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Press Release

July 24, 2019 at 4:05 PM EDT

Innoviva Reports Second Quarter 2019 Financial Results

  • Total net revenue decreased by 4% to $64.1 million in the second quarter of 2019, compared to the same quarter in 2018.
  • Income before income taxes decreased slightly to $56.5 million in the second quarter of 2019, compared to the same quarter in 2018.

BRISBANE, Calif.--(BUSINESS WIRE)--Jul. 24, 2019-- Innoviva, Inc. (NASDAQ:INVA) (the Company) today reported financial results for the second quarter ended June 30, 2019.

  • Gross royalty revenues of $67.6 million from Glaxo Group Limited (“GSK”) for the second quarter of 2019 included royalties of $47.1 million from global net sales of RELVAR®/BREO® ELLIPTA®, royalties of $10.6 million from global net sales of ANORO® ELLIPTA® and $9.9 million from global net sales of TRELEGY® ELLIPTA®.1
  • Total operating expenses for the second quarter of 2019 were $4.3 million, compared with $4.4 million in the second quarter of 2018. Stock-based compensation for the second quarter of 2019 was $0.5 million compared to $1.5 million for the second quarter of 2018.
  • Net cash and cash equivalents, short-term investments and marketable securities totaled $249.7 million, and royalties receivable from GSK totaled $67.6 million, as of June 30, 2019.

“Global net sales of RELVAR®/BREO® ELLIPTA® decreased 18% versus the second quarter of 2018. U.S. net sales declined 44% as increased pricing discounts in the ICS/LABA sector offset volume growth. Non-U.S. sales growth accelerated from the first quarter of 2019 and increased 13% versus the second quarter of 2018, driven by continued market share gains in certain European markets and growth in Japan. Non-U.S. growth was negatively impacted by foreign currency translation; in constant exchange rates (CER), RELVAR®/BREO® ELLIPTA® non-U.S. net sales grew 19%.”

“ANORO® ELLIPTA® global net sales decreased slightly versus the second quarter of 2018. U.S. net sales fell 9%, compared to the same quarter of 2018, as increased pricing pressure, a negative inventory adjustment, and higher levels of sales through market segments with higher rebates offset growth in the LAMA/LABA class. Non-U.S. ANORO® ELLIPTA® net sales grew 18% year over year in the quarter. The rate of growth increased from the first quarter of 2019 even after a negative impact from foreign currency translation. On a CER basis, ANORO® ELLIPTA® non-U.S. net sales grew 24%. In addition, TRELEGY® ELLIPTA global net sales were $151.4 million,” stated Geoffrey Hulme, interim Principal Executive Officer.

Hulme continued, “In the quarter, U.S. RELVAR®/BREO® ELLIPTA® net sales were impacted in part by weaker pricing that occurred in the wake of the launch of generic versions of Advair. Non-U.S. net sales for RELVAR®/BREO® ELLIPTA® grew strongly year over year and comprised nearly two-thirds of global net sales of RELVAR®/BREO® ELLIPTA®.”

“During the second quarter, our core operating expenses were similar to the levels in the first quarter. Some additional expenses were incurred in the second quarter in the evaluation of strategic options. The ratio of operating cash flow to net royalty revenues remained strong. Management and the board continue to examine potential strategic actions to maximize future shareholder value.”

Recent Highlights

  • GSK Net Sales:
    • Second quarter 2019 net sales of RELVAR®/BREO® ELLIPTA® by GSK were $313.9 million, down 18% from $383.4 million in the second quarter of 2018, with $116.4 million in net sales from the U.S. market and $197.5 million from non-U.S. markets.
    • Second quarter 2019 net sales of ANORO® ELLIPTA® by GSK were $163.6 million, down slightly from $163.9 million in the second quarter of 2018, with $102.2 million net sales from the U.S. market and $61.4 million from non-U.S. markets.
    • Second quarter 2019 net sales of TRELEGY® ELLIPTA® by GSK were $151.4 million, up significantly from $36.5 million in the second quarter of 2018, with $109.5 million in net sales from the U.S. market and $41.9 million in net sales from non-U.S. markets.

1 For TRELEGY® ELLIPTA®, Innoviva is entitled to 15% of royalty payments made by GSK that are assigned to TRC, LLC.

About Innoviva

Innoviva, Inc. (referred to as “Innoviva”, the “Company”, or “we” and other similar pronouns) is focused on royalty management. Innoviva’s portfolio includes the respiratory assets partnered with Glaxo Group Limited (“GSK”), including RELVAR®/BREO® ELLIPTA® (fluticasone furoate/ vilanterol, “FF/VI”), ANORO® ELLIPTA® (umeclidinium bromide/ vilanterol, “UMEC/VI”) and TRELEGY® ELLIPTA® (the combination FF/UMEC/VI). Under the Long-Acting Beta2 Agonist (“LABA”) Collaboration Agreement, Innoviva is entitled to receive royalties from GSK on sales of RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA®. Innoviva is also entitled to 15% of royalty payments made by GSK under its agreements originally entered into with us, and since assigned to Theravance Respiratory Company, LLC (“TRC”), relating to TRELEGY® ELLIPTA® and any other product or combination of products that may be discovered and developed in the future under the LABA Collaboration Agreement and the Strategic Alliance Agreement with GSK (referred to herein as the “GSK Agreements”), which have been assigned to TRC other than RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA®.

ANORO®, RELVAR®, BREO®, TRELEGY® and ELLIPTA® are trademarks of the GlaxoSmithKline group of companies.

Forward Looking Statements

This press release contains certain “forward-looking” statements as that term is defined in the Private Securities Litigation Reform Act of 1995 regarding, among other things, statements relating to goals, plans, objectives and future events. Innoviva intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. The words “anticipate”, “expect”, “goal”, “intend”, “objective”, “opportunity”, “plan”, “potential”, “target” and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements involve substantial risks, uncertainties and assumptions. These statements are based on the current estimates and assumptions of the management of Innoviva as of the date of this press release and are subject to known and unknown risks, uncertainties, changes in circumstances, assumptions and other factors that may cause the actual results of Innoviva to be materially different from those reflected in the forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, among others, risks related to: expected cost savings; lower than expected future royalty revenue from respiratory products partnered with GSK; the commercialization of RELVAR®/BREO® ELLIPTA®, ANORO® ELLIPTA® and TRELEGY® ELLIPTA® in the jurisdictions in which these products have been approved; the strategies, plans and objectives of Innoviva (including Innoviva’s growth strategy and corporate development initiatives beyond the existing respiratory portfolio); the timing, manner, and amount of potential capital returns to shareholders; the status and timing of clinical studies, data analysis and communication of results; the potential benefits and mechanisms of action of product candidates; expectations for product candidates through development and commercialization; the timing of regulatory approval of product candidates; and projections of revenue, expenses and other financial items. Other risks affecting Innoviva are described under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Innoviva’s Annual Report on Form 10-K for the year ended December 31, 2018, which is on file with the Securities and Exchange Commission (“SEC”) and available on the SEC’s website at www.sec.gov. Past performance is not necessarily indicative of future results. No forward-looking statements can be guaranteed and actual results may differ materially from such statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. The information in this press release is provided only as of the date hereof, and Innoviva assumes no obligation to update its forward-looking statements on account of new information, future events or otherwise, except as required by law.

INNOVIVA, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)

Three Months Ended

 

Six Months Ended

June 30,

 

June 30,

2019

 

2018

 

2019

 

2018

Revenue:
Royalty revenue from a related party, net (1)

$

64,107

 

$

67,086

 

$

119,290

 

$

119,466

 

 
Operating expenses:
General and administrative

 

4,347

 

 

4,411

 

 

7,362

 

 

10,222

 

General and administrative - cash severance expenses

 

-

 

 

-

 

 

-

 

 

3,174

 

General and administrative - related party

 

-

 

 

-

 

 

-

 

 

2,700

 

Total operating expenses

 

4,347

 

 

4,411

 

 

7,362

 

 

16,096

 

 
Income from operations

 

59,760

 

 

62,675

 

 

111,928

 

 

103,370

 

 
Other income (expense), net

 

(8

)

 

39

 

 

(7

)

 

(3,060

)

Interest income

 

1,403

 

 

380

 

 

2,378

 

 

771

 

Interest expense

 

(4,661

)

 

(6,478

)

 

(9,278

)

 

(14,135

)

Income before income taxes

 

56,494

 

 

56,616

 

 

105,021

 

 

86,946

 

Income tax expense, net

 

10,433

 

 

-

 

 

18,941

 

 

-

 

Net income

 

46,061

 

 

56,616

 

 

86,080

 

 

86,946

 

Net income attributable to noncontrolling interest

 

8,321

 

 

1,990

 

 

14,550

 

 

2,739

 

Net income attributable to Innoviva stockholders

$

37,740

 

$

54,626

 

$

71,530

 

$

84,207

 

 
Basic net income per share attributable to Innoviva stockholders

$

0.37

 

$

0.54

 

$

0.71

 

$

0.84

 

Diluted net income per share attributable to Innoviva stockholders

$

0.34

 

$

0.49

 

$

0.65

 

$

0.77

 

 
Shares used to compute basic net income per share

 

101,151

 

 

100,873

 

 

101,105

 

 

100,739

 

Shares used to compute diluted net income per share

 

113,391

 

 

113,399

 

 

113,384

 

 

113,483

 

(1) Total net revenue from a related party is comprised of the following (in thousands):

Three Months Ended

 

Six Months Ended

June 30,

June 30,

2019

 

2018

 

2019

 

2018

(unaudited)

 

 

 

 

 
Royalties from a related party

$

67,563

 

$

70,542

 

$

126,202

 

$

126,378

 

Amortization of capitalized fees paid to a related party

 

(3,456

)

 

(3,456

)

 

(6,912

)

 

(6,912

)

Royalty revenue from a related party, net

$

64,107

 

$

67,086

 

$

119,290

 

$

119,466

 

INNOVIVA, INC.
Condensed Consolidated Balance Sheets
(in thousands)

June 30,

 

December 31,

2019

 

2018

(unaudited)

 

(1)

 
Assets
Cash, cash equivalents and marketable securities

$

249,663

 

$

114,908

 

Other current assets

 

68,022

 

 

84,135

 

Property and equipment, net

 

136

 

 

160

 

Operating lease right-of-use asset

 

1,348

 

 

-

 

Capitalized fees paid to a related party, net

 

145,987

 

 

152,899

 

Deferred tax assets

 

177,114

 

 

196,054

 

Other assets

 

37

 

 

37

 

Total assets

$

642,307

 

$

548,193

 

 
 
Liabilities and stockholders’ equity
Other current liabilities

$

3,213

 

$

1,436

 

Accrued interest payable

 

4,262

 

 

4,264

 

Convertible subordinated notes, net

 

238,939

 

 

238,664

 

Convertible senior notes, net

 

134,239

 

 

130,734

 

Senior secured term loans, net

 

13,497

 

 

13,457

 

Other long-term liabilities

 

1,455

 

 

586

 

 
Innoviva stockholders’ equity

 

226,683

 

 

153,583

 

Noncontrolling interest

 

20,019

 

 

5,469

 

 
Total liabilities and stockholders’ equity

$

642,307

 

$

548,193

 

(1) The selected consolidated balance sheet amounts at December 31, 2018 are derived from audited financial statements.
INNOVIVA, INC.
Cash Flows Summary
(in thousands)

Six Months Ended June 30,

2019

 

2018

(unaudited)

Net cash provided by operating activities

$

133,151

 

$

101,639

 

Net cash provided by (used in) investing activities

 

(54,060

)

 

35,591

 

Net cash provided by (used in) financing activities

 

444

 

 

(123,340

)

 

Source: Innoviva, Inc.

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