HALOZYME THERAPEUTICS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

As used in this report, unless the context suggests otherwise, references to
"Halozyme," "the Company," "we," "our," "ours," and "us" refer to Halozyme
Therapeutics, Inc., its wholly owned subsidiary, Halozyme, Inc. and Halozyme
Inc.'s wholly owned subsidiaries, Halozyme Switzerland GmbH and Halozyme
Switzerland Holdings GmbH. References to "Notes" refer to the Notes to Condensed
Consolidated Financial Statements included herein (refer to Item 1 of Part I).

The following information should be read in conjunction with the interim
unaudited condensed consolidated financial statements and Notes thereto included
in Item 1 of this Quarterly Report on Form 10-Q, as well as the audited
financial statements and notes thereto and Management's Discussion and Analysis
of Financial Condition and Results of Operations for the fiscal year ended
December 31, 2021, included in our Annual Report on Form 10-K for the year ended
December 31, 2021. Past financial or operating performance is not necessarily a
reliable indicator of future performance, and our historical performance should
not be used to anticipate results or future period trends.

This report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements in this report
other than statements of historical fact 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 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 the launch of new products by our collaborators, third party performance
under key collaboration agreements, the ability to complete the acquisition of
Antares Pharma, Inc, and the timing thereof, the ability of our bulk drug
manufacturers to provide adequate supply for our collaboration partners,
revenue, expense and cash burn levels, anticipated amounts and timing of share
repurchases, anticipated profitability and expected trends, the potential impact
of the COVID-19 global pandemic on our business and trends and other statements
regarding matters that are not historical are forward-looking statements. Such
statements reflect management's current forecast of certain aspects of our
future, are based on currently available operating, financial and competitive
information and are subject to various risks, uncertainties and assumptions that
could cause actual results to differ materially from those anticipated or
implied in our forward-looking statements due to a number of factors including,
but not limited to, those set forth below under the section entitled "Risks
Factors" and elsewhere in this Quarterly Report on Form 10-Q and our most recent
Annual Report on Form 10-K. Readers are urged not to place undue reliance on
these forward-looking statements, which speak only as of the date of this
Quarterly 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 Quarterly Report.

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.
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We currently have ENHANZE collaborations with F. Hoffmann-La Roche, Ltd. and
Hoffmann-La Roche, Inc. (Roche), Baxalta US Inc. and Baxalta GmbH (members of
the Takeda group of companies) (Baxalta), Pfizer Inc. (Pfizer), Janssen Biotech,
Inc. (Janssen), AbbVie, Inc. (AbbVie), Eli Lilly and Company (Lilly), Bristol
Myers Squibb Company (BMS), Alexion Pharma International Operations Unlimited
Company (an indirect wholly owned subsidiary of AstraZeneca PLC) (Alexion),
argenx BVBA (argenx), Horizon Therapeutics plc. (Horizon), ViiV Healthcare (the
global specialist HIV company majority owned by GlaxoSmithKline) (ViiV) and
Chugai Pharmaceutical Co., Ltd (Chugai). 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 first quarter of 2022 and recent key events are as follows:

Collaborators

•In March 2022, we entered into a global collaboration and license agreement
with Chugai Pharmaceutical Co., Ltd. The license gives Chugai exclusive access
to ENHANZE drug delivery technology for an undisclosed target. Under the terms
of the agreement, we received an upfront payment of $25 million and Chugai is
obligated to make future payments of up to $160 million, in the aggregate,
subject to achievement of specified development, regulatory and sales-based
milestones. We will also be entitled to receive royalties on sales of
commercialized medicines using our ENHANZE technology.

•In March 2022, ViiV initiated enrollment of a Phase 1 study to evaluate the safety and pharmacokinetics of N6LS, a broadly neutralizing antibody, administered subcutaneously with ENHANZE technology.

•In March 2022, argenx announced that data from argenx's phase 3 ADAPT-SC study
evaluating subcutaneous (SC) efgartigimod (1000mg efgartigimod-PH20) for the
treatment of generalized myasthenia gravis (gMG) achieved the primary endpoint
of total IgG reduction from baseline at day 29, demonstrating statistical
non-inferiority to VYVGART® (efgartigimod alfa-fcab) intravenous (IV)
formulation in gMG patients. Based on these results, argenx has stated it plans
to submit a Biologics License Application (BLA) to the U.S. Food and Drug
Administration (FDA) by the end of 2022.

Corporate

•In March 2022, we entered into an agreement for assignment and assumption of
lease with Seismic Software, Inc. pursuant to which effective January 1, 2023 we
will assume Seismic's office lease, as amended with Kilroy Realty L.P. for
approximately 72,534 square feet of space in office and research facilities. The
premises are intended to serve as our new headquarters with an expected
occupancy date of approximately January 1, 2023.

•In April 2022, we entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Antares Pharma, Inc. ("Antares") and Atlas Merger Sub, Inc., a
wholly owned subsidiary of Halozyme ("Purchaser"), pursuant to which on the
terms and subject to conditions set forth in the Merger Agreement, Purchaser
agreed to commence a cash tender offer to acquire all of the outstanding shares
of common stock of Antares at a purchase price of $5.60 per share for a total
transaction value of approximately $960.0 million. The transaction is expected
to close in the first half of 2022.




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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:

                    [[Image Removed: halo-20220331_g1.jpg]]


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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 twelve 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. In June 2020, the FDA approved the
fixed-dose combination of Perjeta® (pertuzumab) and Herceptin for subcutaneous
injection (Phesgo™) utilizing ENHANZE technology 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. Roche subsequently returned the rights for the
first exclusive target.

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 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.

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In October 2019, Roche nominated a new undisclosed exclusive target to be studied using ENHANZE technology. In November 2021, Roche initiated a Phase 1 study with the undisclosed target and ENHANZE.

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 EC 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.

In May 2016, Baxalta announced that HYQVIA received a marketing authorization
from the EC 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).

In October 2021, Baxalta initiated a Phase 1 single-dose, single-center, open-label, three-arm study to assess the tolerability and safety of immune globulin subcutaneous (human), 20% solution with ENHANZE (TAK-881) at various infusion rates in healthy adult subjects.

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 several Phase 3 studies, Phase 2 studies and Phase
1 studies 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 intravenous DARZALEX 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 DARZALEX
IV 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. Subsequent to these
approvals, Janssen received several additional regulatory approvals for
additional indications and patient populations in US, EU, Japan and China.
Beginning with the US, 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 July 2021,
Janssen received FDA approval for DARZALEX FASPRO in combination with
pomalidomide and dexamethasone (D-Pd) for patients with multiple myeloma after
first or subsequent relapse. In July 2021, Janssen received FDA approval for
DARZALEX FASPRO in combination with D-Pd for patients with multiple myeloma
after first or subsequent relapse. In December 2021, Janssen received FDA
approval for DARZALEX FASPRO in combination with
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Kyprolis® (carfilzomib) and dexamethasone for patients with relapsed or
refractory multiple myeloma who have received one to three prior lines of
therapy. In the EU, in June 2021, we announced that Janssen received marketing
authorization from the EC for DARZALEX SC in two new indications, in combination
with D-VCd in newly diagnosed adult patients with AL amyloidosis and in
combination with D-Pd in adult patients with relapsed or refractory multiple
myeloma. In Japan in March 2021, Janssen announced approval from Japan's
Ministry of Health, Labour and Welfare (MHLW) for subcutaneous formulation of
DARZALEX (known as DARZQURO in Japan) for the treatment of multiple myeloma, and
in May 2021 Janssen commenced commercial sale in Japan. In August 2021, Janssen
received approval of DARZQURO (Daratumumab SC) for systemic AL amyloidosis in
Japan. In China in October 2021, Janssen's DARZALEX FASPRO was approved by the
China National Medical Products Administration (NMPA) for the treatment of
primary light chain amyloidosis, in combination with D-VCd in newly diagnosed
patients.

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

In July 2021, Janssen elected the target HIV reverse transcriptase limited to
non-nucleoside reverse transcriptase inhibitors. In December 2021, Janssen
initiated a Phase 1 clinical trial combining rilpivirine and ENHANZE. Janssen
and ViiV are exploring the possibility of an ultra-long acting version of
CABENUVA using 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 selected eight targets to-date. BMS has
designated multiple immuno-oncology targets including programmed death 1 (PD-1)
and has an option to select 3 additional targets by November 2022. In October
2018, BMS dosed the first patient in a Phase 1/2a study of BMS-986179, an
anti-CD-73 antibody, alone and in combination with nivolumab, using ENHANZE
technology, which was subsequently discontinued. In October 2019, BMS initiated
a Phase 1 study of relatlimab, an anti-LAG-3 antibody, in combination with
nivolumab using ENHANZE technology. In April 2021, BMS initiated a Phase 1/2
study of BMS-986258, an anti-TIM-3 antibody, alone and in combination with
nivolumab in advanced malignant tumors. In June 2021, BMS initiated a Phase 3
study of nivolumab using ENHANZE technology for patients with advanced or
metastatic clear cell renal cell carcinoma, leveraging data and insights from
Phase 1/2 CA209-8KX study in patients with solid tumors.

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 and has access to three targets.

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 Multifocal Motor
Neuropathy (MMN).

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
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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 December 2021, argenx
announced the FDA approval of efgartigimod (VYVGARTTM) for the treatment of
generalized myasthenia gravis for the IV dosing regimen. In March 2022, argenx
announced that data from argenx's phase 3 ADAPT-SC study evaluating SC
efgartigimod (1000mg efgartigimod-PH20) for the treatment of generalized
myasthenia gravis (gMG) achieved the primary endpoint of total IgG reduction
from baseline at day 29, demonstrating statistical non-inferiority to VYVGART
(efgartigimod alfa-fcab) IV formulation in gMG patients. Based on these results,
argenx has stated it plans to submit a BLA to the FDA by the end of 2022.

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 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. In March 2021, Horizon
completed dosing in a Phase 1 study exploring the SC formulation of TEPEZZA. The
trial was a small, single-dose Phase 1 pharmacokinetic trial which included
evaluation of ENHANZE technology for a SC formulation. In March 2022, Horizon
announced the completion of a Phase 1 trial for the TEPEZZA subcutaneous
program.

ViiV Healthcare

In June 2021, we entered into a global collaboration and license agreement with
ViiV. The license gives ViiV exclusive access to our ENHANZE technology for four
specific small and large molecule targets for the treatment and prevention of
HIV. These targets are integrase inhibitors, reverse transcriptase inhibitors
limited to nucleoside reverse transcriptase inhibitors (NRTI) and nucleoside
reverse transcriptase translocation inhibitors (NRTTIs), capsid inhibitors and
broadly neutralising monoclonal antibodies (bNAbs), that bind to the gp120 CD4
binding site. In December 2021, ViiV initiated enrollment of a Phase 1 study to
evaluate cabotegravir administered subcutaneously with ENHANZE. In March 2022,
ViiV initiated enrollment of a Phase 1 study to evaluate the safety and
pharmacokinetics of N6LS, a broadly neutralizing antibody, administered
subcutaneously with ENHANZE technology.

Chugai Collaboration

In March 2022, we entered into a global collaboration and license agreement with
Chugai Pharmaceutical Co., Ltd. The license gives Chugai exclusive access to
ENHANZE drug delivery technology for an undisclosed target. Chugai intends to
explore the potential use of ENHANZE for a Chugai drug candidate.

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
VRC07-523LS and N6LS broadly neutralizing antibodies (bnAbs) against HIV for HIV
treatment. In March 2021, we were notified that the first patient was dosed with
N6LS and rHuPH20 in VRC 609 Phase 1 dose-escalation study to evaluate safety,
tolerability, and pharmacokinetics of N6LS using ENHANZE technology.

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 CAP256V2LS
and rHuPH20 in CAPRISA 012B Phase 1 dose-escalation study to evaluate safety,
tolerability, and pharmacokinetics of CAPR256V2LS alone and in combination with
VRC07-523LS using ENHANZE technology. In January 2021, we were notified the
first patient was dosed with CAP256V2LS and rHuPH20 in combination with
VRC07-523LS and rHuPH20 in CAPRISA 012B Phase 1 study. VRC07-523LS broadly
neutralizing antibody was supplied by the NIH/VRC under a research collaboration
with CAPRISA.
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For a further discussion of the collaboration agreements, refer to Note 4, Revenue.

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. As an organization
we have returned to the office and continue to effectively operate with a
combination of remote and office work utilizing a hybrid model. Importantly, our
suppliers continue to operate without interruption related to COVID-19. We
recognize that the duration of the pandemic and its continued impact on the
global economy as a whole remains unknown at this time. We are not clear the
extent to which 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.
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Results of Operations

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Royalties - Royalty revenue was $69.6 million for the three months ended
March 31, 2022 compared to $36.9 million for the three months ended March 31,
2021. The increase was mainly driven by continued sales uptake of DARZALEX
FASPRO by Janssen and Phesgo by Roche in all geographies, partially offset by
slightly lower sales of Herceptin SC and MabThera SC by Roche. We expect royalty
revenue to continue to grow as a result of our 2020 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):

                                                  Three Months Ended
                                                      March 31,
                                                  2022           2021        Change
                Sales of bulk rHuPH20         $   16,448      $ 16,770      $ (322)

                Sales of Hylenex                   5,692         4,996         696
                Total product sales, net      $   22,140      $ 21,766      $  374


Product sales, net increased by $0.4 million in the three months ended March 31,
2022 compared to the same period in 2021, primarily due to higher sales Hylenex.
We expect that product sales of bulk rHuPH20 will fluctuate in future periods
based on the needs of our collaborators.

We expect that future product sales of Hylenex to be relatively flat as we experience modest market growth offset by a reduction in COVID-19 backlog.

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

                                                                    Three Months Ended
                                                                        March 31,
                                                                 2022                2021              Change

Upfront license fees, license fees for the election of additional targets,

   license maintenance fees and other license fees and
event-based
   payments:

Chugai                                                           25,000                  -             25,000
BMS                                                                   -             25,000            (25,000)
Janssen                                                               -              5,000             (5,000)

    Subtotal                                                     25,000             30,000             (5,000)
Reimbursement for research and development services                 534                333                201
Total revenues under collaborative agreements                $   25,534

$ 30,333 $ (4,799)

Revenue from license fees decreased $4.8 million for the three months ended
March 31, 2022, compared to the same period in 2021. 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.

The acquisition of Antares is expected to be accretive to revenue and Non-GAAP
earnings, supported by Antares' proprietary product revenues, royalty revenues
and profitability. The addition of Antares is also expected to accelerate top-
and bottom-line growth and enhance cash flow generation through 2027 and beyond.

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. Cost of product sales were $15.9
million for the three months ended March 31, 2022 compared to $18.2 million for
the three months ended March 31, 2021. The decrease of $2.3 million in cost of
product sales was mainly due to the timing of manufacturing overhead costs
incurred in the three months ended March 31, 2021.
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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, preclinical and regulatory
activities related to our ENHANZE collaborations and our rHuPH20 platform.
Research and development expenses were $11.9 million for the three months ended
March 31, 2022 compared to $9.0 million for the three months ended March 31,
2021. The increase of $2.9 million is primarily due to an increase in
compensation expense, including share-based compensation, for personnel in
support of investments in ENHANZE.

Selling, General and Administrative - Selling, general and administrative (SG&A)
expenses consist primarily of salaries and related costs for personnel in
executive, selling and administrative functions as well as professional fees for
legal and accounting, business development, commercial operations support for
Hylenex and alliance management and marketing support for ENHANZE. SG&A expenses
were $13.8 million for the three months ended March 31, 2022 compared to $11.1
million for the three months ended March 31, 2021. The increase of $2.7 million,
or 25%, was primarily due to an increase in compensation expense and merger and
acquisition and diligence activities.

Interest Expense - Interest expense was $1.8 million for the three months ended
March 31, 2022 compared to $2.0 million for the three months ended March 31,
2021. The decrease of $0.2 million was primarily due to a decrease in interest
expense related to the repurchase of 2024 Convertible Notes in 2021. We expect
that our aggregate interest expense will increase once we put in place the
credit facilities to complete the Antares acquisition.

Income Taxes - Income tax expense was $14.3 million for the three months ended
March 31, 2022, compared to income tax expense of $0.2 million for the three
months ended March 31, 2021. The increase in income tax expense is due to the
recording of full quarter income tax expense in the current year whereas in the
prior period there was minimal income tax expense due to a full valuation
allowance in place.









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Liquidity and Capital Resources

Overview

Our principal sources of liquidity are our existing cash, cash equivalents and
available-for-sale marketable securities. As of March 31, 2022, we had cash,
cash equivalents and marketable securities of $786.1 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, draw on our existing line of credit, 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 $47.8 million for the three months ended
March 31, 2022 compared to $58.3 million cash provided in the three months ended
March 31, 2021. The $10.5 million decrease in cash provided by operations was
mainly due to an increase in working capital spend, partially offset by an
increase in royalties revenue during the three months ended March 31, 2022
compared to the corresponding period in the prior year.

Investing Activities

Net cash used in investing activities was $49.3 million for the three months
ended March 31, 2022 compared to $45.3 million cash used in investing activities
for the three months ended March 31, 2021. The increase in cash used in
investing activities was primarily due to an increase in purchase of marketable
securities for the three months ended March 31, 2022.

Financing Activities

Net cash provided by financing activities was $0.6 million for the three months
ended March 31, 2022, compared to $338.7 million cash provided by financing
activities for the three months ended March 31, 2021, mainly due to $784.9
million cash received from the 2027 Convertible Notes offering in the prior
year, partially offset by prior year activities of $369.1 million related to the
Induced Conversion of the 2024 Convertible Notes, $76.2 million in repurchase of
common stock and a $1.2 million increase in net proceeds during the current year
from the issuance of common stock under equity incentive plans.

Share Repurchases

In November 2019, our 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. We completed the share repurchase program in October
2021 and retired the repurchased shares. In December 2021, we announced our
second share repurchase program to repurchase up to $750.0 million of our
outstanding common stock over a three-year period. See Note 8. Stockholders'
Equity, within the notes to the consolidated financial statements for additional
information regarding our share repurchases.

Long-Term Debt

0.25% Convertible Notes due 2027

In March 2021, we completed the sale of $805.0 million in aggregate principal
amount of 0.25% Convertible Senior Notes due 2027 (the "2027 Convertible Notes"
and collectively with the 2024 Convertible Notes the "Convertible Notes"). The
net proceeds in connection with the 2027 Convertible Notes, after deducting the
initial purchasers' fee of $20.1 million, was approximately $784.9 million. We
also incurred additional debt issuance costs totaling $0.4 million. Debt
issuance costs and the initial purchasers' fee are presented as a debt discount.

The 2027 Convertible Notes pay interest semi-annually in arrears on March 1st
and September 1st of each year at an annual rate of 0.25%. The 2027 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
2027 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. The 2027 Convertible Notes have a maturity date of March 1, 2027.
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Holders may convert their 2027 Convertible Notes at their option only in the
following circumstances: (1) during any calendar quarter commencing after the
calendar quarter ending on June 30, 2021, 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 5 consecutive trading
day period (such 5 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 our 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 our common stock, as described in the
offering memorandum for the 2027 Convertible Notes; (4) if we call such notes
for redemption; and (5) at any time from, and including, September 1, 2026 until
the close of business on the scheduled trading day immediately before the
maturity date. The Notes will be convertible, regardless of the foregoing
circumstances, at any time from, and including, September 1, 2026 until the
close of business on the scheduled trading day immediately preceding the
maturity date. As of March 31, 2022, the 2027 Convertible Notes are not
convertible.

Upon conversion, we will pay cash for the settlement of principal and for the
premium, if applicable, we will pay cash, deliver shares of common stock or a
combination of cash and shares of common stock, at our election. The initial
conversion rate for the 2027 Convertible Notes is 12.9576 shares of common stock
per $1,000 in principal amount of 2027 Convertible Notes, equivalent to a
conversion price of approximately $77.17 per share of our common stock. The
conversion rate is subject to adjustment.

1.25% Convertible Notes due 2024

In November 2019, we completed the sale of $460.0 million in aggregate principal
amount of 1.25% Convertible Senior Notes due 2024 ("2024 Convertible Notes").
The net proceeds in connection with the issuance of the 2024 Convertible Notes,
after deducting the initial purchasers' fee of $12.7 million, was approximately
$447.3 million. We also incurred debt issuance cost totaling $0.3 million. Debt
issuance costs and the initial purchasers' fee are presented as a debt discount.

The 2024 Convertible Notes 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%. The 2024 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 2024 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 2024 Convertible
Notes have a maturity date of December 1, 2024.

Holders may convert their 2024 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 our 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 our common stock, as described in the
offering memorandum for the 2024 Convertible Notes; (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. As of March 31, 2022, the 2024 Convertible Notes are convertible.

In January 2021 we notified the note holders our irrevocable election to settle
the principal of the 2024 Convertible Notes in cash and for the premium, if
applicable, deliver shares of common stock. The conversion rate for the 2024
Convertible Notes is 41.9208 shares of common stock per $1,000 in principal
amount of 2024 Convertible Notes, equivalent to a conversion price of
approximately $23.85 per share of our common stock. The conversion rate is
subject to adjustment.

In March 2021, we completed a privately negotiated and induced conversion of
$369.1 million principal amount of the 2024 Convertibles ("Note Repurchases" or
the "Induced Conversion"). In connection with the Induced Conversion, we paid
approximately $370.2 million in cash, which includes principal and accrued
interest, and issued approximately 9.08 million shares of our common stock
representing the intrinsic value based on the contractual conversion rate and
incremental shares as an inducement for conversion. As a result of the Induced
Conversion, we recorded $21.0 million in induced conversion expense which is
included in Other income (expense) of the Condensed Consolidated Statements of
Income in 2021. The induced conversion expense represents the fair value of the
common stock issued upon conversion in excess of the common stock issuable under
the original terms of the 2024 Convertible Notes.


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Revolving Credit Facility

In December 2021, we entered into a credit agreement with Bank of America and
the other lenders party thereto (the "Credit Agreement") evidencing a revolving
credit facility (the "Facility") that provides for secured revolving loans and
letters of credit in an aggregate amount of up to $75.0 million. The Credit
Agreement contains an expansion feature, which allows us, subject to certain
conditions, to increase the aggregate principal amount of the Facility to $250.0
million, provided we remain in compliance with underlying financial covenants on
a pro forma basis including the consolidated interest coverage ratio and the
consolidated net leverage ratio covenants set forth in the Credit Agreement. The
facility matures on December 23, 2024.

Borrowings under the Facility bear interest, at our option, at a rate equal to
an applicable margin plus: (a) the applicable Bloomberg Short-Term Bank Yield
Index rate (or the "BSBY Rate," as defined in the Credit Agreement), or (b) a
base rate determined by reference to the highest of (1) the federal funds
effective rate plus 0.50%, (2) the Bank of America prime rate, (3) the BSBY Rate
plus 1.00%, and (4) 1.00%. The margin for the Facility ranges, based on our
consolidated total net leverage ratio, from 0.00% to 0.75% in the case of base
rate loans and from 1.00% to 1.75% in the case of BSBY Rate loans. In addition
to paying interest on any outstanding principal under the Facility, we will pay
(i) a commitment fee in respect of the unutilized commitments thereunder and
(ii) customary letter of credit fees and agency fees. The commitment fees range
from 0.15% to 0.30% per annum based on our consolidated net leverage ratio. As
of March 31, 2022, the revolving credit facility was undrawn.

Additional Capital Requirements.

Our expected working and other capital requirements are described in our 2021
Annual Report on Form 10-K in "Part II, Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations." At March 31, 2022,
other than cash required for the Antares acquisition, which is expected to close
in the first half of 2022 and the changes disclosed in the "Notes to Condensed
Consolidated Financial Statements" and "Liquidity and Capital Resources" in this
Quarterly Report, there have been no other material changes to our expected
working and other capital requirements described in our 2021 Annual Report on
Form 10-K.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations
are based on our condensed consolidated financial statements, which have been
prepared in accordance with U.S. generally accepted accounting principles, or
U.S. GAAP. The preparation of our condensed 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.

Our significant accounting policies are described in Note 2 to the consolidated
financial statements included in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2021. The accounting policies and estimates that are
most critical to a full understanding and evaluation of our reported financial
results are described in Management's Discussion and Analysis of Financial
Condition and Results of Operations in Item 7 of our Annual Report on Form 10-K
for the fiscal year ended December 31, 2021. There were no material changes to
our critical accounting policies or estimates during the three months ended
March 31, 2022.

Recent Accounting Pronouncements

Refer to Note 2, Summary of Significant Accounting Policies, of our condensed consolidated financial statements for a discussion of recent accounting pronouncements and their effect, if any.

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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, evolved into a global pandemic and spread to
most regions of the world including the city of San Diego, California where our
main office is located.

The COVID-19 pandemic 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 to
determine the timing for all employees to return to working from the office.

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.

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.


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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, 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 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 will 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
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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 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, including
revenues from milestones, royalties and product sales 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 on 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.
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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:

•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.
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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:

•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.
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Failure to complete the acquisition of Antares, or once completed, failure to
successfully integrate the Antares business, could adversely impact our stock
price and future business and operations.

As described above under "Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Overview", on April 12, 2022, we
entered into a Merger Agreement with Antares and Purchaser (our subsidiary),
pursuant to which, on the terms and subject to the conditions set forth in the
Merger Agreement, Purchaser agreed to commence a cash tender offer to acquire
all of the outstanding shares of common stock of Antares at a purchase price of
$5.60 per share, for a total transaction value of approximately $960.0 million.
We expect the transaction to close in the first half of 2022.

Our acquisition of Antares may not occur. If the acquisition of Antares is not
completed for any reason, we may incur acquisition-related expenses without
realizing the expected benefits, and the price of our common stock may decline
to the extent that the current market price reflects an assumption that the
acquisition will be completed.

Our integration of the Antares business into our operations will be a complex
and time-consuming process that may not be successful. The primary areas of
focus for successfully combining the business of Antares with our operations may
include, among others: retaining and integrating management and other key
employees; aligning and prioritizing product development initiatives,
integrating information, communications and other systems; and managing the
growth of the combined company.

Even if we successfully integrate the business of Antares into our operations,
we may not realize the anticipated benefits. We are seeking to acquire Antares
with the expectation that the acquisition will result in various benefits for
the combined company, including providing an opportunity for increased revenues,
expansion into additional market segments and the ability to leverage existing
U.S. commercial infrastructure to promote the companies' proprietary products.
Increased competition and/or deterioration in business conditions may limit our
ability to expand this business. As such, we may not be able to realize the
benefits anticipated in connection with the acquisition.

Upon closing of the pending acquisition of Antares, we may become exposed to
additional risks to our operations as a combined Company including, but not
limited to: (i) an increased reliance on third parties to perform many necessary
services for our products such as the supply and manufacture of Antares'
products and services related to the distribution, invoicing, packaging, storage
and transportation of such products; (ii) reliance on Antares' partners to
manufacture and supply the drug for their product and to distribute and
commercialize such products; (iii) reliance on a limited number of customers for
the majority of Antares' revenues; (iv) increased competition from companies
competing against Antares' proprietary products and its partners' products; (v)
increased risks associated with product development of Antares' products and its
partners' products and (vi) increased regulatory risks associated with ongoing
regulatory review of Antares' products and its partners' products.

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 expect to 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 March 31, 2022 was $877.6 million, which includes $90.9 million in aggregate
principal amount of the 2024 Convertible Notes and $805.0 million in aggregate
principal amount of the 2027 Convertible Notes, net of unamortized debt discount
of $1.4 million and of $16.9 million, respectively. We expect to incur
additional debt to finance the acquisition of Antares and may incur additional
debt in the future. On April 12, 2022, in connection with the Merger Agreement,
we entered into a commitment letter with Bank of America Securities, Inc. ("BofA
Securities") and Bank of America, N.A. (together with BofA Securities, the
"Commitment Parties") pursuant to which the Commitment Parties have committed to
provide a $375 million senior secured term loan and a $75 million revolving
credit facility.
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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.

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
March 31, 2022, the conditional conversion feature was triggered and our 2024
Convertible 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.

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.
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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:

•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 or maintain market acceptance or
experience reduced sales 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

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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, including our planned acquisition of Antares, could disrupt our business and harm our financial condition.

In order to augment our product pipeline or otherwise strengthen our business,
we have entered into the Merger Agreement to acquire Antares and we may decide
to acquire additional businesses, products and technologies. As we have limited
experience in evaluating and completing acquisitions, our ability as an
organization to make such acquisitions is unproven. Acquisitions could require
significant capital infusions and could involve many risks, including, but not
limited to, the following:

•we may have to issue 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;
•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.

Our effective tax rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of accrued amounts.

Our effective tax rate is derived from a combination of applicable tax rates in
the various places that we operate. In preparing our financial statements, we
estimate the amount of tax that will become payable in each of such places.
Nevertheless, our effective tax rate may be different than experienced in the
past due to numerous factors, including changes in the mix of our profitability
between different tax jurisdictions, the results of examinations and audits of
our tax filings, our inability to secure or sustain acceptable agreements with
tax authorities, changes in accounting for income taxes and changes in tax laws.
Any of these factors could cause us to experience an effective tax rate
significantly different from previous periods or our current expectations and
may result in tax obligations in excess of amounts accrued in our financial
statements.

In addition, on September 30, 2021, we determined, based on our facts and
circumstances, that it was more likely than not that a substantial portion of
our deferred tax assets would be realized and, as a result, substantially all of
our valuation allowance against our deferred tax assets was released. This
resulted in substantially and disproportionately increasing our reported net
income and our earnings per share compared to our operating results for 2021.
Historical and future comparisons to these amounts are not, and will not be,
indicative of actual profitability trends for our business. Beginning in 2022,
we expect to
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commence recording income tax expense at an estimated tax rate that will likely
approximate statutory tax rates, which would result in a significant reduction
in our net income and net income per share.

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 March 31, 2022 were $51.57 and $31.36, respectively. In addition to
the other risks and uncertainties described elsewhere in this Quarterly Report
on Form 10-Q and all other risks and uncertainties that are either not known to
us at this time or which we deem to be immaterial, any of the following factors
may lead to a significant drop in our stock price:

•the presence of competitive products to those being developed by 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.
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Anti-takeover provisions in our charter documents, the Indentures and Delaware law may make an acquisition of us more difficult.

Anti-takeover provisions in our charter documents, the Indentures 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 Convertible Notes issuances, we entered into an
indenture dated as of November 18, 2019 and an indenture dated as of March 1,
2021 (the "Indentures"), 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 Indentures 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.
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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:

•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.
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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.
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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.
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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, Bausch Health Companies, 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.
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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. In addition, our
cybersecurity insurance may not be sufficient to cover us against liability
related to any such breaches. 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.



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