-20”), an entity must separately account for the liability and equity components of
convertible debt instruments whose conversion may be settled entirely or partially in cash (such as our Convertible Notes) in a
manner that reflects the issuer’s economic interest cost for non-convertible debt. The liability component of our Convertible
Notes was initially valued at the fair value of a similar debt instrument that does not have an associated equity component and
was reflected as a liability in our consolidated balance sheet. The equity component of the Convertible Notes was included in
the additional paid-in capital section of our stockholders’ equity on our consolidated balance sheet, and the value of the equity
component was treated as original issue discount for purposes of accounting for the debt component. This original issue
discount will be amortized to non-cash interest expense over the term of the notes, and we will record a greater amount of non-
cash interest expense in current periods as a result of this amortization. Accordingly, we will report lower net income in our
financial results because ASC 470-20 will require the interest expense associated with the notes to include both the current
period’s amortization of the debt discount and the notes’ coupon interest, which could adversely affect our reported or future
financial results, the trading price of our common stock and the trading price of the Convertible Notes.

If collaboration product candidates are approved for marketing but do not gain market acceptance resulting in commercial
performance below that which was expected or projected, our business may suffer and we may not be able to fund future
operations.

Assuming that existing or future collaboration product candidates obtain the necessary regulatory approvals for
commercial sale, a number of factors may affect the market acceptance of these newly-approved products, including, among
others:

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the degree to which the use of these products is restricted by the approved product label;
the price of these products relative to other therapies for the same or similar treatments;
the extent to which reimbursement for these products and related treatments will be available from third party
payors including government insurance programs and private insurers;
the introduction of generic or biosimilar competitors to these products;
the perception by patients, physicians and other members of the health care community of the effectiveness and
safety of these products for their prescribed treatments relative to other therapies for the same or similar
treatments;
the ability and willingness of our collaborators to fund sales and marketing efforts; and
the effectiveness of the sales and marketing efforts of our collaborators.

If these collaboration products do not gain market acceptance resulting in commercial performance below that which was
expected or projected, the royalties we expect to receive from these products will be diminished which could harm our ability to
fund future operations, including conduct acquisitions, execute our planned share repurchases, or affect our ability to use funds
for other general corporate purposes and cause our business to suffer.

In addition, our partners’ product candidates will be restricted to the labels approved by FDA and applicable regulatory
bodies, and these restrictions may limit the marketing and promotion of the ultimate products. If the approved labels are
restrictive, the sales and marketing efforts for these collaboration products may be negatively affected.

Our ability to license our ENHANZE technology to our collaboration partners depends on the validity of our patents and
other proprietary rights.

Patents and other proprietary rights are essential to our business. Our success will depend in part on our ability to obtain
and maintain patent protection for our inventions, to preserve our trade secrets and to operate without infringing the proprietary
rights of third parties. We have multiple patents and patent applications throughout the world pertaining to our recombinant
human hyaluronidase and methods of use and manufacture, including an issued U.S. patent which expires in 2027 and an issued
European patent which expires in 2024, which we believe cover the products and product candidates under our existing
collaborations, and Hylenex. Although we believe our patent filings represent a barrier to entry for potential competitors
looking to utilize these hyaluronidases, upon expiration of our patents other pharmaceutical companies may (if they do not

infringe our other patents) seek to compete with us by developing, manufacturing and selling biosimilars to the active drug
ingredient in our ENHANZE technology used by our collaboration partners in combination with their products. Any such loss
of patent protection or proprietary rights could lead to a reduction or loss of revenues, incentivize one or more of our key
ENHANZE collaboration partners to terminate their relationship with us and impact our ability to enter into new collaboration
and license agreements.

Developing 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 insurance coverage may
not be sufficient and could materially and adversely affect our business and financial condition. Furthermore, various
distributors of pharmaceutical products require minimum product liability insurance coverage before purchase or acceptance of
products for distribution. Failure to satisfy these insurance requirements could impede our ability to achieve broad distribution
of our proposed products, and higher insurance requirements could impose additional costs on us. In addition, since many of
our 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.

If our collaborators do not achieve projected development, clinical, or regulatory goals in the timeframes publicly
announced or otherwise expected, the commercialization of our collaboration products may be delayed and, as a result,
our stock price may decline, and we may face lawsuits relating to such declines.

From time to time, our 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 and our collaborators’ control. If scientific, regulatory, strategic or other factors cause a collaboration partner to
not meet a goal, regardless of whether that goal has been publicly articulated or not, our stock price may decline rapidly. Stock
price declines may also trigger direct or derivative shareholder lawsuits. As with any litigation proceeding, the eventual
outcome of any legal action is difficult to predict. If any such lawsuits occur, we will incur expenses in connection with the
defense of these lawsuits, and we may have to pay substantial damages or settlement costs in connection with any resolution
thereof. Although we have insurance coverage against which we may claim recovery against some of these expenses and costs,
the amount of coverage may not be adequate to cover the full amount or certain expenses and costs may be outside the scope of
the policies we maintain. In the event of an adverse outcome or outcomes, our business could be materially harmed from
depletion of cash resources, negative impact on our reputation, or restrictions or changes to our governance or other processes
that may result from any final disposition of the lawsuit. Moreover, responding to and defending pending litigation significantly
diverts management’s attention from our operations.

In addition, the consistent failure to meet publicly announced milestones may erode the credibility of our management

team with respect to future milestone estimates.

Future acquisitions could disrupt our business and harm our financial condition.

In order to augment our product pipeline or otherwise strengthen our business, we 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:

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we may have to issue additional convertible debt or equity securities to complete an acquisition, which would
dilute our stockholders and could adversely affect the market price of our common stock;
an acquisition may negatively impact our results of operations because it may require us to amortize or write down
amounts related to goodwill and other intangible assets, or incur or assume substantial debt or liabilities, or it may
cause adverse tax consequences, substantial depreciation or deferred compensation charges;
we may encounter difficulties in assimilating and integrating the business, products, technologies, personnel or
operations of companies that we acquire;
certain acquisitions may impact our relationship with existing or potential 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;

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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.

Risks Related To Ownership of Our Common Stock

Our stock price is subject to significant volatility.

We participate in a highly dynamic industry which often results in significant volatility in the market price of common
stock irrespective of company performance. The high and low sales prices of our common stock during the twelve months
ended December 31, 2020 were $44.53 and $12.71, 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:

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the presence of competitive products to those being developed by our partners;
failure (actual or perceived) of our collaborators to devote attention or resources to the development or
commercialization of products or 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;
pandemics or other global crises;
general negative conditions in the financial markets;
the cost associated with obtaining regulatory approval for any of our collaboration product candidates;
the failure, for any reason, to secure or defend our intellectual property position;
the failure or delay of applicable regulatory bodies to approve our partners’ product candidates;
identification of safety or tolerability issues;
failure of our partners’ clinical trials to meet efficacy endpoints;
suspensions or delays in the conduct of our partners’ clinical trials or securing of regulatory approvals;
adverse regulatory action with respect to our and our collaborators’ products and product candidates such as loss
of regulatory approval to commercialize such products, clinical holds, imposition of onerous requirements for
approval or product recalls;
our failure, or the failure of our third party collaborators, 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 collaboration
candidate;
the sale of additional debt and/or equity securities by us;
our failure to obtain financing on acceptable terms or at all;
a restructuring of our operations;
an inability to execute our share repurchase program in the time and manner we expect due to market, business,
legal or other considerations; or
a conversion of the Convertible Notes into shares of our common stock.

Future transactions where we raise capital may negatively affect our stock price.

We are currently a “Well-Known Seasoned Issuer” and may file automatic shelf registration statements at any time with
the SEC. Sales of substantial amounts of shares of our common stock or other securities under our current or future shelf
registration statements could lower the market price of our common stock and impair our ability to raise capital through the sale
of equity securities.

Anti-takeover provisions in our charter documents, the Indenture and Delaware law may make an acquisition of us more
difficult.

Anti-takeover provisions in our charter documents, the Indenture and Delaware law may make an acquisition of us more
difficult. First, our Board of Directors is classified into three classes of directors. Under Delaware law, directors of a
corporation with a classified board may be removed only for cause unless the corporation’s certificate of incorporation provides
otherwise. Our amended and restated certificate of incorporation, as amended, does not provide otherwise. In addition, our
bylaws limit who may call special meetings of stockholders, permitting only stockholders holding at least 50% of our
outstanding shares to call a special meeting of stockholders. Our amended and restated certificate of incorporation does not
include a provision for cumulative voting for directors. Under cumulative voting, a minority stockholder holding a sufficient
percentage of a class of shares may be able to ensure the election of one or more directors. Finally, our bylaws establish
procedures, including advance notice procedures, with regard to the nomination of candidates for election as directors and
stockholder proposals.

These provisions in our charter documents may discourage potential takeover attempts, discourage bids for our common
stock at a premium over market price or adversely affect the market price of, and the voting and other rights of the holders of,
our common stock. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect
directors other than the candidates nominated by our board of directors.

Further, in connection with our recent Convertible Notes issuance, we entered into an indenture, dated as of November 18,
2019, (“Indenture”) with The Bank of New York Mellon Trust Company, N.A., as trustee. Certain provisions in the Indenture
could make it more difficult or more expensive for a third party to acquire us. For example, if a takeover would constitute a
fundamental change, holders of the Convertible Notes will have the right to require us to repurchase their Convertible Notes in
cash. In addition, if a takeover constitutes a make-whole fundamental change, we may be required to increase the conversion
rate for holders who convert their Convertible Notes in connection with such takeover. In either case, and in other cases, our
obligations under the Convertible Notes and the Indenture could increase the cost of acquiring us or otherwise discourage a
third party from acquiring us or removing incumbent management

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware

General Corporation Law, which may prohibit large stockholders from consummating a merger with, or acquisition of, us.

These provisions may deter an acquisition of us that might otherwise be attractive to stockholders.

Risks Related to Our Industry

Our partners’ 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 collaboration
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 product and our partners’ products and product candidates. We are dependent on receiving FDA and other governmental
approvals, including regulatory approvals in jurisdictions outside the United States, prior to manufacturing, marketing and
shipping our products. Consequently, there is always a risk that the FDA or other applicable governmental authorities, including
those outside the United States, will not approve our partners’ products or may impose onerous, costly and time-consuming
requirements such as additional clinical or animal testing. Regulatory authorities may require that our partners’ change our
studies or conduct additional studies, which may significantly delay or make continued pursuit of approval commercially
unattractive to our partners. For example, the approval of Baxalta’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 ultimately approved by the FDA, 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 product or partners’ products are approved, regulatory agencies may also take post-approval action limiting or revoking our
or our partners’ ability to sell these products. Any of these regulatory actions may adversely affect the economic benefit we may
derive from our product or our partners’ products and therefore harm our financial condition.

Under certain of these regulations, in addition to our partners, we and our contract suppliers and manufacturers are subject
to periodic inspection of our or their respective facilities, procedures and operations and/or the testing of products by the FDA,
the DEA and other authorities, which conduct periodic inspections to confirm that we and our contract suppliers and
manufacturers are in compliance with all applicable regulations. The FDA also conducts pre-approval and post-approval
reviews and plant inspections to determine whether our systems, or our contract suppliers’ and manufacturers’ processes, are in
compliance with cGMP and other FDA regulations. If our partners, we, or our contract suppliers, fail these inspections, our
partners may not be able to commercialize their products in a timely manner without incurring significant additional costs, or at
all.

In addition, the FDA imposes a number of complex regulatory requirements on entities that advertise and promote
pharmaceuticals including, but not limited to, standards and regulations for direct-to-consumer advertising, off-label promotion,
industry-sponsored scientific and educational activities, and promotional activities involving the Internet.

We may be subject, directly or indirectly, to various broad federal and state healthcare laws. If we are unable to comply, or
have not fully complied, with such laws, we could face civil, criminal and administrative penalties, damages, monetary
fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs,
contractual damages, reputational harm, diminished profits and future earnings and curtailment or restructuring of our
operations, any of which could adversely affect our ability to operate.

Our business operations and activities may be directly, or indirectly, subject to various broad federal and state healthcare
laws, including without limitation, anti-kickback laws, the Foreign Corrupt Practices Act (FCPA), false claims laws, civil
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 and other federal healthcare programs, contractual damages, reputational harm, diminished
profits and future earnings and curtailment or restructuring of our operations, any of which could adversely affect our ability to
operate.

In addition, any sales of products outside the U.S. will also likely subject us to the FCPA and foreign equivalents of the

healthcare laws mentioned above, among other foreign laws.

We may be required to initiate or defend against legal proceedings related to intellectual property rights, which may result
in substantial expense, delay and/or cessation of the development and commercialization of our products.

We primarily rely on patents to protect our intellectual property rights. The strength of this protection, however, is

uncertain. For example, it is not certain that:

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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.

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, Hylenex and our partners’ products may not be
accepted in the market resulting in commercial performance below that which was expected or projected.

Our ability to earn sufficient returns on Hylenex and our partners’ ability to earn sufficient returns on their products will
depend in part on the extent to which reimbursement for these products and related treatments will be available from
government health administration authorities, private health insurers, managed care organizations and other healthcare
providers.

Third-party 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 and our
partners commercialize, which could limit their market acceptance and result in a material adverse effect on our revenues and
financial condition.

Customer contracts, such as with group purchasing organizations and hospital formularies, will often not offer contract or
formulary status without either the lowest price or substantial proven clinical differentiation. If, for example, Hylenex is
compared to animal-derived hyaluronidases by these entities, it is possible that neither of these conditions will be met, which
could limit market acceptance and result in a material adverse effect on our revenues and financial condition.

The rising cost of healthcare and related pharmaceutical product pricing has led to cost containment pressures from
third-party payers as well as changes in federal coverage and reimbursement policies and practices that could cause us
and our partners to sell our products at lower prices, and impact access to our and our partners’ products, resulting in less
revenue to us.

Any of our proprietary or 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 and the Affordable Care Act of 2010 (ACA), could significantly influence the
manner in which pharmaceutical products are prescribed and purchased, resulting in lower prices and/or a reduction in demand.
Such cost containment measures and healthcare reforms could adversely affect our ability to sell our product and our partners’
ability to sell their products.

In the U.S., our business may be impacted by changes in federal reimbursement policy resulting from executive actions,

federal regulations, or federal demonstration projects.

The federal administration and/or agencies, such as CMS, have announced a number of demonstration projects,
recommendations and proposals to implement various elements described in the drug pricing blueprint. CMS, the federal
agency responsible for administering Medicare and overseeing state Medicaid programs and Health Insurance Marketplaces,
has substantial power to implement policy changes or demonstration projects that can quickly and significantly affect how
drugs, including our products, are covered and reimbursed. For example, in November 2020, former President Trump
announced the interim final rule to implement the Most Favored Nations drug pricing model seeking to tie Medicare payment
rates to an international index price. This final rule is currently subject to a preliminary injunction. Additionally, a number of
Congressional committees have also held hearings and evaluated proposed legislation on drug pricing and payment policy
which may affect our business. For example, in July 2019, the Senate Finance Committee advanced a bill that in part would
penalize pharmaceutical manufacturers for increasing drug list prices covered by Medicare Part B and Part D, faster than the
rate of inflation, and cap out-of-pocket expenses for Medicare Part D beneficiaries. Several other proposals have been
introduced that, if enacted and implemented, could affect access to and sales of our and our partners’ products, allow the federal
government to engage in price negotiations on certain drugs, and allow importation of prescription medication from Canada or
other countries.

In this dynamic environment, we are unable to predict which or how many federal policy, legislative or regulatory
changes may ultimately be enacted. To the extent federal government initiatives decrease or modify the coverage or
reimbursement available for our or our partners’ products, limit or impact our decisions regarding the pricing of
biopharmaceutical products or otherwise reduce the use of our or our partners’ U.S. products, such actions could have a
material adverse effect on our business and results of operations.

Furthermore, individual states are considering proposed legislation and have become increasingly aggressive in passing
legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient
reimbursement constraints, discounts, restrictions on certain product access, importation from other countries and bulk
purchasing. Legally mandated price controls on payment amounts by third party 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.

In addition, private payers in the US, including insurers, pharmacy benefit managers (PBMs), integrated healthcare
delivery systems, and group purchasing organizations, are continuously seeking ways to reduce drug costs. Many payers have
developed and continue to develop ways to shift a greater portion of drug costs to patients through, for example, limited benefit
plan designs, high deductible plans and higher co-pay or coinsurance obligations. Consolidation in the payer space has also
resulted in a few large PBMs and insurers which place greater pressure on pricing and utilization negotiations for our and our
partners’ products in the U.S., increasing the need for higher discounts and rebates and limiting patient access and utilization.
Ultimately, additional discounts, rebates and other price reductions, fees, coverage and plan changes, or exclusions imposed by
these private payers on our and our partners’ products could have an adverse event on product sales, our business and results of
operations.

We also face risks relating to the reporting of pricing data that affects the reimbursement of and discounts provided for
our products. Government price reporting regulations are complex and may require a manufacturer to update certain previously
submitted data. If our submitted pricing data are incorrect, we may become subject to substantial fines and penalties or other
government enforcement actions, which could have a material adverse effect on our business and results of operations. In
addition, as a result of restating previously reported price data, we also may be required to pay additional rebates and provide
additional discounts.

We face intense competition and rapid technological change that could result in the development of products by others
that are competitive with or superior to our proprietary and collaboration products, including those 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. Many of these competitors have substantially more resources and product development, manufacturing and
marketing experience and capabilities than we do. The competitors for Hylenex recombinant include, but are not limited to,
Valeant Pharmaceuticals International, Inc.’s FDA-approved product, Vitrase®, an ovine (ram) hyaluronidase, and Amphastar
Pharmaceuticals, Inc.’s product, Amphadase®, a bovine (bull) hyaluronidase. For our ENHANZE technology, such competitors
may include major pharmaceutical and specialized biotechnology firms. These competitors may develop technologies and
products that are more effective, safer, or less costly than our current or future proprietary and collaboration products and
product candidates or that could render our and our partners’ products, technologies and product candidates obsolete or
noncompetitive.

General Risks

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. We
depend substantially on our ability to hire, train, motivate and retain high quality personnel, especially our scientists and
management team. If we are unable to identify, hire and retain qualified personnel, our ability to support current and future
alliances with strategic collaborators could be adversely impacted. Our use of domestic and international third-party contractors,
consultants and staffing agencies also subjects us to potential co-employment liability claims.

Furthermore, if we were to lose key management personnel, we may lose some portion of our institutional knowledge and
technical know-how, potentially causing a disruption or delay in one or more of our partnered development programs until
adequate replacement personnel could be hired and trained. In addition, we do not have key person life insurance policies on the
lives of any of our employees which would help cover the cost of associated with the loss of key employees.

Our operations might be interrupted by the occurrence of a natural disaster or other catastrophic event.

Our operations, including laboratories, offices and other research facilities, are located in multiple buildings in San Diego,
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, pandemics, 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 partners’ research and development programs.

Cyberattacks, security breaches or system breakdowns may disrupt our operations and harm our operating results

and reputation.

We and our partners are subject to increasingly sophisticated attempts to gain unauthorized access to our information
technology storage and access systems and are devoting resources to protect against such intrusion. Cyberattacks could render
us or our partners unable to utilize key systems or access important data needed to operate our business. The wrongful use,
theft, deliberate sabotage or any other type of security breach with respect to any of our or any of our vendors and partners’
information technology storage and access systems could result in the breakdown or other service interruption, or the disruption
of our ability to use such systems or disclosure or dissemination of proprietary and confidential information that is
electronically stored, including intellectual property, trade secrets, financial information, regulatory information, strategic plans,
sales trends and forecasts, litigation materials or personal information belonging to us, our staff, our patients, customers and/or
other business partners which could result in a material adverse impact on our business, operating results and financial
condition. We continue to invest in monitoring, and other security and data recovery measures to protect our critical and
sensitive data and systems. However, these may not be adequate to prevent or fully recover systems or data from all
breakdowns, service interruptions, attacks or breaches of our systems. Furthermore, any physical break-in or trespass of our
facilities could result in the misappropriation, theft, sabotage or any other type of security breach with respect to our proprietary
and confidential information, including research or clinical data or damage to our research and development equipment and
assets. Such adverse effects could be material and irrevocable to our business, operating results, financial condition and
reputation.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our administrative offices and research facilities are currently located in San Diego, California. During 2020 we leased
an aggregate of approximately 50,000 square feet of office and research space. We believe our facilities are adequate for our
current and near-term 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.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

PART II

Securities

Market Information

Our common stock is listed on the NASDAQ Global Select Market under the symbol “HALO.” As of February 17, 2021,

we had approximately 52,081 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 and stock repurchases; therefore, we do not expect to pay any dividends on our common stock in the
foreseeable future. In addition, the provisions of our borrowing arrangements 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.

Purchase of Equity Securities by the Issuer

In November, 2019, we announced that the Board of Directors authorized the initiation of a capital return program to
repurchase up to $550.0 million of outstanding common stock over a three-year period. During 2019, we repurchased
approximately 11.1 million shares of common stock for $200.0 million at an average price of $18.03.

During 2020, we repurchased 6.5 million shares of common stock for $150.0 million at an average price of $23.05. The
shares were purchased through open market transactions and through an Accelerated Share Repurchase (ASR) agreement with
Bank of America in December 2020, for which we repurchased $21.7 million of common stock and received 0.5 million shares.
We retired the repurchased shares and they resumed the status of authorized and unissued shares.

The table below sets forth information regarding repurchases during the three months ended December 31, 2020:

Period
October 1, 2020 through October 31, 2020 . . . . . .
November 1, 2020 through November 30, 2020 . .
December 1, 2020 through December 31, 2020 (1)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Number of
Shares
Purchased

Weighted-
Average Price
paid per share

531,674 $
43,247 $
520,445 $

1,095,366

27.69
27.79
41.71

Total Number of
Shares
Purchased as
Part of Publicly
Announced
Programs

Approximate
Dollar Value of
Shares That May
Yet Be
purchased under
the Programs

531.674 $
43.247 $
520.445 $

1,095.366

222,798
221,595
199,885

(1) These shares were repurchased through the December 2020 ASR.

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, 2015 to December 31, 2020. 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 . . . . . . . . . . . . . . . .

12/31/2015
$100
$100
$100

12/31/2016
$57
$109
$79

12/31/2017
$117
$141
$96

12/31/2018
$84
$137
$87

12/31/2019
$102
$187
$109

12/31/2020
$246
$272
$138

Item 6. Selected Financial Data

The selected consolidated financial data set forth below as of December 31, 2020 and 2019, and for the years ended
December 31, 2020, 2019 and 2018, 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, 2018, 2017 and 2016, and for the years ended December 31, 2017 and 2016,
are derived from our audited consolidated financial statements that are contained in reports previously filed with the SEC, not
included herein.

Statement of Operations Data:

2020

2019

2018

2017

2016

Summary Financial Information

Year Ended December 31,

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) per share, basic . . . . . . . . . . . . . . . . .
Net income (loss) per share, diluted . . . . . . . . . . . . . . .
Shares used in computing net income (loss) per share,
basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares used in computing net income (loss) per share,
diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(in thousands, except for per share amounts)
$ 267,594 $ 195,992 $ 151,862 $ 316,613 $ 146,691
$ 129,085 $ (72,240) $ (80,330) $ 62,971 $ (103,023)
(0.81)
$
(0.81)
$
127,964
136,206

(0.56) $
(0.56) $

(0.50) $
(0.50) $

0.95 $
0.91 $

0.46 $
0.45 $

144,329

143,599

136,419

141,463

144,329

143,599

139,068

127,964

Balance Sheet Data:

2020

2019

2018

2017

2016

As of December 31,

(in thousands)

Cash and cash equivalents and available-for-sale
marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 368,013 $ 421,262 $ 354,526 $ 469,214 $ 204,981
$ 133,379 $ 457,799 $ 278,488 $ 379,044 $ 201,947
$ 579,924 $ 565,874 $ 440,248 $ 519,945 $ 261,515
9,255 $ 60,865 $ 44,618
$

5,259 $

5,772 $

Long-term debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity (deficit) . . . . . . . . . . . . . . . . . . . .

$
— $ 383,045 $ 34,874 $ 125,140 $ 199,228
$ 428,877 $ 474,109 $ 191,361 $ 311,579 $ 293,996
$ 151,047 $ 91,765 $ 248,887 $ 208,366 $ (32,481)

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 biopharma technology platform company that provides innovative and disruptive
solutions with the goal of improving patient experience and outcomes. Our proprietary enzyme, rHuPH20, is used to facilitate
the delivery of injected drugs and fluids. We license our technology to biopharmaceutical companies to collaboratively develop
products that combine our ENHANZE® drug delivery technology with the collaborators’ proprietary compounds.

Our approved product and our collaborators’ approved products and product candidates are based on rHuPH20, our
patented recombinant human hyaluronidase enzyme. rHuPH20 is the active ingredient in our first commercially approved
product, Hylenex® recombinant, and it works by breaking down hyaluronan (or HA), a naturally occurring carbohydrate that is
a major component of the extracellular matrix in tissues throughout the body such as skin and cartilage. This temporarily
increases dispersion and absorption allowing for 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® drug delivery technology (“ENHANZE”). We license the
ENHANZE technology to form collaborations with biopharmaceutical companies that develop or market drugs requiring or
benefiting from injection via the subcutaneous route of administration. In the development of proprietary intravenous (IV)
drugs combined with our ENHANZE technology, data have been generated supporting the potential for ENHANZE to reduce
treatment burden, as a result of shorter duration of subcutaneous (SC) administration. ENHANZE may enable fixed-dose SC
dosing compared to weight-based dosing required for IV administration, and potentially allow for lower rates of infusion related
reactions. ENHANZE may enable more flexible treatment options such as home administration by a healthcare professional or
potentially the patient. Lastly, certain proprietary drugs co-formulated with ENHANZE have been granted additional
exclusivity, extending the patent life of the product beyond the one of the proprietary IV drug.

We currently have ENHANZE collaborations with F. Hoffmann-La Roche, Ltd. and Hoffmann-La Roche, Inc. (Roche),
Baxalta US Inc. and Baxalta GmbH (now members of the Takeda group of companies, following the acquisition of Shire plc by
Takeda Pharmaceutical Company Limited in January 2019) (Baxalta), Pfizer Inc. (Pfizer), Janssen Biotech, Inc. (Janssen),
AbbVie, Inc. (AbbVie), Eli Lilly and Company (Lilly), Bristol-Myers Squibb Company (BMS), Alexion Pharma Holding
(Alexion), ARGENX BVBA (argenx) and Horizon Therapeutics plc. (Horizon). We receive royalties from three of these
collaborations, including royalties from sales of one product from the Baxalta collaboration, three products from the Roche
collaboration and one product from Janssen collaboration. Future potential revenues from royalties and fees from ENHANZE
collaborations and the sales and/or royalties of our approved products 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 2020 and recent key events are as follows:

Janssen

•

In January 2021, we announced that Janssen received accelerated approval from the FDA for DARZALEX FASPRO
in combination with bortezomib, cyclophosphamide and dexamethasone (D-VCd) for the treatment of adult patients
with newly diagnosed light chain (AL) amyloidosis. AL amyloidosis is a rare and potentially fatal disease that
develops when plasma cells in the bone marrow generate abnormal light chains, which form amyloid deposits in vital
organs and lead to organ deterioration. There were no approved therapies for these patients prior to Darzalex FASPRO.

In December 2020, Janssen achieved the first sales milestone for Darzalex FASPRO/Darxalex SC, triggering a
payment of $15.0 million.

In November 2020, Janssen initiated a Phase 1 study of amivantamab using ENHANZE technology.

In November 2020, we announced that Janssen submitted regulatory applications to the FDA and EMA seeking
approval of the DARZALEX FASPRO in the U.S. and as DARZALEX SC in the European Union (EU) in
combination with pomalidomide and dexamethasone (D-Pd) for the treatment of patients with relapsed or refractory
multiple myeloma who have received at least one prior line of therapy.

In November 2020, Janssen announced it submitted a Type II variation application to the EMA seeking European
approval for the DARZALEX SC to be used in the treatment of patients with AL amyloidosis.

In August 2020, Janssen announced that Health Canada approved DARZALEX SC in four regimens across five
indications in patients with multiple myeloma, most notably newly diagnosed, transplant-ineligible patients as well as
relapsed or refractory patients.

In June 2020, we announced that Janssen received European marketing authorization and launched the commercial
sale of DARZALEX SC in the European Union, triggering a $10.0 million milestone payment. The approval applies
to all current daratumumab indications in frontline and relapsed/refractory settings.

In May 2020, we announced that Janssen received US FDA approval of DARZALEX FASPRO in four of six
regimens approved for the intravenous form in multiple myeloma patients, including newly diagnosed, transplant-
ineligible patients as well as relapsed or refractory patients and launched the commercial sale, triggering a $15 million
milestone payment.

In April 2020, we announced the submission of a New Drug Application (NDA) to Japan's Ministry of Health, Labour
and Welfare (MHLW) by Janssen seeking approval of a new SC formulation of daratumumab, an intravenous (IV)
treatment approved for patients with multiple myeloma.

Argenx

•

In January 2021, argenx initiated a Phase 3 study of ARGX-113 utilizing ENHANZE in pemphigus vulgaris (PV), a
rare autoimmune disease that causes painful blisters on the skin and mucous membranes.

In December 2020, argenx initiated a Phase 3 study of ARGX-113 using ENHANZE technology for patients with
immune thrombocytopenia (ITP), an immune disorder in which the blood does not clot normally, triggering a $15.0
million payment.

In October 2020, we announced that argenx expanded the existing global collaboration and license agreement that was
signed in February 2019. Under the newly announced expansion, argenx gained the ability to exclusively access our
ENHANZE technology for three additional targets upon nomination, for a total of up to six targets. To date, argenx has
nominated two targets including the human neonatal Fc receptor FcRn and complement component C2.

Roche

•

In December 2020, Roche initiated a Phase 3 study in patients with non-small cell lung cancer for Tecentriq using
ENHANZE technology, triggering a $17.0 million payment.

In December 2020, we announced that the European Commission approved Roche's Phesgo, a fixed-dose combination
of Perjeta (pertuzumab) and Herceptin (trastuzumab) with ENHANZE technology, administered by subcutaneous
injection for the treatment of patients with early and metastatic HER2-positive breast cancer. This is the first time the
European Commission has approved a product combining two monoclonal antibodies that can be administered by a
single subcutaneous injection utilizing ENHANZE technology.

In June 2020, we announced that Roche received FDA approval of Phesgo utilizing ENHANZE technology for the
treatment of patients with HER2-positive breast cancer.

•

Horizon

In November 2020, we announced a global collaboration and license agreement that gives Horizon exclusive access to
ENHANZE technology for SC formulation of medicines targeting IGF-1R. Horizon intends to use ENHANZE to
develop a SC formulation of TEPEZZA (teprotumumab-trbw), indicated for the treatment of thyroid eye disease, a
serious, progressive and vision-threatening rare autoimmune disease, potentially shortening drug administration time,
reducing healthcare practitioner time and offering additional flexibility and convenience for patients.

Baxalta

In September 2020, Takeda announced that the EMA approved a label update for HYQVIA broadening its use and
making it the first and only facilitated subcutaneous immunoglobulin replacement therapy in adults, adolescents and
children with an expanded range of secondary immunodeficiencies (SID).

BMS

In June 2020, BMS selected 3 targets on an exclusive basis and exercised their option to convert a co-exclusive license
to an exclusive license, triggering a $5.0 million payment. BMS has selected eight targets on an exclusive basis to date.

Corporate

In March 2020, Hylenex, which was approved in an NDA, was deemed to be an approved Biologics License
Application (BLA) under section 351(a) of the Public Health Service Act (PHS Act). A portion of our competition
comes from compounding pharmacies, which are prohibited from compounding biologic products per the Drug
Quality & Security Act (DQSA). As hyaluronidase is now considered a biologic, this change may benefit sales of
Hylenex.

During 2020 we repurchased 6.5 million shares of common stock in open market and accelerated share repurchases for
$150.0 million at an average price per share of $23.05. Since the inception of our capital return program in November
2019 to repurchase up to $550.0 million of outstanding common stock over a three-year period, we have repurchased a
total of 17.6 million shares for $350.0 million at an average price per share of $19.88 as of December 31, 2020.

Results of Operations

Comparison of Years Ended December 31, 2020 and 2019

Royalties – Royalty revenue was $88.6 million in 2020 compared to $69.9 million in 2019. The increase was mainly
driven by sales of DARZALEX FASPRO in the U.S and EU by Janssen due to the product launch in the second quarter of
2020, partially offset by slightly lower sales of Herceptin SC and MabThera SC by Roche. In general, we expect royalty
revenue to grow as a result of our recent ENHANZE partner product launches, offsetting the ongoing impact from biosimilars
in Europe related to our mature ENHANZE partner products.

Product Sales, Net – Product sales, net were as follows (in thousands):

Sales of bulk rHuPH20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of ENHANZE drug product . . . . . . . . . . . . . . . . . . . .
Sales of Hylenex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total product sales, net . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,

2020
38,237 $
719
17,031
55,987 $

2019
48,285
768
16,995
66,048

Dollar Change
(10,048)
$
(49)
36
(10,061)

Percentage
Change

(21) %
(6) %
— %
(15) %

Product sales, net was lower by $10.1 million in 2020 compared to 2019, due to lower sales of rHuPH20 as a result of a
one-off large partner order in 2019. We expect that product sales of bulk rHuPH20 and ENHANZE drug product will fluctuate
in future periods based on the needs of our collaborators. In March 2020, the Surgeon General advised hospitals to cancel
elective surgeries due to COVID-19. Hylenex is used in cataract surgery and other ophthalmologic surgeries, and therefore the
advisory resulted in a decrease in sales of Hylenex in the second quarter of 2020. Most states resumed elective surgeries in
April and May of 2020 which supported an increase in sales in the second half of 2020.

Revenues Under Collaborative Agreements – Revenues under collaborative agreements were as follows (in thousands):

Year Ended December 31,

2020

2019

Dollar Change

Percentage
Change

Upfront license fees, license fees for the election of additional
targets, event-based payments, license maintenance fees and
amortization of deferred upfront and other license fees:

Janssen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Horizon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Roche . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
argenx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

BMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reimbursements for research and development services: . .
Total revenues under collaborative agreements . . . . .

42,000 $
30,000
17,000
20,000
12,264
500
121,764
1,247
123,011 $

—
—
10,000
45,000
—
3,500
58,500
1,545
60,045

42,000
30,000
7,000
(25,000)
12,264
(3,000)
63,264
(298)
62,966

100 %
100 %
70 %
(56) %
100 %
(86) %
108 %
(19) %
105 %

Revenue from license fees increased $63.3 million in 2020, compared to 2019 mainly due to the recognition of $121.3
million related to the Janssen, Horizon, Roche, argenx and BMS collaborations in the current year, as compared to $55.0
million recognized in connection with argenx and Roche collaboration in 2019. Revenue from upfront licenses fees, license
fees for the election of additional targets, license maintenance fees and other license fees and event-based payments vary from
period to period based on our ENHANZE collaboration activity. We expect these revenues to continue to fluctuate in future
periods based on our collaborators’ ability to meet various clinical and regulatory milestones set forth in such agreements and
our ability to obtain new collaborative agreements. To date, based on current partner communications, we have not identified
any COVID-19 related delays that will materially impact our ENHANZE milestone revenue. We will continue to monitor the
ENHANZE development activities of our partners and the impact of their plans on our milestone revenue, as there may be
potential for COVID-19 related delays.

Cost of Product Sales –Cost of product sales were $43.4 million in 2020 compared to $45.5 million in 2019. The decrease
of $2.1 million in cost of product sales was mainly due to a decrease in sales of bulk rHuPH20 to Janssen, partially offset by an
increase in sales of bulk rHuPH20 to Baxalta and Roche.

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 were as follows (in thousands):

Year Ended December 31,

2020

2019

Dollar Change

Percentage
Change

Programs

PEGPH20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ENHANZE collaborations and rHuPH20 platform . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total research and development expenses . . . . . . . . .

7,201 $
—
26,002
1,033
34,236 $

103,150
17,201
18,896
1,584
140,831

(95,949)
(17,201)
7,106
(551)
$ (106,595)

(93) %
(100) %
38 %
(35) %
(76) %

Research and development expenses relating to our PEGPH20 programs for 2020 decreased by 93%, compared to the
same period in 2019, primarily due to decreased clinical trial activities. On November 4, 2019, we announced that the
HALO-301 clinical study failed to reach the primary endpoint of overall survival. As a result, we halted development activities
for PEGPH20, closed our oncology operations and began the close out process for all our clinical trials. We implemented an
organizational restructuring to focus our operations solely on ENHANZE, which was completed in the second quarter of 2020
and resulted in a reduction in research and development expenses.

Research and development expenses relating to our ENHANZE collaborations and our rHuPH20 platform for 2020
increased by 38%, compared to 2019, primarily due to increased costs to support additional ENHANZE targets and a higher
allocation of overhead costs. The rHuPH20 platform includes research and development expenses related to our proprietary
rHuPH20 enzyme that were not designated to a specific program at the time the expenses were incurred.

Selling, General and Administrative – Selling, general and administrative (SG&A) expenses were $45.7 million in 2020
compared to $77.3 million in 2019. The decrease of $31.6 million, or 41%, was primarily due to a decrease in compensation
expense, one time restructuring cost in the prior year and discontinuation of commercial expenses related to market research
and educational activities as we prepared for a potential commercial launch of PEGPH20. The discontinuation of our
development activities for PEGPH20 and closure of our oncology operations resulted in a reduction in commercialization
activities and compensation expense.

Interest Expense – Interest expense was $20.4 million in 2020 compared to $11.6 million in 2019. The increase of $8.8
million was primarily due to interest expense related to the Convertible Notes, offset by a discontinuation in interest expense for
the Royalty-backed Loan and the Oxford and SVB Loan following the repayment of those obligations. We expect interest
expense related to the Convertible Notes to decrease by approximately $12.0 million in 2021 as the non-cash interest expense
associated with the amortization of the equity component of Convertible Notes will be eliminated upon the adoption of ASU
2020-06.

Comparison of Years Ended December 31, 2019 and 2018

For discussion related to changes in financial condition and the results of operations for fiscal year 2019 compared to
fiscal year 2018, refer to Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, which was
filed with the SEC on February 24, 2020.

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, 2020, we had cash, cash equivalents and marketable securities of $368.0 million. We believe that our current
cash, cash equivalents and marketable securities will be sufficient to fund our operations for at least the next twelve months. We
expect to fund our operations going forward with existing cash resources, anticipated revenues from our existing collaborations
and cash that we may raise through future transactions. We may raise cash through any one of the following financing vehicles:
(i) new collaborative agreements; (ii) expansions or revisions to existing collaborative relationships; (iii) private financings;
(iv) other equity or debt financings; (v) monetizing assets; and/or (vi) the public offering of securities.

We may, in the future, offer and sell additional equity, debt securities and warrants to purchase any of such securities,
either individually or in units to raise capital to raise funds for additional working capital, capital expenditures, share
repurchases, acquisitions or for other general corporate purposes.

Cash Flows

Operating Activities

Net cash provided by operations was $55.5 million in 2020 compared to cash used in by operation $85.4 million in 2019.
The $140.9 million increase in cash provided by operations was mainly due to an increase in cash received related to
collaboration partner license of $119.0 million during the current year, offset by $55.0 million owed from argenx and Roche for
license fees in the prior year, and an increase in working capital spend for 2020 compared to the prior year.

Investing Activities

Net cash provided by investing activities was $78.4 million in 2020 compared to net cash used in by investing activities
$5.5 million in 2019. The increase in net cash provided by investing activities was primarily due to the increase in proceeds
from maturities of marketable securities for 2020.

Financing Activities

Net cash used in financing activities was $106.3 million in 2020, compared to net cash provided by financing activities of
$153.2 million in 2019, mainly due to a decrease in cash proceeds from issuance of long-term debt, offset by a decrease of
$49.9 million in repurchase of common stock, a $49.2 million increase in net proceeds from the issuance of common stock
under equity incentive plans and a decrease in the amount of repayments of long-term debt of $88.5 million in 2020.

Share Repurchases

The Board of Directors approved a share repurchase program, pursuant to which we may repurchase our issued and
outstanding shares of common stock from time to time. The Company retired the repurchased shares. See Note 8. Stockholders’
Equity, within the notes to the consolidated financial statements for additional information regarding our share repurchases.

Debt

Convertible Notes

In November 2019, we completed the sale of $460.0 million in aggregate principal amount of 1.25% Convertible Senior
Notes due in 2024 (Convertible Notes) in a private placement to qualified institutional buyers. We received net proceeds from
the offering of approximately $447.4 million. We used $200.0 million of the net proceeds from the offering to repurchase
shares of our common stock, including approximately $143.1 million to repurchase approximately 8.1 million shares of
common stock concurrently with the offering in privately negotiated transactions, $6.9 million in open market purchases and
$50.0 million to repurchase approximately 2.6 million shares of common stock through an accelerated share repurchase
agreement.

We used approximately $26.1 million of the net proceeds from the offering to repay all outstanding amounts under our
loan agreement with Oxford Finance and Silicon Valley Bank and intend to use the remainder of the net proceeds for general
corporate purposes, including additional share repurchases subsequent to the offering, and working capital.

The Convertible Notes will pay interest semi-annually in arrears on June 1st and December 1st of each year, beginning on
June 1, 2020, at an annual rate of 1.25% and will be convertible into cash, shares of common stock or a combination of cash
and shares of common stock, at our election, based on the applicable conversion rate at such time. The Convertible Notes are
general unsecured obligations and will rank senior in right of payment to all indebtedness that is expressly subordinated in right
of payment to the Convertible Notes, will rank equally in right of payment with all existing and future liabilities that are not so
subordinated, will be effectively junior to any secured indebtedness to the extent of the value of the assets securing such
indebtedness and will be structurally subordinated to all indebtedness and other liabilities (including trade payables) of our
current or future subsidiaries.

Holders may convert their Convertible Notes at their option only in the following circumstances: (1) during any calendar
quarter commencing after the calendar quarter ending on March 31, 2020, if the last reported sale price per share of common
stock exceeds 130% of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending
on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business
days immediately after any five consecutive trading day period (such five consecutive trading day period, the “measurement
period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was
less than 98% of the product of the last reported sale price per share of Company’s common stock on such trading day and the
conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on Company’s
common stock, as described in the offering memorandum; (4) if we call such notes for redemption; and (5) at any time from,
and including, June 1, 2024 until the close of business on the scheduled trading day immediately before the maturity date of
December 1, 2024. The Convertible Notes will be convertible, regardless of the foregoing circumstances, at any time from, and
including, June 1, 2024 until the close of business on the scheduled trading day immediately preceding the maturity date.

In January 2021, we notified the note holders that we will settle the principal of the Convertible Notes in cash. Therefore,
upon conversion, the principal value of the Convertible Notes will be paid in cash and depending on our stock price, any
additional amount over principal amount will be settled in shares of common stock. The initial conversion rate for the
Convertible Notes will be 41.9208 shares of common stock per $1,000 in principal amount of Convertible Notes, equivalent to
a conversion price of approximately $23.85 per share of our common stock. The conversion rate is subject to adjustment as
described in the Indenture.

Upon the occurrence of certain circumstances, holders of the Convertible Notes may require us to purchase all or portion
of their notes for cash, which may require the use of a substantial amount of cash. As of December 31, 2020, the conditional
conversion feature was triggered and our notes are classified as a current liability. At December 31, 2020, we had a working
capital position of $133.4 million, which includes the Convertible Notes that are currently redeemable as of December 31, 2020
but excludes another $65.6 million that is classified as equity. The debt may change from current to non-current period over
period, primarily as a result of changes in our stock price. We believe that it is remote that holders of the notes would choose to
convert their notes early because the fair value of the security that a note holder can currently realize in an active market is
greater than the conversion value the note holder would realize upon early conversion. In the unlikely event that all the debt was
converted, we will have two business days following a forty trading day observation period from the conversion date to pay the
principal in cash. For the year ended December 31, 2020, we have positive operating income and positive cash flow from
operations and, accordingly, while there can be no assurance, we believe we have the ability to generate sufficient cash flows
from operations or to raise additional capital through a variety of financing arrangements to satisfy early conversion of the
Convertible Notes.

Royalty-backed Loan

In January 2016, through our wholly-owned subsidiary Halozyme Royalty LLC (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. transferred to Halozyme Royalty the right to receive royalty payments from the
commercial sales of ENHANZE products owed under the Roche Collaboration and Baxalta Collaboration (Collaboration
Agreements). The royalty payments from the Collaboration Agreements were used to repay the principal and interest on the
loan (the Royalty Payments). The Royalty-backed Loan bore interest at a per annum rate of 8.75% plus the three-month LIBOR
rate. The three-month LIBOR rate was subject to a floor of 0.7% and a cap of 1.5%. In June 2020, we paid the full remaining
balance and final payment of $2.93 million thereby satisfying and discharging all obligations under, and terminating, the
Royalty-backed Loan.

Oxford and SVB Loan and Security Agreement

In June 2016, we entered into a Loan and Security Agreement (the Loan Agreement) with Oxford Finance LLC (Oxford)
and Silicon Valley Bank (SVB) (collectively, the Lenders), providing a senior secured loan facility of up to an aggregate
principal amount of $70.0 million, comprising a $55.0 million draw in June 2016 and an additional $15.0 million tranche,
which we had the option to draw during the second quarter of 2017 and did not exercise. The proceeds were partially used to
pay the outstanding principal and final payment owed on a previous loan agreement with the Lenders. The remaining proceeds
were used for working capital and general business requirements. The Loan Agreement repayment schedule provided for
interest only payments for the first 18 months, followed by consecutive equal monthly payments of principal and interest in
arrears through the maturity date of January 1, 2021. The Loan Agreement provided for a final payment equal to 5.50% of the
initial $55 million principal amount. The final payment was due when the Loan Agreement becomes due or upon the
prepayment of the facility. We had the option to prepay the outstanding balance of the Loan Agreement in full and exercised
this option in November 2019, at which point we paid the full remaining balance and final payment of $26.1 million, thereby
satisfying and discharging all obligations under, and terminating, the Loan Agreement.

Off-Balance Sheet Arrangements

As of December 31, 2020, 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 relationships.

Contractual Obligations

As of December 31, 2020, future minimum payments due under our contractual obligations are as follows (in thousands):

Payments Due by Period

Contractual Obligations
Short-term debt(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on short-term debt(2) . . . . . . . . . . . . . . . . . . . . . . . .
Operating leases(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third-party manufacturing obligations(4) . . . . . . . . . . . . . .
Purchase obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

_______________

(1). Short-term debt consists of the Convertible Notes.

Less than
1 Year

Total

1-3 Years

$ 460,000 $ 460,000 $

4-5 Years
— $ —
—
—
—
2,714
—
30,646
—
644
$ 549,725 $ 515,721 $ 34,004 $ —

5,750
2,563
46,884
524

5,750
5,277
77,530
1,168

More than
5 Years
$ —
—
—
—
—
$ —

(2).

(3).

Interest on short-term debt includes semi-annual interest payments on the Convertible Note. The Convertible Note
bears interest at an annual rate of 1.25%.

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.

Contractual obligations for purchases of goods or services include agreements that are enforceable and legally binding to
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 certain 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 and development 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 and milestones from our collaborators;

the amount of product sales for Hylenex recombinant;

the costs of obtaining and validating additional manufacturers of rHuPH20;

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 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. Our significant
accounting policies are outlined in Note 2 to the Consolidated Financial Statements included in the Form 10-K. 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

Methodology

Judgment and Uncertainties

Revenue is recognized when we
determine it is probable a milestone
will be achieved. This assessment is
based on our past experience with
our collaboration partners, market
insight and partner communication.

Effect if Actual Results Differ From
Assumptions

A revenue reversal will be required in
the event it is determined that
achievement of a milestone, previously
deemed probable, will not occur. This
reversal may be material.

For collaborative agreements, we are entitled
to receive event-based payments subject to
the collaboration partner's achievement of
specified development and regulatory
milestones. We recognize revenue when it is
deemed probable that these milestones will
be achieved, which could be in a period prior
to its actual occurrence. At the end of each
reporting period, we re-evaluate the
probability of achievement of such
milestones, and if necessary, adjust our
estimate of the overall transaction price.

For collaborative agreements, royalty
revenue is recognized in the period the
underlying sales occur, but we do not receive
final royalty reports from our collaboration
partners until after we complete our financial
statements for a prior quarter. Therefore, we
recognize revenue based on estimates of the
royalty earned, which are based on
preliminary reports provided by our
collaboration partners.

For collaborative arrangements, when
necessary, we perform an allocation of the
upfront amount based on relative stand-alone
selling prices (SSP) of licenses for individual
targets. We determine
license SSP using an income-based valuation
approach utilizing risk-adjusted discounted
cash flow projections.

The amount of royalty revenue
recognized for the quarter is
estimated using our knowledge of
past royalty payments, market
insight and an estimate made by our
collaboration partners provided in a
preliminary report.

A final royalty report and associated
royalty payment is received
approximately 60 days after quarter-
end. If necessary, a true-up is recorded
at that time if there is a difference from
the initial estimated royalty revenue
recorded. To date, the true-up entries
have not been material.

The inputs used in the valuation
model to determine SSP are based
on estimates utilizing market data
and information provided by our
collaboration partners.

Differences in the allocation of the
transaction price between delivered and
undelivered performance obligations
can impact the timing of revenue
recognition but do not change the total
revenue recognized under any
agreement.

Share-Based Payments

Methodology

Judgment and Uncertainties

We maintain a Stock Incentive Plan, which
provides for share-based payment awards,
including stock options, restricted stock and
performance awards. We determine the fair
value of our stock option awards and
performance awards at the date of grant
using a Black-Scholes model. We determine
the fair value of our restricted stock awards
at the date of grant using the closing market
value of our common stock on the date of
grant.

Option-pricing models and generally
accepted valuation techniques
require management to make
assumptions and to apply judgment
to determine the fair value of our
awards. These assumptions and
judgments include estimating the
future volatility of our stock price,
expected dividend yield and future
employee stock option exercise
behaviors. Changes in these
assumptions can materially affect
the fair value estimate.

Our performance awards require
management to make assumptions
regarding the likelihood of
achieving long-term Company
goals.

Valuation Allowance
A valuation allowance has been established
to offset the net deferred tax assets as
realization of such assets is uncertain. We
intend to continue maintaining a full
valuation allowance on our DTAs until there
is sufficient evidence to support the reversal
of all or some portion of these allowances

We have considered future taxable
income and tax planning strategies
in assessing the need for a valuation
allowance. Both future taxable
income and tax planning strategies
include a number of estimates.

Effect if Actual Results Differ From
Assumptions

We do not currently believe there is a
reasonable likelihood that there will be
a material change in estimates or
assumptions we use to determine stock-
based compensation expense. However,
if actual results are not consistent with
our estimates or assumptions, we may
be exposed to changes in share-based
compensation expense that could be
material.

If actual results are not consistent with
the assumptions used, the share-based
compensation expense reported in our
financial statements may not be
representative of the actual economic
cost of the share-based compensation.
A 10% change in our share-based
compensation expense for the year
ended December 31, 2020 would have
affected pre-tax earnings by
approximately $1.7 million in 2020.

Given our current earnings and
anticipated future earnings, we believe
that there is a reasonable possibility
that within the next 12 months,
sufficient positive evidence may
become available to reach a conclusion
that a significant portion of the
valuation allowance will no longer be
needed. Release of the valuation
allowance would result in the
recognition of certain DTAs and a
decrease to income tax expense for the
period the release is recorded.

Recent Accounting Pronouncements

Refer to Note 2, Summary of Significant Accounting Policies, 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, 2020, our cash equivalents and marketable securities consisted of investments in money market
funds, asset-backed securities, U.S. Treasury securities, corporate debt obligations and commercial paper. These investments
were made in accordance with our investment policy which specifies the categories, allocations, and ratings of securities we
may consider for investment. The primary objective of our investment activities is to preserve principal while at the same time
maximizing the income we receive without significantly increasing risk. Some of the financial instruments that we invest in
could be subject to market risk. This means that a change in prevailing interest rates may cause the value of the instruments to
fluctuate. For example, if we purchase a security that was issued with a fixed interest rate and the prevailing interest rate later
rises, the value of that security will probably decline. Based on our current investment portfolio as of December 31, 2020, 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. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in
our Exchange Act reports is recorded, processed, summarized and reported within the timelines specified in the Securities and
Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decision regarding required
disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control
objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision and with the participation of our management, including our principal executive officer and
principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under
Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal
executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of
the end of the period covered by this 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, 2020 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 Exchange Act
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, 2020. 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, 2020, our internal control over financial reporting is effective
based on the COSO criteria. 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, 2020. The report appears below.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Halozyme Therapeutics, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Halozyme Therapeutics, Inc.’s internal control over financial reporting as of December 31, 2020, 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). In our opinion, Halozyme Therapeutics, Inc. (the Company)
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the
COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, and the related
consolidated statements of operations, comprehensive (loss) income, cash flows, and stockholders’ equity (deficit) for each of
the three years in the period ended December 31, 2020, and the related notes and the financial statement schedule listed in the
Index at Item 15(a) and our report dated February 23, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’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 are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. 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.

Definition and Limitations of Internal Control Over Financial Reporting

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.

/s/ Ernst & Young LLP

San Diego, California
February 23, 2021

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 2021 Annual Meeting
of Stockholders under the heading “Election of Directors.” 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 and Corporate Governance
Guidelines” 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. (58), 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 Quest Diagnostics Incorporated, a diagnostic information services company. Within the past five years,
Dr. Torley served 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).

Elaine Sun (49), Senior Vice President, Chief Financial Officer. Ms. Sun joined Halozyme in March 2020 as Senior Vice
President, Chief Financial Officer. Prior to joining Halozyme, from January 2017 to December 2019, Ms. Sun served in senior
management positions at Sutrovax, Inc., a biopharmaceutical company, most recently serving as Chief Financial Officer and
Chief Strategy Officer. From 2013 to December 2016, Ms. Sun was an independent financial advisory consultant for private
and public healthcare companies. From 2009 to 2012, Ms. Sun served as Managing Director and Head of West Coast
Healthcare at Evercore Partners, a leading M&A advisory firm, where she led Evercore’s U.S. life sciences efforts. From 2005
to 2008, Ms. Sun served as Managing Director, Healthcare Investment Banking at Merrill Lynch & Co. Ms. Sun received her
MBA degree from Harvard Business School and her Bachelor of Arts degree from Wellesley College.

Masaru Matsuda (50), Senior Vice President, General Counsel, Chief Compliance Officer & Secretary. Mr. Matsuda
joined Halozyme in August 2018 as Vice President, Associate General Counsel and Chief Compliance Officer and has served
as Senior Vice President, General Counsel, Chief Compliance Officer and Secretary since January 2020. Prior to joining
Halozyme, Mr. Matsuda held positions of increasing responsibility in the Law Department at Amgen Inc., a biopharmaceutical
company, from May 2000 to August 2018, most recently as Vice President, Law, Global Commercial Operations. Prior to
joining Amgen, Mr. Matsuda was an associate attorney at Orrick, Herrington & Sutcliffe LLP from June 1998 to April 2000,

and at Pillsbury Winthrop Shaw Pittman LLP from June 1996 to June 1998. Mr. Matsuda received his Juris Doctor from the
University of California, Hastings College of the Law and his Bachelor of Science Degree in Business Administration from the
University of Southern California.

Michael J. LaBarre (57), Senior Vice President, Chief Technical Officer. Dr. LaBarre joined Halozyme in June 2008 as
Vice President, Product Development and has served in various officer positions most recently as Senior Vice President, Chief
Technical Officer since January 2020. Prior to joining Halozyme, Dr. LaBarre served as Vice President, Product Development
at Paramount BioSciences, a pharmaceutical company, from April 2006 to June 2008. Prior to that he served as Director,
Analytical and Protein Biochemistry, Discovery Research at Biogen Idec, a pharmaceutical company, from December 2003 to
April 2006. He also served in various research and development roles at IDEC Pharmaceuticals Corporation, a pharmaceutical
company, from November 1995 to December 2003 most recently as Director, Analytical and Formulation Sciences, R&D.
Prior to joining IDEC, Dr. LaBarre held research and development positions at various pharmaceutical companies from July
1992 to November 1995. Dr. LaBarre received his Ph.D. in Chemistry from the University of Arizona and his B.S. in
Chemistry from Southampton College of Long Island University.

Item 11. Executive Compensation

The information required by this item is incorporated by reference to the information under the captions “Executive
Compensation and Related Information” and “Compensation Committee Interlocks and Insider Participation” 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, 2020:

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,
Restricted Stock
Units and
Performance Stock
Units
(a)

Weighted
Average
Exercise Price
of Outstanding
Options
(b)

(2)

6,704,330

—
6,704,330

$15.83

—
$15.83

Number of Shares
Remaining Available
for Future Issuance
under Equity
Compensation
Plans (Excluding
Shares Reflected
in Column (a))
(c)

10,806,631

—
10,806,631

_____________________

(1) Represents stock options, restricted stock units, and performance stock units under the Amended and Restated 2011

Stock Plan.

(2) This amount does not include restricted stock units and performance 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” and “Corporate Governance - Director Independence” 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.

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, 2020 and 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Operations for Each of the Years Ended December 31, 2020, 2019 and 2018 . . . . . .
Consolidated Statements of Comprehensive Income (Loss) for Each of the Years Ended December 31, 2020,
2019 and 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for Each of the Years Ended December 31, 2020, 2019 and 2018 . . . . . .
Consolidated Statements of Stockholders’ Equity for Each of the Years Ended December 31, 2020,
2019 and 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

F-1

F-3
F-4

F-5
F-6

F-8

F-9

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 and should be read in conjunction with the consolidated financial statements of Halozyme Therapeutics,
Inc.

Schedule II: Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

F-38

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.

Exhibit Title

Herewith

Form

Date Filed

Incorporated by
Reference

Filed

(b)

Exhibits.

Exhibit

Number

3.1

3.2

4.1

4.2

4.3

10.1

10.2

10.3#

10.4#

10.5#

10.6#

10.7#

10.8#

10.9#

Amended and Restated Certification of Incorporation

Bylaws, as amended

Indenture, dated November 18, 2019, between The Bank of New
York Mellon Trust Company, N.A., as trustee, and the Registrant

Form of Note, dated November 18, 2019, between the Bank of New
York Mellon Trust Company, N.A., as trustee, and the Registrant

Description of Securities

License Agreement between University of Connecticut and
Registrant, dated November 15, 2002

First Amendment to the License Agreement between University of
Connecticut and Registrant, dated January 9, 2006

Halozyme Therapeutics, Inc. 2011 Stock Plan (as amended through
May 2, 2018)

Form of Stock Option Agreement (2011 Stock Plan)

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)

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)

8-K

5/3/2019

12/19/2016

11/18/2019

8-K

11/18/2019

10-K

SB-2

2/24/2020

4/23/2004

8-K

1/12/2006

8-K

4/6/2018

8-K

5/6/2011

10-Q

8/10/2015

10-Q

8/10/2015

10-Q

11/9/2015

10-Q

11/9/2015

10-Q

11/9/2015

10-K

2/28/2017

10.10#

10.11#

Form of Restricted Stock Award Agreement (2011 Stock Plan -
grants made on or after 11/4/2015)

Form of Restricted Stock Units Agreement (2011 Plan - grants
made on or after 2/22/2017)

10.12#

Form of Indemnity Agreement for Directors and Executive Officers

8-K

12/20/2007

10.13#

Severance Policy

10.14#

Form of Amended and Restated Change In Control Agreement with
Officer

10.15

10.16

10.17

Lease (11404 and 11408 Sorrento Valley Road), effective as of June
10, 2011

First Amendment to Lease (11404 and 11408 Sorrento Valley
Road), dated June 30, 2017

Second Amendment to Lease (11404 and 11408 Sorrento Valley
Road), dated March 23, 2018

8-K

12/13/2018

10-Q

11/9/2015

8-K

6/16/2011

8-K

7/5/2017

10-Q

5/10/2018

Exhibit Title

Herewith

Form

Date Filed

Incorporated by
Reference

Filed

8-K

6/16/2011

8-K

7/5/2017

10-Q

5/10/2018

10-K

10-Q

3/1/2013

5/8/2013

8-K

7/5/2017

DEF-14
A
10-Q

3/23/2016

8/10/2020

Exhibit

Number

10.18

10.19

10.20

10.21

10.22

10.23

10.24#

Amended and Restated Lease (11388 Sorrento Valley Road),
effective as of June 10, 2011

First Amendment to Amended and Restated Lease (11388 Sorrento
Valley Road), dated June 30, 2017

Second Amendment to Amended and Restated Lease (11388
Sorrento Valley Road), dated March 23, 2018
Lease (11436 Sorrento Valley Road), effective as of April 2013

First Modification to Lease (11436 Sorrento Valley Road)

Second Modification to Lease (11436 Sorrento Valley Road), dated
June 30, 2017
Halozyme Therapeutics, Inc. Executive Incentive Plan

10.25#

Form of PSU Agreement

10.26#
21.1
23.1
31.1

31.2

Form of PSU Agreement
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 - the instance document does not appear

in the interactive Data File because its XBRL tags are embedded
within the Inline XBRL 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

104

Cover Page Interactive Data File (formatted as inline XBRL and
contained in Exhibit 101)

____________

Indicates management contract or compensatory plan or arrangement.

(c)

Financial Statement Schedules. See Item 15(a) 2 above.

X
X
X
X

Item 16. Form 10-K Summary

None.

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.

SIGNATURES

Date:

February 23, 2021

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 Elaine Sun, and each of them, as his/her true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him/her and in his/her 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/she 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/her 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 23, 2021

/s/ Elaine Sun

Elaine Sun

/s/ Connie L. Matsui

Connie L. Matsui

/s/ Jean-Pierre Bizzari

Jean-Pierre Bizzari

/s/ Bernadette Connaughton

Bernadette Connaughton

/s/ James M. Daly

James M. Daly

/s/ Jeffrey W. Henderson

Jeffrey W. Henderson

/s/ Kenneth J. Kelley

Kenneth J. Kelley

/s/ Matthew L. Posard

Matthew L. Posard

Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

February 23, 2021

Chair of the Board of Directors

February 23, 2021

Director

February 23, 2021

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Halozyme Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Halozyme Therapeutics, Inc. (the Company) as of
December 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive (loss) income,
stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2020, and the related
notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial statements referred to above, present fairly, in all material
respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting
principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, 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 23, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures
that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of this critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit
matter or on the accounts or disclosures to which it relates.

F-1

Estimation of Overall Transaction Price for Collaboration Agreements

Description of the Matter

How We Addressed the Matter in Our
Audit

At December 31, 2020 the Company has ten collaboration agreements. As
discussed in Notes 2 and 4 of the financial statements, amounts are
included in the transaction price when management determines that it is
probable that the amount will not result in a significant reversal of revenue
in the future. During 2020, the Company recognized $69.5 million of
variable consideration in the transaction price under their collaboration
arrangements.

Auditing management’s conclusions related to determining the probability
of achievement of milestones is complex and highly judgmental as a result
of the uncertainties and limited visibility by the Company into the
progression of developing and commercializing the combined targets as
completed by the collaboration partners

We obtained an understanding and evaluated the design and tested the
operating effectiveness of controls over the Company’s process to
routinely evaluate the probability of achievement of milestones and any
related constraint for each collaboration, in addition to the controls over the
completeness and accuracy of determining the population of agreements
and potential milestone payments.

To test the milestone amounts included, or excluded, from the transaction
price, we performed audit procedures that included, among others,
observing the quarterly meetings with accounting and Alliance Managers
discussing the status of each collaboration. For each milestone, we
examined available evidence including correspondence with the
collaboration partner and evaluated management’s conclusions on the
probabilities of achievement. We reviewed supporting documentation to
corroborate that milestones were included in the transaction price when
determined to be probable of achievement. We reviewed the collaboration
agreements and related amendments to validate the completeness of the list
of targets and potential milestone payments that management considered in
their analysis. We performed a lookback analysis to validate the company’s
accuracy of determining the probability of achieving these milestones.

We have served as the Company’s auditor since 2006.

/s/ Ernst & Young LLP

San Diego, California
February 23, 2021

F-2

HALOZYME THERAPEUTICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)

December 31,
2020

December 31,
2019

Current assets:

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Marketable securities, available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net and other contract assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Current liabilities:

LIABILITIES AND STOCKHOLDERS’ EQUITY

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:

147,703
220,310
97,730
60,747
28,274
554,764
10,593
14,067
500
579,924

1,928
20,483
1,746
397,228
421,385
4,026
—
3,466

120,179
301,083
59,442
29,359
33,373
543,436
10,855
11,083
500
565,874

6,434
55,649
4,012
19,542
85,637
1,247
383,045
4,180

Preferred stock - $0.001 par value; 20,000 shares authorized; no shares
issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock - $0.001 par value; 300,000 shares authorized; 135,030 and
136,713 shares issued and outstanding at December 31, 2020 and 2019,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

—

135
625,483
22
(474,593)
151,047
579,924

137
695,066
240
(603,678)
91,765
565,874

See accompanying notes to consolidated financial statements.

F-3

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

Year Ended December 31,

2020

2019

2018

Revenues:

Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

88,596

69,899

Product sales, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Revenues under collaborative agreements . . . . . . . . . . . . . . . . . . . . . . .

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating expenses:

Cost of product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):

Investment and other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55,987

123,011

267,594

43,367

34,236

45,736

123,339

144,255

5,425

(20,378)

129,302

217

66,048

60,045

195,992

45,546

140,804

77,252

263,602

78,981

28,234

44,647

151,862

10,136

150,252

60,804

221,192

(67,610)

(69,330)

6,986

(11,627)

(72,251)

(11)

7,578

(18,041)

(79,793)

537

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

129,085

(72,240) $

(80,330)

Net income (loss) per share: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

0.95
0.91

$
$

(0.50) $
(0.50) $

(0.56)
(0.56)

Shares used in computing net income (loss) per share: . . . . . . . . . . . . . . . . .
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

136,206
141,463

144,329
144,329

143,599
143,599

See accompanying notes to consolidated financial statements.

F-4

HALOZYME THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)

Year Ended December 31,

2020

2019

2018

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

129,085

(72,240) $

(80,330)

Other comprehensive (loss) income:

Unrealized (loss) gain on marketable securities . . . . . . . . . . . . . . . . . .

Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . .

Unrealized loss on foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . .

(164)

(32)

(22)

508

—

182

(8)

(1)

Total comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

128,867

(71,723) $

(80,157)

See accompanying notes to consolidated financial statements.

F-5

HALOZYME THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Operating activities:

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:

Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of premiums (accretion of discounts) on marketable
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on disposal of equipment . . . . . . . . . . . . . . . . . . . . . . . .
Deferral of unearned revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recognition of deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferral of lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on impairment of right-of-use asset . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in operating assets and liabilities:

Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . .
Net cash provided (used in) by operating activities . . . . . . . . . . . . . . . . . . . .
Investing activities:

Purchases of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from maturities of marketable securities . . . . . . . . . . . . . . . . . .
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from disposal of property and equipment . . . . . . . . . . . . . . . . .
Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . . .
Financing activities:

Proceeds from issuance of long-term debt, net . . . . . . . . . . . . . . . . . . . . .
Repayment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of debt issuance cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock under equity incentive plans,
net of taxes paid related to net share settlement . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash, cash equivalents and restricted cash . . . . . . .
Cash, cash equivalents and restricted cash at beginning of period . . . . . . . . .
Cash, cash equivalents and restricted cash at end of period . . . . . . . . . . . . . .

Year Ended December 31,
2019

2020

2018

129,085

(72,240) $

(80,330)

17,204
3,284
14,136

839
(772)
4,632
(4,119)
(1,033)
577
—
(13)

(38,288)
(31,388)
2,518
(41,208)
55,454

(226,185)
305,967
(2,504)
1,076
78,354

—
(19,560)
—
(150,117)

63,393
(106,284)
27,524
120,679
148,203

34,776
4,068
2,484

(2,469)
1,431
—
(3,996)
(459)
1,127
401
(7)

(29,437)
(6,734)
(19,006)
4,638
(85,423)

(389,759)
388,250
(4,040)
—
(5,549)

447,350
(108,082)
(279)
(199,998)

35,696
2,388
1,545

(3,090)
5
3,000
(2,832)
(7)
—
—
(9)

11,613
(17,480)
(5,695)
5,696
(49,500)

(311,112)
318,268
(4,663)
—
2,493

—
(77,516)
—
—

14,224
153,215
62,243
58,436
120,679

13,719
(63,797)
(110,804)
169,240
58,436

F-6

Year Ended December 31,
2019

2020

2018

Supplemental disclosure of cash flow information:

Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Supplemental disclosure of non-cash investing and financing activities:

Amounts accrued for purchases of property and equipment . . . . . . . . . . . . . $
Debt issuance cost included in accounts payable . . . . . . . . . . . . . . . . . . . . . $
$
Right-of-use assets obtained in exchange for lease obligation . . . . . . . . . . .
$
Leasehold improvements paid by lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,534
180

117
—
1,746
—

$
$

$
$
$
$

9,029
188

61
68
897
—

$
$

$
$
$
$

16,891
220

542
—
—
1,322

See accompanying notes to consolidated financial statements.

F-7

HALOZYME THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)

Common Stock

Amount

Additional
Paid-In
Capital

Accumulated
Other
Comprehensive
Income (Loss)

Accumulated
Deficit

Total
Stockholders’
Equity
(Deficit)

BALANCE AT DECEMBER 31, 2017 . . . . . . . .

142,789

143

$ 731,044 $

(450) $

(522,371) $

208,366

Adjustment to beginning retained earnings . . . . .

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, net . . . . . . . .

Other comprehensive income . . . . . . . . . . . . . . . .

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

1,932

—

35,696

13,717

—

173

—

71,263

—

35,696

13,719

—

173

(80,330)

BALANCE AT DECEMBER 31, 2018 . . . . . . . .

144,725

145

$ 780,457 $

(277) $

(531,438) $

248,887

Share-based compensation expense . . . . . . . . . . .

—

34,776

Issuance of common stock pursuant to exercise of
stock options and vesting of restricted stock units
and performance restricted stock units, net . . . . .

2,493

Issuance of restricted stock awards, net . . . . . . . .

—

14,222

—

Repurchase of common stock . . . . . . . . . . . . . . . .

(10,579)

(10)

(199,988)

Equity component of convertible notes . . . . . . . .

Other comprehensive income . . . . . . . . . . . . . . . .

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

65,599

—

517

—

34,776

14,224

—

(199,998)

65,599

517

(72,240)

BALANCE AT DECEMBER 31, 2019 . . . . . . . .

136,713

137

$ 695,066 $

240

(603,678) $

91,765

Share-based compensation expense . . . . . . . . . . .

—

17,204

Issuance of common stock pursuant to exercise of
stock options and vesting of restricted stock units
and performance restricted stock units, net . . . . .

5,278

63,388

Issuance of restricted stock awards, net . . . . . . . .

Repurchase of common stock . . . . . . . . . . . . . . . .

(7,022)

Equity component of convertible notes . . . . . . . .

Other comprehensive loss . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

(7)

—

(150,110)

(65)

—

BALANCE AT DECEMBER 31, 2020 . . . . . . . .

135,030

135

$ 625,483 $

—

(218)

—

17,204

63,393

—

(150,117)

(65)

(218)

129,085

(474,593) $

151,047

See accompanying notes to consolidated financial statements.

F-8

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements

1. Organization and Business

Our approved product and our collaborators’ approved products and product candidates are based on rHuPH20, our
patented recombinant human hyaluronidase enzyme. rHuPH20 is the active ingredient in our first commercially approved
product, Hylenex® recombinant (“Hylenex”), and it works by breaking down hyaluronan (or “HA”), a naturally occurring
carbohydrate that is a major component of the extracellular matrix in tissues throughout the body such as skin and cartilage.
This temporarily increases dispersion and absorption allowing for 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® drug delivery technology
(“ENHANZE”). We license the ENHANZE technology to form collaborations with biopharmaceutical companies that develop
or market drugs requiring or benefiting from injection via the subcutaneous route of administration. In the development of
proprietary intravenous (IV) drugs combined with our ENHANZE technology, data have been generated supporting the
potential for ENHANZE to reduce treatment burden, as a result of shorter duration of subcutaneous (SC) administration.
ENHANZE may enable fixed-dose SC dosing compared to weight-based dosing required for IV administration, and potentially
allow for lower rates of infusion related reactions. ENHANZE may enable more flexible treatment options such as home
administration by a healthcare professional or potentially the patient. Lastly, certain proprietary drugs co-formulated with
ENHANZE have been granted additional exclusivity, extending the patent life of the product beyond the one of the proprietary
IV drug.

We currently have ENHANZE collaborations with F. Hoffmann-La Roche, Ltd. and Hoffmann-La Roche, Inc. (“Roche”),
Baxalta US Inc. and Baxalta GmbH (now members of the Takeda group of companies, following the acquisition of Shire plc by
Takeda Pharmaceutical Company Limited in January 2019) (“Baxalta”), Pfizer Inc. (“Pfizer”), Janssen Biotech, Inc.
(“Janssen”), AbbVie, Inc. (“AbbVie”), Eli Lilly and Company (“Lilly”), Bristol-Myers Squibb Company (“BMS”), Alexion
Pharma Holding (“Alexion”), ARGENX BVBA (“argenx”) and Horizon Therapeutics plc. (Horizon). We receive royalties from
three of these collaborations, including royalties from sales of one product from the Baxalta collaboration and three products
from the Roche collaboration and one product from Janssen collaboration. Future potential revenues from royalties and fees
from ENHANZE collaborations and the sales and/or royalties of our approved products 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.

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., Halozyme Switzerland
GmbH and Halozyme Switzerland Holdings GmbH.

F-9

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

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., Halozyme Switzerland
GmbH and Halozyme Switzerland Holdings GmbH. 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 the date of purchase. As of December 31, 2020, our cash equivalents consisted 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 income (loss) and included as a separate component of stockholders’ equity. The cost of marketable securities
is adjusted for amortization of premiums or accretion of discounts to maturity, and such amortization or accretion is included in
investment and other income, net in the consolidated statements of operations. We use the specific identification method for
calculating realized gains and losses on marketable securities sold. None of the realized gains and losses and declines in value
judged to be as a result of credit loss 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 of our facilities, we are required to maintain letters of credit as security deposits during the
terms of such leases. At December 31, 2020 and 2019, 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 short-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.

Available-for-sale marketable securities consist of asset-backed securities, corporate debt securities, U.S. Treasury
securities and commercial paper, and are measured at fair value using Level 1 and Level 2 inputs. Level 2 financial instruments
are valued using market prices on less active markets and proprietary pricing valuation models with observable inputs,
including interest rates, yield curves, maturity dates, issue dates, settlement dates, reported trades, broker-dealer quotes, issue
spreads, benchmark securities or other market related data. We obtain the fair value of Level 2 investments from our investment
manager, who obtains these fair values from a third-party pricing source. We validate the fair values of Level 2 financial
instruments provided by our investment manager by comparing these fair values to a third-party pricing source.

F-10

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

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 consolidated
balance sheets.

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 royalties, 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 collectability 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, 2020 and 2019. Approximately 74% of the accounts receivable balance at December 31, 2020 represents
amounts due from Janssen, Roche and Baxalta. Approximately 93% of the accounts receivable balance at December 31, 2019
represents amounts due from Janssen, Roche and Baxalta.

The following table indicates the percentage of total revenues in excess of 10% with any single customer:

Partner A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Partner B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Partner C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Partner D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,

2020
35%
26%
11%
8%

2019
40%
18%
—%
23%

2018
72%
2%
—%
—%

We attribute revenues under collaborative agreements, including royalties, to the individual countries where the customer
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,

2020

2019

2018

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

106,918 $
95,949

28,178 $
109,754

26,527
109,890

Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Belgium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

All other foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

30,552

20,086

10,644

3,445

589

45,060

9,905

2,506

5,075

—

8,873

1,497

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

267,594 $

195,992 $

151,862

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 75% and
47% of the accounts payable balance at December 31, 2020 and 2019, 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 zero and 8%
of the accounts payable balance at December 31, 2020 and 2019, respectively.

F-11

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

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, 2020 and 2019 as the collectability of accounts receivable was reasonably
assured.

Inventories

Inventories are stated at lower of cost or net realizable value. Cost is determined on a first-in, first-out basis. Net
realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion,
disposal, and transportation. Inventories are reviewed periodically for potential excess, dated or obsolete status. We evaluate the
carrying value of inventories on a regular basis, taking into account such factors as historical and anticipated future sales
compared to quantities on hand, the price we expect to obtain for products in their respective markets compared with historical
cost and the remaining shelf life of goods on hand.

As of December 31, 2020 and 2019, inventories consisted of $1.3 million and $1.4 million, respectively, of Hylenex
inventory, net and $59.4 million and $28.0 million, respectively, of bulk rHuPH20, consistent with our plan to build inventory
to meet future customer demand.

Leases

The Company has entered into operating leases primarily for real estate and automobiles. These leases have terms
which range from 3 years to 6 years. We determine if an arrangement contains a lease at inception. Right of use (“ROU”) assets
and liabilities resulting from operating leases are included in property and equipment, accrued expenses and other long-term
liabilities on our consolidated balance sheets. Operating lease ROU assets and liabilities are recognized based on the present
value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide
an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in
determining the discount rate to calculate the present value of future payments. The operating lease ROU asset also includes
any lease payments made and excludes lease incentives and initial direct costs incurred. Our leases often include options to
extend or terminate the lease. These options are included in the lease term when it is reasonably certain that we will exercise
that option. Short-term leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense for
minimum lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, which are generally accounted for separately. For
certain equipment leases, such as automobiles, we account for the lease and non-lease components as a single lease component.

Property and Equipment, Net

Property and equipment, including ROU assets are recorded at cost, less accumulated depreciation and amortization.
Equipment is depreciated using the straight-line method over its estimated useful life ranging from three years to ten 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.

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.

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.

F-12

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Revenue Recognition

We generate revenues from payments received under collaborative agreements and product sales. We recognize revenue
when we transfer promised goods or services to customers in an amount that reflects the consideration to which we expect to be
entitled in exchange for those goods or services. To determine revenue recognition for contracts with customers we perform the
following five steps: (i) identify the promised goods or services in the contract; (ii) identify the performance obligations in the
contract, including whether they are distinct in the context of the contract; (iii) determine the transaction price, including the
constraint on variable consideration; (iv) allocate the transaction price to the performance obligations in the contract; and (v)
recognize revenue when (or as) we satisfy the performance obligations.

Revenues under Collaborative Agreements

Under these agreements, we grant the collaboration partner a worldwide license to develop and commercialize products
using our ENHANZE technology to combine our patented rHuPH20 enzyme with their proprietary biologics directed at up to a
specified number of targets. Targets are usually licensed on an exclusive, global basis. Targets selected subsequent to inception
of the arrangement require payment of an additional license fee. The collaboration partner is responsible for all development,
manufacturing, clinical, regulatory, sales and marketing costs for any products developed under the agreement. We are
responsible for supply of bulk rHuPH20 based on the collaboration partner’s purchase orders, and may also be separately
engaged to perform research and development services. While these collaboration agreements are similar in that they originate
from the same framework, each one is the result of an arms-length negotiation and thus may vary from one to the other.

We collect an upfront license payment from collaboration partners, and are also entitled to receive event-based payments
subject to collaboration partners’ achievement of specified development, regulatory and sales-based milestones. In several
agreements, collaboration partners pay us annual fees to maintain their exclusive license rights if they are unable to advance
product development to specified stages. We earn separate fees for bulk rHuPH20 supplies and research and development
services. In addition, collaboration partners will pay us royalties at an on average mid-single digit percent rate of their sales if
products under the collaboration are commercialized. All amounts owed to us are noncancelable after the underlying triggering
event occurs, and nonrefundable once paid. Unless terminated earlier in accordance with its terms, collaborations generally
continue in effect until the last to expire royalty payment term, as determined on a product by product and on a country by
country basis, with each royalty term starting on the first commercial sale of that product and ending the later of: (i) a specified
period or term set forth in the agreement or (ii) expiration of the last to expire of the valid claims of our patents covering
rHuPH20 or other specified patents developed under the collaboration which valid claim covers a product developed under the
collaboration. When there are no valid claims during the applicable royalty term in a given country, the royalty rate is reduced
for those sales. Collaboration partners may terminate the agreement prior to expiration for any reason in its entirety or on a
target-by-target basis generally upon 90 days prior written notice to us. Upon any such termination, the license granted to
collaboration partners (in total or with respect to the terminated target, as applicable) will terminate provided, however, that in
the event of expiration of the agreement (as opposed to a termination), the on-going licenses granted will become perpetual,
non-exclusive and fully paid.

Although these agreements are in form identified as collaborative agreements, we concluded for accounting purposes they
represent contracts with customers, and are not subject to accounting literature on collaborative arrangements. This is because
we grant to collaboration partners licenses to our intellectual property, and provide supply of bulk rHuPH20 and research and
development services which are all outputs of our ongoing activities, in exchange for consideration. Under these collaborative
agreements, we do not develop assets jointly with collaboration partners, and do not share in significant risks of their
development or commercialization activities. Accordingly, we concluded our collaborative agreements are appropriately
accounted for pursuant to ASC Topic 606, Revenue from Contracts with Customers.

Under all of our collaborative agreements, we have identified licenses to use functional intellectual property as the only
performance obligation. The intellectual property underlying the license is our proprietary ENHANZE® technology which
represents application of rHuPH20 to facilitate delivery of drugs or fluids. Each of the licenses grants the collaboration partners
rights to use our intellectual property as it exists and is identified on the effective date of the license, because there is no
ongoing development of the ENHANZE technology required. Therefore, we recognize revenue from licenses at the point when
the license becomes effective and the collaboration partner has received access to our intellectual property, usually at the
inception of the agreement.

When collaboration partners can select additional targets to add to the licenses granted, we consider these rights to be
options. We evaluate whether such options contain material rights, i.e. have exercise prices that are discounted compared to
what we would charge for a similar license to a new collaboration partner. The exercise price of these options includes a
combination of the target selection fees, event-based milestone payments and royalties. When these amounts in aggregate are
not offered at a discount that exceeds discounts available to other customers, we conclude the option does not contain a material

F-13

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

right, and we consider grants of additional licensing rights upon option exercises to be separate contracts (target selection
contracts).

We provide customary indemnification and protection of licensed intellectual property for our customers. These
provisions are part of assurance that the licenses meet the agreements’ representations and are not obligations to provide goods
or services.

We also fulfill purchase orders for supply of bulk rHuPH20 and perform research and development services pursuant to
projects authorization forms for our collaboration partners, which represent separate contracts. Additionally, we price our
supply of bulk rHuPH20 and research and development services at our regular selling prices, called standalone selling price or
SSP. Therefore, our collaboration partners do not have material rights to order these items at prices not reflective of SSP. Refer
to the discussion below regarding recognition of revenue for these separate contracts.

Transaction price for a contract represents the amount to which we are entitled in exchange for providing goods and
services to the customer. Transaction price does not include amounts subject to uncertainties unless it is probable that there will
be no significant reversal of revenue when the uncertainty is resolved. Apart from the upfront license payment (or target
selection fees in the target selection contracts), all other fees we may earn under our collaborative agreements are subject to
significant uncertainties of product development. Achievement of many of the event-based development and regulatory
milestones may not be probable until such milestones are actually achieved. This generally relates to milestones such as
obtaining marketing authorization approvals. With respect to other development milestones, e.g. dosing of a first patient in a
clinical trial, achievement could be considered probable prior to its actual occurrence, based on the progress towards
commencement of the trial. In order to evaluate progress towards commencement of a trial, we assess the status of activities
leading up to our collaboration partner’s initiation of a trial such as feedback received from the FDA (if applicable), completion
of IND filings, readiness and availability of drug, readiness of study sites and our collaboration partner’s commitment of
resources to the program. We do not include any amounts subject to uncertainties into the transaction price until it is probable
that the amount will not result in a significant reversal of revenue in the future. At the end of each reporting period, we re-
evaluate the probability of achievement of such milestones and any related constraint, and if necessary, adjust our estimate of
the overall transaction price.

When target exchange rights are held by collaboration partners, and the amounts attributed to these rights are not
refundable, they are included in the transaction price. However, they are recorded as deferred revenues because we have a
potential performance obligation to provide a new target upon an exchange right being exercised. These amounts are recognized
in revenue when the right of exchange expires or is exercised.

Because our agreements have one type of performance obligation (licenses) which are typically all transferred at the same
time at agreement inception, allocation of transaction price often is not required. However, allocation is required when licenses
for some of the individual targets are subject to rights of exchange, because revenue associated with these targets cannot be
recognized. We perform an allocation of the upfront amount based on relative SSP of licenses for individual targets. We
determine license SSP using income-based valuation approach utilizing risk-adjusted discounted cash flow projections of the
estimated return a licensor would receive. When amounts subject to uncertainties, such as milestones and royalties, are included
in the transaction price, we attribute them to the specific individual target licenses which generate such milestone or royalty
amounts.

We also estimate SSP of bulk rHuPH20 and research and development services, to determine that our collaboration
partners do not have material rights to order them at discounted prices. For supplies of bulk rHuPH20, because we effectively
act as a contract manufacturer to our collaboration partners, we estimate and charge SSP based on the typical contract
manufacturer margins consistently with all of our collaborative partners. We determine SSP of research and development
services based on a fully-burdened labor rate. Our rates are comparable to those we observe in other collaborative agreements.
We also have a history of charging similar rates to all of our collaboration partners.

Upfront amounts allocated to licenses to individual targets are recognized as revenue when the license is transferred to the
collaboration partner, as discussed above, if the license is not subject to exchange rights, or when the exchange right expires or
is exercised. Development milestones and other fees are recognized in revenue when they are included in the transaction price,
because by that time we have already transferred the related license to the collaboration partner.

Sales-based milestones and royalties cannot be recognized until the underlying sales occur. We do not receive final
royalty reports from our collaboration partners until after we complete our financial statements for a prior quarter. Therefore,
we recognize revenue based on estimates of the royalty earned, which are based on internal estimates and available preliminary
reports provided by our collaboration partners. We will record a true-up in the following quarter if necessary, when final royalty
reports are received. To date, we have not recorded any material true-ups.

F-14

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

In contracts to provide research and development services, such services represent the only performance obligation. The
fees are charged based on hours worked by our employees and the fixed contractual rate per hour, plus third-party pass-through
costs, on a monthly basis. We recognize revenues as the related services are performed based on the amounts billed, as the
collaboration partner consumes the benefit of research and development work simultaneously as we perform these services, and
the amounts billed reflect the value of these services to the customer.

Refer to Note 4 Revenue, for further discussion on our collaborative arrangements.

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 are made pursuant to purchase orders subject to the terms of a master agreement,
and delivery of individual packages of Hylenex recombinant represent performance obligations under each purchase order. We
use a contract manufacturer to produce Hylenex recombinant and a third-party logistics (3PL) vendor to process and fulfill
orders. We concluded we are the principal in the sales to wholesalers because we control access to services rendered by both
vendors and direct their activities. We have no significant obligations to wholesalers to generate pull-through sales.

Selling prices initially billed to wholesalers are subject to discounts for prompt payment and subsequent chargebacks
when wholesalers sell Hylenex recombinant at negotiated discounted prices to members of certain group purchasing
organizations (“GPOs”) and government programs. We also pay quarterly distribution fees to certain wholesalers for inventory
reporting and chargeback processing, and to GPOs as administrative fees for services and for access to GPO members. We
concluded the benefits received in exchange for these fees are not distinct from our sales of Hylenex recombinant, and
accordingly we apply these amounts to reduce revenues. Wholesalers also have rights to return unsold product nearing or past
the expiration date. Because of the shelf life of Hylenex recombinant and our lengthy return period, there may be a significant
period of time between when the product is shipped and when we issue credits on returned product.

We estimate the transaction price when we receive each purchase order taking into account the expected reductions of the
selling price initially billed to the wholesaler arising from all of the above factors. We have compiled historical experience and
data to estimate future returns and chargebacks of Hylenex recombinant and the impact of the other discounts and fees we pay.
When estimating these adjustments to the transaction price, we reduce it sufficiently to be able to assert that it is probable that
there will be no significant reversal of revenue when the ultimate adjustment amounts are known.

Each purchase order contains only one type of product, and is usually shipped to the wholesaler in a single shipment.

Therefore, allocation of the transaction price to individual packages is not required.

We recognize revenue from Hylenex recombinant product sales and related cost of sales upon product delivery to the
wholesaler location. At that time, the wholesalers take control of the product as they take title, bear the risk of loss of
ownership, and have an enforceable obligation to pay us. They also have the ability to direct sales of product to their customers
on terms and at prices they negotiate. Although wholesalers have product return rights, we do not believe they have a
significant incentive to return the product to us.

Upon recognition of revenue from product sales of Hylenex recombinant, the estimated amounts of credit for product
returns, chargebacks, distribution fees, prompt payment discounts, and GPO fees are included in sales reserves, accrued
liabilities and net of accounts receivable. We monitor actual product returns, chargebacks, discounts and fees subsequent to the
sale. If these amounts differ from our estimates, we make adjustments to these allowances, which are applied to increase or
reduce product sales revenue and earnings in the period of adjustment.

In connection with the orders placed by wholesalers, we incur costs such as commissions to our sales representatives.
However, as revenue from product sales is recognized upon delivery to the wholesaler, which occurs shortly after we receive a
purchase order, we do not capitalize these commissions and other costs, based on application of the practical expedient allowed
within the applicable guidance.

F-15

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Bulk rHuPH20

We sell bulk rHuPH20 to collaboration partners for use in research and development; subsequent to receiving marketing
approval, we sell it for use in collaboration commercial products. Sales are made pursuant to purchase orders subject to the
terms of the collaborative agreement, and delivery of units of bulk rHuPH20 represent performance obligations under each
purchase order. We provide a standard warranty that the product conforms to specifications. We use contract manufacturers to
produce bulk rHuPH20 and have concluded we are the principal in the sales to collaboration partners. The transaction price for
each purchase order of bulk rHuPH20 is fixed based on the cost of production plus a contractual markup, and is not subject to
adjustments. Allocation of the transaction price to individual quantities of the product is usually not required because each order
contains only one type of product.

We recognize revenue from the sale of bulk rHuPH20 as product sales and related cost of sales upon transfer of title to our
partners. At that time, the partners take control of the product, bear the risk of loss of ownership, and have an enforceable
obligation to pay us.

ENHANZE Drug Product

We sell ENHANZE drug product to collaboration partners for use in research and development in early phase clinical
studies. Sales are made pursuant to purchase orders subject to the terms of the collaborative agreement, and delivery of units of
ENHANZE drug product represent performance obligations under each purchase order. We provide a standard warranty that
the product conforms to specifications. We use contract manufacturers to produce ENHANZE drug product and we concluded
we are the principal in the sales to collaboration partners. The transaction price for each purchase order of ENHANZE drug
product is fixed based on the cost of production plus a contractual markup, and is not subject to adjustments. Allocation of the
transaction price to individual quantities of the product is usually not required because each order contains only one type of
product.

We recognize revenue from the sale of ENHANZE drug product as product sales and related cost of sales upon transfer of
title to our partners. At that time, the partners take control of the product, bear the risk of loss of ownership, and have an
enforceable obligation to pay us.

Revenue Presentation

In our statements of operations, we report as revenues under collaborative agreements the upfront payments, event-based
development and regulatory milestones and sales milestones. We also include in this category revenues from separate research
and development contracts pursuant to project authorization forms. We report royalties received from collaboration partners as
a separate line in our statements of operations.

Revenues from sales of Hylenex recombinant, bulk rHuPH20 that has alternative future use and ENHANZE drug product

are included in product sales, net.

In the footnotes to our financial statements, we provide disaggregated revenue information by type of arrangement
(product sales, net, collaborative agreements and research and development services), and additionally, by type of payment
stream received under collaborative agreements (upfront license fees, event-based development and regulatory milestones and
other fees, sales milestones and royalties).

Cost of Product Sales

Cost of product sales consists primarily of raw materials, third-party manufacturing costs, fill and finish costs, freight
costs, internal costs and manufacturing overhead associated with the production of Hylenex recombinant and bulk rHuPH20
and ENHANZE drug product. Cost of product sales also consists of the write-down of excess, dated and obsolete inventories
and the write-off of inventories that do not meet certain product specifications, if any.

F-16

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

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 operating expenses as incurred when these expenditures relate to our research and development efforts
and have no alternative future uses. When bulk rHuPH20 is manufactured for use in research and development by us or our
partners and the product cannot be redirected for alternative use due to formulation and manufacturing specifications, the
manufacturing costs are recorded as research and development expense. Bulk rHuPH20 that is manufactured for partner use
prior to our partner receiving marketing approval from the FDA or comparable regulatory agencies in foreign countries and
meet these specifications is recorded as research and development expenses. Bulk rHuPH20 formulations manufactured for
general partner and internal use, which can potentially be used by any collaboration partner or by us in Hylenex, is considered
to have alternative future use and all manufacturing costs 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 currently have no in-
licensed technologies that have alternative future uses in research and development projects or otherwise.

Clinical Trial Expenses

We make payments in connection with our clinical trials under contracts with contract research organizations that support
conducting and managing clinical trials. 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. A portion of our obligation to make payments under these
contracts depends 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
amounts we are obligated to pay under our clinical trial agreements are modified (for instance, as a result of changes in the
clinical trial protocol or scope of work to be performed), we adjust our accruals accordingly on a prospective basis. Revisions to
our contractual payment obligations are charged to expense in the period in which the facts that give rise to the revision become
reasonably certain.

Share-Based Compensation

We record compensation expense associated with stock options, restricted stock awards (“RSAs”), restricted stock units
(“RSUs”) and performance stock units (“PSUs”) in accordance with the authoritative guidance for stock-based compensation.
The cost of employee services received in exchange for an award of an equity instrument is measured at the grant date, based on
the estimated fair value of the award, and is recognized as expense on a straight-line basis over the requisite service period of
the award. Share-based compensation expense for an award with a performance condition is recognized when the achievement
of such performance condition is determined to be probable. If the outcome of such performance condition is not determined to
be probable or is not met, no compensation expense is recognized and any previously recognized compensation expense is
reversed. Forfeitures are recognized as a reduction of share-based compensation expense as they occur.

F-17

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

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. Significant judgment is required by management to determine our provision for income
taxes, our deferred tax assets and liabilities, and the valuation allowance to record against our net deferred tax assets, which are
based on complex and evolving tax regulations throughout the world. Deferred tax assets and other tax benefits are recorded
when it is more likely than not that the position will be sustained upon audit. While we have begun to utilize certain of our net
operating losses, we have not yet established a track record of profitability. Accordingly, valuation allowances have been
recorded to reduce our net deferred tax assets to zero until such time as we can demonstrate an ability to realize them.

In response to the coronavirus (COVID-19) pandemic, the Coronavirus Aid, Relief, and Economic Security Act (“CARES
Act”) was enacted on March 27, 2020 in the U.S. The CARES Act includes many measures to assist companies, including
temporary changes to income and non-income-based tax laws. One of the key tax provisions of the bill is allowing taxpayers
with AMT credits to claim a refund in 2020 for the entire amount of the credit instead of recovering the credit through refunds
over a period of years, as originally enacted by the Tax Cuts and Jobs Act (“TCJA”) in 2017. Under the TCJA, we had recorded
a receivable for AMT credits that was expected to be received in future years. Under the CARES Act, the remaining receivable
for the AMT credit is fully refundable in 2020. Other than the refundability of the AMT credit, at this time, we do not believe
that the CARES Act will have a material impact on our financial statements. On December 27, 2020 the Consolidated
Appropriations Act, 2021 was signed into law. It provides additional COVID-19 focused relief and extends certain provisions
of the CARES Act. At this time, we do not believe that the Consolidated Appropriations Act, 2021 will have a material impact
on our financial statements.

Net Income (Loss) Per Share

Basic net income (loss) per common share is computed by dividing net income (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, unvested PSUs and the Convertible Notes are considered common
stock equivalents and are only included in the calculation of diluted earnings per common share when net income is reported
and their effect is dilutive. For the years ended December 31, 2020, 2019 and 2018, approximately 1.7 million, 33.1 million,
and 13.8 million shares, respectively, of outstanding stock options, unvested RSAs, unvested RSUs, unvested PSUs and the
Convertible Notes were excluded from the calculation of diluted net income (loss) per common share because their effect was
anti-dilutive.

The 19.3 million shares underlying the conversion option of the Convertible Notes does not have an impact on our diluted
earnings per share when the average market price of our common stock is less than the conversion price of $23.85 per share, as
we will settle the principal amount of the Convertible Notes in cash upon conversion. When the average market price of our
common stock exceeds the conversion price, we compute the potentially dilutive impact of the shares of common stock related
to the Convertible Notes using the treasury stock method.

A reconciliation of the numerators and the denominators of the basic and diluted net income (loss) per common share

computations is as follows (in thousands, except per share amounts):

Year Ended December 31,

2020

2019

2018

Numerator:

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 129,085 $ (72,240) $ (80,330)

Denominator:

Weighted average common shares outstanding for basic
net income (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net effect of dilutive common stock equivalents . . . . . . . . . . . . . . . . . . . . .
Weighted average common shares outstanding for diluted
net income (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

136,206
5,257

144,329
—

143,599
—

141,463

144,329

143,599

Net income (loss) per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

0.95 $
0.91 $

(0.50) $
(0.50) $

(0.56)
(0.56)

F-18

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

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. Our long-lived assets located in foreign countries had no book
value as of December 31, 2019 and 2018. There are no long-lived assets located in foreign countries as of December 31, 2020.

Adoption and Pending Adoption of Recent Accounting Pronouncements

The following table provides a brief description of recently issued accounting standards, those adopted in the current

period and those not yet adopted:

Standard

Description

Effective Date

January 1, 2022
(Early adoption
permitted
effective January
1, 2021)

In August 2020, the
FASB issued ASU
2020-06, Debt with
Conversion and other
Options (Subtopic
470-20) and
Derivatives and
Hedging - Contracts in
Entity’s Own Equity
(Subtopic 815-40)

The new guidance eliminates
the beneficial conversion and
cash conversion accounting
models for convertible
instruments. It also amends
the accounting for certain
contracts in an entity’s own
equity that are currently
accounted for as derivatives
because of specific settlement
provisions. In addition, the
new guidance requires that the
if-converted method is used in
computing diluted EPS for all
convertible instruments

Effect on the Financial
Statements or Other Significant Matters

We plan to early adopt ASU 2020-06 as of
January 1, 2021 on a modified retrospective
basis, which is expected to result in an
approximate $65.6 million decrease in
additional paid in capital from the derecognition
of the bifurcated equity component, $52.6
million increase in debt from the derecognition
of the discount associated with the bifurcated
equity component and $13.0 million decrease to
the opening balance of accumulated deficit,
representing the cumulative non-cash interest
expense recognized related to the amortization
of the bifurcated conversion option. We expect
to write-off the related deferred tax liabilities of
$11.8 million with a corresponding adjustment
to the valuation allowance, resulting in no net
impact to the cumulative adjustment to retained
earnings. As we intended and have the ability to
settle the principal amount of the convertible
notes in cash upon conversion, in January 2021
we notified the note holders that we will settle
the principal of the convertible notes in cash,
removing our option to settle the principal of
the notes in shares. Therefore, shares used for
diluted EPS will continue to be limited to the
excess conversion value over the principal
amount of the convertible note. Diluted
earnings per share will be impacted due to the
elimination of non-cash interest expense
associated with the amortization of the equity
component.

In August 2018, the
FASB issued ASU
2018-15, Intangibles-
Goodwill and other
Internal-Use Software
(Subtopic 350-40)

The new guidance aligns the
requirement for capitalizing
implementation costs incurred
in a hosting arrangement that
is a service contract with the
requirement for capitalizing
implementation costs incurred
to develop or obtain internal-
use software (and hosting
arrangements that include an
internal-use software license).

January 1, 2020 We adopted the new guidance on January 1,
2020. The adoption did not have a material
impact on our condensed consolidated financial
position or results of operations.

F-19

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Standard

In August 2018, the
FASB issued ASU
2018-13, Fair Value
Measurement (Topic
820).

Description
The new guidance removes,
modifies and adds to certain
disclosure requirements on
fair value measurements in
Topic 820, Fair Value
Measurement.

Effective Date

Effect on the Financial
Statements or Other Significant Matters

January 1, 2020 We adopted the new guidance on January 1,
2020. The adoption did not have a material
impact on our condensed consolidated financial
position or results of operations.

In June 2016, the
FASB issued ASU
2016-13, Financial
Instruments - Credit
Losses (Topic 326),
Measurement of Credit
Losses on Financial
Instruments

The standard amends the
impairment model by
requiring entities to use a
forward-looking approach
based on expected losses to
estimate credit losses for most
financial assets and certain
other instruments that aren’t
measured at fair value through
net income. For available-for-
sale debt securities, entities
will be required to recognize
an allowance for credit losses
rather than a reduction in
carrying value of the asset.
Entities will no longer be
permitted to consider the
length of time that fair value
has been less than amortized
cost when evaluating when
credit losses should be
recognized.

F-20

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

3. Fair Value Measurement

Available-for-sale marketable securities consisted of the following (in thousands):

December 31, 2020

Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortized
Cost
17,013 $
69,755
45,110
88,342
$ 220,220 $

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair Value

49 $
42
7
—
98 $

— $
17,062
(8)
69,789
—
45,117
88,342
—
(8) $ 220,310

December 31, 2019

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair Value

Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

30,484 $

55 $

— $

30,539

Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

161,308

U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

75,192

33,845

178

—

(14)

161,472

(5)

—

75,227

33,845

$ 300,829 $

273 $

(19) $ 301,083

As of December 31, 2020, three available-for-sale marketable securities with a fair market value of $21.2 million were in
a gross unrealized loss position of $8 thousand. Based on our review of these marketable securities, we believe none of the
unrealized loss is as a result of a credit loss as of December 31, 2020, 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.

Contractual maturities of available-for-sale debt securities are as follows (in thousands):

Due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

220,310 $

After one but within five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

220,310 $

274,805

26,278

301,083

December 31, 2020

December 31, 2019

Estimated Fair Value

F-21

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

The following table summarizes, by major security type, our cash equivalents and available-for-sale marketable securities

that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands):

December 31, 2020

December 31, 2019

Level 1

Level 2

Total
estimated
fair value

Level 1

Level 2

Total
estimated
fair value

Cash equivalents:

Money market funds . . . . . . . . . .
Commercial paper . . . . . . . . . . . .

$ 140,571 $

—

— $ 140,571
7,000

7,000

$ 119,949 $

—

— $ 119,949
—
—

Available-for-sale marketable
securities:

Asset-backed securities . . . . . . . .

—

17,062

—

30,539

Corporate debt securities . . . . . . .
U.S. Treasury securities . . . . . . . .
Commercial paper . . . . . . . . . . . .

—
45,117
—

69,789
45,117
88,342
$ 185,688 $ 182,193 $ 367,881

69,789
—
88,342

—
75,227
—

161,472
75,227
33,845
$ 195,176 $ 225,856 $ 421,032

161,472
—
33,845

We had no instruments that were classified within Level 3 as of December 31, 2020 and 2019.

F-22

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

4. Revenue

Our disaggregated revenues were as follows (in thousands):

Year Ended December 31,

2020

2019

2018

Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 88,596 $ 69,899 $ 78,981

Product sales, net

Sales of bulk rHuPH20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 38,237 $ 48,285 $ 12,729

Sales of ENHANZE drug product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

719

768

460

Sales of Hylenex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17,031

16,995

15,045

Total product sales, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55,987

66,048

28,234

Revenues under collaborative agreements:

Upfront license and target nomination fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Event-based development milestones and regulatory milestone and other fees . . . .
Sales-based milestones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues under collaborative agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

37,264
69,500
15,000
1,247
123,011

53,000
5,500
—
1,545
60,045

26,336
16,000
—
2,311
44,647

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 267,594 $ 195,992 $ 151,862

During the year ended December 31, 2020 we recognized revenue related to licenses granted to collaboration partners in
prior periods in the amount of $173.1 million. This amount represents royalties and sales milestones earned in the current
period, as well as $69.5 million of variable consideration in the contracts where uncertainties have been resolved and the
development milestones are probable of being achieved or were achieved. We also recognized revenue of $4.1 million during
the year ended December 31, 2020 that had been included in deferred revenues at December 31, 2019. We did not recognize
any adjustments to reduce sales reserves and allowances liability related to Hylenex recombinant sales in prior periods.

Upon the adoption of ASC 606, we recognized an adjustment to increase our accounts receivable by $19.4 million,
decrease deferred revenues by $51.8 million, and decrease accumulated deficit by $71.2 million. The impact of applying the
provisions of ASC 606 in the year ended December 31, 2018 was to decrease revenues by $4.7 million. Under the previously
existing authoritative accounting literature, at December 31, 2018 our accounts receivable, net would have been $19.3 million
lower, and our deferred revenue $47.4 million higher, than the amounts reported in our consolidated balance sheet. ASC 606
did not have an aggregate impact on our net cash used in operating activities, but resulted in offsetting changes in net loss and
certain assets and liabilities within net cash used in operating activities in the consolidated statement of cash flows.

Accounts receivable, net, other contract assets and deferred revenues (contract liabilities) from contracts with customers,

including collaboration partners, consisted of the following (in thousands):

Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other contract assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 90,730 $ 59,442
—
5,259

7,000
5,772

As of December 31, 2020, the amounts included in the transaction price of our contracts with customers, including
collaboration partners, and allocated to goods and services not yet provided were $55.3 million of which $49.5 million relates to
unfulfilled product purchase orders and $5.8 million has been collected and reported as deferred revenues. The unfulfilled
product purchase orders are estimated to be delivered in 2021. Of the total deferred revenues of $5.8 million, $1.7 million is
expected to be used by our customers within the next 12 months.

December
31, 2020

December
31, 2019

F-23

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

We recognized contract assets of $7.0 million at December 31, 2020, which relate to development milestones deemed

probable of receipt for intellectual property licenses granted to collaboration partners in prior periods.

The following table presents amounts under our collaborative agreements included in the transaction price (i.e. cumulative

amounts triggered or probable) as of December 31, 2020 (in thousands):

Collaboration partner and agreement date:
Roche (December 2006, September 2017 and
October 2018) . . . . . . . . . . . . . . . . . . . . . . . . . .
Baxalta (September 2007) . . . . . . . . . . . . . . . .
Pfizer (December 2012) . . . . . . . . . . . . . . . . . .
Janssen (December 2014) . . . . . . . . . . . . . . . . .
AbbVie (June 2015) . . . . . . . . . . . . . . . . . . . . .
Lilly (December 2015) . . . . . . . . . . . . . . . . . . .
BMS (September 2017) . . . . . . . . . . . . . . . . . .
Alexion (December 2017) . . . . . . . . . . . . . . . .
argenx (February 2019) . . . . . . . . . . . . . . . . . .
Horizon (November 2020) . . . . . . . . . . . . . . . .
Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total amounts under our collaborative
agreements included in the transaction price . .

(1) Upfront and additional target selection fees

Upfront
(1)

Development
(2)

Sales
(3)

Total

105,000 $
10,000
14,500
18,250
23,000
33,000
110,000
40,000
40,000
30,000

47,000 $
3,000
2,000
42,000
6,000
—
10,000
6,000
25,000

— $

22,000 $
9,000
—
15,000
—
—
—
—

—

174,000
22,000
16,500
75,250
29,000
33,000
120,000
46,000
65,000
30,000
411,881

1,022,631

(2) Event-based development and regulatory milestone amounts and other fees

(3) Sales-based milestone amounts

Through December 31, 2020, our collaboration partners have completed development, obtained marketing authorization

approvals for certain indications and commenced commercialization of the following products:

•
•

•

Janssen, for DARZALEX FASPRO in US in May 2020 and subsequently in other regions.
Roche, for Herceptin SC in the EU in August 2013 and subsequently in other regions; and MabThera SC in the EU
in March 2014 and subsequently in other regions; and Phesgo in the US in June 2020 and subsequently in other
regions.
Baxalta, for HYQVIA in the EU and in the US in May 2013.

The remaining targets and products are currently in the process of development by the collaboration partners.

5. Certain Balance Sheet Items

Accounts receivable, net consisted of the following (in thousands):

December 31,
2020

December 31,
2019

Accounts receivable from product sales to collaborators . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable from revenues under collaborative agreements . . . . . . . . . . . . .
Accounts receivable from royalty payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable from other product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other contract assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for distribution fees and discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

25,198
30,404
32,098
4,033
7,000
98,733
(1,003)
97,730

35,649
3,850
17,149
3,591
—
60,239
(797)
59,442

F-24

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Inventories consisted of the following (in thousands):

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,813
33,738
21,196
60,747

2,769
15,710
10,880
29,359

December 31,
2020

December 31,
2019

Prepaid expenses and other assets consisted of the following (in thousands):

December 31,
2020

December 31,
2019

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 . . . . . . . . . . . . . . . . . . . . . . . . . . $

35,048
342
2,510
4,441
42,341
(14,067)
28,274

30,156
4,964
3,655
5,681
44,456
(11,083)
33,373

Prepaid manufacturing expenses include raw materials, slot reservation fees and other amounts paid to contract
manufacturing organizations. Such amounts are reclassified to work-in-process inventory as materials are used or the CMO
services are complete.

Property and equipment, net consisted of the following (in thousands):

December 31,
2020

December 31,
2019

Research equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Manufacturing equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer and office equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right of use of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$
$

7,085
5,336
4,826
1,628
18,875
(11,582)
7,293
3,300
10,593

$
$
$

7,403
3,858
4,859
1,628
17,748
(10,742)
7,006
3,849
10,855

Depreciation and amortization expense was approximately $3.3 million, $4.1 million, and $2.4 million for the years ended
December 31, 2020, 2019 and 2018, respectively. The depreciation and amortization expense is inclusive of $1.7 million, $1.8
million ROU asset amortization for the years ended December 31, 2020 and 2019, respectively.

F-25

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Accrued expenses consisted of the following (in thousands):

December 31,
2020

December 31,
2019

Accrued outsourced research and development expenses . . . . . . . . . . . . . . . . . . . . .
Accrued compensation and payroll taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued outsourced manufacturing expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less long-term portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total accrued expenses, current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

448
8,078
4,535
6,020
4,868
23,949
(3,466)
20,483

8,423
27,888
9,173
7,876
6,469
59,829
(4,180)
55,649

Expense associated with the accretion of the lease liabilities was approximately $0.5 million and $0.8 million for the
twelve months ended December 31, 2020 and 2019, respectively. Total lease expense for the twelve months ended
December 31, 2020 and 2019 $2.2 million and $2.6 million respectively.

Cash paid for amounts related to leases for the twelve months ended December 31, 2020 and 2019 was $3.2 million and

$3.1 million respectively.

Deferred revenue consisted of the following (in thousands):

Collaborative agreements

License fees and event-based payments: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
5,772
5,772
(1,746)
4,026

2,764
2,495
5,259
(4,012)
1,247

December 31,
2020

December 31,
2019

6. Debt, Net

Convertible Notes

In November 2019, we completed the sale of $460.0 million in aggregate principal amount of 1.25% Convertible Senior
Notes due 2024 (“Convertible Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933, as amended (“Securities Act”). The Convertible Notes were issued under an indenture, dated as of
November 18, 2019, (“Indenture”) with The Bank of New York Mellon Trust Company, N.A., as trustee. The offer and sale of
the Convertible Notes and the shares of common stock issuable upon conversion of the Convertible Notes have not been
registered under the Securities Act, or the securities laws of any other jurisdiction, and the Convertible Notes and such shares
may not be offered or sold absent registration or an applicable exemption from registration requirements, or in a transaction not
subject to, such registration requirements.

We received net proceeds from the offering of approximately $447.4 million. We used $200.0 million of the net proceeds
from the offering to repurchase shares of common stock, including approximately $143.1 million to repurchase approximately
8.1 million shares of common stock concurrently with the offering in privately negotiated transactions, $6.9 million in open
market purchases and $50.0 million to repurchase a total of approximately 2.6 million shares of common stock through an
accelerated share repurchase agreement.

We used approximately $26.1 million of the net proceeds from the offering to repay all outstanding amounts under its
loan agreement with Oxford Finance and Silicon Valley Bank and intend to use the remainder of the net proceeds for general
corporate purposes, including additional share repurchases subsequent to the offering and working capital.

The Convertible Notes will pay interest semi-annually in arrears on June 1st and December 1st of each year, beginning on
June 1, 2020, at an annual rate of 1.25%. As of December 31, 2020, the Convertible Notes were convertible into cash, shares of

F-26

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

common stock or a combination of cash and shares of common stock, at our election, based on the applicable conversion rate at
such time. The Convertible Notes are general unsecured obligations and will rank senior in right of payment to all indebtedness
that is expressly subordinated in right of payment to the Convertible Notes, will rank equally in right of payment with all
existing and future liabilities that are not so subordinated, will be effectively junior to any secured indebtedness to the extent of
the value of the assets securing such indebtedness and will be structurally subordinated to all indebtedness and other liabilities
(including trade payables) of the our current or future subsidiaries. The Convertible Notes have a maturity date of December 1,
2024.

Upon the occurrence of certain circumstances, holders of the Convertible Notes may require us to purchase all or a portion
of their notes for cash, which may require the use of a substantial amount of cash. As of December 31, 2020, the conditional
conversion feature was triggered and our notes are classified as a current liability. We believe that it is remote that holders of
the notes would choose to convert their notes early because the fair value of the security that a note holder can currently realize
in an active market is greater than the conversion value the note holder would realize upon early conversion. For the year ended
December 31, 2020, we have positive operating income and positive cash flow from operations and, accordingly, while there
can be no assurance, we believe we have the ability to generate sufficient cash flows from operations or to raise additional
capital through a variety of financing arrangements to satisfy early conversion of the Convertible Notes.

As a result of our plans to early adopt ASU 2020-06, in January 2021 we notified the note holders that we will settle the
principal of the Convertible Notes in cash. Therefore, upon conversion, the principal value of the Convertible Notes will be paid
in cash and depending on our stock price, any additional amount over principal amount will be settled in shares of common
stock. The initial conversion rate for the Convertible Notes will be 41.9208 shares of common stock per $1,000 in principal
amount of Convertible Notes, equivalent to a conversion price of approximately $23.85 per share of our common stock. The
conversion rate is subject to adjustment as described in the Indenture.

In accordance with accounting guidance for debt with conversion and other options, we accounted for the debt and equity
components of the Convertible Notes separately. The estimated fair value of the debt component at the date of issuance
was $381.8 million, which was computed based on our non-convertible borrowing rate for similar debt of 5.19%, derived from
independent valuation analysis. The equity component was allocated a value of $65.6 million and represents the difference
between the $447.4 million of net proceeds from the issuance of the Convertible Notes and the $381.8 million estimated fair
value of the debt component at the date of issuance.

In connection with the Convertible Notes, we paid the initial purchasers of the Convertible Notes a fee of $12.7 million
and incurred additional debt issuance costs totaling $0.3 million, which includes expenses that we paid on behalf of the initial
purchasers and expenses incurred directly by us. Debt issuance costs, the initial purchasers’ fee and the equity component is
presented as a debt discount as of December 31, 2020 in the amount of $62.8 million, and will be amortized over the remaining
estimated term of 3.9 using the effective interest method, utilizing an effective interest rate of 5.10%. The net carrying amount
of the debt as of December 31, 2020 is $397.2 million. The fair value of the Convertible Notes, which was estimated using
trading levels obtained from third-party service provider (Level 2), was $861.7 million at December 31, 2020 and
$461.1 million at December 31, 2019.

For the year ended December 31, 2020 and 2019, we recognized interest expense of $19.9 million and $2.3 million
including contractual coupon interest of $5.8 million and $0.7 million and amortization of the debt discount of $14.1 million
and $1.6 million, respectively.

As of December 31, 2020, we were in compliance with all covenants under the Indenture and there was no material

adverse change in our business, operations or financial condition.

F-27

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Royalty-backed Loan

In January 2016, through our wholly-owned subsidiary Halozyme Royalty LLC (“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. transferred to Halozyme Royalty the right to receive royalty payments
from the commercial sales of ENHANZE products owed under the Roche Collaboration and Baxalta Collaboration
(“Collaboration Agreements”). The royalty payments from the Collaboration Agreements were used to repay the principal and
interest on the loan (the “Royalty Payments”). The Royalty-backed Loan bore interest at a per annum rate of 8.75% plus the
three-month LIBOR rate. The three-month LIBOR rate was subject to a floor of 0.7% and a cap of 1.5%. In June 2020, we paid
the full remaining balance and final payment of $2.93 million thereby satisfying and discharging all obligations under, and
terminating, the Royalty-backed Loan.

Oxford and SVB Loan and Security Agreement

In June 2016, we entered into a Loan and Security Agreement (the “Loan Agreement”) with Oxford Finance LLC
(“Oxford”) and Silicon Valley Bank (“SVB”) (collectively, the “Lenders”), providing a senior secured loan facility of up to an
aggregate principal amount of $70.0 million, comprising a $55.0 million draw in June 2016 and an additional $15.0 million
tranche, which we had the option to draw during the second quarter of 2017 and did not exercise. The initial proceeds were
partially used to pay the outstanding principal and final payment of $4.25 million owed on a previous loan agreement with the
Lenders. The remaining proceeds were used for working capital and general business requirements. The senior secured loan
facility carried a fixed interest rate of 8.25%. The repayment schedule provided for interest only payments for the first 18
months, followed by consecutive equal monthly payments of principal and interest in arrears through the maturity date of
January 1, 2021. The Loan Agreement provided for a final payment equal to 5.50% of the initial $55.0 million principal
amount, which was due when the Loan Agreement becomes due or upon the prepayment of the facility. We had the option to
prepay the outstanding balance of the Loan Agreement in full and exercised this option in November 2019, at which point we
paid the full remaining balance and final payment of $26.1 million, thereby satisfying and discharging all obligations under, and
terminating, the Loan Agreement.

Future maturities and interest payments of long-term debt as of December 31, 2020, are as follows (in thousands):

2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

465,750

2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

465,750

(5,750)

460,000
(62,772)

397,228
(397,228)

Long-term debt, less current portion and unamortized debt discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

F-28

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

7. Share-based Compensation

We currently grant stock options, restricted stock awards, performance stock units and restricted stock units under the
Amended and Restated 2011 Stock Plan (“2011 Stock Plan”), which was approved by the stockholders on May 6, 2016 and
provides for the grant of up to 44.2 million shares of common stock to selected employees, consultants and non-employee
members of our Board of Directors as stock options, stock appreciation rights, restricted stock awards, restricted stock unit
awards and performance awards. Awards are subject to terms and conditions established by the Compensation Committee of
our Board of Directors. During the year ended December 31, 2020, we granted share-based awards under the 2011 Stock Plan.
At December 31, 2020, 6,704,330 shares were subject to outstanding awards and 10,806,631 shares were available for future
grants of share-based 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,

2020

2019

2018

5,484 $

15,107 $

11,720

19,669

17,204 $

34,776 $

17,220

18,476

35,696

Share-based compensation expense by type of share-based award (in thousands):

Year Ended December 31,

2020

2019

2018

Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
RSAs, RSUs and PSUs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,955 $

17,624 $

8,249

17,152

17,204 $

34,776 $

18,742

16,954

35,696

Total unrecognized estimated compensation cost by type of award and the weighted-average remaining requisite service

period over which such expense is expected to be recognized (in thousands, unless otherwise noted):

December 31, 2020

Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RSAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RSUs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PSUs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$
$
$

18,853
460
13,241
297

Unrecognized
Expense

Remaining
Weighted-
Average
Recognition
Period
(years)

2.60
0.33
2.32
1.75

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 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).

F-29

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

A summary of our stock option award activity as of and for the year ended December 31, 2020 is as follows:

Shares
Underlying
Stock Options

Weighted
Average Exercise
Price per Share

Weighted
Average
Remaining
Contractual
Term (years)

Aggregate
Intrinsic
Value

Outstanding at December 31, 2019 . . . . . . . . . . . . . . . . .

11,548,229

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,602,087

Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4,705,843)

Canceled/forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2,810,851)

Outstanding at December 31, 2020 . . . . . . . . . . . . . . . . .

5,633,622

Vested and expected to vest at December 31, 2020 . . . .

5,633,622

Exercisable at December 31, 2020 . . . . . . . . . . . . . . . . .

3,297,904

$14.72

$20.74

$14.08

$17.02

$15.83

$13.36

6.58

5.08

$151.4 million

$96.8 million

The weighted average grant date fair values of options granted during the years ended December 31, 2020, 2019 and
2018 were $20.74 per share, $16.46 per share and $10.33 per share, respectively. The total intrinsic value of options exercised
during the years ended December 31, 2020, 2019 and 2018 was approximately $49.7 million, $10.6 million and $11.5 million,
respectively. Cash received from stock option exercises for the years ended December 31, 2020, 2019 and 2018 was
approximately $66.2 million, $16.5 million and $16.3 million, respectively.

The exercise price of stock options granted is equal to the closing price of the common stock on the date of grant. The fair
value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model (“Black-
Scholes model”). Expected volatility is based on historical volatility of our common stock. The expected term of options
granted is based on analyses of historical employee termination rates and option exercises. The risk-free interest rate is based on
the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The
dividend yield assumption is based on the expectation of no future dividend payments. The assumptions used in the Black-
Scholes model were as follows:

Year Ended December 31,

Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average expected term (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2020

2018

2019
47.57-51.82% 51.56-56.94% 57.18-70.06%
5.5
2.25-2.96%
—

5.1
0.22-1.67%
—

5.5
1.35-2.56%
—

Restricted Stock Awards. RSAs are grants that entitle the holder to acquire shares of our common stock at zero cost. 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 the Board of Directors
typically vest in approximately one year.

The following table summarizes our RSA activity during the year ended December 31, 2020:

Unvested at December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Shares

211,123

61,803

Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(210,676)

Weighted
Average
Grant Date
Fair Value

$11.47

$22.66

$11.48

Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(447)

$8.11

Unvested at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61,803

$22.66

The estimated fair value of the RSAs was based on the closing 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, 2020, 2019 and 2018 was approximately

F-30

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

$2.4 million, $3.3 million and $4.5 million, respectively. The fair value of RSAs vested during the years ended December 31,
2020, 2019 and 2018, was approximately $4.3 million, $4.2 million and $7.2 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 year ended December 31, 2020:

Outstanding at December 31, 2019 . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2020 . . . . . . . . . . . . . . . . . . . .

Number of
Shares
2,092,439
574,279
(714,868)
(921,938)
1,029,912

Weighted
Average
Grant Date
Fair Value
$15.60
$20.25
$14.12
$16.62
$18.31

Weighted
Average
Remaining
Contractual
Term (yrs)

Aggregate
Intrinsic
Value

1.23

$44.0 million

The estimated fair value of the RSUs was based on the closing 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, 2020, 2019 and 2018 was approximately
$10.1 million, $19.1 million and $6.7 million, respectively. The fair value of RSUs vested during the years ended December 31,
2020, 2019 and 2018 was approximately $14.0 million, $18.5 million and $11.0 million, respectively.

Performance Stock Units. A PSU 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 PSU activity during the year ended December 31, 2020:

Outstanding at December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Shares

—

40,796

—

Weighted
Average
Grant Date
Fair Value

$0.00

$16.32

$0.00

Outstanding at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

40,796

$16.32

The estimated fair value of the PSUs was based on the closing market value of our common stock on the date of grant.

The fair value of PSUs vested during the years ended December 31, 2020, 2019 and 2018 was zero.

F-31

8. Stockholders’ Equity

During the years ended December 31, 2020, 2019 and 2018, we issued an aggregate of 4,705,843, 1,540,690 and
1,489,138 shares of common stock, respectively, in connection with the exercises of stock options, for net proceeds of
approximately $66.2 million, $16.5 million and $16.3 million, respectively. For the years ended December 31, 2020, 2019 and
2018, we issued 571,963, 952,182 and 442,599 shares of common stock, respectively, upon vesting of certain RSUs for which
the RSU holders surrendered 142,905, 140,466 and 139,850 RSUs, respectively, to pay for minimum withholding taxes totaling
approximately $5.5 million, $7.0 million and $4.2 million, respectively. Stock options and unvested restricted units totaling
approximately 6.7 million, 13.6 million and 13.4 million shares of our common stock were outstanding as of December 31,
2020, 2019 and 2018, respectively.

Share Repurchases

In November 2019, the Board of Directors authorized a capital return program to repurchase up to $550.0 million of
outstanding common stock over a three-year period. We may utilize a variety of methods including open market purchases,
privately negotiated transactions, accelerated share repurchase programs or any combination of such methods. The Board will
regularly review this capital return program in connection with a balanced capital allocation strategy. During 2019, we
repurchased approximately 11.1 million shares of common stock for $200.0 million at an average price of $18.03.

During 2020, we repurchased 6.5 million shares of common stock for $150.0 million at an average price of $23.05. The
shares were purchased through open market transactions and through an ASR agreement with Bank of America in December
2020, for which we repurchased $21.7 million of common stock and received 0.5 million shares. We retired the repurchased
shares and they resumed the status of authorized and unissued shares.

We had the following activity under the approved share repurchase programs (dollars in thousands, except share and per

share data)

First quarter(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth quarter(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Number of Shares
Purchased

2020

Weighted
Average Price
paid Per Share

3,188,795

88,307

2,134,716

1,095,366

6,507,184

$16.15

$22.58

$27.57

$34.36

$23.05

Total Cost(2)

$51,574

$1,996

$58,902

$37,645

$150,117

(1) This is in addition to 0.5 million shares delivered in February upon completion of the ASR.

(2) Included in the total cost of shares purchased is a commission fee of $0.02 per share.

(3) This includes the December 2020 ASR.

9. Commitments and Contingencies

Operating Leases

Our administrative offices and research facilities are located in San Diego, California. We lease an aggregate of
approximately 50,000 square feet of office and research space in two buildings. The leases commenced in June 2011,
November 2013 and June 2018 and continue through January 2023. The leases are subject to approximately 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.

F-32

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Additionally, we lease certain office equipment under operating leases. Total rent expense was approximately $2.3

million, $2.7 million and $2.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Approximate annual future minimum operating lease payments as of December 31, 2020 are as follows (in thousands):

Year:
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less imputed interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating
Leases

2,563

2,564

150

—

5,277

(409)

4,868

The weighted-average remaining lease term of our operating leases is approximately 2.06 years.

Other Commitments

We have existing supply agreements with contract manufacturing organizations Avid Bioservices, Inc. (“Avid”) and
Catalent Indiana LLC (formerly Cook Pharmica LLC) (“Catalent”) to produce supplies of bulk rHuPH20. Under the terms of
the agreements, we are committed to certain minimum annual purchases of bulk rHuPH20. At December 31, 2020, we had a
$75.9 million minimum purchase obligation in connection with these agreements.

In June 2011, we entered into a services agreement with Patheon for the technology transfer and manufacture of Hylenex

recombinant. At December 31, 2020, we had a $1.4 million minimum purchase obligation in connection with this agreement.

Legal Contingencies

F-33

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

10.

Income Taxes

Total income (loss) before income taxes summarized by region were as follows (in thousands):

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

130,427

(70,737) $

(45,819)

Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,125)

(1,514)

(33,974)

Net income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .

129,302

(72,251) $

(79,793)

Significant components of our net deferred tax assets/(liabilities) were as follows (in thousands).

Year Ended December 31,

2020

2019

2018

December 31,

2020

2019

Deferred tax assets:

Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

84,278

Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Research and development and orphan drug credits . . . . . . . . . . . . . . . . . . . . . . . . . .

Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Alternative minimum tax credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ASC 842 lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest expense limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

253

114,357

4,637

—

1,081

5,536

3,478

39,401

1,069

114,357

9,972

1,683

1,454

2,163

3,037

Valuation allowance for deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax assets, net of valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax liabilities:

Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Convertible note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ASC 842 right of use asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

213,620

173,136

(199,827)

(155,100)

13,793

18,036

(1,002)

(11,776)

(733)

(282)

(865)

(14,450)

(865)

(173)

Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(13,793)

(16,353)

Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

1,683

A valuation allowance of $199.8 million and $155.1 million has been established to offset the net deferred tax assets as

of December 31, 2020 and 2019, respectively, as realization of such assets is uncertain.

We intend to continue maintaining a full valuation allowance on our DTAs until there is sufficient evidence to support the
reversal of all or some portion of these allowances. However, given our current earnings and anticipated future earnings, we
believe that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available
to reach a conclusion that a significant portion of the valuation allowance will no longer be needed. Release of the valuation
allowance would result in the recognition of certain DTAs and a decrease to income tax expense for the period the release is
recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the
level of profitability that we are able to actually achieve.

F-34

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

Income tax expense was comprised of the following components (in thousands):

Year Ended December 31,

2020

2019

2018

Current - federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11) $

114

Current - state . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred - federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred - state . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

228

—

(40)

(85)

—

217

(11) $

519

(64)

—

537

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):

Year Ended December 31,

Federal income tax expense (benefit) at 21% . . . . . . . . . . . . . . . . . . . . .

27,153

2020

2019
(15,173) $

2018
(16,754)

State income tax benefit, net of federal income tax impact . . . . . . . . . . .

(Decrease) increase in valuation allowance . . . . . . . . . . . . . . . . . . . . . . .

Worthless stock deduction of international subsidiary . . . . . . . . . . . . . .

Foreign income subject to tax at other than federal statutory rate . . . . . .

Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Executive compensation limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-deductible expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Research and development credits, net . . . . . . . . . . . . . . . . . . . . . . . . . .

Orphan drug credits, net of federal add back . . . . . . . . . . . . . . . . . . . . . .

Convertible note discount in APIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,942)

44,727

(67,322)

237

(4,117)

1,434

—

217

(1,509)

8,147

—

318

315

858

(1,091)

(5,718)

13,776

(11) $

(4,297)

35,731

—

7,106

(441)

866

1,599

(5,210)

(18,063)

—

537

At December 31, 2020, our unrecognized tax benefit and uncertain tax positions were $19.2 million. Of this, $0.3 million
of this amount would affect the effective tax rate and $18.9 million would affect the effective tax rate only in the event the
valuation allowance was removed. Of the unrecognized tax benefits, we do not expect any significant changes to occur in the
next 12 months. 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, 2020, 2019 and 2018, we recognized an immaterial amount of interest
and penalties.

The following table summarizes the activity related to our unrecognized tax benefits (in thousands):

Year Ended December 31,

2020

2019

2018

Gross unrecognized tax benefits at beginning of period . . . . . . . . . . . . .

21,483

20,028

14,428

Increases in tax positions for prior years . . . . . . . . . . . . . . . . . . . . . . . . .

Decreases in tax positions for prior years . . . . . . . . . . . . . . . . . . . . . . . .

Increases in tax positions for current year . . . . . . . . . . . . . . . . . . . . . . .

(2,357)

—

(23)

1,409

3,083

—

2,517

Gross unrecognized tax benefits at end of period . . . . . . . . . . . . . . . . . .

19,167

21,483

20,028

At December 31, 2020, we had federal, California and other state tax net operating loss carryforwards of approximately

$310.8 million, $259.8 million and $45.3 million, respectively.

F-35

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

The following table shows key expiration dates of the federal and California net operating loss carryforwards (in

thousands):

Net Operating
Loss

2020

2021 and beyond

2028 and beyond

Expires in:

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

310,756

$ —

310,756

—

259,840

$ —

—

259,840

At December 31, 2020, we had federal and California research and development tax credit carryforwards of
approximately $27.9 million and $19.1 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 $88.0 million which will begin to expire in 2034.

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 December 31, 2019. 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.

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, 2020 and 2019, there were no
undistributed earnings in foreign subsidiaries.

We are subject to taxation in the U.S. and in various state and foreign jurisdictions. Our tax years for 2004 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 $1.1 million, $2.2 million and $1.3 million for the years
ended December 31, 2020, 2019 and 2018, respectively.

F-36

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

12. Summary of Unaudited Quarterly Financial Information

The following is a summary of our unaudited quarterly results for the years ended December 31, 2020 and 2019 (in

thousands):

2020 (Unaudited):
Total revenues (1)(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit on product sales . . . . . . . . . . . . . . . . . . . . .

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . .

Net (loss) Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) Income per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares used in computing net (loss) income per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2019 (Unaudited):
Total revenues (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit on product sales . . . . . . . . . . . . . . . . . . . . .
Total operating expenses(5) . . . . . . . . . . . . . . . . . . . . . .
Net Income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Income (loss) per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares used in computing net Income (loss) per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

_______________

Quarter Ended

March 31,

June 30,

September 30,

December 31,

25,354

2,360

28,577

(6,103) $

55,221

597

25,666

25,817

(0.04) $

0.19

65,316

3,480

25,017

36,207

0.27

0.25

121,703

6,183

44,079

73,164

0.54

0.50

137,186

135,935

138,084

136,578

142,081

135,107

145,122

March 31,

June 30,

September 30,

December 31,

Quarter Ended

56,949

3,741

53,983

1,796

0.01

39,148

3,883

53,125

46,230

6,872

70,767

53,665

6,006

85,727

(14,624) $

(25,015) $

(34,397)

(0.10) $

(0.17) $

(0.24)

144,743

147,474

145,411

146,136

141,046

(1) Revenue for the quarter ended December 31, 2020 included $57.0 million in revenue under a collaborative

agreement from Janssen, argenx, Horizon and BMS.

(2) Revenue for the quarter ended September 30, 2020 included $32.0 million in revenue under a collaborative

arrangement from Roche and argenx.

(3) Revenue for the quarter ended June 30, 2020 included $32.3 million in revenue under a collaborative arrangement

from Janssen and BMS.

(4) Revenue for the quarter ended March 31, 2019 included $30.0 million in revenue under a collaborative arrangement

from argenx.

(5) Total operating expenses for the quarter ended December 31, 2019 included $28.4 million restructuring charges.

F-37

Halozyme Therapeutics, Inc.

Notes to Consolidated Financial Statements — (Continued)

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, 2020

Accounts receivable allowances (1) . . . . . . . . . . . . . . . . . .

797 $

13,276 $

(13,070) $

1,003

For the year ended December 31, 2019

Accounts receivable allowances (1) . . . . . . . . . . . . . . . . . .

592 $

7,327 $

(7,122) $

797

For the year ended December 31, 2018

Accounts receivable allowances (1) . . . . . . . . . . . . . . . . . .

559 $

5,988 $

(5,955) $

592

_______________

(1) Allowances are for chargebacks, prompt payment discounts and distribution fees related to Hylenex recombinant

product sales.

F-38

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Halozyme Therapeutics, Inc.
11388 Sorrento Valley Road
San Diego, CA 92121
858-794-8889
info@halozyme.com
www.halozyme.com