Executive Summary / Key Takeaways

• Halozyme Therapeutics is a biopharmaceutical company with a high-margin, technology-driven business model centered on its proprietary ENHANZE drug delivery platform and a growing auto-injector portfolio.
• The company delivered a strong Q1 2025, with total revenue increasing 35% year-over-year to $264.9 million and royalty revenue growing 39% to $168.2 million, driven by key partnered products like DARZALEX SC, Phesgo, and VYVGART Hytrulo.
• Based on this performance and anticipated catalysts, Halozyme raised its full-year 2025 guidance, projecting total revenue of $1.2 billion to $1.28 billion and non-GAAP diluted EPS of $5.30 to $5.70, reflecting significant year-over-year growth.
• ENHANZE offers quantifiable benefits, including dramatically reduced administration times (minutes vs. hours for IV), lower infusion-related reactions, and potential for expanded market access and extended dosing, creating a significant competitive moat.
• A robust pipeline of recently launched and near-term approved products, coupled with ongoing business development for new ENHANZE deals, auto-injectors, and the distinct MDASE technology, underpins confidence in exceeding $1 billion in royalty revenue by 2027 and doubling key financial metrics by 2028.

The Engine Driving Subcutaneous Innovation

Halozyme Therapeutics operates at the intersection of biology and delivery technology, positioning itself as a critical enabler in the evolving landscape of injectable therapies. At its core, the company's strategy revolves around licensing its proprietary drug delivery platforms, primarily the ENHANZE technology, to global biopharmaceutical partners. This model generates durable, high-margin revenue streams, predominantly through royalties on partner product sales. Halozyme complements this with a growing portfolio of auto-injector technologies and proprietary products, acquired through strategic M&A like the Antares Pharma transaction. The overarching goal is to improve the patient experience, reduce treatment burden, and unlock new commercial opportunities for complex biologic drugs, thereby driving strong and sustainable revenue and EBITDA growth well into the next decade.

The company's history is rooted in pioneering the use of human hyaluronidase for subcutaneous drug delivery. Beginning with early collaborations like the one with Roche in 2006, Halozyme built a foundation by licensing its ENHANZE technology, based on the rHuPH20 enzyme. This enzyme temporarily degrades hyaluronan in the subcutaneous space, facilitating the rapid delivery of large volumes of fluid and high-dose biologics. The strategic acquisition of Antares Pharma added device technologies and proprietary products like XYOSTED and Hylenex, broadening Halozyme's capabilities and revenue sources beyond the core ENHANZE licensing model. This evolution reflects a deliberate strategy to become a comprehensive partner in subcutaneous drug delivery.

Technological Edge: The Power of ENHANZE and Beyond

Halozyme's competitive advantage is fundamentally rooted in its differentiated technology platforms, offering tangible and often quantifiable benefits over traditional drug administration methods.

The flagship ENHANZE technology, utilizing the patented rHuPH20 enzyme, is the cornerstone. Its core mechanism breaks down hyaluronan, a key component of the subcutaneous extracellular matrix, to enable the rapid, high-volume delivery of injected drugs. This translates directly into significant patient and healthcare system benefits. For instance, ENHANZE has enabled administration times for partnered products to be dramatically reduced from hours for intravenous (IV) infusions to mere minutes for subcutaneous (SC) injections. Examples include Herceptin SC (2-5 minutes vs. 30-90 minutes IV), MabThera SC (~5 minutes vs. 1.5-4 hours IV), TECENTRIQ SC (~7 minutes vs. 30-60 minutes IV), OCREVUS SC (10 minutes vs. multi-hour IV), Opdivo Qvantig (3-5 minutes), and RYBREVANT SC (~5 minutes vs. multi-hour IV). Beyond speed, ENHANZE can reduce infusion-related reactions, as demonstrated by a five-fold reduction for RYBREVANT SC in the PALOMA 3 trial. It also holds the potential to extend dosing intervals for existing SC drugs, exemplified by ViiV's N6LS program exploring every-four-month dosing. These benefits improve patient comfort, adherence, and can potentially lower healthcare costs by enabling administration outside of costly IV infusion centers, facilitating market expansion as seen with Roche's Ocrevus Zunovo, which is projected to add an incremental ~$2 billion opportunity by reaching new patients. With over 1 million patients treated to date, ENHANZE boasts an extensive and unsurpassed safety database, further de-risking the technology for partners and regulators.

Complementing ENHANZE are Halozyme's auto-injector technologies, including small-volume and high-volume (2-10ml) platforms. These devices are designed to enhance convenience, reliability, and patient comfort, supporting the growing trend towards at-home self-administration. A recent development agreement for a small-volume auto-injector with a current partner and ongoing discussions for the high-volume auto-injector (which requires ENHANZE) highlight the expansion of this business line. The high-volume auto-injector, in particular, represents a significant innovation, requiring the development of custom components, including securing an exclusive supply for a high-volume primary container in 2024 to de-risk development for partners.

Halozyme also possesses the MDASE technology, a separate patented portfolio covering modified human hyaluronidase. This technology, distinct from the truncated rHuPH20 used in ENHANZE, is based on extensive historical research and characterization of various hyaluronidase modifications. While the vast majority of partners seek the validated ENHANZE platform, the MDASE patents are available for license to companies exploring alternative modified hyaluronidases. This opens a potential new revenue stream for Halozyme by leveraging its pioneering intellectual property in this broader space, without impacting the core ENHANZE business.

Ongoing R&D efforts include investments in a new high-yield rHuPH20 manufacturing process aimed at improving efficiency. The proprietary ATRS-1902 program, a hydrocortisone rescue pen utilizing a novel auto-injector platform, is progressing towards a pivotal study following positive Phase 1 pharmacokinetic results and Fast Track designation, demonstrating Halozyme's capability in developing its own drug-device combinations.

These technological assets collectively form a robust competitive moat, enabling Halozyme to command licensing fees and royalties, support partner product success, and drive market expansion by addressing critical patient and healthcare system needs.

Competitive Landscape and Strategic Positioning

In the competitive landscape of drug delivery and biopharmaceuticals, Halozyme occupies a unique position as a technology licensor rather than a direct drug developer for most partnered products. Its primary competition comes not from companies developing the same drugs, but from alternative drug delivery methods and other companies offering hyaluronidase-based or other subcutaneous facilitation technologies.

Halozyme's ENHANZE platform is widely recognized as the Gold Standard for rapid, large-volume subcutaneous delivery, distinguished by its extensive clinical validation, proven safety profile across over 1 million patients, and unmatched track record of global regulatory approvals and commercial success. This positions Halozyme favorably against potential rivals offering less validated or earlier-stage technologies. Management notes that companies exploring alternative hyaluronidase approaches, such as those who have partnered with Alteogen (ALT), have often first engaged with Halozyme, suggesting ENHANZE is the preferred, albeit sometimes unavailable for specific targets, option.

Compared to its large pharmaceutical partners and indirect competitors like Roche (RHHBY), AbbVie (ABBV), Bristol-Myers Squibb (BMY), and Pfizer (PFE), Halozyme operates on a significantly different scale. While these companies possess vast pipelines, global distribution networks, and diversified revenue streams, Halozyme's strength lies in its specialized technological expertise and licensing model. Halozyme's operating margins (55.10% TTM) and EBITDA margins (64.52% TTM) are notably higher than those of its large pharma partners (e.g., Roche operating margin ~22%, EBITDA margin ~30%; AbbVie operating margin ~30%, EBITDA margin ~45%; BMS operating margin ~12%, EBITDA margin ~35%; Pfizer operating margin ~23%, EBITDA margin ~30%), reflecting the high-margin nature of its royalty-driven business model. This operational efficiency is a key differentiator.

Halozyme's competitive strategy involves deepening relationships with existing partners through expanded agreements (like the recent argenx expansion adding four targets) and pursuing new collaborations across ENHANZE, high-volume, and small-volume auto-injectors. The MDASE portfolio represents a distinct opportunity to capture value from companies utilizing modified hyaluronidase IP outside of the core ENHANZE framework. While partner dependency is a vulnerability, the breadth of partnerships across multiple therapeutic areas and product life cycles mitigates this risk. The company's focus on technologies that reduce treatment burden and potentially lower healthcare costs aligns with broader industry trends and provides a compelling value proposition in a cost-conscious environment.

Financial Performance and Outlook

Halozyme demonstrated robust financial performance in the first quarter of 2025, building on a record-breaking 2024 where total revenue exceeded $1 billion for the first time. Total revenue in Q1 2025 grew 35% year-over-year to $264.9 million. This growth was primarily fueled by a 39% increase in royalty revenue to $168.2 million, driven by the continued strong sales uptake of key partnered products: DARZALEX SC (Janssen), Phesgo (Roche), and VYVGART Hytrulo (argenx). Product sales also saw a significant increase of 33% to $78.0 million, largely due to higher partner demand for bulk rHuPH20 and device partnered products, alongside contributions from proprietary products like XYOSTED. Revenues under collaborative agreements increased 12% to $18.6 million, benefiting from the timing of milestone achievements, including a VYVGART Hytrulo sales milestone recognized earlier than projected.

The high-margin nature of the royalty revenue stream contributed to strong bottom-line growth. Net income increased 54% year-over-year to $118.1 million, adjusted EBITDA grew 40% to $162 million, and non-GAAP diluted EPS rose 41% to $1.11. Operating expenses remained relatively controlled, with R&D decreasing slightly due to resource optimization and timing of investments in the new high-yield rHuPH20 process, while SG&A increased due to higher consulting and compensation costs.

Based on this strong start to the year and anticipated future catalysts, Halozyme raised its full-year 2025 financial guidance. The company now expects total revenue between $1.2 billion and $1.28 billion, representing 18% to 26% year-over-year growth. Royalty revenue is projected to be $750 million to $785 million, a significant 31% to 37% increase, with VYVGART Hytrulo expected to be the largest royalty dollar growth driver. Adjusted EBITDA guidance was raised to $790 million to $840 million (25%-33% growth), and non-GAAP diluted EPS to $5.30 to $5.70 (25%-35% growth), reflecting the operating leverage from high-margin royalties and flat expected operating expenses. Product sales are guided to $340 million to $365 million, driven by partner demand, and collaboration revenue to $110 million to $130 million, including a milestone for the EU approval of RYBREVANT SC.

The company's liquidity position is strong, with $747.9 million in cash, cash equivalents, and marketable securities as of March 31, 2025. Net cash provided by operating activities was $154.2 million in Q1 2025. The net debt position stood at $777 million, resulting in a low net leverage ratio of 1 time, down from 1.3 times at year-end 2024.

Management is confident that existing cash and anticipated revenues are sufficient to fund operations for at least the next 12 months. The company continues its disciplined capital deployment strategy, including share repurchases, having completed a $250 million Accelerated Share Repurchase in Q1 2025 and authorizing a new $250 million program in May 2025. Share buybacks have reduced the diluted share count by 10% since 2019. This financial strength and cash flow generation also support the potential for inorganic growth through M&A in drug delivery platforms, with a focus on deals that maintain disciplined leverage.

Looking further out, Halozyme remains confident in exceeding $1 billion in royalty revenue in 2027. This outlook is driven by the expected continued strong performance of the current blockbuster products and the layering of eleven new growth catalysts, including recently launched and near-term approved products like TECENTRIQ SC, OCREVUS SC, Opdivo Qvantig, and the potential launch of RYBREVANT SC. These Wave 3 products represent a significant future market opportunity, projected by analysts and companies to be approximately $35 billion in total parent product sales by 2028, even larger than the current blockbusters ($20 billion opportunity). The company projects that from 2024 to 2028, royalty revenue, adjusted EBITDA, and non-GAAP EPS will more than double, with total revenue reaching $1.7 billion to $1.9 billion. The durability of royalty streams is a key factor, with royalties from current products extending well into the 2030s and some, like VYVGART Hytrulo and Tecentriq Hybreza, into the 2040s. The recent grant of a new European patent extending ENHANZE coverage to March 2029 further supports the duration of full royalty rates for key products in that region, and the company is confident a similar U.S. reissue patent will be granted. The Wave 4 pipeline and ongoing business development efforts for new deals and nominations are expected to contribute additional revenue streams beyond 2028.

Risks and Challenges

Despite the strong performance and positive outlook, Halozyme faces several risks. Intellectual property challenges are prominent, including the patent infringement lawsuit filed against Merck (MRK) regarding the MDASE technology and ongoing Post Grant Reviews (PGRs) initiated by Merck. While management views the MDASE litigation as potential upside distinct from the core ENHANZE business and expresses confidence in prevailing against the PGRs, IP litigation is inherently costly, time-consuming, and uncertain, potentially diverting resources and attention. Opposition proceedings at the European Patent Office have also led to the revocation of some partner co-formulation patents, highlighting the ongoing need to defend IP.

Dependency on partners for product development, regulatory approval, manufacturing, and commercialization is a fundamental aspect of Halozyme's business model. Delays or setbacks experienced by partners, such as the Complete Response Letter received by J&J (JNJ) for Amivantamab SC related to a manufacturing facility inspection, can impact the timing of milestones and royalty revenues. While management is confident in J&J's path to resolution, such issues underscore the reliance on partner execution.

Competition, including alternative subcutaneous delivery technologies and other hyaluronidase approaches, poses a long-term risk. While ENHANZE is the market leader, companies may pursue alternative strategies, potentially impacting market share or pricing power for future partnered products. Regulatory risks, including potential delays or unfavorable outcomes for pipeline products, could impact future revenue streams. Furthermore, broader macroeconomic factors, including changes in U.S. trade policy and potential tariffs, could theoretically impact costs or supply chains, although management suggests limited direct impact on Halozyme's royalty revenues based on current agreements and manufacturing locations.

Conclusion

Halozyme Therapeutics stands as a compelling investment case, built upon a foundation of innovative and validated drug delivery technology that is transforming the administration of complex biologics. The ENHANZE platform, with its proven ability to enable rapid, high-volume subcutaneous delivery and improve patient experience, serves as a powerful engine driving current and future growth. This technological edge, coupled with a strategic focus on expanding its auto-injector portfolio and pursuing new licensing opportunities, positions Halozyme favorably in a market increasingly prioritizing patient convenience and reduced healthcare burden.

The company's recent financial performance, highlighted by strong revenue and earnings growth in Q1 2025 and a raised full-year outlook, underscores the commercial success of its partnered products and the leverage inherent in its high-margin royalty model. With a robust pipeline of recently launched and near-term approvals expected to layer onto the success of existing blockbusters, Halozyme has clear line of sight to continued double-digit growth and significant milestones like exceeding $1 billion in royalty revenue by 2027. While intellectual property defense and partner execution present ongoing risks, the breadth of collaborations, the durability of royalty streams extending well into the next decade, and a strong financial position with capacity for strategic M&A reinforce the company's ability to sustain its growth trajectory and deliver long-term value for investors.