Halozyme Therapeutics: Navigating Royalty Risks and Drug Delivery Innovation

The biotechnology sector is no stranger to high-stakes gambles, and Halozyme Therapeutics (NASDAQ: HALO) sits at the intersection of both promise and peril. As a leader in subcutaneous drug delivery technologies, the company has built a business model reliant on royalty streams from partnerships with pharmaceutical giants. However, a looming "royalty cliff" between 2030 and 2035 threatens to upend its financial trajectory. This article examines the magnitude of the risk, evaluates recent strategic moves to mitigate it, and assesses whether Halozyme's innovations can justify its current valuation.

The Royalty Cliff: A Looming Crisis

Halozyme's revenue has long been driven by its ENHANZE® drug delivery platform, which licenses its rHuPH20 enzyme to partners like Roche, Takeda, and Bristol Myers Squibb. These partnerships enable the development of subcutaneous (SC) formulations of biologics, offering patients faster administration and improved convenience. However, Goldman Sachs has sounded the alarm: approximately 70% of Halozyme's modeled royalties are set to expire between 2030 and 2035, creating a "revenue cliff" that could reduce total revenue by 38% from 2030 to 2041.

The firm's analysis underscores a critical dependency: Halozyme's current valuation assumes $34 billion in new partner product revenues by 2041 to offset the cliff. Yet, given the company's historical pace of securing one partnership per year, achieving this target appears optimistic. Even recent collaborations, such as the 2025 agreement with Merus N.V. to develop a subcutaneous formulation of petosemtamab, are unlikely to provide meaningful near-term relief.

Strategic Innovations: Elektrofi and Beyond

To address this challenge, Halozyme has pursued aggressive innovation. In late 2025, the company acquired Elektrofi, a pioneer in Hypercon™ microparticle technology, for $750 million upfront, with potential milestone payments of up to $150 million. Hypercon enables ultra-high concentration biologic formulations (up to 400–500 mg/mL), reducing injection volumes and enabling at-home administration. This acquisition complements ENHANZE by expanding Halozyme's portfolio into next-generation delivery solutions.

The Elektrofi deal also brings two partner programs into clinical development by late 2026, with potential milestone payments of up to $275 million. While these funds could bolster short-term liquidity, the real value lies in future royalty revenue, projected to begin as early as 2030. However, Goldman Sachs cautions that these new streams may not fully offset the cliff, given the timing mismatch between expiring royalties and new revenue inflows.

The Merus Collaboration: A Glimmer of Hope?

Halozyme's partnership with Merus N.V. offers another potential avenue for growth. Under the terms of the 2025 agreement, Merus will use ENHANZE to develop a subcutaneous version of its bispecific antibody, petosemtamab. The deal includes an upfront payment, future milestone payments tied to regulatory and sales milestones, and low-mid single-digit royalties on net sales according to DCF modeling. While this collaboration strengthens Halozyme's oncology footprint, its financial impact remains contingent on the drug's approval and commercial success-outcomes that are years away.

Long-Term Outlook: Can Innovation Outpace Decline?

The key question for investors is whether Halozyme's recent advancements can bridge the gap between its expiring royalties and the $34 billion revenue target. The company's 2025 financial performance-31.2% revenue growth and a 124% return on equity-demonstrates its current model's strength. However, sustaining this growth will require accelerating deal-making beyond its historical pace.

Goldman Sachs' skepticism is rooted in the pharmaceutical industry's conservative approach to adopting new delivery technologies. While ENHANZE and Hypercon offer clear clinical benefits, widespread adoption hinges on partners' willingness to invest in re-formulating existing therapies. This process is both time-consuming and capital-intensive, leaving Halozyme vulnerable to delays.

Conclusion: A High-Risk, High-Reward Proposition

Halozyme Therapeutics occupies a unique position in the drug delivery space, with cutting-edge technologies that address critical unmet needs in oncology and biologics. Yet, its long-term value remains contingent on navigating the 2030–2035 royalty cliff. The Elektrofi acquisition and Merus collaboration represent strategic steps forward, but their success depends on execution risks and market dynamics beyond the company's control.

For investors, the calculus hinges on two factors: the pace of new partnership acquisitions and the commercial viability of Elektrofi's Hypercon technology. If Halozyme can accelerate deal flow and demonstrate the cost-effectiveness of its solutions, it may yet justify its valuation. However, under a base-case scenario, the looming cliff suggests a need for caution. As the 2030 deadline approaches, all eyes will be on the company's ability to transform innovation into sustainable revenue.