0001104659-21-056556 | 10-Q | XBRL Viewer

Schedule of balance sheets and income statements of VIE

The summarized financial information for TRC is presented as follows:

Balance sheets


	March 31,		December 31,
(In thousands)	2021		2020
Assets
Cash and cash equivalents	$	28,444	$	38,081
Receivables from collaborative arrangements		22,084		24,946
Prepaid expenses and other current assets		1		—
Equity and long-term investments		22,869		16,959
Total assets		73,398		79,986

Liabilities and LLC Members' Equity
Current liabilities		640		508
LLC members' equity		72,758		79,478
Total liabilities and LLC members' equity	$	73,398	$	79,986

Income statements


	Three Months Ended March 31,
(In thousands)	2021		2020
Royalty revenue from a related party	$	22,084	$	16,135
Operating expenses		3,281		271
Income from operations		18,803		15,864
Other income (expense), net		—		36
Changes in fair values of equity and long-term investments		(483)		—
Net income	$	18,320	$	15,900

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.

Financial Instruments and Fair Value Measurements - Available-for-Sale Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Available-for-Sale Securities
Amortized Cost	$ 248,932	$ 204,808
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Value	248,932	204,808
Credit loss	0
Money market funds
Available-for-Sale Securities
Amortized Cost	248,932	204,808
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Value	$ 248,932	$ 204,808

Income Taxes	3 Months Ended
Mar. 31, 2021
Income Taxes
Income Taxes	9. Income Taxes Provisional income tax expense for the three months ended March 31, 2021 and 2020 was $19.7 million and $15.9 million, respectively. The Company’s effective income tax rate for the three months ended March 31, 2021 was 15.2%, compared to 16.8% for the same period in 2020. The income tax expense for the three months ended March 31, 2021 and 2020 was determined based upon estimates of the Company's effective income tax rates in various jurisdictions. Our effective income tax rate for the three months ended March 31, 2021 was lower than the U.S. federal statutory income tax rate of 21% due primarily to non-deductible expenses and noncontrolling interest.

Income Taxes

3 Months Ended

Mar. 31, 2021

Income Taxes

Income Taxes

9. Income Taxes

Provisional income tax expense for the three months ended March 31, 2021 and 2020 was $19.7 million and $15.9 million, respectively. The Company’s effective income tax rate for the three months ended March 31, 2021 was 15.2%, compared to 16.8% for the same period in 2020. The income tax expense for the three months ended March 31, 2021 and 2020 was determined based upon estimates of the Company's effective income tax rates in various jurisdictions. Our effective income tax rate for the three months ended March 31, 2021 was lower than the U.S. federal statutory income tax rate of 21% due primarily to non-deductible expenses and noncontrolling interest.

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.

Financial Instruments and Fair Value Measurements - Equity Investment in InCarda (Details) - InCarda $ / shares in Units, $ in Millions	1 Months Ended	3 Months Ended
	Oct. 31, 2020 USD ($) $ / shares shares	Mar. 31, 2021 USD ($) director	Dec. 31, 2020 USD ($)
Equity Investment
Number of Investee's Board members currently representing the Company \| director		1
Number of the Investee's Board members \| director		8
Equity investment ownership percentage		13.00%
Term of warrants	1 year
Series C preferred stock and warrants
Equity Investment
Payments to acquire equity securities	$ 15.0
Transaction costs to acquire equity securities	$ 0.8
Equity and long-term investments at fair value		$ 15.8
Unrealized loss from fair value changes in equity investments		(0.5)
Impairment of equity investments		0.0
Series C preferred stock
Equity Investment
Number of shares purchased under the securities purchase agreement \| shares	20,469,432
Warrants
Equity Investment
Number of warrants purchased under the securities purchase agreement \| shares	5,117,358
Exercise price of warrants \| $ / shares	$ 0.7328
Equity and long-term investments at fair value		$ 0.7	$ 1.1

Stock-Based Compensation

3 Months Ended

Mar. 31, 2021

Stock-Based Compensation

Stock-Based Compensation

6. Stock-Based Compensation

Stock- Based Compensation Expense

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


	Three Months Ended March 31,
(In thousands)	2021		2020
General and administrative	$	451	$	435

Valuation Assumptions

Black-Scholes-Merton assumptions used in calculating the estimated value of our stock options on the date of grant were as follows:


	Three Months Ended
	March 31, 2021
Risk-free interest rate		1.1	%
Expected term (in years)		6.11
Volatility		45.6	%
Dividend yield		0.0	%
Weighted-average estimated fair value of stock options granted	$	5.42

There were no grants of stock options during the three months ended March 31, 2020.

Revenue Recognition and Collaborative Arrangements (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Revenue Recognition and Collaborative Arrangements
Total net revenue	$ 85,518	$ 78,678
GSK
Revenue Recognition and Collaborative Arrangements
Total net revenue	85,518	78,678
GSK \| Royalty revenue from a related party
Revenue Recognition and Collaborative Arrangements
Royalties from a related party	88,974	82,134
Less: amortization of capitalized fees paid to a related party	(3,456)	(3,456)
GSK \| RELVAR/BREO
Revenue Recognition and Collaborative Arrangements
Royalties from a related party	56,390	56,149
GSK \| ANORO
Revenue Recognition and Collaborative Arrangements
Royalties from a related party	10,500	9,850
GSK \| TRELEGY
Revenue Recognition and Collaborative Arrangements
Royalties from a related party	$ 22,084	$ 16,135

Amount, excluding tax collected from customer, of revenue from satisfaction of performance obligation by transferring promised good or service to customer. Tax collected from customer is tax assessed by governmental authority that is both imposed on and concurrent with specific revenue-producing transaction, including, but not limited to, sales, use, value added and excise.

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Mar. 31, 2020
Income Taxes
Provisional income tax expense	$ 19,736	$ 15,932
Effective tax rate (as a percent)	15.20%	16.80%
Federal statutory tax rate (as a percent)	21.00%

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

Revenue Recognition and Collaborative Arrangements

Revenue Recognition and Collaborative Arrangements

3 Months Ended

Mar. 31, 2021

Revenue Recognition and Collaborative Arrangements

3. Revenue Recognition and Collaborative Arrangements

Net Revenue from Collaborative Arrangements

Net revenue recognized under our GSK Agreements was as follows:


	Three Months Ended March 31,
(In thousands)	2021		2020
Royalties from a related party - RELVAR/BREO	$	56,390	$	56,149
Royalties from a related party - ANORO		10,500		9,850
Royalties from a related party - TRELEGY		22,084		16,135
Total royalties from a related party		88,974		82,134
Less: amortization of capitalized fees paid to a related party		(3,456)		(3,456)
Royalty revenue from GSK	$	85,518	$	78,678

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.

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Consolidated Entities - Pulmoquine Therapeutics, Inc. (Details) - USD ($)
$ in Thousands

1 Months Ended

Apr. 30, 2020

Mar. 31, 2021

Dec. 31, 2020

^[1]

Pulmoquine Therapeutics, Inc.

$ 1,088,290

$ 999,570

Pulmoquine Therapeutics, Inc. | Series A preferred stock

$ 3,300

Number of shares purchased under the securities purchase agreement

5,808,550

Payments to acquire equity securities

$ 5,000

[1]	Consolidated balance sheet as of December 31, 2020 has been derived from audited consolidated financial statements.

Sum of the carrying amounts as of the balance sheet date of all assets that are recognized. Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.

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Financial Instruments and Fair Value Measurements

Financial Instruments and Fair Value Measurements - Equity Investment in Entasis (Details) - Entasis $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2021 USD ($) director	Sep. 30, 2020 USD ($) $ / shares shares	Jun. 30, 2020 USD ($) $ / shares shares	Dec. 31, 2020 USD ($)
Equity Investment
Number of investee's board members which may be designated by the Company \| director	2
Number of Investee's Board members currently representing the Company \| director	0
Number of the Investee's Board members \| director	6
Equity investment ownership percentage	51.00%
Unrealized loss from fair value changes in equity investments	$ (11.5)
Common stock and warrants
Equity Investment
Payments to acquire equity securities		$ 12.5	$ 35.0
Fair value of equity securities	66.6			$ 78.0
Common stock
Equity Investment
Number of shares purchased under the securities purchase agreement \| shares		4,672,897	14,000,000
Fair value of equity securities	40.0			46.1
Warrants
Equity Investment
Number of warrants purchased under the securities purchase agreement \| shares		4,672,897	14,000,000
Fair value of equity securities	$ 26.6			$ 31.9
Warrants acquired in second quarter of 2020
Equity Investment
Exercise price of warrants \| $ / shares			$ 2.50
Term of warrants			5 years
Warrants acquired in third quarter of 2020
Equity Investment
Exercise price of warrants \| $ / shares		$ 2.675
Term of warrants		5 years

Net Income Per Share - Basic and Diluted EPS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Numerator:
Net income attributable to Innoviva stockholders, basic	$ 94,123	$ 65,437
Add: interest expense on 2023 Notes	1,204	1,180
Net income attributable to Innoviva stockholders, diluted	$ 95,327	$ 66,617
Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders	101,365	101,235
Dilutive effect of 2023 Notes	12,189	12,189
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan	70	85
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders	113,624	113,509
Net income per share attributable to Innoviva stockholders
Basic net income per share	$ 0.93	$ 0.65
Diluted net income per share	$ 0.84	$ 0.59
Convertible senior notes \| 2025 Notes
Net Income Per Share
Dilutive effect of the assumed conversion premium	0	0
Convertible senior notes \| 2025 Notes \| Common stock
Net Income Per Share
Conversion price of convertible notes into common stock (in dollars per share)	$ 17.26	$ 17.26

Net Income Per Share

3 Months Ended

Mar. 31, 2021

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 three months ended March 31, 2021 and 2020, respectively.

The following table shows the computation of basic and diluted net income per share for the three months ended March 31, 2021 and 2020:


	Three Months Ended March 31,
(In thousands except per share data)	2021		2020
Numerator:
Net income attributable to Innoviva stockholders, basic	$	94,123	$	65,437
Add: interest expense on 2023 Notes		1,204		1,180
Net income attributable to Innoviva stockholders, diluted	$	95,327	$	66,617

Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders		101,365		101,235
Dilutive effect of 2023 Notes		12,189		12,189
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan		70		85
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders		113,624		113,509

Net income per share attributable to Innoviva stockholders
Basic	$	0.93	$	0.65
Diluted	$	0.84	$	0.59

Anti-Dilutive Securities

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


	Three Months Ended March 31,
(In thousands)	2021		2020
Outstanding options and awards granted under equity incentive plan and employee stock purchase plan	$	1,159	$	1,094

Financial Instruments and Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2021

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

Available-for-sale securities are summarized below:


	March 31, 2021
			Gross		Gross
			Unrealized		Unrealized		Estimated
(In thousands)	Amortized Cost		Gains		Losses		Fair Value
Money market funds⁽¹⁾	$	248,932	$	—	$	—	$	248,932
Total	$	248,932	$	—	$	—	$	248,932

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


	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.

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 March 31, 2021 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	$	248,932	$	—	$	—	$	248,932
Investments held by ISP Fund LP ⁽¹⁾		304,696		—		—		304,696
Equity investment - Armata Common Stock		71,053		—		—		71,053
Equity investment - Armata Warrants		—		54,166		—		54,166
Equity investment - Entasis Common Stock		39,960		—		—		39,960
Equity investment - Entasis Warrants		—		26,580		—		26,580
Equity investment - InCarda Warrants		—		—		664		664
Total assets measured at estimated fair value	$	664,641	$	80,746	$	664	$	746,051
Debt
2023 Notes	$	—	$	242,336	$	—	$	242,336
2025 Notes		—		203,513		—		203,513
Total fair value of debt	$	—	$	445,849	$	—	$	445,849

(1)	The investments, which consisted of equity investments of $130.5 million and money market funds of $174.2 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, 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.

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.

Cash and cash equivalents

Financial Instruments and Fair Value Measurements - Fair Value Measurements (Details) - USD ($) $ in Thousands	Dec. 11, 2020	Mar. 31, 2021	Dec. 31, 2020
ISP Fund LP
Debt
Lock-up period	36 months
Recurring basis
Assets
Total assets measured at estimated fair value		$ 746,051	$ 627,254
Recurring basis \| Money market funds
Assets
Total assets measured at estimated fair value		248,932	204,808
Recurring basis \| Money market funds \| ISP Fund LP
Assets
Total assets measured at estimated fair value		174,200	284,800
Recurring basis \| Equity investments and Money market funds \| ISP Fund LP
Assets
Total assets measured at estimated fair value		304,696	299,288
Recurring basis \| Equity investment \| ISP Fund LP
Assets
Total assets measured at estimated fair value		130,500	14,500
Recurring basis \| Quoted Price in Active Markets for Identical Assets, Level 1
Assets
Total assets measured at estimated fair value		664,641	576,176
Recurring basis \| Quoted Price in Active Markets for Identical Assets, Level 1 \| Money market funds
Assets
Total assets measured at estimated fair value		248,932	204,808
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		304,696	299,288
Recurring basis \| Significant Other Observable Inputs, Level 2
Assets
Total assets measured at estimated fair value		80,746	49,931
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	0
Recurring basis \| Significant Unobservable Inputs, Level 3
Assets
Total assets measured at estimated fair value		664	1,147
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	0
Nonrecurring basis \| Debt
Debt
2023 Notes		242,336	239,779
2025 Notes		203,513	206,135
Total fair value of debt		445,849	445,914
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		242,336	239,779
2025 Notes		203,513	206,135
Total fair value of debt		445,849	445,914
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		71,053	25,958
Armata \| Recurring basis \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value		54,166	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		71,053	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	0
Armata \| Recurring basis \| Significant Other Observable Inputs, Level 2 \| Equity investment \| Common stock
Assets
Total assets measured at estimated fair value		0	0
Armata \| Recurring basis \| Significant Other Observable Inputs, Level 2 \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value		54,166	18,049
Armata \| Recurring basis \| Significant Unobservable Inputs, Level 3 \| Equity investment \| Common stock
Assets
Total assets measured at estimated fair value		0	0
Armata \| Recurring basis \| Significant Unobservable Inputs, Level 3 \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value		0	0
Entasis \| Recurring basis \| Equity investment \| Common stock
Assets
Total assets measured at estimated fair value		39,960	46,122
Entasis \| Recurring basis \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value		26,580	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		39,960	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	0
Entasis \| Recurring basis \| Significant Other Observable Inputs, Level 2 \| Equity investment \| Common stock
Assets
Total assets measured at estimated fair value		0	0
Entasis \| Recurring basis \| Significant Other Observable Inputs, Level 2 \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value		26,580	31,882
Entasis \| Recurring basis \| Significant Unobservable Inputs, Level 3 \| Equity investment \| Common stock
Assets
Total assets measured at estimated fair value		0	0
Entasis \| Recurring basis \| Significant Unobservable Inputs, Level 3 \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value		0	0
InCarda \| Recurring basis \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value		664	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	0
InCarda \| Recurring basis \| Significant Other Observable Inputs, Level 2 \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value		0	0
InCarda \| Recurring basis \| Significant Unobservable Inputs, Level 3 \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value		$ 664	$ 1,147

CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands

Mar. 31, 2021

Dec. 31, 2020

^[1]

Current assets:

$ 282,890

$ 246,487

88,974

93,931

Prepaid expenses and other current assets

1,069

1,640

Total current assets

372,933

342,058

Property and equipment, net

Equity and long-term investments

519,325

438,258

Capitalized fees paid to a related party, net

121,797

125,253

Deferred tax assets, net

74,023

93,759

Other assets

188

214

Accrued personnel-related expenses

1,088,290

999,570

Current liabilities:

Accounts payable

652

490

Accrued interest payable

1,668

4,152

Other accrued liabilities

1,470

1,402

Total current liabilities

3,804

6,110

Long-term debt, net of discount and issuance costs

387,728

385,517

Other long-term liabilities

106

Commitments and contingencies (Note 8)

Stockholders' equity:

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

Common stock: $0.01 par value, 200,000 shares authorized, 101,408 and 101,392 issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

1,014

Additional paid-in capital

1,261,326

1,260,900

Accumulated deficit

(627,879)

(722,002)

Total Innoviva stockholders' equity

634,461

539,912

Noncontrolling interest

62,220

67,925

Total stockholders' equity

696,681

607,837

Total liabilities and stockholders' equity

$ 1,088,290

$ 999,570

[1]	Consolidated balance sheet as of December 31, 2020 has been derived from audited consolidated financial statements.

Stock-Based Compensation - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
General and administrative
Stock-based compensation
Allocated Share-based Compensation Expense	$ 451	$ 435

Financial Instruments and Fair Value Measurements - Equity Investment in Armata (Details) - Armata $ / shares in Units, $ in Millions		3 Months Ended
	Jan. 26, 2021 USD ($) shares	Mar. 31, 2021 USD ($) director tranche $ / shares	Mar. 31, 2020 USD ($) $ / shares shares	Dec. 31, 2020 USD ($)
Equity investment
Equity investment ownership percentage		59.60%
Percentage of maximum voting rights		49.50%
Number of Investee's Board members currently representing the Company \| director		3
Number of the Investee's Board members \| director		8
Change in fair value of common stock and warrants		$ 61.2	$ 21.9
Common stock and warrants
Equity investment
Payments to acquire equity securities			$ 25.0
Fair value of equity securities		125.3		$ 44.0
Common stock
Equity investment
Number of shares purchased under the securities purchase agreement \| shares			8,710,800
Fair value of equity securities		71.1		26.0
Warrants
Equity investment
Number of warrants purchased under the securities purchase agreement \| shares			8,710,800
Fair value of equity securities		$ 54.2		$ 18.0
Warrants purchased in 2020
Equity investment
Exercise price of warrants \| $ / shares			$ 2.87
Term of warrants			5 years
Warrants purchased in 2021
Equity investment
Exercise price of warrants \| $ / shares		$ 3.25
Term of warrants		5 years
Innoviva Strategic Opportunities, LLC
Equity investment
Number of tranches \| tranche		2
Innoviva Strategic Opportunities, LLC \| Common stock and warrants
Equity investment
Amount of securities purchase agreement	$ 20.0
Innoviva Strategic Opportunities, LLC \| Common stock
Equity investment
Number of shares to be purchased under the securities purchase agreement \| shares	6,153,847
Innoviva Strategic Opportunities, LLC \| Warrants
Equity investment
Number of warrants to be purchased under the securities purchase agreement \| shares	6,153,847

Revenue Recognition and Collaborative Arrangements (Tables)

3 Months Ended

Mar. 31, 2021

Revenue Recognition and Collaborative Arrangements

Schedule of net revenue from collaborative arrangements

Net revenue recognized under our GSK Agreements was as follows:


	Three Months Ended March 31,
(In thousands)	2021		2020
Royalties from a related party - RELVAR/BREO	$	56,390	$	56,149
Royalties from a related party - ANORO		10,500		9,850
Royalties from a related party - TRELEGY		22,084		16,135
Total royalties from a related party		88,974		82,134
Less: amortization of capitalized fees paid to a related party		(3,456)		(3,456)
Royalty revenue from GSK	$	85,518	$	78,678

CONSOLIDATED STATEMENTS OF INCOME (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Royalty revenue from a related party \| GSK
Amortization of capitalized fees paid to a related party	$ 3,456	$ 3,456

Debt - Convertible Senior Notes - Liability and Equity Components (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Liability component
Principal	$ 433,484	$ 433,484
Debt discount and issuance costs, net	(45,756)	(47,967)
Convertible senior notes \| 2025 Notes
Liability component
Principal	192,500	192,500
Debt discount and issuance costs, net	(44,697)	(46,766)
Net carrying amount	147,803	145,734
Equity component, net	$ 65,361	$ 65,361

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Thousands	Mar. 31, 2021	Dec. 31, 2020
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	101,408	101,392
Common stock, shares outstanding	101,408	101,392

Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2021	Apr. 19, 2021
Document and Entity Information
Entity Registrant Name	INNOVIVA, INC.
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2021
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, par value $0.01 per share
Trading Symbol	INVA
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		101,408,012
Entity Central Index Key	0001080014
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q1
Amendment Flag	false

Financial Instruments and Fair Value Measurements

3 Months Ended

Mar. 31, 2021

Financial Instruments and Fair Value Measurements

Financial Instruments and Fair Value Measurements

5. Financial Instruments and Fair Value Measurements

Equity Investment in Armata

During the first quarter of 2020, Innoviva acquired 8,710,800 shares of common stock and an equal number of warrants of Armata Pharmaceuticals, Inc. (“Armata”) for $25.0 million in cash. Armata is a clinical stage biotechnology company focused on precisely targeted bacteriophage therapeutics for antibiotic-resistant infections.

On January 26, 2021, Innoviva Strategic Opportunities LLC (“ISO”), our wholly owned subsidiary, entered into a securities purchase agreement with Armata to acquire 6,153,847 shares of Armata common stock and warrants to purchase 6,153,847 additional shares of Armata common stock for approximately $20.0 million. The investment was closed in two tranches on January 26, 2021 and March 17, 2021. The investment continues to support Armata’s ongoing advancement of its bacteriophage development programs. The additional investment in the first quarter of 2021 increased Innoviva and ISO’s combined ownership to 59.6%. Armata entered into a voting agreement with the Company and ISO, pursuant to which the Company and ISO agreed not to vote or take any action by written consent with respect to any common shares held by the Company and ISO that represent, in the aggregate, more than 49.5% of the total number of shares of Armata’s common stock issued and outstanding as of the record date for voting on the matters related to election or removal of Armata’s board members. Currently, three of the eight members of Armata’s board of directors are also members of the board of directors of Innoviva.

The investment in Armata provides Innoviva and ISO 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 and ISO are not the primary beneficiary of the VIE. We continue to elect 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 purchased in 2020 and 2021 have an exercise price of $2.87 and $3.25 per share, respectively, 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 March 31, 2021, the fair values of Armata’s common stock and warrants were estimated at $71.1 million and $54.2 million, respectively. 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 $125.3 million and $44.0 million was recorded as equity and long-term investments on the consolidated balance sheets as of March 31, 2021 and December 31, 2020, respectively. The changes in the fair values in the amount of $61.2 million and $21.9 million for the three months ended March 31, 2021 and 2020, respectively, were recorded as changes in fair value of equity and long-term investments, net on the consolidated statements of income.

Equity Investment in Entasis

During the second quarter of 2020, we purchased 14,000,000 shares of common stock as well as warrants to purchase 14,000,000 additional shares of common stock of Entasis Therapeutics, Inc. (“Entasis”) for approximately $35.0 million in cash. Entasis is a clinical-stage biotechnology company focused on the discovery and development of novel antibacterial products.

During the third quarter of 2020, we purchased 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. Innoviva has a right to designate two members to Entasis’ board. As of March 31, 2021 and the date hereof, no Innoviva designees are serving on Entasis’ six-member board. As of March 31, 2021, we owned approximately 51.0% of Entasis’s common stock.

The investment in Entasis provides Innoviva the ability to have significant influence, but not control over Entasis’ 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 for those warrants acquired in the second quarter of 2020 and an exercise price of $2.675 per share for the warrants acquired in the third quarter of 2020. 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.

As of March 31, 2021, the fair values of Entasis’s common stock and warrants were estimated at $40.0 million and $26.6 million, respectively. 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 $66.6 million and $78.0 million was recorded as equity and long-term investments on the consolidated balance sheets as of March 31, 2021 and December 31, 2020, respectively. We recorded $11.5 million unrealized loss from the changes of fair value as changes in fair values of equity and long-term investments, net on the consolidated statements of income for the three months ended March 31, 2021.

Equity Investment in InCarda

In October, 2020, TRC purchased 20,469,432 shares of Series C preferred stock and warrants to purchase 5,117,358 additional shares of Series C preferred stock of InCarda Therapeutics, Inc. for $15.0 million. $0.8 million was incurred for investment due diligence costs and recorded as part of the equity investment on the consolidated balance sheets. InCarda is a privately held biopharmaceutical company focused on developing inhaled therapies for cardiovascular diseases. As of March 31, 20201 and as of the date hereof, one of InCarda’s eight board members is designated by TRC. As of March 31, 2021, TRC held 13.0% of InCarda‘s outstanding equity.

The investment in InCarda 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 account for our investment in the 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 March 31, 2021 and December 31, 2020, the fair value of InCarda’s warrants was estimated at $0.7 million and $1.1 million, respectively, and recorded as equity and long-term investments on the consolidated balance sheets. We recorded $0.5 million unrealized loss from the changes of fair value as changes in fair values of equity and long-term investments, net on the consolidated statements of income for the three months ended March 31, 2021. There was no impairment or other change to the value of InCarda’s Series C preferred stock of $15.8 million as of March 31, 2021.

Equity Investment in ImaginAb

On March 18, 2021, TRC entered into a securities purchase agreement with ImaginAb, Inc. to purchase 4,051,724 shares of ImaginAb Series C preferred stock for $4.7 million. On the same day, TRC also entered into a securities purchase agreement with one of ImaginAb’s common stockholders to purchase 4,097,157 shares of ImaginAb common stock for $1.3 million. ImaginAb is a privately held biotechnology company focused on clinically managing cancer and autoimmune diseases via molecular imaging. $0.4 million was incurred for investment due diligence costs and execution and recorded as part of the equity investment on the consolidated balance sheets. As of the date hereof, one of ImaginAb’s seven board members is designated by TRC. As of March 31, 2021, TRC held 13.0% of ImaginAb equity ownership.

The investment in ImaginAb does not provide TRC the ability to control or have significant influence over ImaginAb’s operations. Based on our evaluation, we determined that ImaginAb is a VIE, but TRC is not the primary beneficiary of the VIE. Because ImaginAb’s equity securities are not publicly traded and do not have a readily determinable fair value, we have accounted for our investment in ImaginAb’s Series C preferred stock and common stock 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. As of March 31, 2021, $6.4 million was recorded as equity and long-term investments on the consolidated balance sheets.

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:


	March 31, 2021
			Gross		Gross
			Unrealized		Unrealized		Estimated
(In thousands)	Amortized Cost		Gains		Losses		Fair Value
Money market funds⁽¹⁾	$	248,932	$	—	$	—	$	248,932
Total	$	248,932	$	—	$	—	$	248,932

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


	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.

There was no credit loss to the money market funds as of March 31, 2021.

Fair Value Measurements

Our available-for-sale securities and equity investments 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 March 31, 2021 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	$	248,932	$	—	$	—	$	248,932
Investments held by ISP Fund LP ⁽¹⁾		304,696		—		—		304,696
Equity investment - Armata Common Stock		71,053		—		—		71,053
Equity investment - Armata Warrants		—		54,166		—		54,166
Equity investment - Entasis Common Stock		39,960		—		—		39,960
Equity investment - Entasis Warrants		—		26,580		—		26,580
Equity investment - InCarda Warrants		—		—		664		664
Total assets measured at estimated fair value	$	664,641	$	80,746	$	664	$	746,051
Debt
2023 Notes	$	—	$	242,336	$	—	$	242,336
2025 Notes		—		203,513		—		203,513
Total fair value of debt	$	—	$	445,849	$	—	$	445,849

(1)	The investments, which consisted of equity investments of $130.5 million and money market funds of $174.2 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, 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.

The fair values of our equity investments in Armata 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 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.

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.

Cash and cash equivalents

Consolidated Entities - Theravance Respiratory Company, LLC (Details) - USD ($)
$ in Thousands

3 Months Ended

Mar. 31, 2021

Mar. 31, 2020

Dec. 31, 2020

Assets

$ 282,890

$ 246,487

^[1]

Receivables from collaborative arrangements

88,974

93,931

^[1]

Prepaid expenses and other current assets

1,069

1,640

^[1]

Equity and long-term investments

519,325

438,258

^[1]

Total liabilities and stockholders' equity

1,088,290

999,570

^[1]

Liabilities and LLC Members' Equity

Current liabilities

3,804

6,110

^[1]

1,088,290

999,570

^[1]

Income statements

Royalty revenue from a related party

85,518

$ 78,678

Operating expenses

6,035

2,563

Income from operations

79,483

76,115

Other income (expense), net

(433)

Changes in fair values of equity and long-term investments, net

55,045

21,915

Theravance Respiratory Company, LLC

109,695

78,952

Assets

Cash and cash equivalents

28,444

38,081

Receivables from collaborative arrangements

22,084

24,946

Prepaid expenses and other current assets

Equity and long-term investments

22,869

16,959

Total liabilities and stockholders' equity

73,398

79,986

Liabilities and LLC Members' Equity

Current liabilities

640

508

LLC members' equity

72,758

79,478

73,398

$ 79,986

Income statements

Royalty revenue from a related party

22,084

16,135

Operating expenses

3,281

271

Income from operations

18,803

15,864

Other income (expense), net

Changes in fair values of equity and long-term investments, net

(483)

Commitments and Contingencies

$ 18,320

$ 15,900

[1]	Consolidated balance sheet as of December 31, 2020 has been derived from audited consolidated financial statements.

Commitments and Contingencies

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies

8. Commitments and Contingencies

Operating Lease

Future minimum operating lease payments on our corporate headquarters as of March 31, 2021 were as follows:


(In thousands)
Years ending December 31:
Remainder of 2021	$	92
2022		109
2023		—
Thereafter		—
Total	$	201

Legal Proceedings

From time to time, the Company is involved in legal proceedings in the ordinary course of its business. Currently, we believe that no litigation or arbitration, either individually or in the aggregate, to which we are presently a party is likely to have a material adverse effect on our operating results or financial position.

Description of Operations and Summary of Significant Accounting Policies (Details) - Long-Acting Beta2 Agonist (LABA) Collaboration - GSK $ in Billions	3 Months Ended
	Mar. 31, 2021 USD ($)
Description of Operations and Summary of Significant Accounting Policies
Percentage of economic interest in any future payments made under the agreements	15.00%
RELVAR/BREO
Description of Operations and Summary of Significant Accounting Policies
Royalty rate for first level of annual global net sales (as a percent)	15.00%
Annual global sales level used to determine royalty rate	$ 3.0
Royalty rate for sales above first level of annual global net sales (as a percent)	5.00%
ANORO \| Minimum
Description of Operations and Summary of Significant Accounting Policies
Royalty rate for combination products (as a percent)	6.50%
ANORO \| Maximum
Description of Operations and Summary of Significant Accounting Policies
Royalty rate for combination products (as a percent)	10.00%

Net Income Per Share (Tables)

3 Months Ended

Mar. 31, 2021

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 three months ended March 31, 2021 and 2020:


	Three Months Ended March 31,
(In thousands except per share data)	2021		2020
Numerator:
Net income attributable to Innoviva stockholders, basic	$	94,123	$	65,437
Add: interest expense on 2023 Notes		1,204		1,180
Net income attributable to Innoviva stockholders, diluted	$	95,327	$	66,617

Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders		101,365		101,235
Dilutive effect of 2023 Notes		12,189		12,189
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan		70		85
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders		113,624		113,509

Net income per share attributable to Innoviva stockholders
Basic	$	0.93	$	0.65
Diluted	$	0.84	$	0.59

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:


	Three Months Ended March 31,
(In thousands)	2021		2020
Outstanding options and awards granted under equity incentive plan and employee stock purchase plan	$	1,159	$	1,094

Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies

Schedule of future minimum lease payments

Future minimum operating lease payments on our corporate headquarters as of March 31, 2021 were as follows:


(In thousands)
Years ending December 31:
Remainder of 2021	$	92
2022		109
2023		—
Thereafter		—
Total	$	201

CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
CONSOLIDATED STATEMENTS OF INCOME
Royalty revenue from a related party, net of amortization of capitalized fees paid to a related party of $3,456 in three months ended March 31, 2021 and 2020	$ 85,518	$ 78,678
Operating expenses:
Research and development	49	0
General and administrative	5,986	2,563
Total operating expenses	6,035	2,563
Income from operations	79,483	76,115
Other income (expense), net	(433)	68
Interest income	30	1,302
Interest expense	(4,694)	(4,516)
Changes in fair values of equity and long-term investments, net	55,045	21,915
Income before income taxes	129,431	94,884
Income tax expense, net	(19,736)	(15,932)
Net income	109,695	78,952
Net income attributable to noncontrolling interest	15,572	13,515
Net income attributable to Innoviva stockholders	$ 94,123	$ 65,437
Basic net income per share attributable to Innoviva stockholders	$ 0.93	$ 0.65
Diluted net income per share attributable to Innoviva stockholders	$ 0.84	$ 0.59
Shares used to compute Innoviva basic and diluted net income per share:
Shares used to compute basic net income per share	101,365	101,235
Shares used to compute diluted net income per share	113,624	113,509

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($)
shares in Thousands, $ in Thousands

Common stock

Additional Paid-In Capital

Accumulated Other Comprehensive Income (Loss)

Accumulated Deficit

Noncontrolling Interest

Total

Balance at Dec. 31, 2019

$ 1,013

$ 1,258,859

$ 27

$ (946,404)

$ 28,621

$ 342,116

Balance (in shares) at Dec. 31, 2019

101,288

Increase (Decrease) in Stockholders' Equity

Distributions to noncontrolling interest

$ 0

(15,810)

Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding

$ 0

170

Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding (in shares)

Stock-based compensation

$ 0

435

Other comprehensive income

65,437

13,515

78,952

Balance at Mar. 31, 2020

$ 1,013

1,259,464

(880,967)

26,326

405,869

Balance (in shares) at Mar. 31, 2020

101,320

Balance at Dec. 31, 2020

$ 1,014

1,260,900

(722,002)

67,925

$ 607,837

^[1]

Balance (in shares) at Dec. 31, 2020

101,392

Increase (Decrease) in Stockholders' Equity

Distributions to noncontrolling interest

$ 0

(21,285)

$ (21,285)

Equity activity of noncontrolling interest from a consolidated variable interest entity

Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding

$ 0

(25)

Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding (in shares)

Stock-based compensation

$ 0

451

Balance (in shares) at Mar. 31, 2021

94,123

15,572

109,695

Balance at Mar. 31, 2021

$ 1,014

$ 1,261,326

$ 0

$ (627,879)

$ 62,220

$ 696,681

101,408

[1]	Consolidated balance sheet as of December 31, 2020 has been derived from audited consolidated financial statements.

Debt - Summary (Details) - USD ($)
$ in Thousands

Mar. 31, 2021

Dec. 31, 2020

Debt

Total debt

$ 433,484

Unamortized debt discount and issuance costs

(45,756)

(47,967)

Net long-term debt

387,728

385,517

^[1]

2023 Notes | Convertible subordinated notes

Debt

Total debt

240,984

2025 Notes | Convertible senior notes

Debt

Total debt

192,500

Unamortized debt discount and issuance costs

$ (44,697)

$ (46,766)

[1]	Consolidated balance sheet as of December 31, 2020 has been derived from audited consolidated financial statements.

Consolidated Entities

3 Months Ended

Mar. 31, 2021

Description of Operations and Summary of Significant Accounting Policies

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, 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 Management LP (“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 March 31, 2021, TRC held equity investments in InCarda Therapeutics, Inc. (“InCarda”) and ImaginAb, Inc. (“ImaginAb”). 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


	March 31,		December 31,
(In thousands)	2021		2020
Assets
Cash and cash equivalents	$	28,444	$	38,081
Receivables from collaborative arrangements		22,084		24,946
Prepaid expenses and other current assets		1		—
Equity and long-term investments		22,869		16,959
Total assets		73,398		79,986

Liabilities and LLC Members' Equity
Current liabilities		640		508
LLC members' equity		72,758		79,478
Total liabilities and LLC members' equity	$	73,398	$	79,986

Income statements


	Three Months Ended March 31,
(In thousands)	2021		2020
Royalty revenue from a related party	$	22,084	$	16,135
Operating expenses		3,281		271
Income from operations		18,803		15,864
Other income (expense), net		—		36
Changes in fair values of equity and long-term investments		(483)		—
Net income	$	18,320	$	15,900

Pulmoquine Therapeutics, Inc.

In April 2020, we purchased 5,808,550 shares of Series A preferred stock of Pulmoquine for $5.0 million in cash and held 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 March 31, 2021, Pulmoquine’s total assets, mainly attributable to cash and cash equivalents, were $3.3 million. Pulmoquine does not currently generate revenue. Total operating expense was de minimis for the three months ended March 31, 2021.

ISP Fund LP

In December 2020, Innoviva Strategic Partners LLC, our wholly owned subsidiary (“Strategic Partners”), contributed $300.0 million to ISP Fund LP (the “Partnership”) for investing in “long” positions in the healthcare, pharmaceutical and biotechnology sectors and became a limited partner. The general partner of the Partnership (“General Partner”) is an affiliate of Sarissa Capital.

As of March 31, 2021, we held 100% of the economic interest of the Partnership. As of March 31, 2021, total assets of the Partnership were $304.7 million, of which all were attributable to equity and long-term investments. During the three months ended March 31, 2021, the Partnership incurred $0.4 million investment-related expenses, net of investment-related income and recorded an unrealized gain of $5.8 million from the changes of fair value as changes in fair values of equity and long-term investments, net on the consolidated statements of income.

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Cash flows from operating activities
Net income	$ 109,695	$ 78,952
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes	19,736	15,932
Depreciation and amortization	3,460	3,463
Stock-based compensation	451	435
Amortization of debt discount and issuance costs	2,211	2,032
Amortization of discount on short-term investments	0	(272)
Amortization of lease guarantee	0	(81)
Changes in fair values of equity and long-term investments, net	(54,673)	(21,915)
Other non-cash items	8	0
Changes in operating assets and liabilities:
Receivables from collaborative arrangements	4,957	(2,707)
Prepaid expenses and other current assets	571	140
Accounts payable	(52)	112
Accrued personnel-related expenses and other accrued liabilities	227	(126)
Accrued interest payable	(2,484)	(2,484)
Net cash provided by operating activities	84,107	73,481
Cash flows from investing activities
Maturities of marketable securities	0	54,000
Purchases of marketable securities	0	(12,943)
Purchases of equity and long term investments	(26,394)	(25,000)
Purchases of property and equipment	0	(13)
Net cash provided by (used in) investing activities	(26,394)	16,044
Cash flows from financing activities
Repurchase of shares to satisfy tax withholding	(25)	(55)
Proceeds from issuances of common stock, net	0	225
Distributions to noncontrolling interest	(21,285)	(15,810)
Net cash used in financing activities	(21,310)	(15,640)
Net increase in cash and cash equivalents	36,403	73,885
Cash and cash equivalents at beginning of period	246,487	278,096
Cash and cash equivalents at end of period	282,890	351,981
Supplemental disclosure of cash flow information
Cash paid for interest	$ 4,967	$ 4,967

Debt

3 Months Ended

Mar. 31, 2021

Debt

Debt

7. Debt

Our debt consists of:


	March 31,		December 31,
(In thousands)	2021		2020
2023 Notes	$	240,984	$	240,984
2025 Notes		192,500		192,500
Total debt		433,484		433,484
Unamortized debt discount and issuance costs		(45,756)		(47,967)
Net long-term debt	$	387,728	$	385,517

Convertible Senior Notes Due 2025

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 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:


	March 31,		December 31,
(In thousands)	2021		2020
Liability component
Principal	$	192,500	$	192,500
Debt discount and issuance costs, net		(44,697)		(46,766)
Net carrying amount	$	147,803	$	145,734
Equity component, net	$	65,361	$	65,361

The following table sets forth total interest expense recognized related to the 2025 Notes for the three months ended March 31, 2021 and 2020:


	Three Months Ended March 31,
(In thousands)	2021		2020
Contractual interest expense	$	1,203	$	1,203
Amortization of debt issuance costs		159		145
Amortization of debt discount		1,911		1,749
Total interest and amortization expense	$	3,273	$	3,097

Debt Maturities

The aggregate scheduled maturities of our long-term debt as of March 31, 2021 were as follows:


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

Description of Operations and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2021

Description of Operations and Summary of Significant Accounting Policies

1. Description of Operations and Summary of Significant Accounting Policies

Description of Operations

Innoviva Inc. (referred to as "Innoviva", the "Company", or "we" and other similar pronouns) is 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^®.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements. In our opinion, the unaudited consolidated financial statements have been prepared on the same basis as audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of our financial position, results of operations, comprehensive income and cash flows. The interim results are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2021 or any other period.

The accompanying unaudited consolidated financial statements include the accounts of Innoviva, our wholly-owned subsidiaries and certain variable interest entities for which we are the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. For consolidated entities where we own or are exposed to less than 100% of the economics, we record net income (loss) attributable to noncontrolling interest in our unaudited consolidated statements of income equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on February 25, 2021 (“2020 Form 10-K”).

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.

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 under either voting or VIE models, 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 and long-term 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.

Accounting Pronouncement Adopted by the Company

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 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 adopted Topic 740 effective January 1, 2021. The adoption did not have a material impact on our consolidated financial statements.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements. This ASU improves 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 clarifies various topics in the codification so that entities can apply guidance more consistently. The ASU is effective for fiscal years beginning after December 15, 2020. We adopted ASU 2020-10 effective January 1, 2021. The adoption did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Standards or Updates Not Yet Adopted

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.

Stock-Based Compensation - Valuation Assumptions (Details) - $ / shares shares in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Valuation Assumptions
Granted (in shares)		0
Stock options \| Weighted-average
Valuation Assumptions
Risk-free interest rate	1.10%
Expected term (in years)	6 years 1 month 9 days
Volatility	45.60%
Dividend yield	0.00%
Weighted-average estimated fair value of shares granted (in dollars per share)	$ 5.42

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income	$ 109,695	$ 78,952
Unrealized gain on marketable securities, net	0	6
Comprehensive income	109,695	78,958
Comprehensive income attributable to noncontrolling interest	15,572	13,515
Comprehensive income attributable to Innoviva stockholders	$ 94,123	$ 65,443

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.

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.

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

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(g)(1)(ii))
-URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 45
-Paragraph 1A
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Aggregate scheduled maturities of long-term debt

Net Income Per Share - Anti-Dilutive Securities (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Equity incentive plans and ESPP
Anti-Dilutive Securities
Anti-dilutive securities (in shares)	1,159	1,094

Debt (Tables)

3 Months Ended

Mar. 31, 2021

Debt

Schedule of debt

Our debt consists of:


	March 31,		December 31,
(In thousands)	2021		2020
2023 Notes	$	240,984	$	240,984
2025 Notes		192,500		192,500
Total debt		433,484		433,484
Unamortized debt discount and issuance costs		(45,756)		(47,967)
Net long-term debt	$	387,728	$	385,517

The aggregate scheduled maturities of our long-term debt as of March 31, 2021 were 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:


	March 31,		December 31,
(In thousands)	2021		2020
Liability component
Principal	$	192,500	$	192,500
Debt discount and issuance costs, net		(44,697)		(46,766)
Net carrying amount	$	147,803	$	145,734
Equity component, net	$	65,361	$	65,361

Schedule of components of interest expense

The following table sets forth total interest expense recognized related to the 2025 Notes for the three months ended March 31, 2021 and 2020:


	Three Months Ended March 31,
(In thousands)	2021		2020
Contractual interest expense	$	1,203	$	1,203
Amortization of debt issuance costs		159		145
Amortization of debt discount		1,911		1,749
Total interest and amortization expense	$	3,273	$	3,097

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.

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Debt - Debt Maturities (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Long-term debt maturities for years ending December 31:
2021 to 2022	$ 0
2023	240,984
2024	0
2025	192,500
Total	$ 433,484	$ 433,484

Commitments and Contingencies (Details) $ in Thousands	Mar. 31, 2021 USD ($)
Future minimum lease payments for years ending December 31:
Remainder of 2021	$ 92
2022	109
2023	0
Thereafter	0
Total	$ 201

Description of Operations and Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2021
Description of Operations and Summary of Significant Accounting Policies
Basis of Presentation	Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements. In our opinion, the unaudited consolidated financial statements have been prepared on the same basis as audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of our financial position, results of operations, comprehensive income and cash flows. The interim results are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2021 or any other period. The accompanying unaudited consolidated financial statements include the accounts of Innoviva, our wholly-owned subsidiaries and certain variable interest entities for which we are the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. For consolidated entities where we own or are exposed to less than 100% of the economics, we record net income (loss) attributable to noncontrolling interest in our unaudited consolidated statements of income equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on February 25, 2021 (“2020 Form 10-K”).
Variable Interest Entities	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.
Equity Investments	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 under either voting or VIE models, 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 and long-term 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.
Accounting Pronouncement Adopted by the Company	Accounting Pronouncement Adopted by the Company In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 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 adopted Topic 740 effective January 1, 2021. The adoption did not have a material impact on our consolidated financial statements. In October 2020, the FASB issued ASU 2020-10, Codification Improvements. This ASU improves 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 clarifies various topics in the codification so that entities can apply guidance more consistently. The ASU is effective for fiscal years beginning after December 15, 2020. We adopted ASU 2020-10 effective January 1, 2021. The adoption did not have a material impact on our consolidated financial statements.
Recently Issued Accounting Standards or Updates Not Yet Adopted	Recently Issued Accounting Standards or Updates Not Yet Adopted 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.

Consolidated Entities - ISP Fund LP (Details) - USD ($)
$ in Thousands

3 Months Ended

Mar. 31, 2021

Mar. 31, 2020

Dec. 31, 2020

CONSOLIDATED ENTITIES

Unrealized gain on equity investments

$ 1,088,290

$ 999,570

^[1]

$ 54,673

$ 21,915

ISP Fund LP

CONSOLIDATED ENTITIES

Contributed to partnership for investing

$ 300,000

Economic interest of the Partnership (in percent)

100.00%

Net investment-related expense

$ 304,700

400

Unrealized gain on equity investments

$ 5,800

[1]	Consolidated balance sheet as of December 31, 2020 has been derived from audited consolidated financial statements.