0001104659-21-028328 | 10-K | XBRL Viewer

Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 31, 2020	Feb. 12, 2021	Jun. 30, 2020
Document and Entity Information
Entity Registrant Name	INNOVIVA, INC.
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 31, 2020
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
ICFR Auditor Attestation Flag	true
Entity Shell Company	false
Entity Public Float			$ 876,605,331
Entity Common Stock, Shares Outstanding		101,392,397
Entity Central Index Key	0001080014
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	FY
Amendment Flag	false

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 246,487	$ 278,096
Short-term marketable securities	0	72,749
Related party receivables from collaborative arrangements	93,931	79,427
Prepaid expenses and other current assets	1,640	962
Total current assets	342,058	431,234
Property and equipment, net	28	33
Equity and other long-term investments	438,258	0
Capitalized fees paid to a related party, net	125,253	139,076
Deferred tax assets, net	93,759	154,171
Other assets	214	312
Total assets	999,570	724,826
Current liabilities:
Accounts payable	66	10
Accrued personnel-related expenses	490	647
Accrued interest payable	4,152	4,152
Other accrued liabilities	1,402	562
Total current liabilities	6,110	5,371
Long-term debt, net of discount and issuance costs	385,517	377,120
Other long-term liabilities	106	219
Commitments and contingencies (Note 9)
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, 101,392 and 101,288 issued and outstanding as of December 31, 2020 and December 31, 2019, respectively	1,014	1,013
Additional paid-in capital	1,260,900	1,258,859
Accumulated other comprehensive income	0	27
Accumulated deficit	(722,002)	(946,404)
Total Innoviva stockholders' equity	539,912	313,495
Noncontrolling interest	67,925	28,621
Total stockholders' equity	607,837	342,116
Total liabilities and stockholders' equity	$ 999,570	$ 724,826

CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Revenue:
Total net revenue	$ 336,794	$ 261,016	$ 261,004
Operating expenses:
Research and development	1,788	0	0
General and administrative	13,883	14,656	20,053
General and administrative - related party	0	0	2,700
Total operating expenses	15,671	14,656	22,753
Income from operations	321,123	246,360	238,251
Other expense, net	(348)	(345)	(5,702)
Interest income	1,524	5,540	1,660
Interest expense	(18,331)	(18,660)	(23,954)
Changes in fair values of equity investments	50,277	0	0
Income before income taxes	354,245	232,895	210,255
Income tax benefit (expense), net	(60,431)	(41,902)	196,073
Net income	293,814	190,993	406,328
Net income attributable to noncontrolling interest	69,412	33,705	11,272
Net income attributable to Innoviva stockholders	$ 224,402	$ 157,288	$ 395,056
Basic net income per share attributable to Innoviva stockholders	$ 2.21	$ 1.55	$ 3.92
Diluted net income per share attributable to Innoviva stockholders	$ 2.02	$ 1.43	$ 3.53
Shares used to compute Innoviva basic and diluted net income per share:
Shares used to compute basic net income per share	101,320	101,150	100,849
Shares used to compute diluted net income per share	113,554	113,409	113,408
Royalty revenue from a related party
Revenue:
Total net revenue	$ 326,794	$ 261,016	$ 261,004
Revenue from collaborative arrangements with a related party
Revenue:
Total net revenue	$ 10,000	$ 0	$ 0

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income	$ 293,814	$ 190,993	$ 406,328
Unrealized gain on marketable securities, net	0	30	15
Reclassifications to net income	(27)	0	0
Comprehensive income	293,787	191,023	406,343
Comprehensive income attributable to noncontrolling interest	69,412	33,705	11,272
Comprehensive income attributable to Innoviva stockholders	$ 224,375	$ 157,318	$ 395,071

- Definition

Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income (loss) and other comprehensive income (loss), attributable to noncontrolling interests. Excludes changes in equity resulting from investments by owners and distributions to owners.

+ References + Details

- Definition

Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income and other comprehensive income. Excludes changes in equity resulting from investments by owners and distributions to owners.

+ References + Details

- 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 - 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, 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, net of repurchase of shares to satisfy tax withholding	$ (8)	(1,926)	0	0	0	0	(1,934)
Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding (in shares)	(798)
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	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
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, net of repurchase of shares to satisfy tax withholding	$ 2	536	0	0	0	0	538
Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding (in shares)	190
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	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						101,288
Increase (Decrease) in Stockholders' Equity
Distributions to noncontrolling interest	$ 0	0	0	0	0	(30,474)	$ (30,474)
Equity activity of noncontrolling interest from a consolidated variable interest entity	0	0	0	0	0	366	366
Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding	$ 1	343	0	0	0	0	344
Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding (in shares)	104
Stock-based compensation	$ 0	1,698	0	0	0	0	1,698
Net income	0	0	0	224,402	0	69,412	293,814
Other comprehensive income	0	0	(27)	0	0	0	(27)
Balance at Dec. 31, 2020	$ 1,014	$ 1,260,900	$ 0	$ (722,002)	$ 0	$ 67,925	$ 607,837
Balance (in shares) at Dec. 31, 2020	101,392						101,392

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Cash flows from operating activities
Net income	$ 293,814	$ 190,993	$ 406,328
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes	60,420	41,875	(196,054)
Depreciation and amortization	13,840	13,874	13,872
Stock-based compensation	1,698	2,056	3,233
Amortization of debt discount and issuance costs	8,397	7,799	7,748
Loss on write-off of property and equipment	0	104	0
Loss on extinguishment of debt	0	216	5,745
Amortization of discount on short-term investments	(343)	(2,229)	(256)
Amortization of lease guarantee	(135)	(325)	(325)
Changes in fair values of equity investments	(50,277)	0	0
Other non-cash items	21	0	0
Changes in operating assets and liabilities:
Receivables from collaborative arrangements	(14,504)	3,859	(12,746)
Prepaid expenses and other current assets	(678)	(113)	(95)
Other assets	0	27	0
Accounts payable	56	(1)	(590)
Accrued personnel-related expenses and other accrued liabilities	804	(439)	(1,677)
Accrued interest payable	0	(112)	(1,656)
Other long-term liabilities	0	(126)	4
Net cash provided by operating activities	313,113	257,458	223,531
Cash flows from investing activities
Maturities of marketable securities	86,000	213,924	75,375
Purchases of marketable securities	(12,943)	(231,915)	(71,856)
Purchases of equity and other long term investments	(387,981)	0	0
Purchases of property and equipment	(13)	(12)	0
Net cash provided by (used in) investing activities	(314,937)	(18,003)	3,519
Cash flows from financing activities
Repurchase of shares to satisfy tax withholding	(92)	(89)	(3,073)
Payments of principal on senior secured term loans	0	(13,750)	(230,000)
Payments of cash dividends to stockholders	0	(11)	(80)
Proceeds from issuances of common stock, net	436	627	1,139
Net proceeds from the issuance of variable interest entity's equity	345	0	0
Distributions to noncontrolling interest	(30,474)	(10,553)	(5,955)
Net cash used in financing activities	(29,785)	(23,776)	(237,969)
Net increase (decrease) in cash and cash equivalents	(31,609)	215,679	(10,919)
Cash and cash equivalents at beginning of period	278,096	62,417	73,336
Cash and cash equivalents at end of period	246,487	278,096	62,417
Supplemental disclosure of cash flow information
Cash paid for interest	$ 9,933	$ 10,974	$ 17,861

DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2020

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 and other healthcare assets. Our royalty portfolio contains 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 variable interest entities for which we are the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. For the consolidated variable interest entities, we record net income attributable to noncontrolling interest on our 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, marketable securities and equity investments. 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 Entities

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.

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’ equity. 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.

Equity Investments

We invest from time to time in equity securities of private or public companies. If we determine that we have control over these companies, we include them in our consolidated financial statements. If we determine that we do not have control over these companies under either voting or VIE models, we then determine if we have an ability to exercise significant influence via voting interests, board representation or other business relationships.

We may account for the equity investments where we exercise significant influence using either an equity method of accounting or at fair value by electing the fair value option under Accounting Standards Codification ("ASC") Topic 825, Financial Instruments. If the fair value option is applied to an investment that would otherwise be accounted for under the equity method, we apply it to all our financial interests in the same entity (equity and debt, including guarantees) that are eligible items. All gains and losses from fair value changes, unrealized and realized, are presented as changes in fair values of equity investments, net on the consolidated statements of income.

If we conclude that we do not have an ability to exercise significant influence over an investee, we may elect to account for an equity security without a readily determinable fair value using the measurement alternative described in ASC Topic 825. This measurement alternative allows us to measure the equity investment at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

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.

Property and Equipment

Property and equipment, which consisted of equipment, computer equipment, software, office furniture and fixtures, was immaterial as of December 31, 2020 and 2019, 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 them on a straight-line basis over their estimated useful lives upon the commercial launch of the product, shortly after its regulatory approval. The estimated useful lives of these Capitalized Fees are determined 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.

Stock-based compensation expense is calculated based on awards ultimately expected to vest and is 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, 2020. Transactions with GSK are described in Note 3, “Collaborative Arrangements.”

Sarissa Capital owned 6.3% of our outstanding common stock as of December 31, 2020. Transactions with Sarissa Capital are described in Note 4, “Consolidated Entities”. Sarissa Capital is considered to be a related party because two of its principals are members of our Board of Directors.

Recently Adopted Accounting Standards Updates

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13 Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments, as clarified in subsequent amendments to the initial guidance (collectively, “Topic 326”). Topic 326 requires measurement and recognition of expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecast. We adopted ASC 326 using a modified retrospective approach which requires a cumulative effect adjustment as of the beginning of the reporting period in which the guidance is adopted. Topic 326 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. We adopted Topic 326 effective January 1, 2020. The adoption did not have a material impact on our consolidated financial statements.

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 do not expect the adoption of ASU 2019-12 to have a material impact on our consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which is intended to simplify the accounting for convertible instruments by removing certain separation models in Subtopic 470-20 for convertible instruments. The ASU is effective for fiscal years beginning after December 15, 2021, and for interim periods within those fiscal years with early adoption permitted. We are currently in the process of evaluating the effects of the provisions of ASU 2020-06 on our consolidated financial statements.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements. ASU 2020-10 contains improvements to the Codification by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements is codified in the disclosure section of the Codification. The ASU also improves various topics in the Codification so that entities can apply guidance more consistently on codifications that are varied in nature where the original guidance may have been unclear. The amendments in ASU 2020-10 are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. We do not expect the adoption of ASU 2020-10 to have a material impact on our consolidated financial statements and related disclosures.

NET INCOME PER SHARE

12 Months Ended

Dec. 31, 2020

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 convertible senior notes due 2025 (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. 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, 2020, 2019, and 2018 respectively.

The following table shows the computation of basic and diluted net income per share for the years ended December 31, 2020, 2019 and 2018:


	Year Ended December 31,
(In thousands except per share data)	2020		2019			2018
Numerator:
Net income attributable to Innoviva stockholders, basic	$	224,402	$	157,288	$	395,056
Add: interest expense on 2023 Notes		4,717		4,648		5,661
Net income attributable to Innoviva stockholders, diluted	$	229,119	$	161,936	$	400,717
Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders		101,320		101,150		100,849
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		45		70		370
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders		113,554		113,409		113,408
Net income per share attributable to Innoviva stockholders
Basic	$	2.21	$	1.55	$	3.92
Diluted	$	2.02	$	1.43	$	3.53

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)	2020	2019	2018
Outstanding options and awards granted under equity incentive plan and employee stock purchase plan	1,193	1,130	1,490

REVENUE RECOGNITION AND COLLABORATIVE ARRANGEMENTS

12 Months Ended

Dec. 31, 2020

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 Agreements was as follows:


	Year Ended December 31,
(In thousands)	2020		2019		2018
Royalties from a related party - RELVAR/BREO	$	221,536	$	189,424	$	220,162
Royalties from a related party - ANORO		45,992		42,625		41,286
Royalties from a related party - TRELEGY		73,089		42,790		13,379
Total royalties from a related party		340,617		274,839		274,827
Less: amortization of capitalized fees paid to a related party		(13,823)		(13,823)		(13,823)
Royalty revenue		326,794		261,016		261,004
Strategic alliance - MABA program		10,000		—		—
Total net revenue from GSK	$	336,794	$	261,016	$	261,004

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%.

2004 Strategic Alliance

During the year ended December 31, 2020, we recognized $10.0 million in revenue from a termination fee paid in connection with the termination of the Bifunctional Muscarinic Antagonist-Beta2 Agonist (“MABA”) program under the Strategic Alliance Agreement with GSK.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI http://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130556-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (e)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

+ Details

CONSOLIDATED ENTITIES

12 Months Ended

Dec. 31, 2020

CONSOLIDATED ENTITIES

CONSOLIDATED ENTITIES

4. CONSOLIDATED ENTITIES

We consolidate the financial results of TRC and Pulmoquine Therapeutics, Inc. (“Pulmoquine”), which we have determined to be VIEs. As we have the power to direct the economically significant activities of these entities and the obligation to absorb losses of, or the right to receive benefits from them, and we are the primary beneficiary of the entities. We also consolidate the financial results of ISP Fund LP (the “Partnership”), our partnership with Sarissa Capital, as we have determined that the Partnership is a VIE and we are its primary beneficiary.

Theravance Respiratory Company, LLC

The primary source of revenue for TRC is the royalties generated from the net sales of TRELEGY^® ELLIPTA^® by GSK. As of December 31, 2020, TRC held an equity investment in InCarda Therapeutics, Inc. (“InCarda”). Refer to Note 5, “Financial Instruments and Fair Value Measurements,” for more information.

The summarized financial information for TRC is presented as follows:

Balance sheets


	December 31,
(In thousands)	2020		2019
Assets
Cash and cash equivalents	$	38,081	$	22,339
Receivables from collaborative arrangements		24,946		14,388
Prepaid expenses and other current assets		—		10
Equity and other long-term investments		16,959		—
Total assets		79,986		36,737

Liabilities and LLC Members' Equity
Current liabilities		508		3,069
LLC members' equity		79,478		33,668
Total liabilities and LLC members' equity	$	79,986	$	36,737

Income statements


	Year Ended December 31,
(In thousands)	2020		2019
Royalty revenue from a related party	$	73,089	$	42,790
Revenue from collaborative arrangements		10,000		—
Total revenue		83,089		42,790
Operating expenses		2,612		3,380
Income from operations		80,477		39,410
Other income (expense), net		38		243
Changes in fair values of equity investments		1,147		—
Net Income	$	81,662	$	39,653

Pulmoquine Therapeutics, Inc.

On April 20, 2020, we entered into a securities purchase agreement with Pulmoquine to purchase 5,808,550 shares of Series A preferred stock for $5.0 million in cash. Upon consummation of the transaction, we owned approximately 90.9% of Pulmoquine's outstanding shares (excluding unvested restricted shares) and hold a majority voting interest. Pulmoquine is a biotechnology company focused on the research and development of an aerosolized formulation of hydroxychloroquine to treat respiratory infections. As of December 31, 2020, total assets attributable to Pulmoquine were $3.5 million, including $3.2 million in cash and cash equivalents and $0.3 million in current assets. Pulmoquine does not currently generate revenue. The net loss for the year ended December 31, 2020, was $2.2 million, including total operating expenses of $2.0 million.

ISP Fund LP

On December 11, 2020, we entered into a Strategic Advisory Agreement (the “Services Agreement”) with Sarissa Capital Management LP (“Sarissa Capital”), pursuant to which Sarissa Capital provides a variety of strategic services to us in order to assist us in the development and execution of our acquisition strategy. The services shall be provided free of charge to us.

Innoviva Strategic Partners LLC, our wholly owned subsidiary (“Strategic Partners”), also entered into a subscription agreement and an Amended and Restated Limited Partnership Agreement (the “Partnership Agreement”), pursuant to which Strategic Partners became a limited partner of ISP Fund LP (the “Partnership”). The general partner of the Partnership (“General Partner”) is an affiliate of Sarissa Capital and, pursuant to an investment management agreement, Sarissa Capital acts as the investment adviser to the Partnership. $300.0 million was contributed to the Partnership for investing in “long” positions in the healthcare, pharmaceutical and biotechnology sectors.

The Partnership Agreement provides for Sarissa Capital to receive a one percent management fee from the Partnership, payable quarterly in advance, measured based on the Net Asset Value of Strategic Partners’ capital account in the Partnership. In addition, General Partner is entitled to a 10% annual performance allocation based on the Net Profits of the Partnership during the annual measurement period. The Partnership Agreement includes a lock-up period of thirty-six months after which Strategic Partners is entitled to make withdrawals from the Partnership as of such lock-up expiration date and each anniversary thereafter, subject to certain limitations.

As of December 31, 2020, we held 100% of the economic interest of Partnership. Total assets of the Partnership were $299.3 million, of which all were attributable to equity and other long-term investments. During the year ended December 31, 2020, the Partnership incurred $0.4 million in net investment-related expense and recorded an unrealized loss of $0.4 million on the equity investments, which is included in changes in fair values of equity investments on the consolidated statements of income.

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2020

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

5. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Equity Investment in Armata

On January 27, 2020, we entered into a securities purchase agreement with Armata Pharmaceuticals, Inc. (“Armata”) to acquire 8,710,800 shares of Armata’s common stock and warrants to purchase up to 8,710,800 additional shares of its common stock for approximately $25.0 million in cash. Armata is a clinical stage biotechnology company focused on precisely targeted bacteriophage therapeutics for antibiotic-resistant infections. The investment is to support Armata’s ongoing advancement of its bacteriophage development programs including the expected first in human studies related to Armata's lead phage candidate, AP-PA02, targeting Pseudomonas aeruginosa, as well as AP-SA02, its phage candidate targeting Staphylococcus Aureus.

The investment was closed in two tranches on February 12, 2020 and March 27, 2020. Two of our board members joined Armata’s board at the first closing and have remained on Armata's board ever since. As of December 31, 2020, we owned approximately 46.6% of Armata’s common stock.

The investment provides Innoviva the ability to have significant influence, but not control over Armata’s operations. Based on our evaluation, we determined that Armata is a VIE, but Innoviva is not the primary beneficiary of the VIE. We elected the fair value option to account for both Armata’s common stock and warrants. The fair value of Armata’s common stock is measured based on its closing market price. The warrants have an exercise price of $2.87 per share, are exercisable immediately within five years from the issuance date of the warrants and include a cashless exercise option. We use the Black-Scholes-Merton pricing model to estimate the fair value of these warrants with the following input assumptions: Armata’s closing market price on the valuation date, the risk-free interest rate computed based on the U.S. Treasury yield, the remaining contractual term as the expected term, and the expected stock price volatility calculated based on the historical volatility of the common stock of Armata and its peer companies.

As of December 31, 2020, the fair values of Armata’s common stock and warrants were estimated at $26.0 million and $18.0 million, respectively. The total fair value of both financial instruments in the amount of $44.0 million was recorded as equity and long-term investments on the consolidated balance sheets as of December 31, 2020. We recorded $19.0 million in unrealized gain from fair value changes in our investment in Armata securities as changes in fair values of equity, net on the consolidated statements of income for the year ended December 31, 2020.

Equity Investment in Entasis

On April 12, 2020, we entered into a securities purchase agreement with Entasis Therapeutics, Inc. (“Entasis”) to purchase 14,000,000 shares of Entasis common stock as well as warrants to purchase 14,000,000 additional shares of its common stock for approximately $35.0 million in cash (the “April 2020 Entasis Agreement”). Entasis is a clinical-stage biotechnology company focused on the discovery and development of novel antibacterial products. The investment is to support Entasis’s ongoing advancement of its pathogen-targeted antibacterial product candidates, which include their global Phase 3 registration trial evaluating a fixed-dose combination of sulbactam and durlobactam (SUL-DUR) against Acinetobacter baumanii infections.

The investment was closed in two tranches on April 22, 2020 and June 11, 2020. Innoviva has a right to designate two members to Entasis's board.

On August 27, 2020, we entered into another securities purchase agreement with Entasis (the “August 2020 Entasis Agreement”) to purchase 4,672,897 shares of Entasis common stock as well as warrants to purchase 4,672,897 additional shares of its common stock for approximately $12.5 million in cash. As of December 31, 2020, we owned approximately 51.0% of Entasis’s common stock.

The investment provides Innoviva the ability to have significant influence, but not control, over Entasis’s operations. Based on our evaluation, we determined that Entasis is a VIE, but Innoviva is not the primary beneficiary of the VIE. We elected the fair value option to account for both Entasis’s common stock and warrants at fair value. The fair value of Entasis’s common stock is measured based on its closing market price at each balance sheet date. The warrants have an exercise price of $2.50 per share under the April 2020 Entasis Agreement and an exercise price of $2.675 under the August 2020 Entasis Agreement. The warrants are exercisable immediately within five years from the issuance date of the warrants and include a cashless exercise option. We use the Black-Scholes-Merton pricing model to estimate the fair value of these warrants with the following input assumptions: Entasis’s closing market price on the valuation date, the risk-free interest rate computed based on the U.S. Treasury yield, the remaining contractual term as the expected term, and the expected stock price volatility calculated based on the historical volatility of the common stock of Entasis and its peer companies.

As of December 31, 2020, the fair values of Entasis’s common stock and warrants were estimated at $46.1 million and $31.9 million, respectively. The total fair value of both financial instruments in the amount of $78.0 million was recorded as equity and long-term investments on the consolidated balance sheets. We recorded $30.5 million in unrealized gain from fair value changes in our investment in Entasis securities as changes in fair values of equity, net on the consolidated statements of income for the year ended December 31, 2020.

Equity Investment in InCarda

On October 6, 2020, TRC entered into a securities purchase agreement with InCarda Therapeutics, Inc. (“InCarda”) to purchase 20,469,432 shares of InCarda Series C preferred stock and warrants to purchase 5,117,358 additional shares of Series C preferred stock for $15.0 million. InCarda is a privately held biopharmaceutical company focused on developing inhaled therapies for cardiovascular diseases. The investment is intended to fund the ongoing clinical development of InRhythm™ (flecainide for inhalation), the company’s lead program, for the treatment of a recent-onset episode of paroxysmal atrial fibrillation. TRC has the right to designate one member to InCarda’s board. As of December 31, 2020, TRC held 13.4% of InCarda equity ownership.

The investment does not provide TRC the ability to control or have significant influence over InCarda's operations. Based on our evaluation, we determined that InCarda is a VIE, but TRC is not the primary beneficiary of the VIE. We have accounted for the investment in Series C preferred shares in InCarda using the measurement alternative. Under the measurement alternative, the equity investment is initially recorded at its allocated cost, but the carrying value may be adjusted through earnings upon an impairment or when there is an observable price change involving the same or a similar investment with the same issuer. The warrants are recorded at fair value and subject to remeasurement at each balance sheet date. The warrants are exercisable immediately with an exercise price of $0.7328 per share and expire on October 6, 2021, one year from the issuance date. We use the Black-Scholes-Merton pricing model to estimate the fair value of the warrants with the following input assumptions: the exercise price of the warrants, the risk-free interest rate computed based on the U.S. Treasury yield, the remaining contractual term as the expected term, and the expected stock price volatility calculated based on the historical volatility of the common stock of its peer companies.

As of December 31, 2020, the fair value of InCarda’s warrants was estimated at $1.1 million and recorded as equity and long-term investments on the consolidated balance sheets. We recorded $1.1 million unrealized gains as changes in fair values of equity investments, net on the consolidated statements of income for the year ended December 31, 2020. There was no impairment or other change to the value of the Series C preferred stock of $15.0 million as of December 31, 2020.

Summarized Financial Data

As of December 31, 2020, the total changes in fair values of our equity investments in Armata and Entasis exceeded 10% of our income before income taxes. Rule 4-08(g) of Regulation S-X, according to the SEC guidance, requires summarized financial information of these entities in an annual report if either the investment, asset or income test as set in the rule exceeds the 10% level individually or in aggregate. The summarized financial information, including the portion we do not own in these entities, is presented for Armata and Entasis, respectively, on a one quarter lag regardless of the date of our investments as follows:

Armata Pharmaceuticals, Inc.

Balance Sheet Information


	September 30,
(In thousands)	2020
Current assets	$	17,024
Noncurrent assets	$	28,651
Current liabilities	$	7,070
Noncurrent liabilities	$	13,986

Income Statement Information


	For the nine months
	ended September 30,
(In thousands)	2020
Revenue	$	319
Loss from operations	$	(15,134)
Net loss	$	(15,557)

Entasis Therapeutics Holdings Inc

Balance Sheet Information


	September 30,
(In thousands)	2020
Current assets	$	68,398
Noncurrent assets	$	1,564
Current liabilities	$	6,862
Noncurrent liabilities	$	864

Income Statement Information


	For the six months
	ended September 30,
(In thousands)	2020
Loss from operations	$	(26,080)
Net loss	$	(24,529)

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, 2020
			Gross		Gross
			Unrealized		Unrealized		Estimated
(In thousands)	Amortized Cost		Gains		Losses		Fair Value
Money market funds ⁽¹⁾	$	204,808	$	—	$	—	$	204,808
Total	$	204,808	$	—	$	—	$	204,808

(1)	Money market funds were included in cash and cash equivalents on the consolidated balance sheets.


	December 31, 2019
			Gross		Gross
			Unrealized		Unrealized		Estimated
(In thousands)	Amortized Cost		Gains		Losses		Fair Value
U.S. government securities ⁽¹⁾	$	53,799	$	35	$	—	$	53,834
U.S. commercial paper ⁽¹⁾		18,915		—		—		18,915
Money market funds ⁽²⁾		233,992		—		—		233,992
Total	$	306,706	$	35	$	—	$	306,741

(1)	U.S. government securities and U.S. commercial paper were included in short-term marketable securities on the consolidated balance sheets.

(2)	Money market funds were presented in cash and cash equivalents on the consolidated balance sheets.

As of December 31, 2020, all investments were money market funds. There was no credit loss as of December 31, 2020.

Fair Value Measurements

Our 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, 2020 Using:
	Quoted Price		Significant
	in Active		Other		Significant
	Markets for		Observable		Unobservable
Types of Instruments	Identical Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	204,808	$	—	$	—	$	204,808
Investments held by ISP Fund LP ⁽¹⁾		299,288		—		—		299,288
Equity investment - Armata Common Stock		25,958		—		—		25,958
Equity investment - Armata Warrants		—		18,049		—		18,049
Equity investment - Entasis Common Stock		46,122		—		—		46,122
Equity investment - Entasis Warrants		—		31,882		—		31,882
Equity investment - InCarda Warrants		—		—		1,147		1,147
Total assets measured at estimated fair value	$	576,176	$	49,931	$	1,147	$	627,254
Debt
2023 Notes	$	—	$	239,779	$	—	$	239,779
2025 Notes		—		206,135		—		206,135
Total fair value of debt	$	—	$	445,914	$	—	$	445,914

(1)	The investments, which consisted of equity investments of $14.5 million and money market funds of $284.8 million, held by ISP Fund LP were subject to a 36-month lock-up period from our initial contribution date, December 11, 2020.


	Estimated Fair Value Measurements as of December 31, 2019 Using:
	Quoted Price		Significant
	in Active		Other		Significant
	Markets for		Observable		Unobservable
Types of Instruments	Identical 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

The fair values of our equity investments in Armata’s and Entasis's common stock and those investments held by ISP Fund LP are based on the quoted prices in active markets and are classified as Level 1 financial instruments. The fair values of our marketable securities and the warrants of Armata and Entasis classified within Level 2 are 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 InCarda’s warrants is classified as Level 3 financial instruments as InCarda’s securities are not publicly traded and the assumptions used in the valuation model are based on significant unobservable and observable inputs including those of publicly traded peer companies.

The fair values of our 2023 Notes and our 2025 Notes are based on recent trading prices of the respective instruments.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2020

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

7. 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, 2020, total shares remaining available for issuance under the 2012 Plan were 4,851,655.

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, 2020, total shares remaining available for issuance under the ESPP were 181,699.

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.

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 income as follows:


	Year Ended December 31,
(In thousands)	2020		2019		2018
General and administrative	$	1,698	$	2,056	$	3,233

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


	Year Ended December 31,
(In thousands)	2020		2019		2018
Stock options	$	242	$	—	$	305
RSUs		1,149		1,431		1,650
RSAs		273		615		1,920
Market-based RSUs (PSUs)		—		—		(224)
Market-based RSAs (PSAs)		—		—		(464)
ESPP		34		10		46
Total stock-based compensation expense	$	1,698	$	2,056	$	3,233

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, 2020, 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)
Stock options	$	1,328	3.4
RSUs		351	0.3
RSAs		369	2.4
Total unrecognized compensation cost	$	2,048

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	at Grant		RSAs	at Grant
Balance as of December 31, 2019	1,087	$	24.18	94	$	13.94	78	$	14.46
Granted	250		14.10	85		13.30	31		14.30
Exercised	(30)		12.30	—		—	—		—
Released RSUs/RSAs	—		—	(94)		13.94	(28)		13.92
Forfeited	(152)		24.43	—		—	(51)		14.56
Balance as of December 31, 2020	1,155		22.28	85		13.30	30		14.61

As of December 31, 2020, the aggregate intrinsic value of the options outstanding and options exercisable was nil. All outstanding options were exercisable. The weighted average remaining contractual term was 3.69 years.

The total intrinsic value of the options exercised was $0.1 million, $0.2 million, and $0.4 million for the years ended December 31, 2020, 2019 and 2018, respectively. The total estimated fair value of options vested was not material for the year ended December 31, 2020 and 2019, and $0.8 million for the year ended December 31, 2018, respectively.

The total estimated fair value of RSUs vested was $1.3 million, $1.4 million, and $2.6 million in the years ended December 31, 2020, 2019 and 2018, respectively.

The total estimated fair value of RSAs vested was $0.6 million, $0.9 million, and $7.6 million in the years ended December 31, 2020, 2019 and 2018, respectively.

Valuation Assumptions

The weighted-average assumptions used in calculating the estimated value of our stock options on the date of grant as follows:


	Year Ended
	December 31, 2020
Risk-free interest rate		0.4	%
Expected term (in years)		6.11
Volatility		46.9	%
Dividend yield		0	%
Weighted-average estimated fair value of stock options granted	$	6.28

There were no grants of stock options during the years ended December 31, 2019 and 2018.

DEBT

12 Months Ended

Dec. 31, 2020

DEBT

DEBT

8. DEBT

Our debt consists of:


	December 31,
(In thousands)	2020		2019
2023 Notes	$	240,984	$	240,984
2025 Notes		192,500		192,500
Total debt		433,484		433,484
Unamortized debt discount and issuance costs		(47,967)		(56,364)
Net long-term debt	$	385,517	$	377,120

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.

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)	2020		2019
Liability component
Principal	$	192,500	$	192,500
Debt discount and issuance costs, net		(46,766)		(54,597)
Net carrying amount	$	145,734	$	137,903
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, 2020, 2019 and 2018:


	Year Ended December 31,
(In thousands)	2020		2019		2018
Contractual interest expense	$	4,813	$	4,813	$	4,799
Amortization of debt issuance costs		601		551		505
Amortization of debt discount		7,230		6,618		6,071
Total interest and amortization expense	$	12,644	$	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 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.

Debt Maturities

The aggregate scheduled maturities of our long-term debt as of December 31, 2020 are as follows:


(In thousands)
Years ending December 31:
2021 to 2022	$	—
2023		240,984
2024		—
2025		192,500
Total	$	433,484

INCOME TAXES

12 Months Ended

Dec. 31, 2020

INCOME TAXES

INCOME TAXES

10. INCOME TAXES

Income tax benefit (expense) consists of the following:


	Year Ended December 31,
(In thousands)	2020		2019		2018
Current
State	$	(11)	$	(26)	$	19
Deferred
Federal		(60,408)		(41,567)		190,195
State		(12)		(309)		5,859
		(60,420)		(41,876)		196,054
Total income tax benefit (expense), net	$	(60,431)	$	(41,902)	$	196,073

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)	2020		2019		2018
Expected tax at federal statutory rate	$	74,392	$	48,908	$	44,154
State income tax, net of federal benefit		(26)		325		(5,878)
Non-deductible executive compensation		—		—		747
Noncontrolling interest		(14,577)		(7,078)		(2,367)
Other		839		326		310
Change in valuation allowance		(197)		(579)		(233,039)
Income tax expense (benefit), net	$	60,431	$	41,902	$	(196,073)

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)	2020		2019
Deferred tax assets
Net operating loss carryforwards	$	121,839	$	172,359
Research and development tax credit carryforwards		55,211		55,966
Other		1,100		1,412
Total deferred tax assets before valuation allowance		178,150		229,737
Valuation allowance		(63,423)		(63,620)
Total deferred tax assets		114,727		166,117
Deferred tax liabilities
Debt issuance discount and other		(10,596)		(11,946)
Unrealized Gain on Investment		(10,372)		—
Net deferred tax assets	$	93,759	$	154,171

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, 2020, we recognized $60.4 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, 2020, we had federal net operating loss carryforwards of approximately $0.4 billion, of which approximately $2.0 million can be carried forward indefinitely and the remaining will expire from 2032 through 2035. We also had federal research and development tax credit carryforwards of approximately $43.6 million, which will expire beginning 2021. We also had state net operating loss carryforwards of approximately $650.7 million expiring in the beginning of 2029 and state research tax credits of approximately $32.2 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, 2020 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 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, 2020 and 2019, 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)
Unrecognized tax benefits as of December 31, 2017	$	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
Net decrease in tax portions for 2020		(157)
Unrecognized tax benefits as of December 31, 2020	$	15,185

Our total unrecognized tax benefits as of December 31, 2020 were $15.2 million. Total unrecognized tax benefits that, if recognized, would affect our effective tax rate, were $8.0 million as of December 31, 2020.

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.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2020

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 Entities

Cash and Cash Equivalents

Investments in Marketable Securities

Equity Investments

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

Property and equipment, which consisted of equipment, computer equipment, software, office furniture and fixtures, was immaterial as of December 31, 2020 and 2019, 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.

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, 2020. Transactions with GSK are described in Note 3, “Collaborative Arrangements.”

Recently Adopted Accounting Standards Updates

Recently Issued Accounting Standards or Updates Not Yet Adopted

NET INCOME PER SHARE (Tables)

12 Months Ended

Dec. 31, 2020

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, 2020, 2019 and 2018:


	Year Ended December 31,
(In thousands except per share data)	2020		2019			2018
Numerator:
Net income attributable to Innoviva stockholders, basic	$	224,402	$	157,288	$	395,056
Add: interest expense on 2023 Notes		4,717		4,648		5,661
Net income attributable to Innoviva stockholders, diluted	$	229,119	$	161,936	$	400,717
Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders		101,320		101,150		100,849
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		45		70		370
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders		113,554		113,409		113,408
Net income per share attributable to Innoviva stockholders
Basic	$	2.21	$	1.55	$	3.92
Diluted	$	2.02	$	1.43	$	3.53

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)	2020	2019	2018
Outstanding options and awards granted under equity incentive plan and employee stock purchase plan	1,193	1,130	1,490

CONSOLIDATED ENTITIES (Tables)

12 Months Ended

Dec. 31, 2020

Theravance Respiratory Company, LLC

CONSOLIDATED ENTITIES

Schedule of balance sheets and income statements of VIE

The summarized financial information for TRC is presented as follows:

Balance sheets


	December 31,
(In thousands)	2020		2019
Assets
Cash and cash equivalents	$	38,081	$	22,339
Receivables from collaborative arrangements		24,946		14,388
Prepaid expenses and other current assets		—		10
Equity and other long-term investments		16,959		—
Total assets		79,986		36,737

Liabilities and LLC Members' Equity
Current liabilities		508		3,069
LLC members' equity		79,478		33,668
Total liabilities and LLC members' equity	$	79,986	$	36,737

Income statements


	Year Ended December 31,
(In thousands)	2020		2019
Royalty revenue from a related party	$	73,089	$	42,790
Revenue from collaborative arrangements		10,000		—
Total revenue		83,089		42,790
Operating expenses		2,612		3,380
Income from operations		80,477		39,410
Other income (expense), net		38		243
Changes in fair values of equity investments		1,147		—
Net Income	$	81,662	$	39,653

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

+ References + Details

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Tables)

12 Months Ended

Dec. 31, 2020

FINANCIAL INSTRUMENTS 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, 2020
			Gross		Gross
			Unrealized		Unrealized		Estimated
(In thousands)	Amortized Cost		Gains		Losses		Fair Value
Money market funds ⁽¹⁾	$	204,808	$	—	$	—	$	204,808
Total	$	204,808	$	—	$	—	$	204,808

(1)	Money market funds were included in cash and cash equivalents on the consolidated balance sheets.


	December 31, 2019
			Gross		Gross
			Unrealized		Unrealized		Estimated
(In thousands)	Amortized Cost		Gains		Losses		Fair Value
U.S. government securities ⁽¹⁾	$	53,799	$	35	$	—	$	53,834
U.S. commercial paper ⁽¹⁾		18,915		—		—		18,915
Money market funds ⁽²⁾		233,992		—		—		233,992
Total	$	306,706	$	35	$	—	$	306,741

(1)	U.S. government securities and U.S. commercial paper were included in short-term marketable securities on the consolidated balance sheets.

(2)	Money market funds were presented in cash and cash equivalents on the consolidated balance sheets.

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, 2020 Using:
	Quoted Price		Significant
	in Active		Other		Significant
	Markets for		Observable		Unobservable
Types of Instruments	Identical Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	204,808	$	—	$	—	$	204,808
Investments held by ISP Fund LP ⁽¹⁾		299,288		—		—		299,288
Equity investment - Armata Common Stock		25,958		—		—		25,958
Equity investment - Armata Warrants		—		18,049		—		18,049
Equity investment - Entasis Common Stock		46,122		—		—		46,122
Equity investment - Entasis Warrants		—		31,882		—		31,882
Equity investment - InCarda Warrants		—		—		1,147		1,147
Total assets measured at estimated fair value	$	576,176	$	49,931	$	1,147	$	627,254
Debt
2023 Notes	$	—	$	239,779	$	—	$	239,779
2025 Notes		—		206,135		—		206,135
Total fair value of debt	$	—	$	445,914	$	—	$	445,914

(1)	The investments, which consisted of equity investments of $14.5 million and money market funds of $284.8 million, held by ISP Fund LP were subject to a 36-month lock-up period from our initial contribution date, December 11, 2020.


	Estimated Fair Value Measurements as of December 31, 2019 Using:
	Quoted Price		Significant
	in Active		Other		Significant
	Markets for		Observable		Unobservable
Types of Instruments	Identical 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

Armata

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Schedule of balance sheets and income statements of VIE

Armata Pharmaceuticals, Inc.

Balance Sheet Information


	September 30,
(In thousands)	2020
Current assets	$	17,024
Noncurrent assets	$	28,651
Current liabilities	$	7,070
Noncurrent liabilities	$	13,986

Income Statement Information


	For the nine months
	ended September 30,
(In thousands)	2020
Revenue	$	319
Loss from operations	$	(15,134)
Net loss	$	(15,557)

Entasis

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Schedule of balance sheets and income statements of VIE

Entasis Therapeutics Holdings Inc

Balance Sheet Information


	September 30,
(In thousands)	2020
Current assets	$	68,398
Noncurrent assets	$	1,564
Current liabilities	$	6,862
Noncurrent liabilities	$	864

Income Statement Information


	For the six months
	ended September 30,
(In thousands)	2020
Loss from operations	$	(26,080)
Net loss	$	(24,529)

- 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

- Definition

+ References + Details

STOCK-BASED COMPENSATION (Tables)

12 Months Ended

Dec. 31, 2020

STOCK-BASED COMPENSATION

Schedule of stock-based compensation expense

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


	Year Ended December 31,
(In thousands)	2020		2019		2018
General and administrative	$	1,698	$	2,056	$	3,233

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 income by award type is as follows:


	Year Ended December 31,
(In thousands)	2020		2019		2018
Stock options	$	242	$	—	$	305
RSUs		1,149		1,431		1,650
RSAs		273		615		1,920
Market-based RSUs (PSUs)		—		—		(224)
Market-based RSAs (PSAs)		—		—		(464)
ESPP		34		10		46
Total stock-based compensation expense	$	1,698	$	2,056	$	3,233

Schedule of unrecognized stock-based compensation cost

As of December 31, 2020, 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)
Stock options	$	1,328	3.4
RSUs		351	0.3
RSAs		369	2.4
Total unrecognized compensation cost	$	2,048

Summary of equity award activity and related information

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	at Grant		RSAs	at Grant
Balance as of December 31, 2019	1,087	$	24.18	94	$	13.94	78	$	14.46
Granted	250		14.10	85		13.30	31		14.30
Exercised	(30)		12.30	—		—	—		—
Released RSUs/RSAs	—		—	(94)		13.94	(28)		13.92
Forfeited	(152)		24.43	—		—	(51)		14.56
Balance as of December 31, 2020	1,155		22.28	85		13.30	30		14.61

Summary of weighted-average assumptions used to calculate estimated value of stock options

The weighted-average assumptions used in calculating the estimated value of our stock options on the date of grant as follows:


	Year Ended
	December 31, 2020
Risk-free interest rate		0.4	%
Expected term (in years)		6.11
Volatility		46.9	%
Dividend yield		0	%
Weighted-average estimated fair value of stock options granted	$	6.28

DEBT (Tables)

12 Months Ended

Dec. 31, 2020

Debt

Schedule of debt

Our debt consists of:


	December 31,
(In thousands)	2020		2019
2023 Notes	$	240,984	$	240,984
2025 Notes		192,500		192,500
Total debt		433,484		433,484
Unamortized debt discount and issuance costs		(47,967)		(56,364)
Net long-term debt	$	385,517	$	377,120

Aggregate scheduled maturities of long-term debt

The aggregate scheduled maturities of our long-term debt as of December 31, 2020 are as follows:


(In thousands)
Years ending December 31:
2021 to 2022	$	—
2023		240,984
2024		—
2025		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)	2020		2019
Liability component
Principal	$	192,500	$	192,500
Debt discount and issuance costs, net		(46,766)		(54,597)
Net carrying amount	$	145,734	$	137,903
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, 2020, 2019 and 2018:


	Year Ended December 31,
(In thousands)	2020		2019		2018
Contractual interest expense	$	4,813	$	4,813	$	4,799
Amortization of debt issuance costs		601		551		505
Amortization of debt discount		7,230		6,618		6,071
Total interest and amortization expense	$	12,644	$	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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+ Details

INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2020

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)	2020		2019		2018
Current
State	$	(11)	$	(26)	$	19
Deferred
Federal		(60,408)		(41,567)		190,195
State		(12)		(309)		5,859
		(60,420)		(41,876)		196,054
Total income tax benefit (expense), net	$	(60,431)	$	(41,902)	$	196,073

Schedule of differences between expected U.S. federal statutory income tax to 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)	2020		2019		2018
Expected tax at federal statutory rate	$	74,392	$	48,908	$	44,154
State income tax, net of federal benefit		(26)		325		(5,878)
Non-deductible executive compensation		—		—		747
Noncontrolling interest		(14,577)		(7,078)		(2,367)
Other		839		326		310
Change in valuation allowance		(197)		(579)		(233,039)
Income tax expense (benefit), net	$	60,431	$	41,902	$	(196,073)

Schedule of 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)	2020		2019
Deferred tax assets
Net operating loss carryforwards	$	121,839	$	172,359
Research and development tax credit carryforwards		55,211		55,966
Other		1,100		1,412
Total deferred tax assets before valuation allowance		178,150		229,737
Valuation allowance		(63,423)		(63,620)
Total deferred tax assets		114,727		166,117
Deferred tax liabilities
Debt issuance discount and other		(10,596)		(11,946)
Unrealized Gain on Investment		(10,372)		—
Net deferred tax assets	$	93,759	$	154,171

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)
Unrecognized tax benefits as of December 31, 2017	$	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
Net decrease in tax portions for 2020		(157)
Unrecognized tax benefits as of December 31, 2020	$	15,185

NET INCOME PER SHARE - Basic and Diluted EPS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Aug. 07, 2017
Numerator:
Net income attributable to Innoviva stockholders, basic	$ 224,402	$ 157,288	$ 395,056
Add: interest expense on 2023 Notes	4,717	4,648	5,661
Net income attributable to Innoviva stockholders, diluted	$ 229,119	$ 161,936	$ 400,717
Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders	101,320	101,150	100,849
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	45	70	370
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders	113,554	113,409	113,408
Net income per share attributable to Innoviva stockholders
Basic net income per share	$ 2.21	$ 1.55	$ 3.92
Diluted net income per share	$ 2.02	$ 1.43	$ 3.53
Convertible senior notes \| 2025 Notes
Net Income Per Share
Dilutive effect of the assumed conversion premium	0	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

REVENUE RECOGNITION AND COLLABORATIVE ARRANGEMENTS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2014
Revenue Recognition and Collaborative Arrangements
Total net revenue	$ 336,794	$ 261,016	$ 261,004
Strategic alliance - MABA program
Revenue Recognition and Collaborative Arrangements
Revenue recognized upon termination of contract	10,000
Royalty revenue from a related party
Revenue Recognition and Collaborative Arrangements
Total net revenue	326,794	261,016	261,004
Revenue from collaborative arrangements with a related party
Revenue Recognition and Collaborative Arrangements
Total net revenue	10,000	0	0
GSK
Revenue Recognition and Collaborative Arrangements
Total net revenue	336,794	261,016	261,004
Milestone fees paid	$ 220,000	220,000
GSK \| Long-Acting Beta2 Agonist (LABA) Collaboration
Revenue Recognition and Collaborative Arrangements
Milestone fees paid				$ 220,000
Percentage of economic interest in any future payments made under the agreements	15.00%
GSK \| Royalty revenue from a related party
Revenue Recognition and Collaborative Arrangements
Royalties from a related party	$ 340,617	274,839	274,827
Less: amortization of capitalized fees paid to a related party	(13,823)	(13,823)	(13,823)
Total net revenue	326,794	261,016	261,004
GSK \| RELVAR/BREO
Revenue Recognition and Collaborative Arrangements
Royalties from a related party	$ 221,536	189,424	220,162
GSK \| RELVAR/BREO \| Long-Acting Beta2 Agonist (LABA) Collaboration
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%
GSK \| ANORO
Revenue Recognition and Collaborative Arrangements
Royalties from a related party	$ 45,992	42,625	41,286
GSK \| ANORO \| Long-Acting Beta2 Agonist (LABA) Collaboration \| Minimum
Revenue Recognition and Collaborative Arrangements
Royalty rate for combination products (as a percent)	6.50%
GSK \| ANORO \| Long-Acting Beta2 Agonist (LABA) Collaboration \| Maximum
Revenue Recognition and Collaborative Arrangements
Royalty rate for combination products (as a percent)	10.00%
GSK \| TRELEGY
Revenue Recognition and Collaborative Arrangements
Royalties from a related party	$ 73,089	42,790	13,379
GSK \| TRELEGY \| Long-Acting Beta2 Agonist (LABA) Collaboration \| Minimum
Revenue Recognition and Collaborative Arrangements
Royalty rate for combination products (as a percent)	6.50%
GSK \| TRELEGY \| Long-Acting Beta2 Agonist (LABA) Collaboration \| Maximum
Revenue Recognition and Collaborative Arrangements
Royalty rate for combination products (as a percent)	10.00%
GSK \| Revenue from collaborative arrangements with a related party \| Strategic alliance - MABA program
Revenue Recognition and Collaborative Arrangements
Total net revenue	$ 10,000	$ 0	$ 0

CONSOLIDATED ENTITIES - Theravance Respiratory Company, LLC (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Assets
Cash and cash equivalents	$ 246,487	$ 278,096
Receivables from collaborative arrangements	93,931	79,427
Prepaid expenses and other current assets	1,640	962
Equity and other long-term investments	438,258	0
Total assets	999,570	724,826
Liabilities and LLC Members' Equity
Current liabilities	6,110	5,371
LLC members' equity	539,912	313,495
Total liabilities and stockholders' equity	999,570	724,826
Income statements of TRC
Total net revenue	336,794	261,016	$ 261,004
Operating expenses	15,671	14,656	22,753
Income from operations	321,123	246,360	238,251
Other income (expense), net	(348)	(345)	(5,702)
Changes in fair values of equity investments	50,277	0	0
Net income	293,814	190,993	406,328
Royalty revenue from a related party
Income statements of TRC
Total net revenue	326,794	261,016	261,004
Revenue from collaborative arrangements with a related party
Income statements of TRC
Total net revenue	10,000	0	$ 0
Theravance Respiratory Company, LLC
Assets
Cash and cash equivalents	38,081	22,339
Receivables from collaborative arrangements	24,946	14,388
Prepaid expenses and other current assets	0	10
Equity and other long-term investments	16,959	0
Total assets	79,986	36,737
Liabilities and LLC Members' Equity
Current liabilities	508	3,069
LLC members' equity	79,478	33,668
Total liabilities and stockholders' equity	79,986	36,737
Income statements of TRC
Total net revenue	83,089	42,790
Operating expenses	2,612	3,380
Income from operations	80,477	39,410
Other income (expense), net	38	243
Changes in fair values of equity investments	1,147	0
Net income	81,662	39,653
Theravance Respiratory Company, LLC \| Royalty revenue from a related party
Income statements of TRC
Total net revenue	73,089	42,790
Theravance Respiratory Company, LLC \| Revenue from collaborative arrangements with a related party
Income statements of TRC
Total net revenue	$ 10,000	$ 0

CONSOLIDATED ENTITIES - Pulmoquine Therapeutics, Inc. (Details) - USD ($) $ in Thousands		12 Months Ended
	Apr. 20, 2020	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
CONSOLIDATED ENTITIES
Total assets		$ 999,570	$ 724,826
Cash balance		246,487	278,096
Total operating expenses		15,671	$ 14,656	$ 22,753
Pulmoquine Therapeutics, Inc.
CONSOLIDATED ENTITIES
Percentage of outstanding shares acquired	90.90%
Total assets		3,500
Cash balance		3,200
Other current assets		300
Net loss		2,200
Total operating expenses		$ 2,000
Pulmoquine Therapeutics, Inc. \| Series A preferred stock
CONSOLIDATED ENTITIES
Securities to be purchased	5,808,550
Payments for acquire variable interest	$ 5,000

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS - Summarized Financial Data (Details) - USD ($) $ in Thousands	6 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2020	Sep. 30, 2020	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Balance Sheet Information
Current assets			$ 342,058	$ 431,234
Current liabilities			6,110	5,371
Income Statement Information
Total revenue			336,794	261,016	$ 261,004
Loss from operations			321,123	246,360	238,251
Net (income) loss			$ 293,814	$ 190,993	$ 406,328
Armata
Balance Sheet Information
Current assets	$ 17,024	$ 17,024
Noncurrent assets	28,651	28,651
Current liabilities	7,070	7,070
Noncurrent liabilities	13,986	13,986
Income Statement Information
Total revenue		319
Loss from operations		(15,134)
Net (income) loss		(15,557)
Entasis
Balance Sheet Information
Current assets	68,398	68,398
Noncurrent assets	1,564	1,564
Current liabilities	6,862	6,862
Noncurrent liabilities	864	$ 864
Income Statement Information
Loss from operations	(26,080)
Net (income) loss	$ (24,529)

STOCK-BASED COMPENSATION - Compensation Awards (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Stock options
Number of outstanding options
Balance at the beginning of the period (in shares)	1,087
Granted (in shares)	250	0	0
Exercised (in shares)	(30)
Released RSUs/RSAs (in shares)	0
Forfeited (in shares)	(152)
Balance at the end of the period (in shares)	1,155	1,087
Weighted-Average Exercise Price of Outstanding Options
Balance at the beginning of the period (in dollars per share)	$ 24.18
Granted (in dollars per share)	14.10
Exercised (in dollars per share)	12.30
Released RSUs/RSAs (in shares)	0
Forfeited (in dollars per share)	24.43
Balance at the end of the period (in dollars per share)	$ 22.28	$ 24.18
Additional disclosures
Aggregate intrinsic value of options outstanding	$ 0.0
Aggregate intrinsic value of options exercisable	$ 0.0
Weighted average remaining contractual term of options outstanding	3 years 8 months 8 days
Weighted average remaining contractual term of options exercisable	3 years 8 months 8 days
Total intrinsic value of options exercised	$ 0.1	$ 0.2	$ 0.4
Total estimated fair value of options vested			0.8
RSUs
Number of outstanding RSUs and PSUs/RSAs and PSAs
Balance at the beginning of the period (in shares)	94
Granted (in shares)	85
Exercised (in shares)	0
Released RSUs and RSAs (in shares)	(94)
Forfeited (in shares)	0
Balance at the end of the period (in shares)	85	94
Weighted-Average Fair Value per Share at Grant
Balance at the beginning of the period (in dollars per share)	$ 13.94
Granted (in dollars per share)	13.30
Exercised (in dollars per share)	0
Released RSUs and RSAs (in dollars per share)	13.94
Forfeited (in dollars per share)	0
Balance at the end of the period (in dollars per share)	$ 13.30	$ 13.94
Additional disclosures
Total estimated fair value of equity instruments vested	$ 1.3	$ 1.4	2.6
RSAs
Number of outstanding RSUs and PSUs/RSAs and PSAs
Balance at the beginning of the period (in shares)	78
Granted (in shares)	31
Exercised (in shares)	0
Released RSUs and RSAs (in shares)	(28)
Forfeited (in shares)	(51)
Balance at the end of the period (in shares)	30	78
Weighted-Average Fair Value per Share at Grant
Balance at the beginning of the period (in dollars per share)	$ 14.46
Granted (in dollars per share)	14.30
Exercised (in dollars per share)	0
Released RSUs and RSAs (in dollars per share)	13.92
Forfeited (in dollars per share)	14.56
Balance at the end of the period (in dollars per share)	$ 14.61	$ 14.46
Additional disclosures
Total estimated fair value of equity instruments vested	$ 0.6	$ 0.9	$ 7.6

DEBT - Convertible Senior Notes (Details) $ / shares in Units, $ in Thousands		12 Months Ended
	Aug. 07, 2017 USD ($) $ / shares	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Aug. 01, 2017 $ / shares
Liability component
Principal		$ 433,484	$ 433,484
Unamortized debt discount and issuance costs		(47,967)	(56,364)
Common stock
Debt
Share Price \| $ / shares					$ 13.28
2025 Notes
Debt
Debt discount			67,300
Convertible senior notes \| 2025 Notes
Liability component
Principal		192,500	192,500
Unamortized debt discount and issuance costs		(46,766)	(54,597)
Net carrying amount		145,734	137,903
Equity component, net		65,361	65,361
Interest expense
Contractual interest expense		4,813	4,813	$ 4,799
Amortization of debt issuance costs		601	551	505
Amortization of debt discount		7,230	6,618	6,071
Total interest and amortization expense		$ 12,644	$ 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
Conversion premium (as a percent)	30.00%

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Thousands	Dec. 31, 2020	Dec. 31, 2019
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	101,392	101,288
Common stock, shares outstanding	101,392	101,288

CONSOLIDATED STATEMENTS OF INCOME (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Royalty revenue from a related party \| GSK
Amortization of capitalized fees paid to a related party	$ 13,823	$ 13,823	$ 13,823

DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property and Equipment (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Property and Equipment
Property and equipment, net	$ 28	$ 33
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, 2020
GSK
Related Parties
Percentage of common stock owned by a related party	31.60%
Sarissa Capital
Related Parties
Percentage of common stock owned by a related party	6.30%

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS - Equity Investment in Armata (Details) - Armata $ / shares in Units, $ in Millions		12 Months Ended
	Jan. 27, 2020 USD ($) shares	Dec. 31, 2020 USD ($) item tranche $ / shares
Equity Investment
Number of tranches \| tranche		2
Number of Innoviva board members who joined investee's board \| item		2
Equity investment ownership percentage		46.60%
Unrealized gain from fair value changes in equity investments		$ 19.0
Common stock and warrants
Equity Investment
Amount of securities purchase agreement	$ 25.0
Equity and long-term investments at fair value		44.0
Common stock
Equity Investment
Number of shares to be purchased under the securities purchase agreement \| shares	8,710,800
Equity and long-term investments at fair value		$ 26.0
Warrants
Equity Investment
Maximum number of additional shares into which warrants may be converted under the securities purchase agreement \| shares	8,710,800
Exercise price of warrants \| $ / shares		$ 2.87
Term of warrants		5 years
Equity and long-term investments at fair value		$ 18.0

CONSOLIDATED ENTITIES - ISP Fund LP (Details) - USD ($) $ in Thousands		12 Months Ended
	Dec. 11, 2020	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
CONSOLIDATED ENTITIES
Total assets		$ 999,570	$ 724,826
Initial contribution		387,981	0	$ 0
Unrealized loss on equity investments		50,277	$ 0	$ 0
ISP Fund LP
CONSOLIDATED ENTITIES
Total assets		$ 299,300
Economic interest (in percent)		100.00%
Net investment-related expense		$ 400
Unrealized loss on equity investments		$ 400
Contributed to partnership for investing	$ 300,000
Lock-up period	36 months
ISP Fund LP \| General Partner
CONSOLIDATED ENTITIES
Percentage of annual performance allocation based on net profits	10.00%

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS - Equity Investment in Entasis (Details) - Entasis $ / shares in Units, $ in Millions			12 Months Ended
	Aug. 27, 2020 USD ($) $ / shares shares	Apr. 12, 2020 USD ($) $ / shares shares	Dec. 31, 2020 USD ($) item tranche
Equity Investment
Number of tranches \| tranche			2
Number of investee's board members which may be designated by the Company \| item			2
Equity investment ownership percentage			51.00%
Unrealized gain from fair value changes in equity investments			$ 30.5
Common stock and warrants
Equity Investment
Amount of securities purchase agreement	$ 12.5	$ 35.0
Equity and long-term investments at fair value			78.0
Common stock
Equity Investment
Number of shares to be purchased under the securities purchase agreement \| shares	4,672,897	14,000,000
Equity and long-term investments at fair value			$ 46.1
Warrants
Equity Investment
Maximum number of additional shares into which warrants may be converted under the securities purchase agreement \| shares	4,672,897	14,000,000
Exercise price of warrants \| $ / shares	$ 2.675	$ 2.50
Term of warrants			5 years
Equity and long-term investments at fair value			$ 31.9

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS - Equity Investment in InCarda (Details) - InCarda - USD ($) $ / shares in Units, $ in Millions		12 Months Ended
	Oct. 06, 2020	Dec. 31, 2020
Equity Investment
Equity investment ownership percentage		13.40%
Series C preferred stock and warrants
Equity Investment
Amount of securities purchase agreement	$ 15.0
Unrealized gain from fair value changes in equity investments		$ 1.1
Impairment of equity investments		$ 0.0
Series C preferred stock
Equity Investment
Number of shares to be purchased under the securities purchase agreement	20,469,432
Warrants
Equity Investment
Maximum number of additional shares into which warrants may be converted under the securities purchase agreement	5,117,358
Exercise price of warrants		$ 0.7328
Term of warrants		1 year
Equity and long-term investments at fair value		$ 1.1

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS - Available-for-Sale Securities (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Available-for-Sale Securities
Amortized Cost	$ 204,808	$ 306,706
Gross Unrealized Gains	0	35
Gross Unrealized Losses	0	0
Estimated Fair Value	204,808	306,741
Credit loss	0
U.S. government securities
Available-for-Sale Securities
Amortized Cost		53,799
Gross Unrealized Gains		35
Gross Unrealized Losses		0
Estimated Fair Value		53,834
U.S. commercial paper
Available-for-Sale Securities
Amortized Cost		18,915
Gross Unrealized Gains		0
Gross Unrealized Losses		0
Estimated Fair Value		18,915
Money market funds
Available-for-Sale Securities
Amortized Cost	204,808	233,992
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Value	$ 204,808	$ 233,992

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS - Fair Value Measurements (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Money market funds \| ISP Fund LP
Assets
Total assets measured at estimated fair value	$ 284,800
Equity investment \| ISP Fund LP
Assets
Total assets measured at estimated fair value	14,500
Recurring basis
Assets
Total assets measured at estimated fair value	627,254	$ 306,741
Recurring basis \| U.S. government securities
Assets
Total assets measured at estimated fair value		53,834
Recurring basis \| U.S. commercial paper
Assets
Total assets measured at estimated fair value		18,915
Recurring basis \| Money market funds
Assets
Total assets measured at estimated fair value	204,808	233,992
Recurring basis \| Equity investments and Money market funds \| ISP Fund LP
Assets
Total assets measured at estimated fair value	299,288
Recurring basis \| Quoted Price in Active Markets for Identical Assets, Level 1
Assets
Total assets measured at estimated fair value	576,176	233,992
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
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
Recurring basis \| Quoted Price in Active Markets for Identical Assets, Level 1 \| Money market funds
Assets
Total assets measured at estimated fair value	204,808	233,992
Recurring basis \| Quoted Price in Active Markets for Identical Assets, Level 1 \| Equity investments and Money market funds \| ISP Fund LP
Assets
Total assets measured at estimated fair value	299,288
Recurring basis \| Significant Other Observable Inputs, Level 2
Assets
Total assets measured at estimated fair value	49,931	72,749
Recurring basis \| Significant Other Observable Inputs, Level 2 \| U.S. government securities
Assets
Total assets measured at estimated fair value		53,834
Recurring basis \| Significant Other Observable Inputs, Level 2 \| U.S. commercial paper
Assets
Total assets measured at estimated fair value		18,915
Recurring basis \| Significant Other Observable Inputs, Level 2 \| Money market funds
Assets
Total assets measured at estimated fair value	0	0
Recurring basis \| Significant Other Observable Inputs, Level 2 \| Equity investments and Money market funds \| ISP Fund LP
Assets
Total assets measured at estimated fair value	0
Recurring basis \| Significant Unobservable Inputs, Level 3
Assets
Total assets measured at estimated fair value	1,147	0
Recurring basis \| Significant Unobservable Inputs, Level 3 \| U.S. government securities
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
Recurring basis \| Significant Unobservable Inputs, Level 3 \| Money market funds
Assets
Total assets measured at estimated fair value	0	0
Recurring basis \| Significant Unobservable Inputs, Level 3 \| Equity investments and Money market funds \| ISP Fund LP
Assets
Total assets measured at estimated fair value	0
Nonrecurring basis \| Debt
Debt
2023 Notes	239,779	243,394
2025 Notes	206,135	208,976
Total fair value of debt	445,914	452,370
Nonrecurring basis \| Quoted Price in Active Markets for Identical Assets, Level 1 \| Debt
Debt
2023 Notes	0	0
2025 Notes	0	0
Total fair value of debt	0	0
Nonrecurring basis \| Significant Other Observable Inputs, Level 2 \| Debt
Debt
2023 Notes	239,779	243,394
2025 Notes	206,135	208,976
Total fair value of debt	445,914	452,370
Nonrecurring basis \| Significant Unobservable Inputs, Level 3 \| Debt
Debt
2023 Notes	0	0
2025 Notes	0	0
Total fair value of debt	0	$ 0
Armata \| Recurring basis \| Equity investment \| Common stock
Assets
Total assets measured at estimated fair value	25,958
Armata \| Recurring basis \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value	18,049
Armata \| Recurring basis \| Quoted Price in Active Markets for Identical Assets, Level 1 \| Equity investment \| Common stock
Assets
Total assets measured at estimated fair value	25,958
Armata \| Recurring basis \| Quoted Price in Active Markets for Identical Assets, Level 1 \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value	0
Armata \| Recurring basis \| Significant Other Observable Inputs, Level 2 \| Equity investment \| Common stock
Assets
Total assets measured at estimated fair value	0
Armata \| Recurring basis \| Significant Other Observable Inputs, Level 2 \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value	18,049
Armata \| Recurring basis \| Significant Unobservable Inputs, Level 3 \| Equity investment \| Common stock
Assets
Total assets measured at estimated fair value	0
Armata \| Recurring basis \| Significant Unobservable Inputs, Level 3 \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value	0
Entasis \| Recurring basis \| Equity investment \| Common stock
Assets
Total assets measured at estimated fair value	46,122
Entasis \| Recurring basis \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value	31,882
Entasis \| Recurring basis \| Quoted Price in Active Markets for Identical Assets, Level 1 \| Equity investment \| Common stock
Assets
Total assets measured at estimated fair value	46,122
Entasis \| Recurring basis \| Quoted Price in Active Markets for Identical Assets, Level 1 \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value	0
Entasis \| Recurring basis \| Significant Other Observable Inputs, Level 2 \| Equity investment \| Common stock
Assets
Total assets measured at estimated fair value	0
Entasis \| Recurring basis \| Significant Other Observable Inputs, Level 2 \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value	31,882
Entasis \| Recurring basis \| Significant Unobservable Inputs, Level 3 \| Equity investment \| Common stock
Assets
Total assets measured at estimated fair value	0
Entasis \| Recurring basis \| Significant Unobservable Inputs, Level 3 \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value	0
InCarda \| Recurring basis \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value	1,147
InCarda \| Recurring basis \| Quoted Price in Active Markets for Identical Assets, Level 1 \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value	0
InCarda \| Recurring basis \| Significant Other Observable Inputs, Level 2 \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value	0
InCarda \| Recurring basis \| Significant Unobservable Inputs, Level 3 \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value	$ 1,147

STOCK-BASED COMPENSATION - 2012 Plan and ESPP (Details)	12 Months Ended
STOCK-BASED COMPENSATION - 2012 Plan and ESPP (Details)	Dec. 31, 2020 USD ($) item shares
2012 Equity Incentive Plan
Stock-based compensation
Shares remaining available for issuance	4,851,655
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	181,699

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 - 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
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
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

DEBT - Debt Maturities (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Long-term debt maturities for years ending December 31:
2021 to 2023	$ 0
2024	240,984
2025	0
Thereafter	192,500
Total	$ 433,484	$ 433,484

COMMITMENTS AND CONTINGENCIES - (Details) - Burlingame, California $ in Thousands	Dec. 31, 2020 USD ($)	Nov. 30, 2019 ft²
Operating Lease
Rentable square feet \| ft²		2,111
Lease term		36 months
Future minimum lease payments for years ending December 31:
2021	$ 123
2022	109
Thereafter	0
Total	$ 232

INCOME TAXES - Deferred Taxes (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Deferred tax assets
Net operating loss carryforwards	$ 121,839	$ 172,359
Research and development tax credit carryforwards	55,211	55,966
Other	1,100	1,412
Total deferred tax assets before valuation allowance	178,150	229,737
Valuation allowance	(63,423)	(63,620)
Total deferred tax assets	114,727	166,117
Deferred tax liabilities
Debt issuance discount and other	(10,596)	(11,946)
Unrealized Gain on Investment	(10,372)	0
Net deferred tax assets	$ 93,759	$ 154,171

SUBSEQUENT EVENTS (Details) - Armata shares in Millions, $ in Millions			3 Months Ended	12 Months Ended
	Jan. 26, 2021 USD ($) tranche shares	Jan. 27, 2020 USD ($)	Mar. 31, 2021 USD ($) shares	Dec. 31, 2020 tranche
Subsequent Events
Number of tranches \| tranche				2
Common stock and warrants
Subsequent Events
Amount of securities purchase agreement		$ 25.0
Subsequent events \| Common stock and warrants
Subsequent Events
Amount of securities purchase agreement	$ 20.0
Number of tranches \| tranche	2
Subsequent events \| Common stock and warrants \| Tranche one
Subsequent Events
Number of shares purchased \| shares	1.9
Aggregate purchase price	$ 6.1
Subsequent events \| Common stock and warrants \| Tranche two
Subsequent Events
Number of shares purchased \| shares			4.3
Aggregate purchase price			$ 13.9