0001104659-20-022807 | 10-K | XBRL Viewer

Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 31, 2019	Feb. 11, 2020	Jun. 28, 2019
Document and Entity Information
Entity Registrant Name	INNOVIVA, INC.
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 31, 2019
Document Transition Report	false
Entity File Number	000-30319
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	94-3265960
Entity Address, Address Line One	1350 Old Bayshore Highway, Suite 400
Entity Address, City or Town	Burlingame
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94010
City Area Code	650
Local Phone Number	238-9600
Title of 12(b) Security	Common Stock $0.01 Par Value
Trading Symbol	INVA
Security Exchange Name	NASDAQ
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Public Float			$ 1,006,059,818
Entity Common Stock, Shares Outstanding		101,300,967
Entity Central Index Key	0001080014
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Amendment Flag	false

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 278,096	$ 62,417
Short-term marketable securities	72,749	52,491
Related party receivables from collaborative arrangements	79,427	83,286
Prepaid expenses and other current assets	962	849
Total current assets	431,234	199,043
Property and equipment, net	33	160
Capitalized fees paid to a related party, net	139,076	152,899
Deferred tax assets, net	154,171	196,054
Other assets	312	37
Total assets	724,826	548,193
Current liabilities:
Accounts payable	10	11
Accrued personnel-related expenses	647	470
Accrued interest payable	4,152	4,264
Other accrued liabilities	562	955
Total current liabilities	5,371	5,700
Long-term debt, net of discount and issuance costs	377,120	382,855
Other long-term liabilities	219	586
Commitments and contingencies (Note 8)
Stockholders' equity:
Preferred stock: $0.01 par value, 230 shares authorized, no shares issued and outstanding	0	0
Common stock: $0.01 par value, 200,000 shares authorized, 101,288 and 101,098 issued and outstanding as of December 31, 2019 and 2018, respectively	1,013	1,011
Additional paid-in capital	1,258,859	1,256,267
Accumulated other comprehensive income (loss)	27	(3)
Accumulated deficit	(946,404)	(1,103,692)
Total Innoviva stockholders' equity	313,495	153,583
Noncontrolling interest	28,621	5,469
Total stockholders' equity	342,116	159,052
Total liabilities and stockholders' equity	$ 724,826	$ 548,193

CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Revenue:
Total net revenue	$ 261,016	$ 261,004	$ 217,217
Operating expenses:
Research and development	0	0	1,355
General and administrative	14,656	20,053	32,258
General and administrative - related party	0	2,700	0
Total operating expenses	14,656	22,753	33,613
Income from operations	246,360	238,251	183,604
Other expense, net	(345)	(5,702)	(7,038)
Interest income	5,540	1,660	1,311
Interest expense	(18,660)	(23,954)	(43,601)
Income before income taxes	232,895	210,255	134,276
Income tax benefit (expense), net	41,902	(196,073)	4
Net income	190,993	406,328	134,272
Net income attributable to noncontrolling interest	33,705	11,272	129
Net income attributable to Innoviva stockholders	$ 157,288	$ 395,056	$ 134,143
Basic net income per share attributable to Innoviva stockholders	$ 1.55	$ 3.92	$ 1.25
Diluted net income per share attributable to Innoviva stockholders	$ 1.43	$ 3.53	$ 1.17
Shares used to compute Innoviva basic and diluted net income per share:
Shares used to compute basic net income per share	101,150	100,849	106,945
Shares used to compute diluted net income per share	113,409	113,408	119,866
Royalty revenue from a related party
Revenue:
Total net revenue	$ 261,016	$ 261,004	$ 214,118
Revenue from collaborative arrangements from a related party
Revenue:
Total net revenue	$ 0	$ 0	$ 3,099

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income	$ 190,993	$ 406,328	$ 134,272
Net unrealized income (loss) on marketable securities, net of tax impact of $8, $0, $0 respectively	30	15	(19)
Comprehensive income	191,023	406,343	134,253
Comprehensive income attributable to noncontrolling interest	33,705	11,272	129
Comprehensive income attributable to Innoviva stockholders	$ 157,318	$ 395,071	$ 134,124

- Definition

The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

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+ Details

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) shares in Thousands, $ in Thousands	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income (loss)	Accumulated Deficit	Treasury Stock	Noncontrolling Interest	Total
Balance at Dec. 31, 2016	$ 1,085	$ 1,282,077	$ 1	$ (1,632,891)	$ (3,263)	$ 0	$ (352,991)
Balance (in shares) at Dec. 31, 2016	108,585				(150)
Increase (Decrease) in Stockholders' Equity
Contributions from noncontrolling interest	$ 0	0	0	0	$ 0	23	23
Exercise of stock options, and issuance of common stock units and stock awards	$ 9	(1,702)	0	0	$ 0	0	(1,693)
Exercise of stock options, and issuance of common stock units and stock awards (in shares)	891				0
Stock-based compensation	$ 0	9,833	0	0	$ 0	0	9,833
Cash dividend forfeited	0	7	0	0	0	0	7
Repurchase of common stock	$ (75)	(97,425)	0	0	$ 0	0	(97,500)
Repurchase of common stock (in shares)	(7,430)				0
Equity components of Convertible Senior Notes due 2025, net of issuance costs	$ 0	65,361	0	0	$ 0	0	65,361
Net income	0	0	0	134,143	0	129	134,272
Other comprehensive income (loss)	0	0	(19)	0	0	0	(19)
Balance at Dec. 31, 2017	$ 1,019	1,258,151	(18)	(1,498,748)	$ (3,263)	152	(242,707)
Balance (in shares) at Dec. 31, 2017	102,046				(150)
Increase (Decrease) in Stockholders' Equity
Distributions to noncontrolling interest	$ 0	0	0	0	$ 0	(5,955)	(5,955)
Exercise of stock options, and issuance of common stock units and stock awards	$ (8)	(1,926)	0	0	$ 0	0	(1,934)
Exercise of stock options, and issuance of common stock units and stock awards (in shares)	(798)				0
Stock-based compensation	$ 0	3,233	0	0	$ 0	0	3,233
Cash dividend forfeited	0	72	0	0	0	0	72
Retirement of treasury stock	$ 0	(3,263)	0	0	$ 3,263	0	0
Retirement of treasury stock (in shares)	(150)				150
Net income	$ 0	0	0	395,056	$ 0	11,272	406,328
Other comprehensive income (loss)	0	0	15	0	0	0	15
Balance at Dec. 31, 2018	$ 1,011	1,256,267	(3)	(1,103,692)	$ 0	5,469	$ 159,052
Balance (in shares) at Dec. 31, 2018	101,098				0		101,098
Increase (Decrease) in Stockholders' Equity
Distributions to noncontrolling interest	$ 0	0	0	0	$ 0	(10,553)	$ (10,553)
Exercise of stock options, and issuance of common stock units and stock awards	$ 2	536	0	0	$ 0	0	538
Exercise of stock options, and issuance of common stock units and stock awards (in shares)	190				0
Stock-based compensation	$ 0	2,056	0	0	$ 0	0	2,056
Net income	0	0	0	157,288	0	33,705	190,993
Other comprehensive income (loss)	0	0	30	0	0	0	30
Balance at Dec. 31, 2019	$ 1,013	$ 1,258,859	$ 27	$ (946,404)	$ 0	$ 28,621	$ 342,116
Balance (in shares) at Dec. 31, 2019	101,288				0		101,288

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Cash flows from operating activities
Net income	$ 190,993	$ 406,328	$ 134,272
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes	41,875	(196,054)	0
Depreciation and amortization	13,874	13,872	13,982
Stock-based compensation	2,056	3,233	9,833
Amortization of debt discount and issuance costs	7,799	7,748	5,116
Loss on write-off of property and equipment	104	0	0
Loss on extinguishment of debt	216	5,745	7,256
Amortization of discount on short-term investments	(2,229)	(256)	(105)
Amortization of lease guarantee	(325)	(325)	(325)
Changes in operating assets and liabilities:
Receivables from collaborative arrangements	3,859	(12,746)	(23,693)
Prepaid expenses and other current assets	(113)	(95)	12
Other assets	27	0	0
Accounts payable	(1)	(590)	473
Accrued personnel-related expenses and other accrued liabilities	(439)	(1,677)	(81)
Accrued interest payable	(112)	(1,656)	(1,908)
Other long-term liabilities	(126)	4	16
Deferred revenue	0	0	(3,099)
Net cash provided by operating activities	257,458	223,531	141,749
Cash flows from investing activities
Maturities of marketable securities	213,924	75,375	44,387
Purchases of marketable securities	(231,915)	(71,856)	(67,623)
Sales of marketable securities	0	0	0
Purchases of property and equipment	(12)	0	0
Net cash provided by (used in) investing activities	(18,003)	3,519	(23,236)
Cash flows from financing activities
Repurchase of shares to satisfy tax withholding	(89)	(3,073)	(2,128)
Payments of principal on senior secured term loans	(13,750)	(230,000)	(6,250)
Payments of cash dividends to stockholders	(11)	(80)	(281)
Proceeds from issuances of common stock, net	627	1,139	435
Proceeds from issuance of convertible senior notes due 2025	0	0	192,500
Proceeds from senior secured term loans	0	0	250,000
Payments of debt issuance costs and debt discount	0	0	(12,803)
Payments of principal on non-recourse notes due 2029	0	0	(487,189)
Repurchase of common stock	0	0	(97,500)
Contributions from (distributions to) noncontrolling interest	(10,553)	(5,955)	23
Net cash used in financing activities	(23,776)	(237,969)	(163,193)
Net increase (decrease) in cash and cash equivalents	215,679	(10,919)	(44,680)
Cash and cash equivalents at beginning of period	62,417	73,336	118,016
Cash and cash equivalents at end of period	278,096	62,417	73,336
Supplemental disclosure of cash flow information
Cash paid for interest	$ 10,974	$ 17,861	$ 40,353

DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2019

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 (referred to as "Innoviva", the "Company", or "we" and other similar pronouns) is a company with a portfolio of royalties that include 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^® 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; and royalties from the sales of ANORO^® ELLIPTA^® which tier upward at a range from 6.5% to 10%. 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”), including TRELEGY^® ELLIPTA^® and any other product or combination of products that may be discovered or 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^®.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Innoviva and its wholly-owned subsidiaries and a variable interest entity for which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. For the consolidated variable interest entity, the Company records net income attributable to noncontrolling interest on its consolidated statements of income equal to the percentage of ownership interest retained in such entity by the respective noncontrolling party.

Use of Management’s Estimates

The preparation of consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. Management evaluates its significant accounting policies and estimates on an ongoing basis. We base our estimates on historical experience and other relevant assumptions that we believe to be reasonable under the circumstances. These estimates also form the basis for making judgments about the carrying values of assets and liabilities when these values are not readily apparent from other sources.

Certain Risks and Concentrations

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and marketable securities. Although we deposit our cash with multiple financial institutions, our deposits, at times, may exceed federally insured limits. Refer to “Segment Reporting” below for concentrations with respect to revenues and geographic locations.

Segment Reporting

We operate in a single segment, which is to provide capital return to stockholders by maximizing the potential value of our respiratory assets partnered with GSK. Revenues are generated from our collaborative arrangements and royalty payments from GSK, located in Great Britain. Our facilities are located within the United States.

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 evaluation, if we determine we are the primary beneficiary of a VIE, we consolidate the entity in 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. As of December 31, 2019 and 2018, $14.4 million and $6.4 million, respectively, of the related-party receivables from collaborative arrangements were attributable to TRC. The cash balance attributable to TRC as of December 31, 2019 was $22.3 million. The primary source of revenue for TRC is the royalties generated from the net sales of TRELEGY^® ELLIPTA^® by GSK. Total revenue for TRC related to TRELEGY^® ELLIPTA^® for

1. DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

the years ended December 31, 2019 and 2018 was $42.8 million and $13.4 million, respectively. Total operating expenses were $3.4 million for the year ended December 31, 2019, compared to minimal amounts for the year ended December 31, 2018. The expenses incurred in 2019 were primarily related to an arbitration initiated by Theravance Biopharma against the Company and TRC, as further described in Item 3 of Part I of this Form 10-K titled "Legal Proceedings".

Cash and Cash Equivalents

We consider all highly liquid investments purchased with a maturity of three months or less on the date of purchase to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.

Investments in Marketable Securities

We invest in short-term investments and marketable securities, primarily corporate notes, government securities, government agencies, and government commercial papers. We limit the amount of credit exposure with any one issuer, industry or geographic area for investments other than instruments backed by the U.S. federal government. We classify our marketable securities as available-for-sale securities and report them at fair value in cash equivalents or short-term marketable securities on the consolidated balance sheets with related unrealized gains and losses included as a component of stockholders’ deficit. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income on the consolidated statements of operations. Realized gains and losses, if any, on available-for-sale securities are included in interest income. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income.

We regularly review all of our investments for other-than-temporary declines in estimated fair value. Our review includes the consideration of the cause of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized loss position, the severity and duration of the unrealized losses, whether we have the intent to sell the securities and whether it is more likely than not that we will be required to sell the securities before the recovery of their amortized cost basis. When we determine that the decline in estimated fair value of an investment is below the amortized cost basis and the decline is other-than-temporary, we reduce the carrying value of the security and record a loss for the amount of such decline to other income (expense), net.

Fair Value of Financial Instruments

We define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Our valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. We classify these inputs into the following hierarchy:

Level 1—Quoted prices for identical instruments in active markets.

Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3—Unobservable inputs and little, if any, market activity for the assets.

Financial instruments include cash equivalents, marketable securities, receivables from collaborative arrangements, accounts payable, and accrued liabilities. Cash equivalents and marketable securities are carried at estimated fair value. The carrying values of receivables from collaborative arrangements, accounts payable, and accrued liabilities approximate their estimated fair value due to the relatively short-term nature of these instruments.

1. DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property and Equipment

Property and equipment, which consisted of equipment, computer equipment, software, office furniture and fixtures, was immaterial as of December 31, 2019 and 2018, respectively.

Property, equipment and leasehold improvements are stated at cost and depreciated using the straight-line method as follows:


Leasehold improvements		Shorter of remaining lease terms or useful life
Equipment, furniture and fixtures		5 - 7 years
Software and computer equipment		3 years

Capitalized Fees Paid to a Related Party

We capitalize fees paid to licensors related to agreements for approved products or commercialized products. We capitalize these fees as capitalized fees paid to a related party (“Capitalized Fees”) and amortize these Capitalized Fees on a straight-line basis over their estimated useful lives upon the commercial launch of the product, which has been shortly after regulatory approval of such 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 Collaboration Agreement is terminated earlier. Consistent with our policy for classification of costs under the research and development collaborative arrangements, the amortization of these Capitalized Fees is recognized as a reduction of royalty revenue. We review our Capitalized Fees for impairment on a product-by-product basis for each major geographic area when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The recoverability of Capitalized Fees is measured by comparing the asset’s carrying amount to the expected undiscounted future cash flows that the asset is expected to generate. The determination of recoverability typically requires various estimates and assumptions, including estimating the useful life over which cash flows will occur, their amount, and the asset’s residual value, if any. We derive the required cash flow estimates from near-term forecasted product sales and long-term projected sales in the corresponding market.

Revenue Recognition

Revenue is recognized when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. Revenue is recognized through a five-step process: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price for the contract; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) a performance obligation is satisfied.

We recognize the royalty revenue on net sales of products with respect to which we have contractual royalty rights in the period in which the royalties are earned and reported to us. Royalties are recognized net of amortization of capitalized fees associated with any approval and launch milestone payments made to GSK.

Fair Value of Stock-Based Compensation Awards

We use the Black-Scholes-Merton option pricing model to estimate the fair value of options granted under our equity incentive plans and rights to acquire stock granted under our employee stock purchase plan (“ESPP”). The Black-Scholes-Merton option valuation model requires the use of assumptions, including the expected term of the award and the expected stock price volatility. We use the “simplified” method as described in Staff Accounting Bulletin No. 107, “Share-Based Payment,” for the expected option term. We use our historical volatility to estimate expected stock price volatility.

Restricted stock units (“RSUs”) and restricted stock awards (“RSAs”) are measured based on the fair market values of the underlying stock on the dates of grant.

1. DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Stock-based compensation expense is calculated based on awards ultimately expected to vest and was reduced for estimated forfeitures at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differed from those estimates. Our estimated annual forfeiture rates for stock options, RSUs and RSAs are based on our historical forfeiture experience.

The estimated fair value of stock options, RSUs and RSAs is expensed on a ratable or straight-line basis over the expected term of the grant or expected term of the vesting, and the estimated fair value of performance-contingent RSUs and RSAs is expensed using an accelerated method over the term of the award once we have determined that it is probable that performance milestones will be achieved. Compensation expense for RSUs and RSAs that contain performance conditions is based on the grant date fair value of the award. Compensation expense is recorded over the requisite service period based on management’s best estimate as to whether it is probable that the shares awarded are expected to vest. We assess the probability of the performance milestones being met on a continuous basis. The grant date fair value of the RSUs and RSAs with a market condition is determined using a Monte Carlo valuation model and the compensation expense is recognized over the implied service period.

Compensation expense for purchases under the ESPP is recognized based on the fair value of the common stock on the date of offering, less the purchase discount percentage provided for in the plan.

Income Taxes

We utilize the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and the tax basis of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The recognition and measurement of tax benefits requires significant judgment. Our judgment might change as new information becomes available. We will continue to evaluate our deferred tax assets each reporting period to determine whether adjustments to our valuation allowance are required and deferred tax assets will be realized based on the consideration of all available positive and negative evidence, including the differences between our anticipated and actual future operating results, using a “more likely than not” standard.

We assess all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is greater than 50% likely to be realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and we will determine whether the factors underlying the sustainability assertion have changed and whether the amount of the recognized tax benefit is still appropriate.

Comprehensive Income

Comprehensive income is comprised of net income and other comprehensive income (loss). Other comprehensive income (loss) consists of changes in unrealized and realized gains and losses on our marketable securities and the related tax impact of these changes.

Related Parties

GSK owned 31.6% of our outstanding common stock as of December 31, 2019. Transactions with GSK are described in Note 3, “Collaborative Arrangements.”

Recently Adopted Accounting Standards Updates

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update 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 previous GAAP. The

1. DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

standard also requires additional qualitative and quantitative disclosures. We adopted the standard in 2019 and recognized a right-of-use asset and lease liabilities in the amount of $0.3 million, respectively, for the operating lease on our current corporate headquarters at December 31, 2019.

In August 2018, the U.S. Securities and Exchange Commission (the “SEC”) adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements relating to the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of income is required to be filed. This final rule is effective on November 5, 2018. Effective January 1, 2019, the Company adopted this rule and added a Consolidated Statement of Changes in Stockholders’ Equity (Deficit) in its Form 10-Qs filed during the year ended December 31, 2019, which presented a reconciliation in a single statement showing the changes in stockholders equity for each interim period, as well as each comparable period.

Recently Issued Accounting Standards or Updates Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”, which is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. We are currently in the process of evaluating the effects of the provisions of ASU 2019-12 on our financial statements.

NET INCOME PER SHARE

12 Months Ended

Dec. 31, 2019

NET INCOME PER SHARE

NET INCOME PER SHARE

2. NET INCOME PER SHARE

Basic net income per share attributable to Innoviva stockholders is computed by dividing net income attributable to Innoviva stockholders by the weighted-average number of shares of common stock outstanding. Diluted net income per share attributable to Innoviva stockholders is computed by dividing net income attributable to Innoviva stockholders 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 convertible subordinated notes due 2023 (the “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 current 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 years ended December 31, 2019 and 2018, respectively.

2. NET INCOME PER SHARE (Continued)

The following table shows the computation of basic and diluted net income per share for the years ended December 31, 2019, 2018 and 2017:


	Year Ended December 31,
(In thousands except per share data)	2019		2018			2017
Numerator:
Net income attributable to Innoviva stockholders, basic	$	157,288	$	395,056	$	134,143
Add: interest expense on 2023 Notes		4,648		5,661		5,647
Net income attributable to Innoviva stockholders, diluted	$	161,936	$	400,717	$	139,790
Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders		101,150		100,849		106,945
Dilutive effect of 2023 Notes		12,189		12,189		12,189
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan		70		370		732
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders		113,409		113,408		119,866
Net income per share attributable to Innoviva stockholders
Basic	$	1.55	$	3.92	$	1.25
Diluted	$	1.43	$	3.53	$	1.17

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:


	Year Ended December 31,
(In thousands)	2019	2018	2017
Outstanding options and awards granted under equity incentive plan and employee stock purchase plan	1,130	1,490	2,121

REVENUE RECOGNITION AND COLLABORATIVE ARRANGEMENTS

12 Months Ended

Dec. 31, 2019

REVENUE RECOGNITION AND COLLABORATIVE ARRANGEMENTS

REVENUE RECOGNITION AND COLLABORATIVE ARRANGEMENTS

3. REVENUE RECOGNITION AND COLLABORATIVE ARRANGEMENTS

Revenue from Collaborative Arrangements

Net revenue recognized under our GSK Agreement was as follows:


	Year Ended December 31,
(In thousands)	2019		2018		2017
Royalties from a related party — RELVAR/BREO	$	189,424	$	220,162	$	198,726
Royalties from a related party — ANORO		42,625		41,286		29,036
Royalties from a related party — TRELEGY		42,790		13,379		179
Total royalties from a related party		274,839		274,827		227,941
Less: amortization of capitalized fees paid to a related party		(13,823)		(13,823)		(13,823)
Royalty revenue		261,016		261,004		214,118
Strategic alliance — MABA program license		—		—		3,099
Total net revenue from GSK	$	261,016	$	261,004	$	217,217

3. REVENUE RECOGNITION AND COLLABORATIVE ARRANGEMENTS (Continued)

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. 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 royalty payments made by GSK under its agreements originally entered into with us, and since assigned to TRC in connection with the Spin-Off, including TRELEGY^® ELLIPTA^®, which royalties are upward tiering and range from 6.5% to 10%.

AVAILABLE-FOR-SALE SECURITIES AND FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2019

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:


	December 31, 2019
			Gross		Gross
			Unrealized		Unrealized		Estimated
(In thousands)	Amortized Cost		Gains		Losses		Fair Value
U.S. government securities	$	53,799	$	35		—	$	53,834
U.S. commercial paper		18,915		—		—		18,915
Money market funds		233,992		—		—		233,992
Total	$	306,706	$	35	$	—	$	306,741


	December 31, 2018
			Gross		Gross
			Unrealized		Unrealized		Estimated
(In thousands)	Amortized Cost		Gains		Losses		Fair Value
U.S. government securities	$	29,736	$	—	$	(3)	$	29,733
U.S. government agencies		4,971		—		—		4,971
U.S. corporate notes		2,875		—		—		2,875
U.S. commercial paper		22,037		—		—		22,037
Money market funds		49,358		—		—		49,358
Total	$	108,977	$	—	$	(3)	$	108,974

As of December 31, 2019, all of the available-for-sale debt securities had contractual maturities within one year, and the average duration of debt securities was approximately three months.

4. AVAILABLE-FOR-SALE SECURITIES AND FAIR VALUE MEASUREMENTS (Continued)

Fair Value Measurements

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


	Estimated Fair Value Measurements as of December 31, 2019 Using:
	Quoted Price in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
Types of Instruments	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
U.S. government securities	$	—	$	53,834	$	—	$	53,834
U.S. commercial paper		—		18,915		—		18,915
Money market funds		233,992		—		—		233,992
Total assets measured at estimated fair value	$	233,992	$	72,749	$	—	$	306,741
Debt
2023 Notes	$	—	$	243,394	$	—	$	243,394
2025 Notes		—		208,976		—		208,976
Total fair value of debt	$	—	$	452,370	$	—	$	452,370


	Estimated Fair Value Measurements as of December 31, 2018 Using:
	Quoted Price in
	Active Markets		Significant Other		Significant
	for Identical		Observable		Unobservable
Types of Instruments	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
U.S. government securities	$	—	$	29,733	$	—	$	29,733
U.S. government agencies		—		4,971		—		4,971
U.S. corporate notes		—		2,875		—		2,875
U.S. commercial paper		—		22,037		—		22,037
Money market funds		49,358		—		—		49,358
Total assets measured at estimated fair value	$	49,358	$	59,616	$	—	$	108,974
Debt
Term B Loan	$	—	$	13,750	$	—	$	13,750
2023 Notes		—		258,918		—		258,918
2025 Notes		—		230,692		—		230,692
Total fair value of debt	$	—	$	503,360	$	—	$	503,360

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 and of our 2025 Notes is based on recent trading prices of the instruments. The carrying amount of our initial Term B Loan before deducting debt issuance costs approximates fair value at December 31, 2018 as the loan carried a variable interest rate that was tied to the LIBOR rate plus an applicable spread.

STOCK BASED COMPENSATION

12 Months Ended

Dec. 31, 2019

STOCK BASED COMPENSATION

STOCK BASED COMPENSATION

6. STOCK-BASED COMPENSATION

Equity Incentive Plans

In May 2012, we adopted the 2012 Equity Incentive Plan (the “2012 Plan”). The 2012 Plan provides for the grant of incentive stock options, nonstatutory stock options, RSAs, RSUs and Stock Appreciation Rights to employees, non-employee directors and consultants. As of December 31, 2019, total shares remaining available for issuance under the 2012 Plan were 5,043,494.

Employee Stock Purchase Plan

Under the 2004 Employee Stock Purchase Plan (the “ESPP”), our employees may purchase common stock through payroll deductions at a price equal to 85% of the lower of the fair market value of the stock at the beginning of the offering period or at the end of each applicable purchase period. The ESPP provides for consecutive and overlapping offering periods of 24 months in duration, with each offering period composed of four consecutive six-month purchase periods. The purchase periods end on either May 15 or November 15. ESPP contributions are limited to a maximum of 15% of an employee’s eligible compensation. The maximum number of shares that an employee may purchase in any purchase period is 2,500. An employee may not purchase shares with a value greater than $25,000 in any calendar year.

As of December 31, 2019, total shares remaining available for issuance under the ESPP were 187,576.

Performance-Contingent RSAs and RSUs

Since 2011, the Compensation Committee of our Board of Directors (the “Compensation Committee”) has 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 was the remaining grant of 63,000 special long-term retention and incentive performance-contingent RSAs to senior management in 2011. These awards were released in November 2017 upon vesting.

6. STOCK-BASED COMPENSATION (Continued)

Market-Based RSAs and RSUs

2016 Market-Based RSAs and RSUs

On January 14, 2016, the Compensation Committee approved and granted 282,394 RSAs and 46,294 RSUs to senior management. These awards included a market condition based on Relative Total Shareholder Return (“TSR”) and a service condition that required continued employment collectively, the “Performance Measures”. The vesting percentages of these awards were 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 would 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 would 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. The grant date fair value of these awards was determined using a Monte Carlo valuation model. The aggregate value of $2.0 million was to be recognized as compensation expense over the implied service period and would not be reversed if the market condition was not met.

In February 2018, the Compensation Committee certified the maximum achievement of the TSR as of the first measurement date, January 12, 2018. RSAs totaling 69,440 and RSUs totaling 30,862 representing two-thirds of the amounts were released on February 20, 2018. In connection with the separation of certain members of senior management from the Company in early February 2018, the Board of Directors agreed to accelerate the vesting and distribution of an aggregate of 118,821 RSAs to these members of senior management. The remaining 59,411 RSAs for these members of senior management were forfeited. As a net result of the vesting acceleration of the RSAs and the forfeiture of those unvested RSAs, an additional $0.7 million compensation expense was recognized in March 2018.

In August and September 2018, the remaining 34,721 RSAs and 15,432 RSUs were forfeited due to the additional separation of senior management members, and $0.2 million of previously recognized compensation expense was reversed.

2017 Market-Based RSAs and RSUs

On January 17, 2017, the Compensation Committee approved and granted 353,508 RSAs and 53,360 RSUs to senior management. These awards included a market condition based on the TSR of Innoviva’s common stock as compared to the TSR of the Nasdaq Biotechnology Index (“Index”) and a service condition that required continued employment collectively, the “Performance Measures II.” The vesting percentages of these awards were 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 would 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 would 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 was determined using a Monte Carlo valuation model. The aggregate value of $3.2 million was to be recognized as compensation expense over the implied service period and was subject to forfeiture.

In connection with the separation of certain members of senior management from the Company during 2018, all of the 2017 market-based RSAs and RSUs were forfeited and $1.3 million previously recognized compensation expense was reversed.

2018 Market-Based RSAs and RSUs

On March 2, 2018, the Compensation Committee approved and granted 111,668 RSAs and 49,630 RSUs to senior management. These awards included a market condition based on the TSR of Innoviva’s common stock over a three-year performance period from the date of grant for the RSAs and from the date of grant until September 30, 2020 for RSUs, and a service condition that required continued employment. The grant date fair value of these awards was determined using a Monte Carlo valuation model. The aggregate value of $1.7 million was to be recognized as compensation expense over the implied service period and would not be reversed if the market condition was not met, but with the exception of such person’s continued employment with the Company.

6. STOCK-BASED COMPENSATION (Continued)

In connection with the separation of the senior management members from the Company during 2018, all of the 2018 market-based RSAs and RSUs were forfeited.

Director Compensation Program

Our non-employee directors receive compensation for services provided as a director. Each member of our Board of Directors who is not an employee receives both cash and equity compensation for services as a director, member of a committee of the Board of Directors, lead independent director and chairman, as applicable. In October 2017, both the cash and equity components of the compensation program were amended, effective immediately (the “October 2017 Amendments”).

Each of our independent directors receives periodic automatic grants of equity awards under a program implemented under the 2012 Plan. These grants are non-discretionary. Only our independent directors or affiliates of such directors are eligible to receive automatic grants under the 2012 Plan. Under the program, each individual who first became a non-employee director will, on the date such individual joins the Board of Directors, automatically be granted a one-time grant of RSUs covering a number of shares of our common stock calculated as $125,000 ($250,000 prior to the October 2017 Amendments) divided by our common stock closing share price on the date of grant as reported on The Nasdaq Global Select Market, rounded down to the nearest whole share (the “Initial RSUs”), plus a one-time grant of RSUs covering a number of shares of our common stock calculated as $225,000 ($250,000 prior to the October 2017 Amendments) divided by our common stock closing share price on the date of grant as reported on The Nasdaq Global Select Market, which would be pro-rated for the number of whole months remaining until the anniversary of the prior year’s stockholders’ meeting, rounded down to the nearest whole share (the “Pro Rata RSUs”). The Initial RSUs vest in two equal annual installments, while Pro Rata RSUs vest in a single installment at the sooner of the next annual stockholder meeting or the one-year grant anniversary, in each case subject to the non-employee director’s continuous service through the applicable vesting date.

Annually, upon his or her re-election to the Board of Directors at the Annual Meeting of Stockholders, each non-employee director is automatically granted an RSU covering a number of shares of our common stock calculated as $225,000 ($250,000 prior to the October 2017 Amendments) divided by our common stock closing share price on the date of grant as reported on The Nasdaq Global Select Market, rounded down to the nearest whole share. These RSUs will vest at the sooner of the next annual stockholder meeting or the one-year anniversary of grant, subject to the non-employee director’s continuous service through the applicable vesting date. Following the amendment to our non-employee director compensation program, both the annual RSUs and Initial RSUs described above remained unchanged with the exception that the number of shares of our common stock subject to each award has been reduced.

These RSUs will vest in full upon the director’s death, the occurrence of a change in control or, with respect to awards made after the October 2017 Amendments, the director’s disability before the director’s service terminates. Director RSUs carry dividend equivalent rights to be credited with an amount equal to all cash dividends paid on the underlying shares of common stock while unvested. Dividend equivalents are subject to the same terms and conditions, including vesting, as the RSUs to which they attach and are paid in cash upon vesting.

Stock-Based Compensation Expense

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


	Year Ended December 31,
(In thousands)	2019		2018		2017
Research and development	$	—	$	—	$	697
General and administrative		2,056		3,233		9,136
Total stock-based compensation expense	$	2,056	$	3,233	$	9,833

6. STOCK-BASED COMPENSATION (Continued)

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


	Year Ended December 31,
(In thousands)	2019		2018		2017
Stock options	$	—	$	305	$	593
RSUs		1,431		1,650		2,282
RSAs		615		1,920		4,497
Performance-based RSAs		—		—		242
Market-based RSUs (PSUs)		—		(224)		291
Market-based RSAs (PSAs)		—		(464)		1,855
ESPP		10		46		73
Total stock-based compensation expense	$	2,056	$	3,233	$	9,833

For the year ended December 31, 2018, $1.7 million of stock-based compensation was reversed for the forfeited market-based awards due to the separation of senior management members.

As of December 31, 2019, the unrecognized stock-based compensation cost and the estimated weighted-average amortization period were as follows:


	Unrecognized		Weighted-Average
	Compensation		Amortization
(In thousands)	Cost		Period (Years)
RSUs	$	376	0.3
RSAs		942	2.5
Total unrecognized compensation cost	$	1,318

Compensation Awards

The following table summarizes equity award activity under the 2012 Plan and prior plans and related information:


		Weighted-
		Average			Weighted-			Weighted-
		Exercise			Average			Average
	Number of	Price of		Number of	Fair Value		Number of	Fair Value
	outstanding	Outstanding		outstanding	per Share		outstanding	per Share
(In thousands, except per share data)	options	Options		RSUs and PSUs	at Grant		RSAs and PSAs	at Grant
Balance as of December 31, 2018	1,237	$	24.00	105	$	15.54	77	$	15.37
Granted	—		—	81		13.72	53		15.08
Exercised	(45)		12.27	—		—	—		—
Released RSUs/RSAs	—		—	(92)		15.55	(52)		16.43
Forfeited	(105)		27.14	—		—	—		—
Balance as of December 31, 2019	1,087		24.18	94		13.94	78		14.46

As of December 31, 2019, the aggregate intrinsic value of the options outstanding and options exercisable was $0.1 million. All outstanding options were exercisable. The weighted average remaining contractual term was 2.89 years.

The total intrinsic value of the options exercised was $0.2 million for the year ended December 31, 2019 and $0.4 million for the year ended December 31, 2018. It was not material in the year ended December 31, 2017. The total estimated fair value of options vested was nil, $0.8 million and $3.8 million in the years ended December 31, 2019, 2018 and 2017, respectively.

The total estimated fair value of RSUs vested was $1.4 million in the year ended December 31, 2019, and $2.6 million in the year ended December 31, 2018 and 2017.

The total estimated fair value of RSAs vested was $0.9 million, $7.6 million and $6.3 million in the years ended December 31, 2019, 2018 and 2017, respectively.

DEBT

12 Months Ended

Dec. 31, 2019

DEBT

DEBT

7. DEBT

Our debt consists of:


	December 31,
(In thousands)	2019		2018
Term B Loan	$	—	$	13,750
2023 Notes		240,984		240,984
2025 Notes		192,500		192,500
Total debt		433,484		447,234
Unamortized debt discount and issuance costs		(56,364)		(64,379)
Net long-term debt	$	377,120	$	382,855

Senior Secured Term Loans

On August 18, 2017, we entered into a credit agreement (the “Credit Agreement”) and completed a financing of $250.0 million Term B Loan, the net proceeds of which were used to repay the remaining balance of our then outstanding 2029 Notes. The Term B Loan was set to mature on August 18, 2022. Two and one-half percent (2.5%) of the initial principal amount was due quarterly beginning December 31, 2017. The remaining outstanding balance was due at maturity. Prepayments, in whole or in part, can be made at any time without a penalty. The initial term loan beared interest at a varying rate of three-month LIBOR plus 4.5%. Interest was due quarterly, beginning November 20, 2017.

The Term B Loan was unconditionally guaranteed by one of our wholly-owned subsidiaries. These loans were senior secured obligations, collateralized by a lien on substantially all of our and our subsidiary’s personal property and material real property assets (if any). The lien was removed when the loans were fully paid off in December 2019.

In connection with the financing of the Term B Loan, we incurred $2.5 million in original interest discount and $4.9 million in debt issuance costs, which were being amortized to interest expense over the term of the loan using the effective interest method. As a result of the prepayments of $230.0 million in 2018, $5.7 million of debt issuance costs were written off as a loss on the extinguishment of debt, which is presented as part of other income (expense), net in our consolidated statements of operations. In December 2019, we repaid the remaining principal balance of $13.8 million and wrote off the remaining unamortized debt issuance costs.

Convertible Senior Notes Due 2025

On August 7, 2017, we completed a private placement of $192.5 million aggregate principal amount of our 2025 Notes. The proceeds include the 2025 Notes sold pursuant to the $17.5 million over-allotment option granted by us to the initial purchasers, which option was exercised in full. The 2025 Notes were sold in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The 2025 Notes are senior unsecured obligations and bear interest at a rate of 2.5% per year, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2018.

The 2025 Notes are convertible, based on the applicable conversion rate, into cash, shares of our common stock or a combination thereof, at our election. The initial conversion rate for the 2025 Notes is 57.9240 shares of our common stock per $1,000 principal amount of the 2025 Notes (which is equivalent to an initial conversion price of approximately $17.26 per share), representing a 30.0% conversion premium over the last reported sale price of the Company’s common stock on August 1, 2017, which was $13.28 per share. The conversion rate is subject to customary anti-dilution adjustments in certain circumstances. The 2025 Notes will mature on August 15, 2025, unless repurchased or converted in accordance with their terms prior to such date. Prior to February 15, 2025, the 2025 Notes will be convertible at the option of the holders only upon the occurrence of specified events and during certain periods. From, and including, February 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, the 2025 Notes will be convertible at any time.

Concurrently with the pricing of the offering, we repurchased and retired 1,317,771 shares of our common stock for approximately $17.5 million of the net proceeds from the offering, in privately negotiated transactions effected through one of the initial purchasers or its affiliate, as our agent. The remaining net proceeds from the sale of the 2025 Notes in the offering were used to repay a portion of the principal outstanding under the 2029 Notes on August 15, 2017.

7. DEBT (Continued)

In accordance with accounting guidance for debt with conversion and other options, we separately account for the liability and equity components of the 2025 Notes by allocating the proceeds between the liability component and the embedded conversion option (“equity component”) due to our ability to settle the conversion obligation of the 2025 Notes in cash, common stock or a combination of cash and common stock, at our option. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature using the income approach. The allocation was performed in a manner that reflected our non-convertible debt borrowing rate for similar debt. The equity component of the 2025 Notes of $67.3 million was recognized as a debt discount and represents the difference between the proceeds from the issuance of the 2025 Notes and the fair value of the liability of the 2025 Notes on the date of issuance. The excess of the principal amount of the liability component over its carrying amount (“debt discount”) is amortized to interest expense using the effective interest method over the term of the 2025 Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

Our outstanding 2025 Notes balances consisted of the following:


	December 31,
(In thousands)	2019		2018
Liability component
Principal	$	192,500	$	192,500
Debt discount and issuance costs, net		(54,597)		(61,766)
Net carrying amount	$	137,903	$	130,734
Equity component, net	$	65,361	$	65,361

The following table sets forth total interest expense recognized related to the 2025 Notes for the years ended December 31, 2019 and 2018:


	Year Ended December 31,
(In thousands)	2019		2018
Contractual interest expense	$	4,813	$	4,799
Amortization of debt issuance costs		551		505
Amortization of debt discount		6,618		6,071
Total interest and amortization expense	$	11,982	$	11,375

Convertible Subordinated Notes Due 2023

In January 2013, we completed an underwritten public offering of $287.5 million aggregate principal amount of unsecured convertible subordinated notes, which will mature on January 15, 2023. The financing raised proceeds, net of issuance costs, of approximately $281.2 million, less $36.8 million to purchase two privately negotiated capped call option transactions in connection with the issuance of the notes. The 2023 Notes bear interest at the rate of 2.125% per year that is payable semi-annually in arrears in cash on January 15 and July 15 of each year, beginning on July 15, 2013.

The 2023 Notes were convertible, at the option of the holder, into shares of our common stock at an initial conversion rate of 35.9903 shares per $1,000 principal amount of the 2023 Notes, subject to adjustment in certain circumstances, which represents an initial conversion price of approximately $27.79 per share.

In connection with the offering of the 2023 Notes, we entered into two privately negotiated capped call option transactions with a single counterparty. The capped call option transaction is an integrated instrument consisting of a call option on our common stock purchased by us with a strike price equal to the initial conversion price of $27.79 per share for the underlying number of shares and a cap price of $38.00 per share, both of which are subject to adjustments consistent with the 2023 Notes. The cap component is economically equivalent to a call option sold by us for the underlying number of shares with an initial strike price of $38.00 per share. As an integrated instrument, the settlement of the capped call coincides with the due date of the convertible debt. Upon settlement, we would receive from our hedge counterparty a number of shares of our common shares that would range from zero, if the stock price was below $27.79 per share, to a maximum of 2,779,659 shares, if the stock price is above $38.00 per share. However, if the market

7. DEBT (Continued)

price of our common stock, as measured under the terms of the capped call transactions, exceeds $38.00 per share, there is no incremental anti-dilutive benefit from the capped call.

As a result of the partial conversion by certain holders of the 2023 Notes in July 2014, and dividends declared and paid in 2014 and 2015, the conversion rate with respect to our 2023 Notes was adjusted in total to 50.5818 shares of our common stock per $1,000 principal amount of the 2023 Notes, which represents a conversion price of approximately $19.77 per share. As a result of the conversion rate adjustments, the capped call strike price and cap price were also adjusted to $19.77 and $27.04, respectively.

For the year ending December 31, 2016, we retired a portion of our 2023 Notes with a face value of $14.1 million and carrying value of $13.9 million by way of purchase in the open market. The 2023 Notes were purchased for a total settlement price of $11.6 million resulting in a gain of $2.3 million, which is included in other income (expense), net in the consolidated statements of operations. As a result of the partial retirement of our 2023 Notes, we entered into a partial termination agreement of the capped call option transaction described above. The partial termination agreement of the capped call option transaction enabled us to receive $0.6 million from the counterparty, which was recorded as an increase in additional paid-in capital in our consolidated balance sheets as of December 31, 2016.

Non-Recourse Notes Due 2029

In April 2014, we entered into certain note purchase agreements relating to the private placement of $450.0 million aggregate principal amount of non-recourse fixed rate term notes due 2029. The 2029 Notes had an annual interest rate of 9%, and prior to May 15, 2016, in the event that the specified portion of royalties received in a quarter was less than the interest accrued for the quarter, the principal amount of the 2029 Notes increased by the interest shortfall amount for that period, and considered as payment in kind (“PIK”). In total, $44.0 million of interest expense was added to the principal balance of the 2029 Notes.

In connection with the sale of the 2029 Notes in 2014, we incurred approximately $15.3 million in debt issuance costs, which were being amortized to interest expense over the term of the 2029 Notes. The 2029 Notes were repaid in full in 2017 with the net proceeds from the 2025 Notes and Term B Loan. With the repayment of the 2029 Notes in 2017, we wrote off $7.3 million of unamortized debt issuance costs which is included in other income (expense), net in our consolidated statements of operations.

Debt Maturities

The aggregate scheduled maturities of our long-term debt as of December 31, 2019 are as follows:


(In thousands)
Years ending December 31:
2020 to 2022	$	—
2023		240,984
2024		—
Thereafter		192,500
Total	$	433,484

INCOME TAXES

12 Months Ended

Dec. 31, 2019

INCOME TAXES

INCOME TAXES

9. INCOME TAXES

Income tax benefit (expense) consists of the following:


	Year Ended December 31,
(In thousands)	2019		2018		2017
Current
State	$	(26)	$	19	$	(4)
Deferred
Federal		(41,567)		190,195		—
State		(309)		5,859		—
		(41,876)		196,054		—
Total income tax benefit (expense), net	$	(41,902)	$	196,073	$	(4)

The impacts of the differences between the expected U.S. federal statutory income tax to our income tax expense are as follows:


		Year Ended December 31,
(In thousands)	2019		2018		2017
Expected tax at federal statutory rate	$	48,908	$	44,154	$	46,997
State income tax, net of federal benefit		325		(5,878)		4
Non-deductible executive compensation		—		747		987
Noncontrolling interest		(7,078)		(2,367)		—
Other		326		310		(1,506)
Impact of tax reform rate change		—		—		124,017
Change in valuation allowance		(579)		(233,039)		(170,495)
Income tax expense (benefit), net	$	41,902	$	(196,073)	$	4

9. INCOME TAXES (Continued)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and deferred tax liabilities are as follows:


	As of December 31,
(In thousands)	2019		2018
Deferred tax assets
Net operating loss carryforwards	$	172,359	$	215,497
Research and development tax credit carryforwards		55,966		56,231
Other		1,412		1,647
Total deferred tax assets before valuation allowance		229,737		273,375
Valuation allowance		(63,620)		(64,199)
Total deferred tax assets		166,117		209,176
Deferred tax liabilities
Debt issuance discount and other		(11,946)		(13,122)
Net deferred tax assets	$	154,171	$	196,054

We record deferred tax assets if the realization of such assets is more likely than not to occur. Significant management judgment is required in determining whether a valuation allowance against the deferred tax assets is required. We have considered all available evidence, both positive and negative, such as our historical operating results and predictability of future taxable income, in making such determination. We are also required to exercise significant management’s judgment in forecasting future taxable income. Specifically, we evaluate the following criteria when considering a valuation allowance:

●

the history of tax net operating losses in recent years;

●

predictability of operating results;

●

profitability for a sustained period of time; and

●

level of profitability on a quarterly basis.

As of December 31, 2018, we had cumulative net income before tax for the three years then ended. Based on our historical operating performance and estimated future taxable income, we concluded that it was more likely than not that we would be able to realize approximately $190.2 million and $5.9 million benefits of the U.S. federal and state deferred tax assets in the future, respectively. As of December 31, 2019, we recognized $41.9 million income tax expense and reduced the deferred tax assets by the same amount based on the taxable income generated during the year.

As of December 31, 2019, we had federal net operating loss carryforwards of approximately $0.6 billion, which will expire from 2030 through 2035, and federal research and development tax credit carryforwards of approximately $44.4 million, which will expire from 2020 through 2034. We also had state net operating loss carryforwards of approximately $649.3 million expiring in the years 2028 through 2035 and state research tax credits of approximately $32.3 million, which do not expire.

Utilization of net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code and similar state provisions. Annual limitations may result in expiration of net operating loss and tax credit carryforwards before some or all of such amounts have been utilized.

We conducted an Internal Revenue Code of 1986, as amended, Section 382 (“Section 382”) analysis through September 30, 2019 to determine whether an ownership change had occurred since inception. The Section 382 study concluded that it is more likely than not that the Company did not experience an ownership change during the testing period. However, notwithstanding the applicable annual limitations, no portion of the net operating loss or credit carryforwards is expected to expire before becoming available to reduce federal and state income tax liabilities as a result of those identified ownership changes. If we undergo another ownership change, the utilization of the pre-ownership change net operating loss carryforwards or pre-ownership change tax attributes, such as

9. INCOME TAXES (Continued)

research tax credits, to offset the post-ownership change income may be subject to an annual limitation, pursuant to Sections 382 and 383 of the Internal Revenue Code of 1986, as amended. Similar rules may apply under state tax laws.

Our policy is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2019 and 2018, we had no accrued interest or penalties.

Uncertain Tax Positions

A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits are as follows (in thousands):


(In thousands)
Unrecognized tax benefits as of December 31, 2017 and 2016	$	15,488
Gross decrease in tax portions for 2018		(75)
Unrecognized tax benefits as of December 31, 2018	$	15,413
Gross decrease in tax portions for 2019		(71)
Unrecognized tax benefits as of December 31, 2019	$	15,342

Our total unrecognized tax benefits as of December 31, 2019 were $15.3 million. Total unrecognized tax benefits that, if recognized, would affect our effective tax rate, were $8.0 million as of December 31, 2019. We do not anticipate the total amount of unrecognized income tax benefits relating to uncertain tax positions existing as of December 31, 2019 will significantly increase or decrease in the next 12 months.

We are subject to taxation in the U.S. and various state jurisdictions. The tax years 2004 through 2013, 2015 and forward remain open to examination by the federal and most state tax authorities due to net operating loss and overall credit carryforward positions.

SUPPLEMENTARY FINANCIAL DATA (UNAUDITED)

12 Months Ended

Dec. 31, 2019

SUPPLEMENTARY FINANCIAL DATA (UNAUDITED)

SUPPLEMENTARY FINANCIAL DATA (UNAUDITED)

SUPPLEMENTARY FINANCIAL DATA (UNAUDITED)

(In thousands, except per share data)

The following table presents certain unaudited consolidated quarterly financial information for the eight quarters in the period ended December 31, 2019. This information has been prepared on the same basis as the audited consolidated financial statements and includes all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the unaudited quarterly results of operations set forth herein.


	For the Quarters Ended
	March 31		June 30		September 30		December 31
2019
Net revenue	$	55,183	$	64,107	$	65,755	$	75,971
Total operating expenses		3,015		4,347		4,962		2,332
Income from operations		52,168		59,760		60,793		73,639
Income tax expense, net		(8,508)		(10,433)		(10,558)		(12,403)
Net income		40,019		46,061		47,051		57,862
Net income attributable to noncontrolling interest		6,229		8,321		7,242		11,913
Net income attributable to Innoviva stockholders	$	33,790	$	37,740	$	39,809	$	45,949
Basic net income per share	$	0.33	$	0.37	$	0.39	$	0.45
Diluted net income per share	$	0.31	$	0.34	$	0.36	$	0.42

	For the Quarters Ended
	March 31		June 30		September 30		December 31
2018
Net revenue	$	52,380	$	67,086	$	61,680	$	79,858
Total operating expenses		11,685		4,411		4,019		2,638
Income from operations		40,695		62,675		57,661		77,220
Income tax benefit, net		—		—		—		196,073
Net income		30,330		56,616		50,167		269,215
Net income attributable to noncontrolling interest		749		1,990		3,078		5,455
Net income attributable to Innoviva stockholders	$	29,581	$	54,626	$	47,089	$	263,760
Basic net income per share	$	0.29	$	0.54	$	0.47	$	2.61
Diluted net income per share	$	0.27	$	0.49	$	0.43	$	2.34

DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING (Policies)

12 Months Ended

Dec. 31, 2019

DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

Use of Management's Estimates

Use of Management’s Estimates

Certain Risks and Concentrations

Segment Reporting

Variable Interest Entity

1. DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Cash and Cash Equivalents

Investments in Marketable Securities

Fair Value of Financial Instruments

Level 1—Quoted prices for identical instruments in active markets.

Level 3—Unobservable inputs and little, if any, market activity for the assets.

Property and Equipment

1. DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property and Equipment

Property and equipment, which consisted of equipment, computer equipment, software, office furniture and fixtures, was immaterial as of December 31, 2019 and 2018, respectively.

Property, equipment and leasehold improvements are stated at cost and depreciated using the straight-line method as follows:


Leasehold improvements		Shorter of remaining lease terms or useful life
Equipment, furniture and fixtures		5 - 7 years
Software and computer equipment		3 years

Capitalized Fees Paid to a Related Party

Revenue Recognition

Fair Value of Stock-Based Compensation Awards

Restricted stock units (“RSUs”) and restricted stock awards (“RSAs”) are measured based on the fair market values of the underlying stock on the dates of grant.

1. DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Compensation expense for purchases under the ESPP is recognized based on the fair value of the common stock on the date of offering, less the purchase discount percentage provided for in the plan.

Income Taxes

Comprehensive Income

Related Parties

GSK owned 31.6% of our outstanding common stock as of December 31, 2019. Transactions with GSK are described in Note 3, “Collaborative Arrangements.”

Recently Adopted Accounting Standards Updates

1. DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently Issued Accounting Standards or Updates Not Yet Adopted

NET INCOME PER SHARE (Tables)

12 Months Ended

Dec. 31, 2019

NET INCOME PER SHARE

Schedule of computation of basic and diluted net income per share

The following table shows the computation of basic and diluted net income per share for the years ended December 31, 2019, 2018 and 2017:


	Year Ended December 31,
(In thousands except per share data)	2019		2018			2017
Numerator:
Net income attributable to Innoviva stockholders, basic	$	157,288	$	395,056	$	134,143
Add: interest expense on 2023 Notes		4,648		5,661		5,647
Net income attributable to Innoviva stockholders, diluted	$	161,936	$	400,717	$	139,790
Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders		101,150		100,849		106,945
Dilutive effect of 2023 Notes		12,189		12,189		12,189
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan		70		370		732
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders		113,409		113,408		119,866
Net income per share attributable to Innoviva stockholders
Basic	$	1.55	$	3.92	$	1.25
Diluted	$	1.43	$	3.53	$	1.17

Schedule of 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:


	Year Ended December 31,
(In thousands)	2019	2018	2017
Outstanding options and awards granted under equity incentive plan and employee stock purchase plan	1,130	1,490	2,121

AVAILABLE-FOR-SALE SECURITIES AND FAIR VALUE MEASUREMENTS (Tables)

12 Months Ended

Dec. 31, 2019

AVAILABLE-FOR-SALE SECURITIES AND FAIR VALUE MEASUREMENTS

Schedule of amortized cost and estimated fair values for available-for-sale securities

Available-for-sale securities are summarized below:


	December 31, 2019
			Gross		Gross
			Unrealized		Unrealized		Estimated
(In thousands)	Amortized Cost		Gains		Losses		Fair Value
U.S. government securities	$	53,799	$	35		—	$	53,834
U.S. commercial paper		18,915		—		—		18,915
Money market funds		233,992		—		—		233,992
Total	$	306,706	$	35	$	—	$	306,741


	December 31, 2018
			Gross		Gross
			Unrealized		Unrealized		Estimated
(In thousands)	Amortized Cost		Gains		Losses		Fair Value
U.S. government securities	$	29,736	$	—	$	(3)	$	29,733
U.S. government agencies		4,971		—		—		4,971
U.S. corporate notes		2,875		—		—		2,875
U.S. commercial paper		22,037		—		—		22,037
Money market funds		49,358		—		—		49,358
Total	$	108,977	$	—	$	(3)	$	108,974

Schedule of available-for-sale securities measured at fair value on a recurring basis

The estimated fair values were as follows:


	Estimated Fair Value Measurements as of December 31, 2019 Using:
	Quoted Price in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
Types of Instruments	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
U.S. government securities	$	—	$	53,834	$	—	$	53,834
U.S. commercial paper		—		18,915		—		18,915
Money market funds		233,992		—		—		233,992
Total assets measured at estimated fair value	$	233,992	$	72,749	$	—	$	306,741
Debt
2023 Notes	$	—	$	243,394	$	—	$	243,394
2025 Notes		—		208,976		—		208,976
Total fair value of debt	$	—	$	452,370	$	—	$	452,370


	Estimated Fair Value Measurements as of December 31, 2018 Using:
	Quoted Price in
	Active Markets		Significant Other		Significant
	for Identical		Observable		Unobservable
Types of Instruments	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
U.S. government securities	$	—	$	29,733	$	—	$	29,733
U.S. government agencies		—		4,971		—		4,971
U.S. corporate notes		—		2,875		—		2,875
U.S. commercial paper		—		22,037		—		22,037
Money market funds		49,358		—		—		49,358
Total assets measured at estimated fair value	$	49,358	$	59,616	$	—	$	108,974
Debt
Term B Loan	$	—	$	13,750	$	—	$	13,750
2023 Notes		—		258,918		—		258,918
2025 Notes		—		230,692		—		230,692
Total fair value of debt	$	—	$	503,360	$	—	$	503,360

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

+ References + Details

STOCK BASED COMPENSATION (Tables)

12 Months Ended

Dec. 31, 2019

STOCK BASED COMPENSATION

Schedule of stock-based compensation expense

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


	Year Ended December 31,
(In thousands)	2019		2018		2017
Research and development	$	—	$	—	$	697
General and administrative		2,056		3,233		9,136
Total stock-based compensation expense	$	2,056	$	3,233	$	9,833

Schedule of stock-based compensation expense included in the consolidated statements of operations by award type

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


	Year Ended December 31,
(In thousands)	2019		2018		2017
Stock options	$	—	$	305	$	593
RSUs		1,431		1,650		2,282
RSAs		615		1,920		4,497
Performance-based RSAs		—		—		242
Market-based RSUs (PSUs)		—		(224)		291
Market-based RSAs (PSAs)		—		(464)		1,855
ESPP		10		46		73
Total stock-based compensation expense	$	2,056	$	3,233	$	9,833

Schedule of unrecognized stock-based compensation cost

As of December 31, 2019, the unrecognized stock-based compensation cost and the estimated weighted-average amortization period were as follows:


	Unrecognized		Weighted-Average
	Compensation		Amortization
(In thousands)	Cost		Period (Years)
RSUs	$	376	0.3
RSAs		942	2.5
Total unrecognized compensation cost	$	1,318

Summary of equity award activity under the 2012 plan and prior plans

The following table summarizes equity award activity under the 2012 Plan and prior plans and related information:


		Weighted-
		Average			Weighted-			Weighted-
		Exercise			Average			Average
	Number of	Price of		Number of	Fair Value		Number of	Fair Value
	outstanding	Outstanding		outstanding	per Share		outstanding	per Share
(In thousands, except per share data)	options	Options		RSUs and PSUs	at Grant		RSAs and PSAs	at Grant
Balance as of December 31, 2018	1,237	$	24.00	105	$	15.54	77	$	15.37
Granted	—		—	81		13.72	53		15.08
Exercised	(45)		12.27	—		—	—		—
Released RSUs/RSAs	—		—	(92)		15.55	(52)		16.43
Forfeited	(105)		27.14	—		—	—		—
Balance as of December 31, 2019	1,087		24.18	94		13.94	78		14.46

DEBT (Tables)

12 Months Ended

Dec. 31, 2019

Debt

Schedule of debt

Our debt consists of:


	December 31,
(In thousands)	2019		2018
Term B Loan	$	—	$	13,750
2023 Notes		240,984		240,984
2025 Notes		192,500		192,500
Total debt		433,484		447,234
Unamortized debt discount and issuance costs		(56,364)		(64,379)
Net long-term debt	$	377,120	$	382,855

Aggregate scheduled maturities of long-term debt

The aggregate scheduled maturities of our long-term debt as of December 31, 2019 are as follows:


(In thousands)
Years ending December 31:
2020 to 2022	$	—
2023		240,984
2024		—
Thereafter		192,500
Total	$	433,484

2025 Notes

Debt

Summary of liability and equity components of convertible notes

Our outstanding 2025 Notes balances consisted of the following:


	December 31,
(In thousands)	2019		2018
Liability component
Principal	$	192,500	$	192,500
Debt discount and issuance costs, net		(54,597)		(61,766)
Net carrying amount	$	137,903	$	130,734
Equity component, net	$	65,361	$	65,361

Schedule of components of interest expense

The following table sets forth total interest expense recognized related to the 2025 Notes for the years ended December 31, 2019 and 2018:


	Year Ended December 31,
(In thousands)	2019		2018
Contractual interest expense	$	4,813	$	4,799
Amortization of debt issuance costs		551		505
Amortization of debt discount		6,618		6,071
Total interest and amortization expense	$	11,982	$	11,375

- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

+ References

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-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=114775985&loc=d3e28878-108400

Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21475-112644

+ Details

INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2019

INCOME TAXES

Schedule of components of the income tax benefit (expense)

Income tax benefit (expense) consists of the following:


	Year Ended December 31,
(In thousands)	2019		2018		2017
Current
State	$	(26)	$	19	$	(4)
Deferred
Federal		(41,567)		190,195		—
State		(309)		5,859		—
		(41,876)		196,054		—
Total income tax benefit (expense), net	$	(41,902)	$	196,073	$	(4)

Schedule of impacts of the differences between the expected U.S. federal statutory income tax to our income tax expense

The impacts of the differences between the expected U.S. federal statutory income tax to our income tax expense are as follows:


		Year Ended December 31,
(In thousands)	2019		2018		2017
Expected tax at federal statutory rate	$	48,908	$	44,154	$	46,997
State income tax, net of federal benefit		325		(5,878)		4
Non-deductible executive compensation		—		747		987
Noncontrolling interest		(7,078)		(2,367)		—
Other		326		310		(1,506)
Impact of tax reform rate change		—		—		124,017
Change in valuation allowance		(579)		(233,039)		(170,495)
Income tax expense (benefit), net	$	41,902	$	(196,073)	$	4

Schedule of significant components of the Company's deferred tax assets and deferred tax liabilities

Significant components of our deferred tax assets and deferred tax liabilities are as follows:


	As of December 31,
(In thousands)	2019		2018
Deferred tax assets
Net operating loss carryforwards	$	172,359	$	215,497
Research and development tax credit carryforwards		55,966		56,231
Other		1,412		1,647
Total deferred tax assets before valuation allowance		229,737		273,375
Valuation allowance		(63,620)		(64,199)
Total deferred tax assets		166,117		209,176
Deferred tax liabilities
Debt issuance discount and other		(11,946)		(13,122)
Net deferred tax assets	$	154,171	$	196,054

Summary of changes in unrecognized tax benefits

A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits are as follows (in thousands):


(In thousands)
Unrecognized tax benefits as of December 31, 2017 and 2016	$	15,488
Gross decrease in tax portions for 2018		(75)
Unrecognized tax benefits as of December 31, 2018	$	15,413
Gross decrease in tax portions for 2019		(71)
Unrecognized tax benefits as of December 31, 2019	$	15,342

DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Description of Operations and Variable Interest Entity (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Description of Operations and Summary of Significant Accounting Policies
Cash balance	$ 278,096				$ 62,417				$ 278,096	$ 62,417
Total net revenue	75,971	$ 65,755	$ 64,107	$ 55,183	79,858	$ 61,680	$ 67,086	$ 52,380	261,016	261,004	$ 217,217
Total operating expenses	2,332	$ 4,962	$ 4,347	$ 3,015	2,638	$ 4,019	$ 4,411	$ 11,685	14,656	22,753	33,613
GSK
Description of Operations and Summary of Significant Accounting Policies
Total net revenue									$ 261,016	261,004	$ 217,217
Long-Acting Beta2 Agonist (LABA) Collaboration \| GSK
Description of Operations and Summary of Significant Accounting Policies
Percentage of economic interest in any future payments made under the agreements									15.00%
Long-Acting Beta2 Agonist (LABA) Collaboration \| GSK \| RELVAR/BREO
Description of Operations and Summary of Significant Accounting Policies
Royalty rate for first level of annual global net sales (as a percent)									15.00%
Annual global sales level used to determine royalty rate									$ 3,000,000
Royalty rate for sales above first level of annual global net sales (as a percent)									5.00%
Long-Acting Beta2 Agonist (LABA) Collaboration \| GSK \| ANORO \| Minimum
Description of Operations and Summary of Significant Accounting Policies
Royalty rate for combination products (as a percent)									6.50%
Long-Acting Beta2 Agonist (LABA) Collaboration \| GSK \| ANORO \| Maximum
Description of Operations and Summary of Significant Accounting Policies
Royalty rate for combination products (as a percent)									10.00%
Long-Acting Beta2 Agonist (LABA) Collaboration \| GSK \| TRELEGY \| Minimum
Description of Operations and Summary of Significant Accounting Policies
Royalty rate for combination products (as a percent)									6.50%
Long-Acting Beta2 Agonist (LABA) Collaboration \| GSK \| TRELEGY \| Maximum
Description of Operations and Summary of Significant Accounting Policies
Royalty rate for combination products (as a percent)									10.00%
TRC
Description of Operations and Summary of Significant Accounting Policies
Cash balance	22,300								$ 22,300
TRC \| TRELEGY
Description of Operations and Summary of Significant Accounting Policies
Total net revenue									42,800	13,400
TRC \| Collaborative arrangement
Description of Operations and Summary of Significant Accounting Policies
Related-party receivables	$ 14,400				$ 6,400				14,400	$ 6,400
Theravance Biopharma \| TRC \| Arbitration
Description of Operations and Summary of Significant Accounting Policies
Total operating expenses									$ 3,400

NET INCOME PER SHARE - Basic and Diluted EPS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Aug. 07, 2017
Numerator:
Net income attributable to Innoviva stockholders, basic	$ 45,949	$ 39,809	$ 37,740	$ 33,790	$ 263,760	$ 47,089	$ 54,626	$ 29,581	$ 157,288	$ 395,056	$ 134,143
Add: interest expense on 2023 Notes									4,648	5,661	5,647
Net income attributable to Innoviva stockholders, diluted									$ 161,936	$ 400,717	$ 139,790
Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders									101,150	100,849	106,945
Dilutive effect of 2023 Notes									12,189	12,189	12,189
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan									70	370	732
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders									113,409	113,408	119,866
Net income per share attributable to Innoviva stockholders
Basic net income per share	$ 0.45	$ 0.39	$ 0.37	$ 0.33	$ 2.61	$ 0.47	$ 0.54	$ 0.29	$ 1.55	$ 3.92	$ 1.25
Diluted net income per share	0.42	$ 0.36	$ 0.34	$ 0.31	2.34	$ 0.43	$ 0.49	$ 0.27	$ 1.43	$ 3.53	$ 1.17
Convertible senior notes \| 2025 Notes
Net Income Per Share
Dilutive effect of the assumed conversion premium									0	0
Convertible senior notes \| 2025 Notes \| Common Stock
Net Income Per Share
Conversion price of convertible notes into common stock (in dollars per share)	$ 17.26				$ 17.26				$ 17.26	$ 17.26		$ 17.26

REVENUE RECOGNITION AND COLLABORATIVE ARRANGEMENTS (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2014
Revenue Recognition and Collaborative Arrangements
Total net revenue	$ 75,971	$ 65,755	$ 64,107	$ 55,183	$ 79,858	$ 61,680	$ 67,086	$ 52,380	$ 261,016	$ 261,004	$ 217,217
Royalty revenue from a related party
Revenue Recognition and Collaborative Arrangements
Total net revenue									261,016	261,004	214,118
Revenue from collaborative arrangements from a related party
Revenue Recognition and Collaborative Arrangements
Total net revenue									0	0	3,099
GSK
Revenue Recognition and Collaborative Arrangements
Total net revenue									261,016	261,004	217,217
Milestone fees paid	$ 220,000				$ 220,000				220,000	220,000
GSK \| Royalty revenue from a related party
Revenue Recognition and Collaborative Arrangements
Royalties from a related party									274,839	274,827	227,941
Less: amortization of capitalized fees paid to a related party									(13,823)	(13,823)	(13,823)
Total net revenue									261,016	261,004	214,118
GSK \| RELVAR/BREO
Revenue Recognition and Collaborative Arrangements
Royalties from a related party									189,424	220,162	198,726
GSK \| ANORO
Revenue Recognition and Collaborative Arrangements
Royalties from a related party									42,625	41,286	29,036
GSK \| TRELEGY
Revenue Recognition and Collaborative Arrangements
Royalties from a related party									42,790	13,379	179
Strategic alliance - MABA program license \| GSK \| Revenue from collaborative arrangements from a related party
Revenue Recognition and Collaborative Arrangements
Total net revenue									$ 0	$ 0	$ 3,099
Long-Acting Beta2 Agonist (LABA) Collaboration \| GSK
Revenue Recognition and Collaborative Arrangements
Milestone fees paid												$ 220,000
Percentage of economic interest in any future payments made under the agreements									15.00%
Long-Acting Beta2 Agonist (LABA) Collaboration \| GSK \| RELVAR/BREO
Revenue Recognition and Collaborative Arrangements
Royalty rate for first level of annual global net sales (as a percent)									15.00%
Annual global sales level used to determine royalty rate									$ 3,000,000
Royalty rate for sales above first level of annual global net sales (as a percent)									5.00%
Long-Acting Beta2 Agonist (LABA) Collaboration \| GSK \| ANORO \| Minimum
Revenue Recognition and Collaborative Arrangements
Royalty rate for combination products (as a percent)									6.50%
Long-Acting Beta2 Agonist (LABA) Collaboration \| GSK \| ANORO \| Maximum
Revenue Recognition and Collaborative Arrangements
Royalty rate for combination products (as a percent)									10.00%
Long-Acting Beta2 Agonist (LABA) Collaboration \| GSK \| TRELEGY \| Minimum
Revenue Recognition and Collaborative Arrangements
Royalty rate for combination products (as a percent)									6.50%
Long-Acting Beta2 Agonist (LABA) Collaboration \| GSK \| TRELEGY \| Maximum
Revenue Recognition and Collaborative Arrangements
Royalty rate for combination products (as a percent)									10.00%

AVAILABLE-FOR-SALE SECURITIES AND FAIR VALUE MEASUREMENTS - Fair Value Measurements (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Recurring basis
Assets
Total assets measured at estimated fair value	$ 306,741	$ 108,974
Recurring basis \| U.S. government securities
Assets
Total assets measured at estimated fair value	53,834	29,733
Recurring basis \| U.S. government agencies
Assets
Total assets measured at estimated fair value		4,971
Recurring basis \| U.S. corporate notes
Assets
Total assets measured at estimated fair value		2,875
Recurring basis \| U.S. commercial paper
Assets
Total assets measured at estimated fair value	18,915	22,037
Recurring basis \| Money market funds
Assets
Total assets measured at estimated fair value	233,992	49,358
Recurring basis \| Quoted Price in Active Markets for Identical Assets, Level 1
Assets
Total assets measured at estimated fair value	233,992	49,358
Recurring basis \| Quoted Price in Active Markets for Identical Assets, Level 1 \| U.S. government securities
Assets
Total assets measured at estimated fair value	0	0
Recurring basis \| Quoted Price in Active Markets for Identical Assets, Level 1 \| U.S. government agencies
Assets
Total assets measured at estimated fair value		0
Recurring basis \| Quoted Price in Active Markets for Identical Assets, Level 1 \| U.S. corporate notes
Assets
Total assets measured at estimated fair value		0
Recurring basis \| Quoted Price 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 Price in Active Markets for Identical Assets, Level 1 \| Money market funds
Assets
Total assets measured at estimated fair value	233,992	49,358
Recurring basis \| Significant Other Observable Inputs, Level 2
Assets
Total assets measured at estimated fair value	72,749	59,616
Recurring basis \| Significant Other Observable Inputs, Level 2 \| U.S. government securities
Assets
Total assets measured at estimated fair value	53,834	29,733
Recurring basis \| Significant Other Observable Inputs, Level 2 \| U.S. government agencies
Assets
Total assets measured at estimated fair value		4,971
Recurring basis \| Significant Other Observable Inputs, Level 2 \| U.S. corporate notes
Assets
Total assets measured at estimated fair value		2,875
Recurring basis \| Significant Other Observable Inputs, Level 2 \| U.S. commercial paper
Assets
Total assets measured at estimated fair value	18,915	22,037
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 securities
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
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 \| Debt
Debt
Term B Loan		13,750
2023 Notes	243,394	258,918
2025 Notes	208,976	230,692
Total fair value of liabilities	452,370	503,360
Nonrecurring basis \| Quoted Price in Active Markets for Identical Assets, Level 1 \| Debt
Debt
Term B Loan		0
2023 Notes	0	0
2025 Notes	0	0
Total fair value of liabilities	0	0
Nonrecurring basis \| Significant Other Observable Inputs, Level 2 \| Debt
Debt
Term B Loan		13,750
2023 Notes	243,394	258,918
2025 Notes	208,976	230,692
Total fair value of liabilities	452,370	503,360
Nonrecurring basis \| Significant Unobservable Inputs, Level 3 \| Debt
Debt
Term B Loan		0
2023 Notes	0	0
2025 Notes	0	0
Total fair value of liabilities	$ 0	$ 0

CAPITALIZED FEES PAID TO A RELATED PARTY (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Capitalized Fees paid to a Related Party
Net carrying value	$ 139,076	$ 152,899
Weighted average remaining amortization period	10 years 1 month 6 days
Capitalized Fees paid to a Related Party, Future amortization
Estimated amortization expense for the year 2020	$ 13,800
Estimated amortization expense for the year 2021	13,800
Estimated amortization expense for the year 2022	13,800
Estimated amortization expense for the year 2023	13,800
Estimated amortization expense for the year 2024	13,800
Estimated amortization expense thereafter	70,000
GSK
Capitalized Fees paid to a Related Party
Gross carrying value	220,000	220,000
Accumulated amortization	(80,924)	(67,101)
Net carrying value	139,076	152,899
GSK \| Royalty revenue from a related party
Capitalized Fees paid to a Related Party
Amortization expense	13,823	13,823	$ 13,823
GSK \| United States
Capitalized Fees paid to a Related Party
Gross carrying value	120,000	120,000
GSK \| Europe
Capitalized Fees paid to a Related Party
Gross carrying value	60,000	60,000
GSK \| Japan
Capitalized Fees paid to a Related Party
Gross carrying value	$ 40,000	$ 40,000

STOCK-BASED COMPENSATION - RSAs and RSUs (Details) - Senior Management - USD ($) $ in Millions				1 Months Ended		2 Months Ended	12 Months Ended
	Mar. 02, 2018	Jan. 17, 2017	Jan. 14, 2016	Feb. 28, 2018	Nov. 30, 2017	Sep. 30, 2018	Dec. 31, 2018	Dec. 31, 2011
Performance-Contingent RSAs and RSUs
Stock-based compensation
Granted (in shares)								63,000
Vested (in shares)					63,000
Market-Based RSAs and RSUs \| 2016 Market-Based RSAs and RSUs
Stock-based compensation
Timeframe for calculation of TSR			2 years
Minimum payout of shares (in shares)			0
Maximum payout of shares (in shares)			328,688
Aggregate value to be recognized as compensation expense			$ 2.0
Reversal of previously recognized compensation expense						$ 0.2
Market-Based RSAs and RSUs \| 2016 Market-Based RSAs and RSUs \| Vested on February 20, 2018
Stock-based compensation
Vesting percentage			66.67%	66.67%
Market-Based RSAs and RSUs \| 2017 Market-Based RSAs and RSUs
Stock-based compensation
Timeframe for calculation of TSR		2 years
Minimum payout of shares (in shares)		0
Maximum payout of shares (in shares)		406,868
Aggregate value to be recognized as compensation expense		$ 3.2
Reversal of previously recognized compensation expense							$ 1.3
Market-Based RSAs and RSUs \| 2017 Market-Based RSAs and RSUs \| Vested on February 20, 2019
Stock-based compensation
Vesting percentage		66.67%
Market-Based RSAs and RSUs \| 2018 Market-Based RSAs and RSUs
Stock-based compensation
Timeframe for calculation of TSR	3 years
Aggregate value to be recognized as compensation expense	$ 1.7
Market-Based RSAs \| 2016 Market-Based RSAs and RSUs
Stock-based compensation
Granted (in shares)			282,394
Vested (in shares)				118,821
Forfeited (in shares)				59,411		34,721
Stock-based compensation, net							$ 0.7
Market-Based RSAs \| 2016 Market-Based RSAs and RSUs \| Vested on February 20, 2018
Stock-based compensation
Exercised (in shares)				69,440
Market-Based RSAs \| 2016 Market-Based RSAs and RSUs \| Vested on February 20, 2019
Stock-based compensation
Vesting percentage			33.33%
Market-Based RSAs \| 2017 Market-Based RSAs and RSUs
Stock-based compensation
Granted (in shares)		353,508
Market-Based RSAs \| 2017 Market-Based RSAs and RSUs \| Vesting on February 20, 2020
Stock-based compensation
Vesting percentage		33.33%
Market-Based RSAs \| 2018 Market-Based RSAs and RSUs
Stock-based compensation
Granted (in shares)	111,668
Market-Based RSUs \| 2016 Market-Based RSAs and RSUs
Stock-based compensation
Granted (in shares)			46,294
Forfeited (in shares)						15,432
Market-Based RSUs \| 2016 Market-Based RSAs and RSUs \| Vested on February 20, 2018
Stock-based compensation
Exercised (in shares)				30,862
Market-Based RSUs \| 2016 Market-Based RSAs and RSUs \| Vested on November 20, 2018
Stock-based compensation
Vesting percentage			33.33%
Market-Based RSUs \| 2017 Market-Based RSAs and RSUs
Stock-based compensation
Granted (in shares)		53,360
Market-Based RSUs \| 2017 Market-Based RSAs and RSUs \| Vested on November 20, 2019
Stock-based compensation
Vesting percentage		33.33%
Market-Based RSUs \| 2018 Market-Based RSAs and RSUs
Stock-based compensation
Granted (in shares)	49,630

STOCK-BASED COMPENSATION - Compensation Awards (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Stock options
Number of outstanding options
Balance at the beginning of the period (in shares)	1,237
Granted (in shares)	0
Exercised (in shares)	(45)
Released RSUs/RSAs (in shares)	0
Forfeited (in shares)	(105)
Balance at the end of the period (in shares)	1,087	1,237
Weighted-Average Exercise Price of Outstanding Options
Balance at the beginning of the period (in dollars per share)	$ 24.00
Granted (in dollars per share)	0
Exercised (in dollars per share)	12.27
Released RSUs/RSAs (in shares)	0
Forfeited (in dollars per share)	27.14
Balance at the end of the period (in dollars per share)	$ 24.18	$ 24.00
Additional disclosures
Aggregate intrinsic value of options outstanding	$ 0.1
Aggregate intrinsic value of options exercisable	$ 0.1
Weighted average remaining contractual term of options outstanding	2 years 10 months 20 days
Weighted average remaining contractual term of options exercisable	2 years 10 months 21 days
Total intrinsic value of options exercised	$ 0.2	$ 0.4
Total estimated fair value of options vested	$ 0.0	$ 0.8	$ 3.8
RSUs and PSUs
Number of outstanding RSUs and PSUs/RSAs and PSAs
Balance at the beginning of the period (in shares)	105
Granted (in shares)	81
Exercised (in shares)	0
Released RSUs and RSAs (in shares)	(92)
Forfeited (in shares)	0
Balance at the end of the period (in shares)	94	105
Weighted-Average Fair Value per Share at Grant
Balance at the beginning of the period (in dollars per share)	$ 15.54
Granted (in dollars per share)	13.72
Exercised (in dollars per share)	0
Released RSUs and RSAs (in dollars per share)	15.55
Forfeited (in dollars per share)	0
Balance at the end of the period (in dollars per share)	$ 13.94	$ 15.54
RSAs and PSAs
Number of outstanding RSUs and PSUs/RSAs and PSAs
Balance at the beginning of the period (in shares)	77
Granted (in shares)	53
Exercised (in shares)	0
Released RSUs and RSAs (in shares)	(52)
Forfeited (in shares)	0
Balance at the end of the period (in shares)	78	77
Weighted-Average Fair Value per Share at Grant
Balance at the beginning of the period (in dollars per share)	$ 15.37
Granted (in dollars per share)	15.08
Exercised (in dollars per share)	0
Released RSUs and RSAs (in dollars per share)	16.43
Forfeited (in dollars per share)	0
Balance at the end of the period (in dollars per share)	$ 14.46	$ 15.37
RSUs
Additional disclosures
Total estimated fair value of equity instruments vested	$ 1.4	$ 2.6	2.6
RSAs
Additional disclosures
Total estimated fair value of equity instruments vested	$ 0.9	$ 7.6	$ 6.3

DEBT - Convertible Senior Notes (Details) $ / shares in Units, $ in Thousands		12 Months Ended
	Aug. 07, 2017 USD ($) $ / shares shares	Dec. 31, 2019 USD ($) $ / shares	Dec. 31, 2018 USD ($) $ / shares	Dec. 31, 2017 USD ($) shares	Aug. 01, 2017 $ / shares
Debt
Value of shares repurchased and retired				$ 97,500
Liability component
Outstanding principal balance		$ 433,484	$ 447,234
Unamortized debt discount and issuance costs		(56,364)	(64,379)
Common Stock
Debt
Share Price \| $ / shares					$ 13.28
Number of shares repurchased and retired \| shares				7,430,000
Value of shares repurchased and retired				$ 75
2025 Notes
Debt
Debt discount		67,300
Convertible senior notes \| 2025 Notes
Liability component
Outstanding principal balance		192,500	192,500
Unamortized debt discount and issuance costs		(54,597)	(61,766)
Net carrying amount		137,903	130,734
Equity component, net		65,361	65,361
Interest expense
Contractual interest expense		4,813	4,799
Amortization of debt issuance costs		551	505
Amortization of debt discount		6,618	6,071
Total interest and amortization expense		$ 11,982	$ 11,375
Convertible senior notes \| 2025 Notes \| Over-Allotment Option
Debt
Loan amount	$ 17,500
Convertible senior notes \| 2025 Notes \| Private Placement
Debt
Loan amount	$ 192,500
Interest rate (as a percent)	2.50%
Convertible senior notes \| 2025 Notes \| Common Stock
Debt
Conversion rate for shares of common stock per $1,000 principal	57.9240
Conversion price (dollars per share) \| $ / shares	$ 17.26	$ 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	$ 17,500

DEBT - Convertible Subordinated Notes (Details) - 2023 Notes - Convertible subordinated notes $ / shares in Units, $ in Millions	1 Months Ended	12 Months Ended
	Jan. 31, 2013 USD ($) item $ / shares $ / item shares	Dec. 31, 2016 USD ($) $ / shares $ / item shares
Debt
Loan amount	$ 287.5
Proceeds from issuance of notes payable, net of debt issuance costs	$ 281.2
Interest rate (as a percent)	2.125%
Initial conversion, shares per $1,000 principal amount \| shares \| shares	35.9903
Adjusted conversion, shares per $1,000 principal amount \| shares		50.5818
Conversion price of convertible notes into common stock (in dollars per share) \| $ / shares	$ 27.79	$ 19.77
Portion of debt retired, face value		$ 14.1
Portion of debt retired, carrying value		13.9
Settlement amount for purchase of notes		11.6
Other (expense) income, net
Debt
Gain (Loss) on Repurchase of Debt Instrument		$ 2.3
Privately-negotiated capped call option
Debt
Payments for capped call options	$ 36.8
Number of derivative instruments purchased \| item	2
Strike price for the underlying number of shares (in dollars per share) \| $ / shares	$ 27.79	$ 19.77
Cap price for the underlying number of shares (in dollars per share) \| $ / item	38.00	27.04
Amount received from capped call option		$ 0.6
Stock prices below $27.79 per share \| Minimum
Debt
Net shares settlement payable to the entity \| shares	0
Stock prices above $38.00 per share \| Maximum
Debt
Net shares settlement payable to the entity \| shares	2,779,659

INCOME TAXES - Reconciliation (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
The impacts of the differences between the expected U.S. federal statutory income tax to our income tax expense
Expected tax at federal statutory rate									$ 48,908	$ 44,154	$ 46,997
State income tax, net of federal benefit									325	(5,878)	4
Non-deductible executive compensation									0	747	987
Noncontrolling Interest									(7,078)	(2,367)	0
Other									326	310	(1,506)
Impact of tax reform rate change									0	0	124,017
Change in valuation allowance									(579)	(233,039)	(170,495)
Income tax expense (benefit), net	$ 12,403	$ 10,558	$ 10,433	$ 8,508	$ (196,073)	$ 0	$ 0	$ 0	$ 41,902	$ (196,073)	$ 4

INCOME TAXES - Deferred Taxes (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Deferred tax assets
Net operating loss carryforwards	$ 172,359	$ 215,497
Research and development tax credit carryforwards	55,966	56,231
Other	1,412	1,647
Total deferred tax assets before valuation allowance	229,737	273,375
Valuation allowance	(63,620)	(64,199)
Total deferred tax assets	166,117	209,176
Deferred tax liabilities
Debt issuance discount and other	(11,946)	(13,122)
Net deferred tax assets	$ 154,171	$ 196,054

INCOME TAXES - Additional Tax Disclosures (Details) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Income Taxes
Accrued interest and penalties	$ 0				$ 0				$ 0	$ 0
Uncertain Tax Positions
Unrecognized tax benefits	15,342,000				15,413,000				15,342,000	15,413,000	$ 15,488,000	$ 15,488,000
Gross decrease in tax portions for 2018										(75,000)
Gross decrease in tax portions for 2019									(71,000)
Unrecognized tax benefits would affect our effective income tax rate if recognized	8,000,000.0								8,000,000.0
Deferred
Federal									41,567,000	(190,195,000)	0
State									309,000	(5,859,000)	0
Total Income tax benefit (expense), net	(12,403,000)	$ (10,558,000)	$ (10,433,000)	$ (8,508,000)	$ 196,073,000	$ 0	$ 0	$ 0	(41,902,000)	$ 196,073,000	$ (4,000)
Federal
Income Taxes
Net operating loss carryforwards	600,000,000								600,000,000
Tax credit carryforward amount	44,400,000								44,400,000
State
Income Taxes
Net operating loss carryforwards	649,300,000								649,300,000
State \| Research and development
Income Taxes
Tax credit carryforward amount	$ 32,300,000								$ 32,300,000

SUPPLEMENTARY FINANCIAL DATA (UNAUDITED) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
SUPPLEMENTARY FINANCIAL DATA (UNAUDITED)
Total net revenue	$ 75,971	$ 65,755	$ 64,107	$ 55,183	$ 79,858	$ 61,680	$ 67,086	$ 52,380	$ 261,016	$ 261,004	$ 217,217
Operating expenses	2,332	4,962	4,347	3,015	2,638	4,019	4,411	11,685	14,656	22,753	33,613
Income from operations	73,639	60,793	59,760	52,168	77,220	57,661	62,675	40,695	246,360	238,251	183,604
Income tax benefit (expense), net	(12,403)	(10,558)	(10,433)	(8,508)	196,073	0	0	0	(41,902)	196,073	(4)
Net income	57,862	47,051	46,061	40,019	269,215	50,167	56,616	30,330	190,993	406,328	134,272
Net income attributable to noncontrolling interest	11,913	7,242	8,321	6,229	5,455	3,078	1,990	749	33,705	11,272	129
Net income attributable to Innoviva stockholders	$ 45,949	$ 39,809	$ 37,740	$ 33,790	$ 263,760	$ 47,089	$ 54,626	$ 29,581	$ 157,288	$ 395,056	$ 134,143
Basic net income per share	$ 0.45	$ 0.39	$ 0.37	$ 0.33	$ 2.61	$ 0.47	$ 0.54	$ 0.29	$ 1.55	$ 3.92	$ 1.25
Diluted net income per share	$ 0.42	$ 0.36	$ 0.34	$ 0.31	$ 2.34	$ 0.43	$ 0.49	$ 0.27	$ 1.43	$ 3.53	$ 1.17

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Thousands	Dec. 31, 2019	Dec. 31, 2018
CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	230	230
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	200,000
Common stock, shares issued	101,288	101,098
Common stock, shares outstanding	101,288	101,098

DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property and Equipment (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Property and Equipment
Property and equipment, net	$ 33	$ 160
Capitalized Fees Paid to a Related Party
Capitalized fees paid to a related party, useful life	15 years
Equipment, furniture and fixtures \| Minimum
Property and Equipment
Estimated useful life	5 years
Equipment, furniture and fixtures \| Maximum
Property and Equipment
Estimated useful life	7 years
Software and computer equipment
Property and Equipment
Estimated useful life	3 years

DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Related Party Transactions (Details)	Dec. 31, 2019
GSK
Related Parties
Percentage of common stock owned by a related party	31.60%

Description of Operations and Summary of Significant Accounting Policies - Recently Adopted Accounting Standards Updates (Details) - ASU 2016-02, Leases $ in Millions	Dec. 31, 2019 USD ($)
Accounting Pronouncement Adopted by the Company
Operating lease right-of-use asset	$ 0.3
Operating lease liability	$ 0.3

STOCK-BASED COMPENSATION - 2012 Plan and ESPP (Details)	12 Months Ended
STOCK-BASED COMPENSATION - 2012 Plan and ESPP (Details)	Dec. 31, 2019 USD ($) item shares
2012 Equity Incentive Plan
Stock-based compensation
Shares remaining available for issuance	5,043,494
ESPP
Stock-based compensation
Purchase price as a percentage of fair market value of stock	85.00%
Total duration of consecutive and overlapping offering periods	24 months
Number of offering periods \| item	4
Duration of purchase period	6 months
Maximum contributions as a percentage of employee's eligible compensation	15.00%
Maximum number of shares an employee may purchase during any purchase period	2,500
Maximum value of shares an employee may purchase in a calendar year \| $	$ 25,000
Shares remaining available for issuance	187,576

AVAILABLE-FOR-SALE SECURITIES AND FAIR VALUE MEASUREMENTS - Available-for-Sale Securities (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Available-for-Sale Securities
Amortized Cost	$ 306,706	$ 108,977
Gross Unrealized Gains	35	0
Gross Unrealized Losses	0	(3)
Estimated Fair Value	$ 306,741	108,974
Maturity period for marketable securities
Maximum contractual maturity	1 year
Weighted average maturity	3 months
U.S. government securities
Available-for-Sale Securities
Amortized Cost	$ 53,799	29,736
Gross Unrealized Gains	35	0
Gross Unrealized Losses	0	(3)
Estimated Fair Value	53,834	29,733
U.S. government agencies
Available-for-Sale Securities
Amortized Cost		4,971
Gross Unrealized Gains		0
Gross Unrealized Losses		0
Estimated Fair Value		4,971
U.S. corporate notes
Available-for-Sale Securities
Amortized Cost		2,875
Gross Unrealized Gains		0
Gross Unrealized Losses		0
Estimated Fair Value		2,875
U.S. commercial paper
Available-for-Sale Securities
Amortized Cost	18,915	22,037
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Value	18,915	22,037
Money market funds
Available-for-Sale Securities
Amortized Cost	233,992	49,358
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Value	$ 233,992	$ 49,358

STOCK-BASED COMPENSATION - Director Compensation Program (Details) - RSUs - Non-employee director	1 Months Ended	9 Months Ended
	Oct. 31, 2017 USD ($)	Sep. 30, 2017 USD ($)	Dec. 31, 2016 installment
Stock-based compensation
One time grant of shares, value	$ 125,000	$ 250,000
Pro rata shares grant, value	225,000	250,000
Number of annual installments \| installment			2
Annual grant of shares, value	$ 225,000	$ 250,000

DEBT - Senior Secured Term Loans (Details) - USD ($) $ in Thousands		1 Months Ended	12 Months Ended
	Aug. 18, 2017	Dec. 31, 2019	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Debt
Repayment of debt			$ 13,750	$ 230,000	$ 6,250
Term B Loan \| Senior secured term loans
Debt
Loan amount	$ 250,000
Quarterly payment, as a percent of initial issue amount	2.50%
Original interest discount	$ 2,500
Repayment of debt		$ 13,800		$ 230,000
Debt issuance costs	$ 4,900
Write-off of debt issuance costs			$ 5,700
LIBOR \| Term B Loan \| Senior secured term loans
Debt
Variable rate basis	three-month LIBOR
Basis spread on variable rate	4.50%

DEBT - Non-Recourse Notes (Details) - USD ($) $ in Thousands	1 Months Ended	12 Months Ended
	Aug. 31, 2017	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Apr. 30, 2014
Debt
Payment of principal on non-recourse notes due 2029		$ 0	$ 0	$ 487,189
Non-Recourse Notes \| 2029 Notes
Debt
Interest added to the principal balance of non-recourse notes due 2029		$ 44,000
Write-off of debt issuance costs	$ 7,300
Non-Recourse Notes \| 2029 Notes \| Private Placement
Debt
Non-Recourse Debt					$ 450,000
Interest rate (as a percent)					9.00%
Debt issuance costs					$ 15,300

DEBT - Debt Maturities (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Long-term debt maturities
2019 to 2022	$ 0
2023	240,984
2024	0
Thereafter	192,500
Total	$ 433,484	$ 447,234

SUBSEQUENT EVENTS (Details) - Subsequent events - Armata $ in Millions	Jan. 27, 2020 USD ($)
Maximum
SUBSEQUENT EVENTS
Conditional Commitment, Investment in Securities, Common Stock and Warrants, Value	$ 25
Minimum
SUBSEQUENT EVENTS
Equity Method Investment, Ownership Percentage	12.50%