0000950170-21-002378 | 10-Q | XBRL Viewer

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2021	Oct. 18, 2021
Document and Entity Information
Entity Registrant Name	INNOVIVA, INC.
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 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		69,492,201
Entity Central Index Key	0001080014
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
Amendment Flag	false

CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands

Sep. 30, 2021

Dec. 31, 2020

Current assets:

Cash and cash equivalents

$ 135,115

$ 246,487

^[1]

101,271

93,931

^[1]

Prepaid expenses and other current assets

542

1,640

^[1]

Total current assets

236,928

342,058

^[1]

Property and equipment, net

^[1]

Equity and long-term investments

507,116

438,258

^[1]

Capitalized fees paid to a related party, net

114,885

125,253

^[1]

Deferred tax assets, net

28,159

93,759

^[1]

Other assets

136

214

^[1]

Total assets

887,239

999,570

^[1]

Current liabilities:

Accounts payable

^[1]

Accrued personnel-related expenses

488

490

^[1]

Accrued interest payable

1,668

4,152

^[1]

Other accrued liabilities

880

1,402

^[1]

Total current liabilities

3,125

6,110

^[1]

Long-term debt, net of discount and issuance costs

392,295

385,517

^[1]

Other long-term liabilities

106

^[1]

Commitments and contingencies (Note 8)

Stockholders' equity:

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

^[1]

Common stock: $0.01 par value, 200,000 shares authorized, 69,492 and 101,392 issued and outstanding as of September 30, 2021 and December 31, 2020 respectively

695

1,014

^[1]

Treasury stock: at cost, 32,005 and no shares at September 30, 2021 and December 31, 2020, respectively

(393,829)

^[1]

Additional paid-in capital

1,262,438

1,260,900

^[1]

Accumulated deficit

(466,493)

(722,002)

^[1]

Total Innoviva stockholders' equity

402,811

539,912

^[1]

Noncontrolling interest

88,994

67,925

^[1]

Total stockholders' equity

491,805

607,837

^[1]

Total liabilities and stockholders' equity

$ 887,239

$ 999,570

^[1]

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

CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Total net revenue	$ 97,862	$ 88,694	$ 284,186	$ 246,318
Operating expenses:
Research and development	449	1,010	536	1,569
General and administrative	2,860	3,254	13,074	8,413
Total operating expenses	3,309	4,264	13,610	9,982
Income from operations	94,553	84,430	270,576	236,336
Other income (expense), net	(652)	(13)	(2,036)	85
Interest income	453	41	503	1,501
Interest expense	(4,790)	(4,603)	(14,229)	(13,680)
Changes in fair values of equity and long-term investments, net	33,613	(29,368)	133,973	39,245
Income before income taxes	123,177	50,487	388,787	263,487
Income tax expense, net	20,531	8,866	65,600	44,689
Net income	102,646	41,621	323,187	218,798
Net income attributable to noncontrolling interest	30,208	13,403	67,678	48,299
Net income attributable to Innoviva stockholders	$ 72,438	$ 28,218	$ 255,509	$ 170,499
Basic net income per share attributable to Innoviva stockholders	$ 1.04	$ 0.28	$ 2.96	$ 1.68
Diluted net income per share attributable to Innoviva stockholders	$ 0.90	$ 0.26	$ 2.63	$ 1.53
Shares used to compute Innoviva basic and diluted net income per share:
Shares used to compute basic net income per share	69,458	101,358	86,298	101,306
Shares used to compute diluted net income per share	81,699	113,572	98,536	113,543
Royalty revenue from a related party
Total net revenue	$ 97,862	$ 88,694	$ 284,186	$ 236,318
Revenue from collaborative arrangements with a related party
Total net revenue	$ 0	$ 0	$ 0	$ 10,000

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income	$ 102,646	$ 41,621	$ 323,187	$ 218,798
Unrealized loss on marketable securities, net	0	2	0	(27)
Comprehensive income	102,646	41,623	323,187	218,771
Comprehensive income attributable to noncontrolling interest	30,208	13,403	67,678	48,299
Comprehensive income attributable to Innoviva stockholders	$ 72,438	$ 28,220	$ 255,509	$ 170,472

- 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.

+ References

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+ Details

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

Total

Common stock

Additional Paid-In Capital

Accumulated Other Comprehensive Income (Loss)

Accumulated Deficit

Treasury Stock

Noncontrolling Interest

Balance at Dec. 31, 2019

$ 342,116

$ 1,013

$ 1,258,859

$ 27

$ (946,404)

$ 28,621

Balance (in shares) at Dec. 31, 2019

101,288,000

Increase (Decrease) in Stockholders' Equity

Distributions to noncontrolling interest

(15,810)

$ 0

(15,810)

Distributions to noncontrolling interest (in shares)

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

170

$ 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)

32,000

Stock-based compensation

435

$ 0

435

Stock-based compensation (in shares)

Net income

78,952

$ 0

65,437

13,515

Net income (in shares)

Other comprehensive income

$ 0

Other comprehensive income (in shares)

Balance at Mar. 31, 2020

405,869

$ 1,013

1,259,464

(880,967)

26,326

Balance (in shares) at Mar. 31, 2020

101,320,000

Balance at Dec. 31, 2019

342,116

$ 1,013

1,258,859

(946,404)

28,621

Balance (in shares) at Dec. 31, 2019

101,288,000

Increase (Decrease) in Stockholders' Equity

Net income

218,798

Balance at Sep. 30, 2020

534,872

$ 1,014

1,260,447

(775,905)

49,316

Balance (in shares) at Sep. 30, 2020

101,391,000

Balance at Mar. 31, 2020

405,869

$ 1,013

1,259,464

(880,967)

26,326

Balance (in shares) at Mar. 31, 2020

101,320,000

Increase (Decrease) in Stockholders' Equity

Distributions to noncontrolling interest

(12,152)

$ 0

(12,152)

Distributions to noncontrolling interest (in shares)

Equity activity of noncontrolling interest from a consolidated variable interest entity

350

$ 0

350

Equity activity of noncontrolling interest from a consolidated variable interest entity (in shares)

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

180

$ 2

178

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

72,000

Stock-based compensation

375

$ 0

375

Stock-based compensation (in shares)

Net income

98,225

$ 0

76,844

21,381

Net income (in shares)

Other comprehensive income

(35)

$ 0

(35)

Other comprehensive income (in shares)

Balance at Jun. 30, 2020

492,812

$ 1,015

1,260,017

(2)

(804,123)

35,905

Balance (in shares) at Jun. 30, 2020

101,392,000

Increase (Decrease) in Stockholders' Equity

Equity activity of noncontrolling interest from a consolidated variable interest entity

$ 0

Equity activity of noncontrolling interest from a consolidated variable interest entity (in shares)

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

(12)

$ (1)

(11)

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

(1,000)

Stock-based compensation

441

$ 0

441

Stock-based compensation (in shares)

Net income

41,621

$ 0

28,218

13,403

Net income (in shares)

Other comprehensive income

$ 0

Other comprehensive income (in shares)

Balance at Sep. 30, 2020

534,872

$ 1,014

1,260,447

(775,905)

49,316

Balance (in shares) at Sep. 30, 2020

101,391,000

Balance at Dec. 31, 2020

$ 607,837

^[1]

$ 1,014

1,260,900

(722,002)

$ 0

67,925

Balance (in shares) at Dec. 31, 2020

101,392,000

Increase (Decrease) in Stockholders' Equity

Distributions to noncontrolling interest

$ (21,285)

$ 0

(21,285)

Distributions to noncontrolling interest (in shares)

Equity activity of noncontrolling interest from a consolidated variable interest entity

$ 0

Equity activity of noncontrolling interest from a consolidated variable interest entity (in shares)

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

(25)

$ 0

(25)

$ 0

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

16,000

Stock-based compensation

451

$ 0

451

$ 0

Stock-based compensation (in shares)

Net income

109,695

$ 0

94,123

$ 0

15,572

Net income (in shares)

Balance at Mar. 31, 2021

696,681

$ 1,014

1,261,326

(627,879)

$ 0

62,220

Balance (in shares) at Mar. 31, 2021

101,408,000

Balance at Dec. 31, 2020

$ 607,837

^[1]

$ 1,014

1,260,900

(722,002)

$ 0

67,925

Balance (in shares) at Dec. 31, 2020

101,392,000

Increase (Decrease) in Stockholders' Equity

Net income

$ 323,187

Balance at Sep. 30, 2021

$ 491,805

$ 695

1,262,438

(466,493)

$ (393,829)

88,994

Balance (in shares) at Sep. 30, 2021

69,492,000

32,005,000

Balance at Mar. 31, 2021

$ 696,681

$ 1,014

1,261,326

(627,879)

$ 0

62,220

Balance (in shares) at Mar. 31, 2021

101,408,000

Increase (Decrease) in Stockholders' Equity

Distributions to noncontrolling interest

(20,161)

$ 0

(20,161)

Distributions to noncontrolling interest (in shares)

Equity activity of noncontrolling interest from a consolidated variable interest entity

$ 0

Equity activity of noncontrolling interest from a consolidated variable interest entity (in shares)

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

$ 1

$ 0

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

92,000

Repurchase of common stock

(394,149)

$ (320)

$ (393,829)

Repurchase of common stock (in shares)

(32,005,000)

32,005,000

Stock-based compensation

470

$ 0

470

$ 0

Stock-based compensation (in shares)

Net income

110,846

$ 0

88,948

$ 0

21,898

Net income (in shares)

Balance at Jun. 30, 2021

393,745

$ 695

1,261,845

(538,931)

$ (393,829)

63,965

Balance (in shares) at Jun. 30, 2021

69,495,000

32,005,000

Increase (Decrease) in Stockholders' Equity

Distributions to noncontrolling interest

(4,912)

$ 0

(4,912)

Distributions to noncontrolling interest (in shares)

Equity activity of noncontrolling interest from a consolidated variable interest entity

(267)

$ 0

(267)

Equity activity of noncontrolling interest from a consolidated variable interest entity (in shares)

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

$ 0

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

(3,000)

Stock-based compensation

542

$ 0

542

$ 0

Stock-based compensation (in shares)

Net income

102,646

$ 0

72,438

$ 0

30,208

Net income (in shares)

Balance at Sep. 30, 2021

$ 491,805

$ 695

$ 1,262,438

$ 0

$ (466,493)

$ (393,829)

$ 88,994

Balance (in shares) at Sep. 30, 2021

69,492,000

32,005,000

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

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Cash flows from operating activities
Net income	$ 323,187	$ 218,798
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes	65,600	44,689
Depreciation and amortization	10,376	10,382
Stock-based compensation	1,463	1,251
Amortization of debt discount and issuance costs	6,778	6,230
Amortization of discount on short-term investments	0	(343)
Amortization of lease guarantee	0	135
Changes in fair values of equity and long-term investments, net	(132,485)	(39,245)
Other non-cash items	(251)	14
Changes in operating assets and liabilities:
Receivables from collaborative arrangements	(7,340)	(12,723)
Prepaid expenses and other current assets	1,098	264
Accounts payable	23	613
Accrued personnel-related expenses and other accrued liabilities	(533)	252
Accrued interest payable	(2,484)	(2,484)
Net cash provided by operating activities	265,432	227,833
Cash flows from investing activities
Maturities of marketable securities	0	86,000
Purchases of marketable securities	0	(12,943)
Purchases of equity and long term investments	(46,373)	(72,500)
Distributions of equity and long-term investments	110,000	0
Purchases of property and equipment	0	(13)
Net cash provided by investing activities	63,627	544
Cash flows from financing activities
Repurchase of common stock	(394,149)	0
Distributions to noncontrolling interest	(46,358)	(27,962)
Repurchase of shares to satisfy tax withholding	(47)	(83)
Proceeds from issuances of common stock, net	123	421
Net proceeds from the issuance of variable interest entity's equity	0	344
Net cash used in financing activities	(440,431)	(27,280)
Net increase (decrease) in cash and cash equivalents	(111,372)	201,097
Cash and cash equivalents at beginning of period	246,487	278,096
Cash and cash equivalents at end of period	135,115	479,193
Supplemental disclosure of cash flow information
Cash paid for interest	$ 9,933	$ 9,933

Description of Operations and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2021

Description of Operations and Summary of Significant Accounting Policies

Description of Operations and Summary of Significant Accounting Policies

1. Description of Operations and Summary of Significant Accounting Policies

Description of Operations

Innoviva Inc. (referred to as “Innoviva”, the “Company”, or “we” and other similar pronouns) is 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”). We evaluate 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.

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 the 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 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. The net sales reports provided by our partner are based on its methodology and assumptions to estimate rebates and returns, which it monitors and adjusts regularly in light of contractual and legal obligations, historical trends, past experience and projected market conditions. Our partner may make significant adjustments to its sales based on actual results recorded, which could cause our royalty revenue to fluctuate. We have the ability to conduct periodic royalty audits to evaluate the information provided by our partner. Royalties are recognized net of amortization of capitalized fees associated with any approval and launch milestone payments made to GSK.

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 ASU 2019-12 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.

Net Income Per Share

9 Months Ended

Sep. 30, 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 and nine months ended September 30, 2021 and 2020, respectively.

The following table shows the computation of basic and diluted net income per share for the three and nine months ended September 30, 2021 and 2020:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands except per share data)	2021		2020		2021		2020
Numerator:
Net income attributable to Innoviva stockholders, basic	$	72,438	$	28,218	$	255,509	$	170,499
Add: interest expense on 2023 Notes		1,186		1,171		3,553		3,535
Net income attributable to Innoviva stockholders, diluted	$	73,624	$	29,389	$	259,062	$	174,034
Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders		69,458		101,358		86,298		101,306
Dilutive effect of 2023 Notes		12,189		12,189		12,189		12,189
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan		52		25		49		48
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders		81,699		113,572		98,536		113,543
Net income per share attributable to Innoviva stockholders
Basic	$	1.04	$	0.28	$	2.96	$	1.68
Diluted	$	0.90	$	0.26	$	2.63	$	1.53

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:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2021		2020		2021		2020
Outstanding options and awards granted under equity incentive plan and employee stock purchase plan		891		1,268		1,048		1,172

Revenue Recognition and Collaborative Arrangements

9 Months Ended

Sep. 30, 2021

Revenue Recognition and Collaborative Arrangements

Revenue Recognition and Collaborative Arrangements

3. Revenue Recognition and Collaborative Arrangements

We recognize 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. Royalties, which may include adjustments of estimates of net sales in prior periods, are recognized net of amortization of capitalized fees associated with any approval and launch milestone payments made to GSK.

Net Revenue from Collaborative Arrangements

Net revenue recognized under our GSK Agreements was as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2021			2020			2021			2020
Royalties from a related party - RELVAR/BREO	$	54,092		$	63,893		$	176,398		$	165,612
Royalties from a related party - ANORO		11,641			11,882			34,101			32,931
Royalties from a related party - TRELEGY		35,585			16,375			84,055			48,143
Total royalties from a related party		101,318			92,150			294,554			246,686
Less: amortization of capitalized fees paid to a related party		(3,456	)		(3,456	)		(10,368	)		(10,368	)
Royalty revenue		97,862			88,694			284,186			236,318
Strategic alliance - MABA program		—			—			—			10,000
Total net revenue from GSK	$	97,862		$	88,694		$	284,186		$	246,318

- 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

9 Months Ended

Sep. 30, 2021

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, we are the primary beneficiary of the entities. We also consolidate the financial results of ISP Fund LP (the “Partnership”), which is 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 September 30, 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


	September 30,		December 31,
(In thousands)	2021		2020
Assets
Cash and cash equivalents	$	46,505	$	38,081
Receivables from collaborative arrangements		35,535		24,946
Prepaid expenses and other current assets		1		—
Equity and long-term investments		22,743		16,959
Total assets	$	104,784	$	79,986

Liabilities and LLC Members’ Equity
Current liabilities	$	189	$	508
LLC members’ equity		104,595		79,478
Total liabilities and LLC members’ equity	$	104,784	$	79,986

Income statements


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2021		2020		2021			2020
Royalty revenue from a related party	$	35,585	$	16,375	$	84,055		$	48,143
Strategic alliance - MABA program		—		—		—			10,000
Total net revenue		35,585		16,375		84,055			58,143
Operating expenses		194		607		3,811			1,358
Income from operations		35,391		15,768		80,244			56,785
Other income, net		—		—		—			37
Changes in fair values of equity and long-term investments		148		—		(589	)		—
Net income	$	35,539	$	15,768	$	79,655		$	56,822

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. These shares represent a majority voting interest in Pulmoquine. Pulmoquine is a biotechnology company focused on the research and development of an aerosolized formulation of hydroxychloroquine to treat respiratory infections. In August 2021, the directors and stockholders of Pulmoquine voted to cease and terminate all operations and activities of Pulmoquine as soon as practicable. In September 2021, we received a net distribution of $2.3 million in cash related to the voluntary dissolution of Pulmoquine. The dissolution will be finalized in the fourth quarter of 2021.

As of September 30, 2021 and December 31, 2020, Pulmoquine’s total assets, mainly attributable to cash and cash equivalents, were $0.2 million and $3.5 million, respectively. Pulmoquine does not generate revenue. Total operating expense was $0.5 million and $0.7 million for the three and nine months ended September 30, 2021 respectively. Total operating expense was $1.1 million and $1.7 million for the three and nine months ended September 30, 2020.

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.

In May 2021, Strategic Partners received a distribution of $110.0 million from the Partnership to provide funding to Innoviva for a strategic repurchase of shares held by GSK. Pursuant to the letter agreement entered into between Strategic Partners, the Partnership and Sarissa Capital Fund GP LP on May 20, 2021, Strategic Partners is obligated to make additional capital contributions to the Partnership in an aggregate amount equal to the amount of the distribution ($110.0 million) prior to March 31, 2022. The capital contributions will then be subject to a 36-month lock up period from the contribution date.

As of September 30, 2021, we continued to hold 100% of the economic interest of the Partnership. As of September 30, 2021 and December 31, 2020, total assets of the Partnership were $228.9 million and $299.3 million, respectively, of which all were attributable to equity and long-term investments. During the three and nine months ended September 30, 2021, the Partnership incurred $0.2 million and $1.5 million, respectively, of investment-related expenses, net of investment-related income. During the three and nine months ended September 30, 2021, the Partnership recorded net unrealized gains of $10.1 million and $30.6 million, respectively, and net realized gains of $10.5 million during the nine months ended September 30, 2021 as changes in fair values of equity and long-term investments, net on the consolidated statements of income.

Financial Instruments and Fair Value Measurements

9 Months Ended

Sep. 30, 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 investments 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% as of March 31, 2021. 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. As of September 30, 2021, three of the eight members of Armata’s board of directors are also members of the board of directors of Innoviva. As of September 30, 2021 and December 31, 2020, we owned approximately 59.5% and 46.6%, respectively, of Armata’s common stock.

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. All 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: 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 September 30, 2021, the fair values of Armata’s common stock and warrants were estimated at $53.8 million and $35.5 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 $89.3 million and $44.0 million was recorded as equity and long-term investments on the consolidated balance sheets as of September 30, 2021 and December 31, 2020, respectively. During the three and nine months ended September 30, 2021, we recorded $11.6 million unrealized loss and $25.3 million unrealized gains, respectively, as changes in fair values of equity and long-term investments, net on the consolidated statements of income. During the three and nine months ended September 30, 2020, we recorded $12.4 million unrealized loss and $23.0 million unrealized gains, respectively, as changes in fair values 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 September 30, 2021, no Innoviva designees are serving on Entasis’ six-member board.

On May 3, 2021, ISO entered into a securities purchase agreement with Entasis to acquire 10,000,000 shares of Entasis common stock and warrants to purchase 10,000,000 additional shares of Entasis common stock for approximately $20.0 million. The investment was closed in two tranches on May 3, 2021 and June 11, 2021. This investment supports the continued development of Entasis’ novel pipeline of pathogen-targeted antibacterial product candidates. As of September 30, 2021, we owned approximately 60.6% of Entasis’ common stock. As of December 31, 2020, we owned approximately 51.0% of Entasis’ 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’ 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 and $2.675 per share for those warrants acquired in the second and third quarter of 2020, respectively. The warrants acquired in the second quarter of 2021 have an exercise price of $2.00 per share. All of 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 September 30, 2021, the fair values of Entasis’s common stock and warrants were estimated at $95.8 million and $70.4 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 $166.2 million and $78.0 million was recorded as equity and long-term investments on the consolidated balance sheets as of September 30, 2021 and December 31, 2020, respectively. During the three and nine months ended September 30, 2021, we recorded $34.9 million and $68.1 million unrealized gains as changes in fair values of equity and long-term investments, net on the consolidated statements of income. During the three and nine months ended September 30, 2020, we recorded $17.0 million unrealized loss and $16.3 million unrealized gain, respectively, as changes in fair values of equity and long-term investments, net on the consolidated statements of income.

Equity Investment in InCarda

During the third quarter of 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. (“InCarda”) 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 September 30, 2021, one of InCarda’s eight board members is designated by TRC. As of September 30, 2021 and December 31, 2020, TRC held 13.0% and 13.4%, respectively, 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. As of September 30, 2021 and December 31, 2020, we recorded $15.8 million from our investment in InCarda’s Series C preferred stock as equity and long-term investments on the consolidated balance sheets. There was no impairment or other change to the value of InCarda’s Series C preferred stock as of September 30, 2021 and December 31, 2020.

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. In September 2021, TRC and InCarda entered into an amendment to extend the expiration date of the warrants from October 6, 2021 to March 31, 2022. 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 September 30, 2021 and December 31, 2020, the fair value of InCarda’s warrants was estimated at $0.6 million and $1.1 million, respectively, and recorded as equity and long-term investments on the consolidated balance sheets. During the three and nine months ended September 30, 2021, we recorded $0.1 million unrealized gain and $0.6 million unrealized loss, respectively, as changes in fair values of equity and long-term investments, net on the consolidated statements of income.

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 September 30, 2021, one of ImaginAb’s five board members is designated by TRC. As of September 30, 2021, TRC held 12.5% 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 September 30, 2021, $6.4 million was recorded as equity and long-term investments on the consolidated balance sheets. There was no change to the value of our investment in ImaginAB’s equity securities as of September 30, 2021.

Available-for-Sale Securities

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


	September 30, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
(In thousands)	Cost		Gains		Losses		Fair Value
Money market funds(1)	$	78,025	$	—	$	—	$	78,025
Total	$	78,025	$	—	$	—	$	78,025

(1)

Money market funds are included in cash and cash equivalents on the consolidated balance sheets.


	December 31, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
(In thousands)	Cost		Gains		Losses		Fair Value
Money market funds (1)	$	204,808	$	—	$	—	$	204,808
Total	$	204,808	$	—	$	—	$	204,808

(1)

Money market funds are included in cash and cash equivalents on the consolidated balance sheets.

There was no credit loss to our available-for-sale securities as of September 30, 2021 and December 31, 2020.

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 September 30, 2021 Using:
	Quoted Price in Active Markets for		Significant Other		Significant
	Identical		Observable		Unobservable
Types of Instruments	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	78,025	$	—	$	—	$	78,025
Investments held by ISP Fund LP (1)		226,848		—		2,098		228,946
Equity investment - Armata Common Stock		53,810		—		—		53,810
Equity investment - Armata Warrants		—		35,470		—		35,470
Equity investment - Entasis Common Stock		95,767		—		—		95,767
Equity investment - Entasis Warrants		—		70,380		—		70,380
Equity investment - InCarda Warrants		—		—		558		558
Total assets measured at estimated fair value	$	454,450	$	105,850	$	2,656	$	562,956
Debt
2023 Notes	$	—	$	259,142	$	—	$	259,142
2025 Notes		—		231,418		—		231,418
Total fair value of debt	$	—	$	490,560	$	—	$	490,560

(1)

The investments held by ISP Fund LP consisted of equity investments and money market funds, which are 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
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
Types of Instruments	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 held by ISP Fund LP consisted of equity investments and money market funds, which are 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 publicly traded 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.

InCarda’s warrants and private placement positions held by the ISP Fund LP and are classified as Level 3 financial instruments as these securities are not publicly traded and the assumptions used in the valuation model for valuing these securities 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

Debt

9 Months Ended

Sep. 30, 2021

Debt

Debt

7. Debt

Our debt consists of:


	September 30,			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		(41,189	)		(47,967	)
Net long-term debt	$	392,295		$	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:


	September 30,			December 31,
(In thousands)	2021			2020
Liability component
Principal	$	192,500		$	192,500
Debt discount and issuance costs, net		(40,420	)		(46,766	)
Net carrying amount	$	152,080		$	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 and nine months ended September 30, 2021 and 2020:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2021		2020		2021		2020
Contractual interest expense	$	1,203	$	1,203	$	3,609	$	3,609
Amortization of debt issuance costs		166		152		487		446
Amortization of debt discount		1,997		1,828		5,859		5,363
Total interest and amortization expense	$	3,366	$	3,183	$	9,955	$	9,418

Debt Maturities

The aggregate scheduled maturities of our long-term debt as of September 30, 2021 were as follows:


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

Description of Operations and Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 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”). We evaluate 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.
Revenue Recognition	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 the 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 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. The net sales reports provided by our partner are based on its methodology and assumptions to estimate rebates and returns, which it monitors and adjusts regularly in light of contractual and legal obligations, historical trends, past experience and projected market conditions. Our partner may make significant adjustments to its sales based on actual results recorded, which could cause our royalty revenue to fluctuate. We have the ability to conduct periodic royalty audits to evaluate the information provided by our partner. Royalties are recognized net of amortization of capitalized fees associated with any approval and launch milestone payments made to GSK.
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 ASU 2019-12 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.

Net Income Per Share (Tables)

9 Months Ended

Sep. 30, 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 and nine months ended September 30, 2021 and 2020:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands except per share data)	2021		2020		2021		2020
Numerator:
Net income attributable to Innoviva stockholders, basic	$	72,438	$	28,218	$	255,509	$	170,499
Add: interest expense on 2023 Notes		1,186		1,171		3,553		3,535
Net income attributable to Innoviva stockholders, diluted	$	73,624	$	29,389	$	259,062	$	174,034
Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders		69,458		101,358		86,298		101,306
Dilutive effect of 2023 Notes		12,189		12,189		12,189		12,189
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan		52		25		49		48
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders		81,699		113,572		98,536		113,543
Net income per share attributable to Innoviva stockholders
Basic	$	1.04	$	0.28	$	2.96	$	1.68
Diluted	$	0.90	$	0.26	$	2.63	$	1.53

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:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2021		2020		2021		2020
Outstanding options and awards granted under equity incentive plan and employee stock purchase plan		891		1,268		1,048		1,172

Consolidated Entities (Tables)

9 Months Ended

Sep. 30, 2021

Consolidated Entities

Schedule of balance sheets and income statements of VIE

The summarized financial information for TRC is presented as follows:

Balance sheets


	September 30,		December 31,
(In thousands)	2021		2020
Assets
Cash and cash equivalents	$	46,505	$	38,081
Receivables from collaborative arrangements		35,535		24,946
Prepaid expenses and other current assets		1		—
Equity and long-term investments		22,743		16,959
Total assets	$	104,784	$	79,986

Liabilities and LLC Members’ Equity
Current liabilities	$	189	$	508
LLC members’ equity		104,595		79,478
Total liabilities and LLC members’ equity	$	104,784	$	79,986

Income statements


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2021		2020		2021			2020
Royalty revenue from a related party	$	35,585	$	16,375	$	84,055		$	48,143
Strategic alliance - MABA program		—		—		—			10,000
Total net revenue		35,585		16,375		84,055			58,143
Operating expenses		194		607		3,811			1,358
Income from operations		35,391		15,768		80,244			56,785
Other income, net		—		—		—			37
Changes in fair values of equity and long-term investments		148		—		(589	)		—
Net income	$	35,539	$	15,768	$	79,655		$	56,822

- 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)

9 Months Ended

Sep. 30, 2021

Financial Instruments and Fair Value Measurements

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


	September 30, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
(In thousands)	Cost		Gains		Losses		Fair Value
Money market funds(1)	$	78,025	$	—	$	—	$	78,025
Total	$	78,025	$	—	$	—	$	78,025

(1)

Money market funds are included in cash and cash equivalents on the consolidated balance sheets.


	December 31, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
(In thousands)	Cost		Gains		Losses		Fair Value
Money market funds (1)	$	204,808	$	—	$	—	$	204,808
Total	$	204,808	$	—	$	—	$	204,808

(1)

Money market funds are 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

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 September 30, 2021 Using:
	Quoted Price in Active Markets for		Significant Other		Significant
	Identical		Observable		Unobservable
Types of Instruments	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	78,025	$	—	$	—	$	78,025
Investments held by ISP Fund LP (1)		226,848		—		2,098		228,946
Equity investment - Armata Common Stock		53,810		—		—		53,810
Equity investment - Armata Warrants		—		35,470		—		35,470
Equity investment - Entasis Common Stock		95,767		—		—		95,767
Equity investment - Entasis Warrants		—		70,380		—		70,380
Equity investment - InCarda Warrants		—		—		558		558
Total assets measured at estimated fair value	$	454,450	$	105,850	$	2,656	$	562,956
Debt
2023 Notes	$	—	$	259,142	$	—	$	259,142
2025 Notes		—		231,418		—		231,418
Total fair value of debt	$	—	$	490,560	$	—	$	490,560

(1)

The investments held by ISP Fund LP consisted of equity investments and money market funds, which are 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
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
Types of Instruments	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 held by ISP Fund LP consisted of equity investments and money market funds, which are subject to a 36-month lock-up period from our initial contribution date, December 11, 2020.

- 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

Debt (Tables)

9 Months Ended

Sep. 30, 2021

Debt

Schedule of debt

Our debt consists of:


	September 30,			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		(41,189	)		(47,967	)
Net long-term debt	$	392,295		$	385,517

Aggregate scheduled maturities of long-term debt

The aggregate scheduled maturities of our long-term debt as of September 30, 2021 were as follows:


(In thousands)
Years ending December 31:
Remainder of 2021	$	—
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:


	September 30,			December 31,
(In thousands)	2021			2020
Liability component
Principal	$	192,500		$	192,500
Debt discount and issuance costs, net		(40,420	)		(46,766	)
Net carrying amount	$	152,080		$	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 and nine months ended September 30, 2021 and 2020:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2021		2020		2021		2020
Contractual interest expense	$	1,203	$	1,203	$	3,609	$	3,609
Amortization of debt issuance costs		166		152		487		446
Amortization of debt discount		1,997		1,828		5,859		5,363
Total interest and amortization expense	$	3,366	$	3,183	$	9,955	$	9,418

- 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

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02.22)
-URI http://asc.fasb.org/extlink&oid=120391452&loc=d3e13212-122682

Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
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-Section 45
-Paragraph 1A
-URI http://asc.fasb.org/extlink&oid=119993939&loc=d3e28541-108399

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
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-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 6
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21506-112644

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(e),(f))
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Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef
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-Section 55
-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=114775985&loc=d3e28878-108400

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

+ Details

Net Income Per Share - Basic and Diluted EPS (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Numerator:
Net income attributable to Innoviva stockholders, basic	$ 72,438	$ 28,218	$ 255,509	$ 170,499
Add: interest expense on 2023 Notes	1,186	1,171	3,553	3,535
Net income attributable to Innoviva stockholders, diluted	$ 73,624	$ 29,389	$ 259,062	$ 174,034
Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders	69,458,000	101,358,000	86,298,000	101,306,000
Dilutive effect of 2023 Notes	12,189	12,189	12,189	12,189
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan	52	25	49	48
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders	81,699,000	113,572,000	98,536,000	113,543,000
Net income per share attributable to Innoviva stockholders
Basic net income per share	$ 1.04	$ 0.28	$ 2.96	$ 1.68
Diluted net income per share	$ 0.90	$ 0.26	$ 2.63	$ 1.53
Convertible senior notes \| 2025 Notes
Net Income Per Share
Dilutive effect of the assumed conversion premium	0	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	$ 17.26	$ 17.26	$ 17.26

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

3 Months Ended

9 Months Ended

Sep. 30, 2021

Jun. 30, 2021

Mar. 31, 2021

Sep. 30, 2020

Jun. 30, 2020

Mar. 31, 2020

Sep. 30, 2021

Sep. 30, 2020

Dec. 31, 2020

Assets

Cash and cash equivalents

$ 135,115

$ 246,487

^[1]

Receivables from collaborative arrangements

101,271

93,931

^[1]

Prepaid expenses and other current assets

542

1,640

^[1]

Equity and long-term investments

507,116

438,258

^[1]

Total assets

887,239

999,570

^[1]

Liabilities and LLC Members' Equity

Current liabilities

3,125

6,110

^[1]

Total liabilities and stockholders' equity

887,239

999,570

^[1]

Income statements

Total net revenue

97,862

$ 88,694

284,186

$ 246,318

Operating expenses

3,309

4,264

13,610

9,982

Income from operations

94,553

84,430

270,576

236,336

Other income, net

(652)

(13)

(2,036)

Changes in fair values of equity and long-term investments

33,613

(29,368)

133,973

39,245

Net income

102,646

$ 110,846

$ 109,695

41,621

$ 98,225

$ 78,952

323,187

218,798

Royalty revenue from a related party

Income statements

Total net revenue

97,862

88,694

284,186

236,318

Revenue from collaborative arrangements with a related party

Income statements

Total net revenue

10,000

Theravance Respiratory Company, LLC

Assets

Cash and cash equivalents

46,505

38,081

Receivables from collaborative arrangements

35,535

24,946

Prepaid expenses and other current assets

Equity and long-term investments

22,743

16,959

Total assets

104,784

79,986

Liabilities and LLC Members' Equity

Current liabilities

189

508

LLC members' equity

104,595

79,478

Total liabilities and stockholders' equity

104,784

$ 79,986

Income statements

Total net revenue

35,585

16,375

84,055

58,143

Operating expenses

194

607

3,811

1,358

Income from operations

35,391

15,768

80,244

56,785

Other income, net

Changes in fair values of equity and long-term investments

148

(589)

Net income

35,539

15,768

79,655

56,822

Theravance Respiratory Company, LLC | Royalty revenue from a related party

Income statements

Total net revenue

35,585

16,375

84,055

48,143

Strategic alliance - MABA program | Theravance Respiratory Company, LLC

Income statements

Total net revenue

$ 0

$ 10,000

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

Financial Instruments and Fair Value Measurements - Equity Investment in Armata (Details) - Armata $ / shares in Units, $ in Millions		3 Months Ended				9 Months Ended
	Jan. 26, 2021 USD ($) $ / shares shares	Sep. 30, 2021 USD ($) Director	Mar. 31, 2021 Tranche	Sep. 30, 2020 USD ($)	Mar. 31, 2020 USD ($) $ / shares shares	Sep. 30, 2021 USD ($) Director	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Equity investment
Equity investment ownership percentage		59.50%	59.60%			59.50%		46.60%
Percentage of maximum voting rights						49.50%
Number of Investee's Board members currently representing the Company \| Director		3				3
Number of the Investee's Board members \| Director		8				8
Unrealized gain from fair value changes in equity investments						$ 25.3	$ 23.0
Unrealized loss from fair value changes in equity investments		$ 11.6		$ 12.4
Common stock and warrants
Equity investment
Payments to acquire equity securities					$ 25.0
Fair value of equity securities		89.3				89.3		$ 44.0
Common stock
Equity investment
Number of shares purchased under the securities purchase agreement \| shares					8,710,800
Fair value of equity securities		53.8				53.8		26.0
Warrants
Equity investment
Number of warrants purchased under the securities purchase agreement \| shares					8,710,800
Fair value of equity securities		$ 35.5				$ 35.5		$ 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

Financial Instruments and Fair Value Measurements - Fair Value Measurements (Details) - USD ($) $ in Thousands	Dec. 11, 2020	Sep. 30, 2021	Dec. 31, 2020
ISP Fund LP
Debt
Lock-up period	36 months
Recurring basis
Assets
Total assets measured at estimated fair value		$ 562,956	$ 627,254
Recurring basis \| Money market funds
Assets
Total assets measured at estimated fair value		78,025	204,808
Recurring basis \| Equity investments and money market funds \| ISP Fund LP
Assets
Total assets measured at estimated fair value		228,946	299,288
Recurring basis \| Quoted Price in Active Markets for Identical Assets, Level 1
Assets
Total assets measured at estimated fair value		454,450	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		78,025	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		226,848	299,288
Recurring basis \| Significant Other Observable Inputs, Level 2
Assets
Total assets measured at estimated fair value		105,850	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		2,656	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		2,098	0
Nonrecurring basis \| Debt
Debt
2023 Notes		259,142	239,779
2025 Notes		231,418	206,135
Total fair value of debt		490,560	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		259,142	239,779
2025 Notes		231,418	206,135
Total fair value of debt		490,560	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		53,810	25,958
Armata \| Recurring basis \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value		35,470	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		53,810	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		35,470	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		95,767	46,122
Entasis \| Recurring basis \| Equity investment \| Warrants
Assets
Total assets measured at estimated fair value		70,380	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		95,767	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		70,380	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		558	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		$ 558	$ 1,147

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2021	Dec. 31, 2020
CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	230,000	230,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	69,492,000	101,392,000
Common stock, shares outstanding	69,492,000	101,392,000
Treasury stock, shares	32,005,000	0

CONSOLIDATED STATEMENTS OF INCOME (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Royalty revenue from a related party \| GSK
Amortization of capitalized fees paid to a related party	$ 3,456	$ 3,456	$ 10,368	$ 10,368

Description of Operations and Summary of Significant Accounting Policies (Details) - Long-Acting Beta2 Agonist (LABA) Collaboration - GSK $ in Billions	9 Months Ended
	Sep. 30, 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%

Financial Instruments and Fair Value Measurements - Equity Investment in Entasis (Details) - Entasis $ / shares in Units, $ in Millions		3 Months Ended				9 Months Ended
	May 03, 2021 USD ($) shares	Sep. 30, 2021 USD ($) Director	Jun. 30, 2021 Tranche $ / shares	Sep. 30, 2020 USD ($) $ / shares shares	Jun. 30, 2020 USD ($) $ / shares shares	Sep. 30, 2021 USD ($) Director	Sep. 30, 2020 USD ($) $ / 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				0
Number of the Investee's Board members \| Director		6				6
Number of tranches \| Tranche			2
Equity investment ownership percentage		60.60%				60.60%		51.00%
Equity Securities, FV-NI, Unrealized Loss				$ 17.0
Equity Securities, FV-NI, Unrealized Gain		$ 34.9				$ 68.1	$ 16.3
Common stock and warrants
Equity Investment
Payments to acquire equity securities	$ 20.0			$ 12.5	$ 35.0
Fair value of equity securities		166.2				166.2		$ 78.0
Common stock
Equity Investment
Number of shares purchased under the securities purchase agreement \| shares	10,000,000			4,672,897	14,000,000
Fair value of equity securities		95.8				95.8		46.1
Warrants
Equity Investment
Number of warrants purchased under the securities purchase agreement \| shares	10,000,000			4,672,897	14,000,000
Fair value of equity securities		$ 70.4				$ 70.4		$ 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			$ 2.675
Term of warrants				5 years			5 years
Warrants acquired in second quarter of 2021
Equity Investment
Exercise price of warrants \| $ / shares			$ 2.00
Term of warrants			5 years

Financial Instruments and Fair Value Measurements - Equity Investment in InCarda (Details) - InCarda	3 Months Ended		9 Months Ended	12 Months Ended
	Sep. 30, 2021 USD ($) Director	Sep. 30, 2020 USD ($) $ / shares shares	Sep. 30, 2021 USD ($) Director	Dec. 31, 2020 USD ($)
Equity Investment
Number of Investee's Board members currently representing the Company \| Director	1		1
Number of the Investee's Board members \| Director	8		8
Equity investment ownership percentage	13.00%		13.00%	13.40%
Series C preferred stock and warrants
Equity Investment
Payments to acquire equity securities		$ 15,000,000.0
Transaction costs to acquire equity securities		$ 800,000
Series C preferred stock
Equity Investment
Number of shares purchased under the securities purchase agreement \| shares		20,469,432
Equity and long-term investments at fair value	$ 15,800,000		$ 15,800,000	$ 15,800,000
Impairment of equity investments			0	0
Warrants
Equity Investment
Number of warrants purchased under the securities purchase agreement \| shares		5,117,358
Equity and long-term investments at fair value	$ 600,000		600,000	$ 1,100,000
Exercise price of warrants \| $ / shares		$ 0.7328
Extended expiration date	Mar. 31, 2022
Unrealized loss from fair value changes in equity investments			$ 600,000
Unrealized gain from fair value changes in equity investments	$ 100,000

Financial Instruments and Fair Value Measurements - Equity Investment in ImaginAb (Details) - ImaginAb $ in Millions	Mar. 18, 2021 USD ($) shares	Sep. 30, 2021 USD ($) Director
Equity Investment
Transaction costs to acquire equity securities	$ 0.4
Equity investment ownership percentage		12.50%
Number of Investee's Board members currently representing the Company \| Director		1
Number of the Investee's Board members \| Director		5
Equity and long-term investments at fair value		$ 6.4
Series C preferred stock
Equity Investment
Number of shares to be purchased under the securities purchase agreement \| shares	4,051,724
Amount of securities purchase agreement	$ 4.7
One of ImaginAb's Common Stockholders \| Common stock
Equity Investment
Number of shares to be purchased under the securities purchase agreement \| shares	4,097,157
Amount of securities purchase agreement	$ 1.3

Financial Instruments and Fair Value Measurements - Available-for-Sale Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Available-for-Sale Securities
Amortized Cost	$ 78,025	$ 204,808
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Value	78,025	204,808
Credit loss	0	0
Money market funds
Available-for-Sale Securities
Amortized Cost	78,025	204,808
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Value	$ 78,025	$ 204,808

Debt - Convertible Senior Notes - Liability and Equity Components (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Liability component
Principal	$ 433,484	$ 433,484
Debt discount and issuance costs, net	(41,189)	(47,967)
Convertible senior notes \| 2025 Notes
Liability component
Principal	192,500	192,500
Debt discount and issuance costs, net	(40,420)	(46,766)
Net carrying amount	152,080	145,734
Equity component, net	$ 65,361	$ 65,361

Debt - Debt Maturities (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Long-term debt maturities for years ending December 31:
Remainder of 2021	$ 0
2022	0
2023	240,984
2024	0
2025	192,500
Total	$ 433,484	$ 433,484

Commitments and Contingencies (Details) $ in Thousands	Sep. 30, 2021 USD ($)
Future minimum lease payments for years ending December 31:
Remainder of 2021	$ 31
2022	109
Thereafter	0
Total	$ 140

Shareholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended
	May 25, 2021	Jun. 30, 2021
Shareholders' Equity
Total consideration for repurchase of shares, including related transaction fees		$ 394,149
Share repurchase agreement with GSK
Shareholders' Equity
Number of shares repurchased	32,005,260
Repurchase price per share	$ 12.25
Total consideration for repurchase of shares, including related transaction fees	$ 394,100

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Income Taxes
Provisional income tax expense	$ 20,531	$ 8,866	$ 65,600	$ 44,689
Effective tax rate (as a percent)			16.90%	17.00%