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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2022

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

 

Commission File Number: 000-30319

 

INNOVIVA, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

 

94-3265960

(State or Other Jurisdiction of
Incorporation or Organization)

 

(I.R.S. Employer
Identification No.)

 

1350 Old Bayshore Highway Suite 400

Burlingame, CA 94010

(Address of Principal Executive Offices)

 

(650) 238-9600

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

INVA

 

The NASDAQ Global Select Market

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Act.

 

Large accelerated filer ☒

 

Accelerated filer ☐

 

 

 

Non-accelerated filer ☐

 

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No

 

The number of shares of registrant’s common stock outstanding on April 30, 2022 was 69,698,562.

 

 

 

 


 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements

 

 

 

Consolidated Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021

3

Unaudited Consolidated Statements of Income for the Three Months ended March 31, 2022 and 2021

4

Unaudited Consolidated Statements of Comprehensive Income for the Three Months ended March 31, 2022 and 2021

5

Unaudited Consolidated Statements of Stockholders’ Equity for the Three Months ended March 31, 2022 and 2021

6

Unaudited Consolidated Statements of Cash Flows for the Three Months ended March 31, 2022 and 2021

8

Notes to Unaudited Consolidated Financial Statements

9

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

30

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

37

 

 

Item 4. Controls and Procedures

37

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

37

 

 

Item 1A. Risk Factors

37

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

37

 

 

Item 3. Defaults Upon Senior Securities

37

 

 

Item 4. Mine Safety Disclosure

37

 

 

Item 5. Other Information

38

 

 

Item 6. Exhibits

38

 

 

Signatures

39

 

 

 

 

 

 

 

 

 

2


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

INNOVIVA, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

*

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

216,802

 

 

$

201,525

 

Related party receivables from collaborative arrangements

 

 

93,515

 

 

 

110,711

 

Prepaid expenses

 

 

5,576

 

 

 

1,367

 

Other current assets

 

 

1,930

 

 

 

70

 

Total current assets

 

 

317,823

 

 

 

313,673

 

Property and equipment, net

 

 

191

 

 

 

12

 

Equity and long-term investments

 

 

544,437

 

 

 

483,845

 

Capitalized fees paid to a related party, net

 

 

107,974

 

 

 

111,430

 

Right-of-use assets

 

 

3,794

 

 

 

97

 

Goodwill

 

 

5,544

 

 

 

 

Intangible assets

 

 

105,000

 

 

 

 

Deferred tax assets, net

 

 

22,398

 

 

 

17,327

 

Other assets

 

 

313

 

 

 

11

 

Total assets

 

$

1,107,474

 

 

$

926,395

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,808

 

 

$

27

 

Accrued personnel-related expenses

 

 

1,933

 

 

 

619

 

Accrued interest payable

 

 

1,397

 

 

 

4,152

 

Convertible subordinated notes due 2023,
   net of issuance costs

 

 

96,016

 

 

 

 

Other accrued liabilities

 

 

8,073

 

 

 

1,009

 

Total current liabilities

 

 

109,227

 

 

 

5,807

 

Long-term debt, net of discount and issuance costs

 

 

442,731

 

 

 

394,653

 

Lease liabilities, long-term

 

 

3,299

 

 

 

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

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

 

 

 

 

 

 

Common stock: $0.01 par value, 200,000 shares authorized,
   
69,594 and 69,566 issued and outstanding as of
   March 31, 2022 and December 31, 2021 respectively

 

 

696

 

 

 

696

 

Treasury stock: at cost, 32,005 at March 31, 2022
   and December 31, 2021, respectively

 

 

(393,829

)

 

 

(393,829

)

Additional paid-in capital

 

 

1,182,912

 

 

 

1,264,024

 

Accumulated deficit

 

 

(403,137

)

 

 

(456,148

)

Total Innoviva stockholders’ equity

 

 

386,642

 

 

 

414,743

 

Noncontrolling interest

 

 

165,575

 

 

 

111,192

 

Total stockholders’ equity

 

 

552,217

 

 

 

525,935

 

Total liabilities and stockholders’ equity

 

$

1,107,474

 

 

$

926,395

 

 

 

*
Consolidated balance sheet as of December 31, 2021 has been derived from audited consolidated financial statements.

See accompanying notes to consolidated financial statements.

3


 

INNOVIVA, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Royalty revenue from a related party, net of amortization
   of capitalized fees paid to a related party of $
3,456 
   in the three months ended March 31, 2022 and 2021

 

$

90,059

 

 

$

85,518

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

5,838

 

 

 

49

 

General and administrative

 

 

6,492

 

 

 

5,986

 

Total operating expenses

 

 

12,330

 

 

 

6,035

 

Income from operations

 

 

77,729

 

 

 

79,483

 

Interest and dividend income

 

 

322

 

 

 

30

 

Other expense, net

 

 

(250

)

 

 

(433

)

Interest expense

 

 

(3,010

)

 

 

(4,694

)

Loss on debt extinguishment

 

 

(20,662

)

 

 

 

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

 

 

(9,411

)

 

 

55,045

 

Income before income taxes

 

 

44,718

 

 

 

129,431

 

Income tax expense, net

 

 

6,860

 

 

 

19,736

 

Net income

 

 

37,858

 

 

 

109,695

 

Net income attributable to noncontrolling interest

 

 

22,085

 

 

 

15,572

 

Net income attributable to Innoviva stockholders

 

$

15,773

 

 

$

94,123

 

Basic net income per share attributable to
   Innoviva stockholders

 

$

0.23

 

 

$

0.93

 

Diluted net income per share attributable
   to Innoviva stockholders

 

$

0.20

 

 

$

0.84

 

Shares used to compute Innoviva basic and diluted
   net income per share:

 

 

 

 

 

 

Shares used to compute basic net income per share

 

 

69,544

 

 

 

101,365

 

Shares used to compute diluted net income per share

 

 

93,730

 

 

 

113,624

 

See accompanying notes to consolidated financial statements.

4


 

INNOVIVA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Net income

 

$

37,858

 

 

$

109,695

 

Unrealized gain on marketable securities, net

 

 

 

 

 

 

Comprehensive income

 

 

37,858

 

 

 

109,695

 

Comprehensive income attributable to noncontrolling interest

 

 

22,085

 

 

 

15,572

 

Comprehensive income attributable to Innoviva stockholders

 

$

15,773

 

 

$

94,123

 

See accompanying notes to consolidated financial statements.

5


 

INNOVIVA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31, 2022

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Treasury Stock

 

 

Noncontrolling

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Shares

 

 

Amount

 

 

Interest

 

 

Equity

 

Balance as of December 31, 2021

 

 

69,566

 

 

$

696

 

 

$

1,264,024

 

 

$

 

 

$

(456,148

)

 

 

32,005

 

 

$

(393,829

)

 

$

111,192

 

 

$

525,935

 

Cumulative adjustment due to adoption
of ASU 2020-06

 

 

 

 

 

 

 

 

(65,361

)

 

 

 

 

 

37,238

 

 

 

 

 

 

 

 

 

 

 

 

(28,123

)

Distributions to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,507

)

 

 

(6,507

)

Fair value of noncontrolling interest in a
   consolidated variable interest entity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38,471

 

 

 

38,471

 

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

 

 

28

 

 

 

 

 

 

214

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

214

 

Stock-based compensation

 

 

 

 

 

 

 

 

620

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

334

 

 

 

954

 

Capped call options associated with
   convertible senior notes due 2028

 

 

 

 

 

 

 

 

(16,585

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,585

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,773

 

 

 

 

 

 

 

 

 

22,085

 

 

 

37,858

 

Balance as of March 31, 2022

 

 

69,594

 

 

$

696

 

 

$

1,182,912

 

 

$

 

 

$

(403,137

)

 

 

32,005

 

 

$

(393,829

)

 

$

165,575

 

 

$

552,217

 

 

6


 

 

 

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated Other

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Noncontrolling

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Interest

 

 

Equity

 

Balance as of December 31, 2020

 

 

101,392

 

 

$

1,014

 

 

$

1,260,900

 

 

$

 

 

$

(722,002

)

 

$

67,925

 

 

$

607,837

 

Distributions to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21,285

)

 

 

(21,285

)

Equity activity of noncontrolling interest from
   a consolidated variable interest entity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 

 

 

8

 

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

 

 

16

 

 

 

 

 

 

(25

)

 

 

 

 

 

 

 

 

 

 

 

(25

)

Stock-based compensation

 

 

 

 

 

 

 

 

451

 

 

 

 

 

 

 

 

 

 

 

 

451

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

94,123

 

 

 

15,572

 

 

 

109,695

 

Balance as of March 31, 2021

 

 

101,408

 

 

$

1,014

 

 

$

1,261,326

 

 

$

 

 

$

(627,879

)

 

$

62,220

 

 

$

696,681

 

See accompanying notes to consolidated financial statements.

7


 

INNOVIVA, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

Net income

 

$

37,858

 

 

$

109,695

 

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

 

 

 

 

 

 

Deferred income tax

 

 

6,860

 

 

 

19,736

 

Depreciation and amortization

 

 

3,501

 

 

 

3,460

 

Stock-based compensation

 

 

954

 

 

 

451

 

Amortization of debt discount and issuance costs

 

 

377

 

 

 

2,211

 

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

 

 

9,411

 

 

 

(54,673

)

Loss on extinguishment of debt

 

 

20,662

 

 

 

 

Other

 

 

280

 

 

 

8

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Receivables from collaborative arrangements

 

 

17,196

 

 

 

4,957

 

Prepaid expenses

 

 

1,345

 

 

 

243

 

Other assets, current

 

 

99

 

 

 

328

 

Accounts payable

 

 

198

 

 

 

(52

)

Accrued personnel-related expenses and other accrued liabilities

 

 

2,116

 

 

 

227

 

Accrued interest payable

 

 

(2,755

)

 

 

(2,484

)

Net cash provided by operating activities

 

 

98,102

 

 

 

84,107

 

Cash flows from investing activities

 

 

 

 

 

 

Purchases of equity and long-term investments

 

 

(56,217

)

 

 

(26,394

)

Purchases of equity investments managed by ISP Fund LP

 

 

(2,015

)

 

 

(112,587

)

Sales of equity investments managed by ISP Fund LP

 

 

24,281

 

 

 

2,387

 

Purchase and sales of other investments managed by ISP Fund LP, net

 

 

(132,266

)

 

 

110,200

 

Purchases of property and equipment

 

 

(9

)

 

 

 

Cash acquired through the consolidation of Entasis Therapeutics Holdings, Inc.

 

 

23,070

 

 

 

 

Net cash used in investing activities

 

 

(143,156

)

 

 

(26,394

)

Cash flows from financing activities

 

 

 

 

 

 

Distributions to noncontrolling interest

 

 

(6,507

)

 

 

(21,285

)

Repurchase of shares to satisfy tax withholding

 

 

(46

)

 

 

(25

)

Proceeds from issuances of common stock, net

 

 

260

 

 

 

 

Payment for repurchase of convertible subordinated notes due 2023

 

 

(165,131

)

 

 

 

Purchases of capped call options associated with convertible senior notes due 2028

 

 

(21,037

)

 

 

 

Proceeds from issuance of convertible senior notes due 2028, net of issuance costs

 

 

252,792

 

 

 

 

Net cash provided by (used in) financing activities

 

 

60,331

 

 

 

(21,310

)

Net increase in cash and cash equivalents

 

 

15,277

 

 

 

36,403

 

Cash and cash equivalents at beginning of period

 

 

201,525

 

 

 

246,487

 

Cash and cash equivalents at end of period

 

$

216,802

 

 

$

282,890

 

Supplemental disclosure of cash flow information: