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Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2017	Oct. 31, 2017
Document and Entity Information
Entity Registrant Name	Innoviva, Inc.
Entity Central Index Key	0001080014
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		108,015,451
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands

Sep. 30, 2017

Dec. 31, 2016

^[1]

Current assets:

Cash and cash equivalents

$ 138,417

$ 118,016

Short-term marketable securities

29,775

32,417

51,878

46,847

Prepaid expenses and other current assets

439

766

Total current assets

220,509

198,046

Property and equipment, net

249

368

Capitalized fees paid to a related party, net

170,177

180,545

Other assets

Total assets

390,972

378,996

Current liabilities:

Accounts payable

629

128

Accrued personnel-related expenses

1,647

2,361

Accrued interest payable

3,566

7,828

Other accrued liabilities

1,157

1,095

Current portion of long-term debt

25,000

7,752

Deferred revenue, current

885

Total current liabilities

32,884

20,049

Long-term debt, net of current portion, discount and issuance costs

578,449

708,341

Other long-term liabilities

1,049

1,383

Deferred revenue

1,551

2,214

Commitments and contingencies (Notes 9)

Stockholders' deficit:

Preferred stock: $0.01 par value, 230 shares authorized, no shares issued and outstanding

Common stock: $0.01 par value, 200,000 shares authorized, 108,152 and 108,585 shares issued as of September 30, 2017 and December 31, 2016, respectively

1,080

1,085

Treasury stock: 150 shares as of September 30, 2017 and December 31, 2016

(3,263)

Additional paid-in capital

1,336,358

1,282,077

Accumulated other comprehensive (loss) income

(3)

Accumulated deficit

(1,557,133)

(1,632,891)

Total stockholders' deficit

(222,961)

(352,991)

Total liabilities and stockholders' deficit

$ 390,972

$ 378,996

[1]	Condensed consolidated balance sheet as of December 31, 2016 has been derived from audited consolidated financial statements.

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
CONDENSED CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	230,000	230,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	108,152,000	108,585,000
Treasury stock, shares	150,000	150,000

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Revenue:
Royalty revenue from a related party, net of amortization for capitalized fees paid to a related party of $3,456 for the three months ended September 30, 2017 and 2016 and $10,368 for the nine months ended September 30, 2017 and 2016	$ 48,422	$ 33,088	$ 147,034	$ 89,294
Revenue from collaborative arrangements from a related party	221	221	663	663
Total net revenue	48,643	33,309	147,697	89,957
Operating expenses:
Research and development	311	286	1,013	1,048
General and administrative	8,310	5,105	29,489	17,582
Total operating expenses	8,621	5,391	30,502	18,630
Income from operations	40,022	27,918	117,195	71,327
Other (expense) income, net	(6,369)	56	(7,108)	1,743
Interest income	376	162	918	411
Interest expense	(10,262)	(13,103)	(35,247)	(39,416)
Net income	$ 23,767	$ 15,033	$ 75,758	$ 34,065
Basic net income per share	$ 0.22	$ 0.14	$ 0.71	$ 0.31
Diluted net income per share	$ 0.21	$ 0.13	$ 0.67	$ 0.31
Shares used to compute basic and diluted net income per share:
Shares used to compute basic net income per share	106,841	109,282	107,236	111,128
Shares used to compute diluted net income per share	119,796	121,993	120,120	111,583

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Amortization of capitalized fees paid to a related party	$ 3,456	$ 3,456	$ 10,368	$ 10,368

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income	$ 23,767	$ 15,033	$ 75,758	$ 34,065
Other comprehensive (loss) income:
Unrealized (loss) gain on marketable securities, net	(3)	2	(4)	11
Less: realized gain on marketable securities, net	0	0	0	(1)
Comprehensive income	$ 23,764	$ 15,035	$ 75,754	$ 34,075

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands

9 Months Ended

Sep. 30, 2017

Sep. 30, 2016

Cash flows from operating activities

Net income

$ 75,758

$ 34,065

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

10,487

10,458

Stock-based compensation

7,406

6,423

Amortization of debt discount and issuance costs

2,953

2,138

Loss (gain) on extinguishment of debt

7,256

(1,752)

Amortization of discount on short-term investments

(6)

(8)

Amortization of lease guarantee

(243)

(108)

Interest added to the principal balance of the non-recourse term notes due 2029

855

Realized gain on sale of marketable securities, net

(1)

Changes in operating assets and liabilities:

Receivables from collaborative arrangements

(5,031)

(10,393)

Prepaid expenses and other current assets

327

280

Other assets

(22)

Accounts payable

501

(290)

Accrued personnel-related expenses and other accrued liabilities

(606)

220

Accrued interest payable

(4,262)

(1,305)

Other long-term liabilities

Deferred revenue

(663)

(664)

Net cash provided by operating activities

93,890

39,898

Cash flows from investing activities

Maturities of marketable securities

44,387

52,101

Purchases of marketable securities

(41,743)

(82,746)

Sales of marketable securities

2,995

Purchases of property and equipment

(250)

Net cash provided by (used in) investing activities

2,644

(27,900)

Cash flows from financing activities

Proceeds from senior secured term loans

250,000

Proceeds from issuance of convertible senior notes due 2025

192,500

Payments of debt issuance costs and debt discount

(12,803)

Payment of principal on non-recourse notes due 2029

(487,189)

(3,277)

Repurchase of shares to satisfy tax withholding

(1,183)

(884)

Payments of cash dividends to stockholders

(146)

(895)

Proceeds from issuances of common stock, net

188

341

Repurchase of common stock

(17,500)

(65,565)

Repurchase of convertible subordinated notes due 2023

(8,095)

Proceeds from capped-call options

391

Net cash used in financing activities

(76,133)

(77,984)

Net increase (decrease) in cash and cash equivalents

20,401

(65,986)

Cash and cash equivalents at beginning of period

118,016

^[1]

159,180

Cash and cash equivalents at end of period

138,417

93,194

Supplemental disclosure of cash flow information

Cash paid for interest

$ 36,556

$ 37,729

[1]	Condensed consolidated balance sheet as of December 31, 2016 has been derived from audited consolidated financial statements.

Description of Operations and Summary of Significant Accounting Policies	9 Months Ended
	Sep. 30, 2017
Description of Operations and Summary of Significant Accounting Policies
Description of Operations and Summary of Significant Accounting Policies	1. Description of Operations and Summary of Significant Accounting Policies Description of Operations Innoviva, Inc. (referred to as “Innoviva”, the “Company”, or “we” and other similar pronouns) is focused on bringing compelling new medicines to patients in areas of unmet need by leveraging its significant expertise in the development, commercialization and financial management of bio-pharmaceuticals. Innoviva’s portfolio is anchored by the respiratory assets partnered with Glaxo Group Limited (“GSK”), including RELVAR®/BREO®ELLIPTA® (fluticasone furoate/ vilanterol, “FF/VI”) and ANORO® ELLIPTA®(umeclidinium bromide/ vilanterol, “UMEC/VI”). Under the Long-Acting Beta2 Agonist (“LABA”) Collaboration Agreement and the Strategic Alliance Agreement with GSK (referred to herein as the “GSK Agreements”), Innoviva is eligible to receive the associated royalty revenues from RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA®. Innoviva is also entitled to 15% of any future 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® (the combination FF/UMEC/VI) and the Bifunctional Muscarinic Antagonist — Beta2 Agonist (“MABA”) program, and any other product or combination of products that may be discovered and developed in the future under the LABA Collaboration Agreement (“LABA Collaboration”), which has been assigned to TRC other than RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA®. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In our opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of our financial position, results of operations, comprehensive income and cash flows. The interim results are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2017 or any other period. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission (“SEC”) on February 28, 2017. Variable Interest Entity We evaluate our ownership, contractual and other interest in entities to determine if they are variable interest entities (“VIE”), whether we have a variable interest in those entities and the nature and extent of those interests. Based on our evaluations, if we determine we are the primary beneficiary of such VIEs, we consolidate such entities into our financial statements. We consolidate the financial results of TRC, which we have determined to be a VIE, because we have the power to direct the economically significant activities of TRC and the obligation to absorb losses of, or the right to receive benefits from, TRC. The financial position and results of operations of TRC are not material for the periods presented. Recently Issued Accounting Pronouncements Not Yet Adopted In April 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-10 to clarify the implementation guidance on licensing and the identification of performance obligations consideration included in ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which is also known as ASC 606, was issued in May 2014 and outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In March 2016, the FASB issued ASU 2016-08 to provide amendments to clarify the implementation guidance on principal versus agent considerations. ASU 2014-09 guidance is effective for the fiscal years and interim reporting periods beginning after December 15, 2017 (as amended through ASU 2015-14 issued in August 2015), with early adoption permitted. Companies can elect a full retrospective method to recast prior-period financial statements or a modified retrospective method to recognize the cumulative effect as an adjustment to the retained earnings in the initial year. We plan to implement the standard in the first quarter of 2018 on a modified retrospective basis and do not anticipate that this standard will have a material impact on our accounting for royalty revenues. We are continuing to assess the potential impacts of the standard on the accounting for other revenues associated with the collaboration agreements. In February 2016, the FASB issued ASU 2016-02, Leases, which supersedes the lease recognition requirements in ASC Topic 840, Leases. The standard requires an entity to recognize right-of-use assets and lease liabilities arising from a lease for both financing and operating leases in the consolidated balance sheets but recognize the impact on the consolidated statement of operations and cash flows in a similar manner under current GAAP. The standard also requires additional qualitative and quantitative disclosures. The standard is effective for us at the beginning January 1, 2019 and requires transition under a modified retrospective method. The most significant impact of the update to us is that we will be required to recognize a “right-of-use” asset and lease liability for the operating lease agreement that was not previously included on the balance sheet under the existing lease guidance. We anticipate that the treatment of the lease on our consolidated statement of operations and cash flows will not materially be affected by the adoption of the new standard.

Net Income Per Share

9 Months Ended

Sep. 30, 2017

Net Income Per Share

Net Income Per Share

2. Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding. Diluted net income per share is computed by dividing net income adjusted with the interest expense on our unsecured convertible subordinated notes due 2023 (the “2023 Notes”) by the weighted-average number of shares of common stock and dilutive potential common stock equivalents then outstanding. Dilutive potential common stock equivalents include the assumed exercise, vesting and issuance of employee stock awards using the treasury stock method, as well as common stock issuable upon assumed conversion of our 2023 Notes using the if-converted method.

Our 2025 Notes are convertible, based on the applicable conversion rate, into cash, shares of our common stock or a combination thereof, at our election. Our intent is to settle the principal amount of the 2025 Notes in cash upon conversion. The impact of the assumed conversion premium to diluted net income per share is computed using the treasury stock method. As the average market price per share of our common stock as reported on The NASDAQ Global Select Market was lower than the initial conversion price of $17.26 per share, there was no dilutive effect of the assumed conversion premium for the three and nine months ended September 30, 2017.

The following table shows the computation of basic and diluted net income per share for the three and nine months ended September 30, 2017 and 2016:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands except per share data)	2017		2016		2017		2016
Numerator:
Net income, basic	$	23,767	$	15,033	$	75,758	$	34,065
Add: interest expense on 2023 Notes	1,410		1,429		4,231		—

Net income, diluted	$	25,177	$	16,462	$	79,989	$	34,065


Denominator:
Weighted-average shares used to compute basic net income per share	106,841		109,282		107,236		111,128
Dilutive effect of 2023 Notes	12,189		12,398		12,189		—
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan	766		313		695		455

Weighted-average shares used to compute diluted net income per share	119,796		121,993		120,120		111,583


Net income per share
Basic	$	0.22	$	0.14	$	0.71	$	0.31

Diluted	$	0.21	$	0.13	$	0.67	$	0.31

Anti-Dilutive Securities

The following common stock equivalents were not included in the computation of diluted net income per share because their effect was anti-dilutive:

	Three Months Ended September 30,		Nine Months Ended September 30,
(In thousands)	2017	2016	2017	2016
Outstanding options and awards granted under equity incentive plan and employee stock purchase plan	1,779	3,881	2,287	4,216
Shares issuable upon conversion of 2023 Notes	—	—	—	12,635

	1,779	3,881	2,287	16,851

Collaborative Arrangements

9 Months Ended

Sep. 30, 2017

Collaborative Arrangements

Collaborative Arrangements

3. Collaborative Arrangements

Net Revenue from Collaborative Arrangements

Net revenue recognized under our GSK Agreements was as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2017			2016			2017			2016
Royalties from a related party - RELVAR/BREO	$	44,604		$	31,917		$	137,938		$	87,686
Royalties from a related party - ANORO	7,274			4,627			19,464			11,976

Total royalties from a related party	51,878			36,544			157,402			99,662
Less: amortization of capitalized fees paid to a related party	(3,456		)	(3,456		)	(10,368		)	(10,368		)

Royalty revenue	48,422			33,088			147,034			89,294
Strategic alliance - MABA program license	221			221			663			663

Total net revenue from GSK	$	48,643		$	33,309		$	147,697		$	89,957

LABA Collaboration

As a result of the launch and approval of RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA® in the U.S., Japan and Europe, we paid milestone fees to GSK totaling $220.0 million during the year ended December 31, 2014. Although we have no further milestone payment obligations to GSK pursuant to the LABA Collaboration Agreement, we continue to have ongoing participation as part of the collaboration, including joint steering and joint project committees that are expected to continue over the life of the agreements. The milestone fees paid to GSK were recognized as capitalized fees paid to a related party, which are being amortized over their estimated useful lives commencing upon the commercial launch of the product. The amortization expense is recorded as a reduction to the royalties from GSK.

We are entitled to receive annual royalties from GSK on sales of RELVAR®/BREO® ELLIPTA® as follows: 15% on the first $3.0 billion of annual global net sales and 5% for all annual global net sales above $3.0 billion. Sales of single-agent LABA medicines and combination medicines would be combined for the purposes of this royalty calculation. For other products combined with a LABA from the LABA Collaboration, such as ANORO® ELLIPTA®, royalties are upward tiering and range from 6.5% to 10%.

We are also entitled to 15% of any future royalty payments made by GSK under its agreements originally entered into with us, and since assigned to TRC, including TRELEGY® ELLIPTA®.

GSK Contingent Payments and Revenue

The potential future contingent payments receivable related to the MABA program of up to $363.0 million are not deemed substantive milestones due to the fact that the achievement of the event underlying the payment predominantly relates to GSK’s performance of future development, manufacturing and commercialization activities for product candidates after licensing the program. We are entitled to 15% of any contingent payments payable by GSK through our ownership interest in TRC.

Available-for-Sale Securities and Fair Value Measurements

9 Months Ended

Sep. 30, 2017

Available-for-Sale Securities and Fair Value Measurements

Available-for-Sale Securities and Fair Value Measurements

4. Available-for-Sale Securities and Fair Value Measurements

Available-for-Sale Securities

The estimated fair value of available-for-sale securities is based on quoted market prices for these or similar investments that were based on prices obtained from a commercial pricing service. Available-for-sale securities are summarized below:

	September 30, 2017
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. government agencies	$	9,959	$	—	$	—		$	9,959
U.S. corporate notes	9,879		—		(3		)	9,876
U.S. commercial paper	24,582		—		—			24,582
Money market funds	118,163		—		—			118,163

Total	$	162,583	$	—	$	(3	)	$	162,580

	December 31, 2016
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. government agencies	$	12,428	$	1	$	—	$	12,429
U.S. commercial paper	72,065		—		—		72,065
Money market funds	64,319		—		—		64,319

Total	$	148,812	$	1	$	—	$	148,813

As of September 30, 2017, all of the available-for-sale securities had contractual maturities within one year and the weighted average maturity of marketable securities was approximately four months.

Fair Value Measurements

Our available-for-sale securities are measured at fair value on a recurring basis and our debt is carried at the amortized cost basis. The estimated fair values were as follows:

	Estimated Fair Value Measurements as of September 30, 2017 Using:
Types of Instruments	Quoted Price in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
U.S. government agencies	$	—	$	9,959	$	—	$	9,959
U.S. corporate notes	—		9,876		—		9,876
U.S. commercial paper	—		24,582		—		24,582
Money market funds	118,163		—		—		118,163

Total assets measured at estimated fair value	$	118,163	$	44,417	$	—	$	162,580

Liabilities
Term B Loan	$	—	$	250,000	$	—	$	250,000
2023 Notes	—		234,658		—		234,658
2025 Notes	—		202,125		—		202,125

Total fair value of liabilities	$	—	$	686,783	$	—	$	686,783

	Estimated Fair Value Measurements as of December 31, 2016 Using:
Types of Instruments	Quoted Price in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
U.S. government agencies	$	—	$	12,429	$	—	$	12,429
U.S. commercial paper	—		72,065		—		72,065
Money market funds	64,319		—		—		64,319

Total assets measured at estimated fair value	$	64,319	$	84,494	$	—	$	148,813

Liabilities
2023 Notes	$	—	$	202,125	$	—	$	202,125
2029 Notes	—		487,189		—		487,189

Total fair value of liabilities	$	—	$	689,314	$	—	$	689,314

The fair value of our marketable securities classified within Level 2 is based upon observable inputs that may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research publications.

The fair value of our 2023 Notes, of our 2025 Notes and of our previously outstanding non-recourse fixed rate term notes due 2029 (the “2029 Notes”) is based on recent trading prices of the instruments. The carrying amount of our initial senior secured term loan (the “Term B Loan”) before deducting debt issuance costs approximates fair value as the loan carries a variable interest rate that is tied to the LIBOR rate plus an applicable spread.

Capitalized Fees Paid to a Related Party	9 Months Ended
Capitalized Fees Paid to a Related Party	Sep. 30, 2017
Capitalized Fees Paid to a Related Party
Capitalized Fees Paid to a Related Party	5. Capitalized Fees Paid to a Related Party We capitalize fees paid to licensors related to agreements for approved products or commercialized products and amortize these fees on a straight-line basis over their estimated useful lives upon the commercial launch of the product. The estimated useful lives of these capitalized fees are based on a country-by-country and product-by-product basis, as the later of the expiration or termination of the last patent right covering the compound in such product in such country and 15 years from first commercial sale of such product in such country, unless the agreement is terminated earlier. Capitalized fees paid to a related party of $220.0 million consist registrational and launch-related milestone fees paid to GSK. Accumulated amortization of these capitalized fees is $49.8 million as of September 30, 2017.

Stock-Based Compensation

9 Months Ended

Sep. 30, 2017

Stock-Based Compensation

Stock-Based Compensation

6. Stock-Based Compensation

Performance-Contingent RSAs and RSUs

Since 2011, the Compensation Committee of our Board of Directors (the “Compensation Committee”) have approved grants of performance-contingent RSAs and RSUs to senior management and a non-executive officer. Generally, these awards have dual triggers of vesting based upon the achievement of certain performance goals by a pre-specified date, as well as a requirement for continued employment. Recognition of stock-based compensation expense begins when the performance goals are deemed probable of achievement.

Included in these performance-contingent RSAs is the remaining grant of 63,000 special long-term retention and incentive performance-contingent RSAs to senior management in 2011. The awards have dual triggers of vesting based upon the achievement of certain performance conditions over a six-year timeframe from 2011 through December 31, 2016 and require continued service to the company. During the year ended December 31, 2016, we determined that the achievement of the requisite performance conditions was met. These awards remain subject to continued employment and will vest in November 2017. The stock-based compensation cost for these awards was not material for the three and nine months ended September 30, 2017.

On January 14, 2016, the Compensation Committee approved and granted 282,394 RSAs and 46,294 RSUs to senior management. These awards include a market condition based on Total Shareholder Return (“TSR”) and a service condition that requires continued employment, collectively the “Performance Measures I”. The vesting percentages of these awards are calculated based on the two-year TSR with a catch-up provision opportunity measured on January 13, 2019 for RSAs and on September 30, 2018 for RSUs. Two-thirds of amounts earned at the end of year two will vest and be distributed on February 20, 2018, while the final one-third earned after two years as well as the catch-up amount earned will vest and be distributed on February 20, 2019 for RSAs and November 20, 2018 for RSUs. The actual payout of shares may range from a minimum of zero shares to a maximum of 328,688 shares granted upon the actual performance against the Performance Measures I. The grant date fair value of these awards is determined using a Monte Carlo valuation model. The aggregate value of $2.0 million is recognized as compensation expense over the implied service period and will not be reversed if the market condition is not met.

On January 17, 2017, the Compensation Committee approved and granted 353,508 RSAs and 53,360 RSUs to senior management. These awards include a market condition based on the TSR of Innoviva’s common stock as compared to the TSR of NASDAQ Biotechnology Index (“Index”) and a service condition that requires continued employment, collectively the “Performance Measures II”. The vesting percentages of these awards are calculated based on the two-year performance period with a catch-up provision opportunity measured on December 31, 2019 for RSAs and on September 30, 2019 for RSUs. Two-thirds of amounts earned at the end of year two will vest and be distributed on February 20, 2019, while the final one-third earned after two years as well as the catch-up amount earned will vest and be distributed on February 20, 2020 for RSAs and November 20, 2019 for RSUs. The actual payout of shares may range from a minimum of zero shares to a maximum of 406,868 shares granted upon the actual performance against the Performance Measures II. The grant date fair value of these awards is determined using a Monte Carlo valuation model. The aggregate value of $3.2 million is recognized as compensation expense over the implied service period and will not be reversed if the market condition is not met.

Stock-Based Compensation Expense

Stock-based compensation expense is included in the condensed consolidated statements of operations as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2017		2016		2017		2016
Research and development	$	180	$	143	$	533	$	490
General and administrative	2,292		1,575		6,873		5,933

Total stock-based compensation expense	$	2,472	$	1,718	$	7,406	$	6,423

As of September 30, 2017, unrecognized stock-based compensation cost, including performance-contingent RSAs for which the performance milestones were determined to be probable of achievement, was as follows:

(In thousands)	Unrecognized Compensation Cost
Stock options	$	455
RSUs	1,623
RSAs	8,887
Performance-based RSAs	38
Market-based RSUs	360
Market-based RSAs	2,425

Total unrecognized compensation cost	$	13,788

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References + Details

Debt

9 Months Ended

Sep. 30, 2017

Shareholders' Deficit	9 Months Ended
Shareholders' Deficit	Sep. 30, 2017
Shareholders' Deficit
Shareholders' Deficit	8. Shareholders’ Deficit In February 2017, we announced a new capital return plan, the 2017 Capital Return Plan. The 2017 Capital Return Plan authorizes a combination of repurchases of stock and/or repurchases, redemptions or prepayments of debt up to $150.0 million, through tender offers, open market purchases, private transactions, exchange offers or other means through December 31, 2017. In August 2017, as part of the 2017 Capital Return Plan, we used approximately $17.5 million of the net proceeds from the offering of our 2025 Notes to repurchase and retire 1,317,771 shares of our common stock at an average price of $13.28 per share concurrently with the pricing of the offering in privately negotiated transactions effected through one of the initial purchasers or its affiliate, as our agent.

Commitments and Contingencies	9 Months Ended
Commitments and Contingencies	Sep. 30, 2017
Commitments and Contingencies
Commitments and Contingencies	9. Commitments and Contingencies Legal Proceedings In April 2017, Sarissa Capital Domestic Fund LP and certain of its affiliates (together, “Sarissa”) filed a Verified Complaint Pursuant to Section 225 of the Delaware General Corporation Law and for Specific Performance in the Delaware Court of Chancery, captioned Sarissa Capital Domestic Fund LP, et al. v. Innoviva, Inc., C.A. No. 2017-0309-JRS (the “Specific Performance Litigation”). Sarissa alleges that it had entered into a binding agreement to settle its proxy contest in exchange for the inclusion of each of George W. Bickerstaff, III and Odysseas Kostas, M.D. on our Board of Directors. Sarissa seeks specific performance of the alleged agreement. On April 30, 2017, we filed a motion to dismiss the Specific Performance Litigation. On May 17, 2017, the Court entered an Order Maintaining Status Quo, which ordered that, during the pendency of the Specific Performance Litigation, the Innoviva Board of Directors shall remain in place, and prohibits the Company from entering or agreeing to any transactions, the consummation of which would require the approval of or vote by Innoviva stockholders or amending, modifying, or repealing Innoviva’s bylaws or charter in the absence of an affirmative vote of five of the then-seven member board of directors or without providing plaintiffs’ counsel five business days’ advance written notice. Trial in the Specific Performance Litigation occurred on July 27, 2017, and the parties are currently awaiting the Court’s ruling. We believe the Specific Performance Litigation is without merit and intend to defend it vigorously. Legal fees relating to this claim have been submitted to the Company’s insurance carrier for reimbursement pursuant to the terms of its directors’ and officers’ insurance policy; however, as of November 3, 2017, the insurance carrier has not yet made a determination as to the extent to which these costs are covered, if at all, under the Company’s policy. We can provide no assurances that such coverage is or will be available and the Company may not be able to recover any portion of the cost of such litigation.

Income Taxes	9 Months Ended
Income Taxes	Sep. 30, 2017
Income Taxes
Income Taxes	10. Income Taxes The effective tax rate for the three and nine months ended September 30, 2017 was 0.05%, compared to 0.11% for the same periods in 2016. Should we continue to generate taxable income in 2017, we expect that the taxable income will be substantially offset by the utilization of net operating losses or other deferred tax assets. The difference between the consolidated effective income tax rate and the U.S. federal statutory rate is primarily attributable to a change in valuation allowance against net deferred tax assets.

Subsequent Events	9 Months Ended
Subsequent Events	Sep. 30, 2017
Subsequent Events
Subsequent Events	11. Subsequent Events In October 2017, we entered into an accelerated share repurchase (ASR) agreement with a financial institution to repurchase $80 million of our common stock. The repurchases under the ASR agreement are expected to complete the previously announced 2017 Capital Return Plan authorized by our Board of Directors.

Description of Operations and Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2017
Description of Operations and Summary of Significant Accounting Policies
Basis of Presentation	Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In our opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of our financial position, results of operations, comprehensive income and cash flows. The interim results are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2017 or any other period. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission (“SEC”) on February 28, 2017.
Variable Interest Entity	Variable Interest Entity We evaluate our ownership, contractual and other interest in entities to determine if they are variable interest entities (“VIE”), whether we have a variable interest in those entities and the nature and extent of those interests. Based on our evaluations, if we determine we are the primary beneficiary of such VIEs, we consolidate such entities into our financial statements. We consolidate the financial results of TRC, which we have determined to be a VIE, because we have the power to direct the economically significant activities of TRC and the obligation to absorb losses of, or the right to receive benefits from, TRC. The financial position and results of operations of TRC are not material for the periods presented.
Recently Issued Accounting Pronouncements Not Yet Adopted	Recently Issued Accounting Pronouncements Not Yet Adopted In April 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-10 to clarify the implementation guidance on licensing and the identification of performance obligations consideration included in ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which is also known as ASC 606, was issued in May 2014 and outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In March 2016, the FASB issued ASU 2016-08 to provide amendments to clarify the implementation guidance on principal versus agent considerations. ASU 2014-09 guidance is effective for the fiscal years and interim reporting periods beginning after December 15, 2017 (as amended through ASU 2015-14 issued in August 2015), with early adoption permitted. Companies can elect a full retrospective method to recast prior-period financial statements or a modified retrospective method to recognize the cumulative effect as an adjustment to the retained earnings in the initial year. We plan to implement the standard in the first quarter of 2018 on a modified retrospective basis and do not anticipate that this standard will have a material impact on our accounting for royalty revenues. We are continuing to assess the potential impacts of the standard on the accounting for other revenues associated with the collaboration agreements. In February 2016, the FASB issued ASU 2016-02, Leases, which supersedes the lease recognition requirements in ASC Topic 840, Leases. The standard requires an entity to recognize right-of-use assets and lease liabilities arising from a lease for both financing and operating leases in the consolidated balance sheets but recognize the impact on the consolidated statement of operations and cash flows in a similar manner under current GAAP. The standard also requires additional qualitative and quantitative disclosures. The standard is effective for us at the beginning January 1, 2019 and requires transition under a modified retrospective method. The most significant impact of the update to us is that we will be required to recognize a “right-of-use” asset and lease liability for the operating lease agreement that was not previously included on the balance sheet under the existing lease guidance. We anticipate that the treatment of the lease on our consolidated statement of operations and cash flows will not materially be affected by the adoption of the new standard.

Description of Operations and Summary of Significant Accounting Policies (Details)	9 Months Ended
	Sep. 30, 2017
GSK \| LABA collaboration and Strategic Alliance agreements
Description of Operations and Summary of Significant Accounting Policies
Percentage of economic interest in any future payments made under the agreements	15.00%

Available-for-Sale Securities and Fair Value Measurements - Available-for-Sale Securities (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Available-for-Sale Securities
Amortized Cost	$ 162,583	$ 148,812
Gross Unrealized Gains	0	1
Gross Unrealized Losses	(3)	0
Estimated Fair Value	$ 162,580	148,813
Maturity period for marketable securities
Maximum contractual maturity period	1 year
Weighted average maturity	4 months
U.S. government agencies
Available-for-Sale Securities
Amortized Cost	$ 9,959	12,428
Gross Unrealized Gains	0	1
Gross Unrealized Losses	0	0
Estimated Fair Value	9,959	12,429
U.S. corporate notes
Available-for-Sale Securities
Amortized Cost	9,879
Gross Unrealized Gains	0
Gross Unrealized Losses	(3)
Estimated Fair Value	9,876
U.S. commercial paper
Available-for-Sale Securities
Amortized Cost	24,582	72,065
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Value	24,582	72,065
Money market funds
Available-for-Sale Securities
Amortized Cost	118,163	64,319
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Value	$ 118,163	$ 64,319

Available-for-Sale Securities and Fair Value Measurements - Fair Value Measurements (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Recurring basis
Assets
Total assets measured at estimated fair value	$ 162,580	$ 148,813
Recurring basis \| U.S. government agencies
Assets
Total assets measured at estimated fair value	9,959	12,429
Recurring basis \| U.S. corporate notes
Assets
Total assets measured at estimated fair value	9,876
Recurring basis \| U.S. commercial paper
Assets
Total assets measured at estimated fair value	24,582	72,065
Recurring basis \| Money market funds
Assets
Total assets measured at estimated fair value	118,163	64,319
Recurring basis \| Quoted Prices in Active Markets for Identical Assets, Level 1
Assets
Total assets measured at estimated fair value	118,163	64,319
Recurring basis \| Quoted Prices in Active Markets for Identical Assets, Level 1 \| U.S. government agencies
Assets
Total assets measured at estimated fair value	0	0
Recurring basis \| Quoted Prices in Active Markets for Identical Assets, Level 1 \| U.S. corporate notes
Assets
Total assets measured at estimated fair value	0
Recurring basis \| Quoted Prices in Active Markets for Identical Assets, Level 1 \| U.S. commercial paper
Assets
Total assets measured at estimated fair value	0	0
Recurring basis \| Quoted Prices in Active Markets for Identical Assets, Level 1 \| Money market funds
Assets
Total assets measured at estimated fair value	118,163	64,319
Recurring basis \| Significant Other Observable Inputs, Level 2
Assets
Total assets measured at estimated fair value	44,417	84,494
Recurring basis \| Significant Other Observable Inputs, Level 2 \| U.S. government agencies
Assets
Total assets measured at estimated fair value	9,959	12,429
Recurring basis \| Significant Other Observable Inputs, Level 2 \| U.S. corporate notes
Assets
Total assets measured at estimated fair value	9,876
Recurring basis \| Significant Other Observable Inputs, Level 2 \| U.S. commercial paper
Assets
Total assets measured at estimated fair value	24,582	72,065
Recurring basis \| Significant Other Observable Inputs, Level 2 \| Money market funds
Assets
Total assets measured at estimated fair value	0	0
Recurring basis \| Significant Unobservable Inputs, Level 3
Assets
Total assets measured at estimated fair value	0	0
Recurring basis \| Significant Unobservable Inputs, Level 3 \| U.S. government agencies
Assets
Total assets measured at estimated fair value	0	0
Recurring basis \| Significant Unobservable Inputs, Level 3 \| U.S. corporate notes
Assets
Total assets measured at estimated fair value	0
Recurring basis \| Significant Unobservable Inputs, Level 3 \| U.S. commercial paper
Assets
Total assets measured at estimated fair value	0	0
Recurring basis \| Significant Unobservable Inputs, Level 3 \| Money market funds
Assets
Total assets measured at estimated fair value	0	0
Nonrecurring basis
Liabilities
Total fair value of liabilities	686,783	689,314
Nonrecurring basis \| Debt Securities
Liabilities
Term B Loan	250,000
2023 Notes	234,658	202,125
2025 Notes	202,125
2029 Notes		487,189
Nonrecurring basis \| Quoted Prices in Active Markets for Identical Assets, Level 1
Liabilities
Total fair value of liabilities	0	0
Nonrecurring basis \| Quoted Prices in Active Markets for Identical Assets, Level 1 \| Debt Securities
Liabilities
Term B Loan	0
2023 Notes	0	0
2025 Notes	0
2029 Notes		0
Nonrecurring basis \| Significant Other Observable Inputs, Level 2
Liabilities
Total fair value of liabilities	686,783	689,314
Nonrecurring basis \| Significant Other Observable Inputs, Level 2 \| Debt Securities
Liabilities
Term B Loan	250,000
2023 Notes	234,658	202,125
2025 Notes	202,125
2029 Notes		487,189
Nonrecurring basis \| Significant Unobservable Inputs, Level 3
Liabilities
Total fair value of liabilities	0	0
Nonrecurring basis \| Significant Unobservable Inputs, Level 3 \| Debt Securities
Liabilities
Term B Loan	0
2023 Notes	0	0
2025 Notes	$ 0
2029 Notes		$ 0

Capitalized Fees Paid to a Related Party (Details) $ in Millions	9 Months Ended
	Sep. 30, 2017 USD ($)
Capitalized Fees paid to a Related Party
Capitalized fees paid to a related party, useful life	15 years
GSK
Capitalized Fees paid to a Related Party
Capitalized fees paid to a related party	$ 220.0
Accumulated amortization of capitalized fees	$ 49.8

Stock-Based Compensation - Performance-Contingent RSAs and RSUs (Details) - USD ($) $ in Millions			12 Months Ended
	Jan. 17, 2017	Jan. 14, 2016	Dec. 31, 2011
TSR and Performance Measures
Stock-based compensation
Timeframe for calculation of TSR	2 years	2 years
Minimum payout of shares (in shares)	0	0
Maximum payout of shares (in shares)	406,868	328,688
Aggregate value of RSA and RSU grants	$ 3.2	$ 2.0
RSAs \| Vesting on February 20, 2018
Stock-based compensation
Vesting percentage		66.70%
RSAs \| Vesting on February 20, 2019
Stock-based compensation
Vesting percentage	66.70%	33.30%
RSAs \| Vesting On February 20, 2020
Stock-based compensation
Vesting percentage	33.30%
RSUs \| Vesting on February 20, 2018
Stock-based compensation
Vesting percentage		66.70%
RSUs \| Vesting on November 20, 2018
Stock-based compensation
Vesting percentage		33.30%
RSUs \| Vesting on February 20, 2019
Stock-based compensation
Vesting percentage	66.70%
RSUs \| Vesting On November 20, 2019
Stock-based compensation
Vesting percentage	33.30%
Special Long-Term Retention and Incentive Cash Awards Program \| RSAs \| Performance Contingent
Stock-based compensation
Shares of common stock approved and authorized for issuance			63,000
Timeframe for achievement of performance conditions			6 years
Senior Management \| RSAs \| TSR and Performance Measures
Stock-based compensation
Granted (in shares)	353,508	282,394
Senior Management \| RSUs \| TSR and Performance Measures
Stock-based compensation
Granted (in shares)	53,360	46,294

Debt - Convertible Senior Notes (Details) $ / shares in Units, $ in Millions	Aug. 07, 2017 USD ($) $ / shares shares	Sep. 30, 2017 $ / shares	Aug. 01, 2017 $ / shares
Common stock
Debt
Share Price \| $ / shares			$ 13.28
Convertible senior notes \| 2025 Notes \| Over-Allotment Option
Debt
Loan amount	$ 17.5
Convertible senior notes \| 2025 Notes \| Private Placement
Debt
Loan amount	$ 192.5
Interest rate (as a percent)	2.50%
Convertible senior notes \| 2025 Notes \| Common stock
Debt
Conversion rate	57.9240
Conversion price (dollars per share) \| $ / shares	$ 17.26	$ 17.26
Conversion premium (as a percent)	30.00%
Number of shares repurchased and retired \| shares	1,317,771
Value of shares repurchased and retired	$ 17.5

Debt - Convertible Senior Notes - Liability and Equity Components (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Liability component
Principal	$ 683,484	$ 728,173
Debt discount and issuance costs, net	(80,035)	(12,080)
Convertible senior notes
Liability component
Principal	192,500	$ 0
Convertible senior notes \| 2025 Notes
Liability component
Principal	192,500
Debt discount and issuance costs, net	(69,895)
Net carrying amount	122,605
Equity component	$ 65,361

Debt - Convertible Senior Notes - Debt Issuance Costs (Details) - Convertible senior notes - 2025 Notes - USD ($) $ in Thousands		9 Months Ended
	Aug. 07, 2017	Sep. 30, 2017
Debt
Debt issuance costs	$ 5,400
Equity component, reduction to additional paid in capital	1,900
Liability component, reduction to carrying value of debt	$ 3,500
Interest expense
Contractual interest expense		$ 722
Amortization of debt issuance costs		69
Amortization of debt discount		834
Total interest expense		$ 1,625

Debt - Convertible Subordinated Notes (Details) $ / shares in Units, $ in Thousands		9 Months Ended	12 Months Ended
	Jan. 31, 2013 USD ($) item	Sep. 30, 2017 USD ($) $ / shares $ / item	Dec. 31, 2014 USD ($)	Dec. 31, 2016 USD ($)
Debt
Principal		$ 683,484		$ 728,173
Convertible subordinated notes
Debt
Principal		$ 240,984		240,984
2023 Notes \| Convertible subordinated notes
Debt
Loan amount	$ 287,500
Proceeds from issuance of notes payable, net of debt issuance costs	281,200
Principal			$ 241,000
Partial conversion			$ 32,400
Repurchase amount				$ 14,100
2023 Notes \| Convertible subordinated notes \| Privately-negotiated capped call option
Debt
Payments for capped call options	$ 36,800
Number of derivative instruments purchased \| item	2
Interest rate (as a percent)	2.125%
Strike price for the underlying number of shares (in dollars per share) \| $ / shares		$ 19.77
Cap price for the underlying number of shares (in dollars per share) \| $ / item		27.04

Debt - Non-Recourse Notes (Details) - Non-Recourse Notes - 2029 Notes - USD ($) $ in Millions	1 Months Ended
	Aug. 31, 2017	Apr. 30, 2014
Debt
Payment of principal	$ 15.2
Notes redeemed	407.6
Write-off of debt issuance costs	$ 6.4
Private Placement
Debt
Loan amount		$ 450.0
Interest rate (as a percent)		9.00%

Debt - Debt Maturities (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Long-term debt maturities
Remainder of 2017	$ 6,250
2018	25,000
2019	25,000
2020	25,000
2021	25,000
2022	143,750
Thereafter	433,484
Total long-term debt	$ 683,484	$ 728,173

Shareholders' Deficit (Details) - 2017 Capital Return Plan - USD ($) $ / shares in Units, $ in Millions	1 Months Ended
	Aug. 31, 2017	Feb. 28, 2017
Share Repurchase Program
Amount approved under share repurchase program		$ 150.0
Common stock
Share Repurchase Program
Value of shares repurchased and retired	$ 17.5
Number of shares repurchased and retired	1,317,771
Average repurchase price per share	$ 13.28

Commitments and Contingencies (Details) - Specific performance litigation	May 17, 2017 director
Legal Proceedings
Minimum number of affirmative vote	5
Number of board of directors	7
Business days	5 days

Income Taxes (Details)	3 Months Ended		9 Months Ended
Income Taxes (Details)	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Taxes
Effective tax rate (as a percent)	0.05%	0.11%	0.05%	0.11%

Subsequent Events (Details) - USD ($) $ in Millions	Oct. 31, 2017	Feb. 28, 2017
2017 Capital Return Plan
Subsequent Event
Amount approved under share repurchase program		$ 150
ASR Plan \| Subsequent events
Subsequent Event
Amount approved under share repurchase program	$ 80