0000950170-22-007798 | 10-Q | XBRL Viewer

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Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2022	Apr. 30, 2022
Cover [Abstract]
Entity Registrant Name	INNOVIVA, INC.
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2022
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		69,698,562
Entity Central Index Key	0001080014
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q1
Amendment Flag	false

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
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	0
Intangible assets	105,000	0
Deferred tax assets, net	22,398	17,327
Other assets	313	11
Total assets	1,107,474	926,395
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	0
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	0
Commitments and contingencies (Note 9)
Stockholders' equity:
Preferred stock: $0.01 par value, 230 shares authorized, no shares issued and outstanding	0	0
Common stock: $0.01 par value, 200,000 shares authorized, 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 SHEETS (Parenthetical) - $ / shares	Mar. 31, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
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	69,594,000	69,566,000
Common stock, shares outstanding	69,594,000	69,566,000
Treasury stock, shares	32,005,000	32,005,000

CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Total revenue	$ 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 extinguishment of debt	(20,662)	0
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

CONSOLIDATED STATEMENTS OF INCOME (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Royalty revenue from a related party \| GSK
Amortization of capitalized fees paid to a related party	$ 3,456	$ 3,456

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Statement of Comprehensive Income [Abstract]
Net Income	$ 37,858	$ 109,695
Unrealized gain on marketable securities, net	0	0
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

- 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	Cumulative Effect, Period of Adoption, Adjustment [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member] Additional Paid-In Capital	Cumulative Effect, Period of Adoption, Adjustment [Member] Accumulated Deficit
Balance at Dec. 31, 2020	$ 607,837	$ 1,014	$ 1,260,900		$ (722,002)		$ 67,925
Balance (in shares) at Dec. 31, 2020		101,392,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Distributions to noncontrolling interest	(21,285)	$ 0	0	0	0		(21,285)
Equity activity of noncontrolling interest from a consolidated variable interest entity	8	0	0	0	0		8
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	0		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
Stock-based compensation	451	$ 0	451	0	0		0
Net income	109,695	0	0	0	94,123		15,572
Balance at Mar. 31, 2021	696,681	$ 1,014	1,261,326		(627,879)		62,220
Balance (in shares) at Mar. 31, 2021		101,408,000
Balance at Dec. 31, 2021	$ 525,935	$ 696	1,264,024		(456,148)	$ (393,829)	111,192	$ (28,123)	$ (65,361)	$ 37,238
Balance (in shares) at Dec. 31, 2021	69,566,000	69,566,000				32,005,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Accounting Standards Update [Extensible Enumeration]								Accounting Standards Update 2020-06 [Member]	Accounting Standards Update 2020-06 [Member]	Accounting Standards Update 2020-06 [Member]
Distributions to noncontrolling interest	$ (6,507)	$ 0	0	0	0	$ 0	(6,507)
Fair value of noncontrolling interest in a consolidated variable interest entity	38,471	0	0	0	0	0	38,471
Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding	214	$ 0	214	0	0	0	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)		28,000
Stock-based compensation	954		620			0	334
Capped call options associated with convertible senior notes due 2028	(16,585)	0	(16,585)	0	0	0	0
Net income	37,858	0	0	0	15,773	0	22,085
Balance at Mar. 31, 2022	$ 552,217	$ 696	$ 1,182,912		$ (403,137)	$ (393,829)	$ 165,575
Balance (in shares) at Mar. 31, 2022	69,594,000	69,594,000				32,005,000

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 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	0
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)
Sale 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)	0
Cash acquired through the consolidation of Entasis Therapeutics Holdings, Inc.	23,070	0
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	0
Payment for repurchase of convertible subordinated notes due 2023	(165,131)	0
Purchases of capped call options associated with convertible senior notes due 2028	(21,037)	0
Proceeds from issuance of convertible senior notes due 2028, net of issuance costs	252,792	0
Net cash provided by (used in) financing activities	60,331	(21,310)
Net increase (decrease) 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
Cash paid for interest	5,411	4,967
Supplemental disclosure of non-cash investing and financing activities
Right-of-use asset obtained through the consolidation of Entasis Therapeutics Holdings, Inc	3,289	0
ASU 2020-06
Supplemental disclosure of non-cash investing and financing activities
Adoption of ASU 2020-06	$ 28,123	$ 0

Description of Operations and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

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, 2022 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 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, 2021 filed with the Securities and Exchange Commission (“SEC”) on February 28, 2022, and as amended on March 17, 2022 (“2021 Form 10-K”).

Prior Period Immaterial Correction

Subsequent to the issuance of the consolidated financial statements for the three months ended March 31, 2021, the Company identified that (i) sales of equity investments managed by ISP Fund LP for $2.4 million, and (ii) purchase and sales of other investments managed by ISP Fund LP, net for $110.2 million were incorrectly netted in the consolidated statement of cash flows within the line item purchases of equity and long-term investments, net. The Company has corrected the presentation in the accompanying consolidated statement of cash flows for the three months ended March 31, 2021 from amounts previously reported to present such line items separately. The correction did not impact total cash flows from investing activities or the consolidated balance sheet, statement of income, or statement of comprehensive income. Management assessed the correction on a quantitative and qualitative basis and determined that it is immaterial to the prior period consolidated financial statements. The Company additionally reclassified purchases of equity investments managed by ISP Fund LP of $112.6 million from purchases of equity and long-term investments to be presented in a separate line item in the consolidated statement of cash flows, to conform with the current period presentation.

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 and Long-Term Investments

We invest from time to time in equity and debt 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 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 the security without a readily determinable fair value using the measurement alternative under ASC Topic 312, Investments - Equity Securities. 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.

We also invest in ISP Fund LP, which investments consist of money market funds and equity securities in the healthcare, pharmaceutical and biotechnology industries. Pursuant to the Partnership Agreement entered in December 2020, we became a limited partner of this partnership, and our contributions are subject to a 36-month lock-up period which restriction prevents us from having control and access to the contributions and related investments. These investments are classified as long-term investments on the consolidated balance sheets.

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.

Research and Development Costs

Research and development costs are expensed in the period that services are rendered or goods are received. Research and development costs consist of salaries and benefits, laboratory supplies and facility costs, as well as fees paid to third parties that conduct certain research and development activities on behalf of the Company’s consolidated variable interest entity, net of certain external research and development costs reimbursed under the collaboration arrangements of the Company’s consolidated variable interest entity. Non-refundable pre-payments for goods or services that will be used or rendered for future research and development activities are deferred. The Company’s consolidated variable interest entity also records accruals for estimated ongoing research costs based on the progress of the studies with significant judgement and estimates.

Goodwill and Intangible Assets

Goodwill is recognized as the excess of the purchase price of an acquired entity over the fair value of amount assigned to assets acquired and liabilities assumed in a business combination. Goodwill and intangible assets with indefinite lives is subject to impairment testing at least annually and will be tested for impairment between annual tests if a triggering event occurs, such as changes due to circumstances that would indicate an impairment of the carrying value. Significant judgments are involved in determining if an indicator of impairment has occurred. Intangible assets with definite lives are amortized on a straight-line basis over the remaining useful life of the intangible asset.

Operating Leases

We account for our leases in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 842, “Leases” (“ASC 842”). Right-of-use assets represent our right to use an underlying asset over the lease term and include any lease payments made prior to the lease commencement date and are reduced by lease incentives. Lease liabilities represent the present value of the total lease payments over the lease term, calculated using the incremental borrowing rate. Lease expense is recognized on a straight-line basis over the expected lease term.

Accounting Pronouncement Adopted by the Company

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. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new standard also requires the if-converted method to be used to calculate diluted earnings per share (“EPS”) 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.

Effective January 1, 2022, we adopted the new standard using the modified retrospective approach and assessed the effect of this adoption on the accounting for our outstanding convertible notes. The effect of the adoption on our 2025 Notes (as defined below) resulted in a decrease to the opening balance of accumulated deficit of $37.2 million, a reduction to additional paid-in capital of $65.4 million, an increase to the balance of the notes by an aggregate amount of $35.6 million, and an increase to deferred tax assets of $7.4 million. The dilutive EPS of our 2025 Notes will be computed under the if-converted method going forward. There was no financial impact from the implementation of the standard for our 2023 Notes (as defined below). Refer to Note 8, “Debt” for more information.

Net Income Per Share

3 Months Ended

Mar. 31, 2022

Earnings Per Share [Abstract]

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”), our convertible senior notes due 2025 (the “2025 Notes”) and our convertible senior notes due 2028 (the “2028 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 was historically computed using the treasury stock method. As the average market price per share of our common stock as reported on The Nasdaq Global Select Market was lower than the initial conversion price of $17.26 per share, there was no dilutive effect of the assumed conversion premium for the three months ended March 31, 2021. The dilutive EPS of the notes was approximately $0.03 per share using the if-converted method for the three months ended March 31, 2022 as a result of the adoption of ASU 2020-06.

The following table shows the computation of basic and diluted net income per share for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,
(In thousands except per share data)	2022		2021
Numerator:
Net income attributable to Innoviva stockholders, basic	$	15,773	$	94,123
Add: interest expense on 2023 Notes		1,021		1,204
Add: interest expense on 2025 Notes		1,164		—
Add: interest expense on 2028 Notes		384		—
Net income attributable to Innoviva stockholders, diluted	$	18,342	$	95,327
Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders		69,544		101,365
Dilutive effect of 2023 Notes		10,155		12,189
Dilutive effect of 2025 Notes		11,150		—
Dilutive effect of 2028 Notes		2,765		—
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan		116		70
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders		93,730		113,624
Net income per share attributable to Innoviva stockholders
Basic	$	0.23	$	0.93
Diluted	$	0.20	$	0.84

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 for the periods presented:


	Three Months Ended March 31,
(In thousands)	2022		2021
Outstanding options and awards granted under equity incentive plan and employee stock purchase plan		386		1,159

Revenue Recognition and Collaborative Arrangements

3 Months Ended

Mar. 31, 2022

Revenue from Contract with Customer [Abstract]

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 March 31,
(In thousands)	2022			2021
Royalties from a related party - RELVAR/BREO	$	55,764		$	56,390
Royalties from a related party - ANORO		8,442			10,500
Royalties from a related party - TRELEGY		29,309			22,084
Total royalties from a related party		93,515			88,974
Less: amortization of capitalized fees paid to a related party		(3,456	)		(3,456	)
Royalty revenue from GSK	$	90,059		$	85,518

- 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=123351226&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=123351226&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=123351226&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=123351226&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=123351226&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=123351226&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=123351226&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=123351226&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=123351226&loc=SL49130554-203045

+ Details

Consolidated Entities

3 Months Ended

Mar. 31, 2022

Consolidated Entities

Consolidated Entities

4. Consolidated Entities

We consolidate the financial results of Theravance Respiratory Company, LLC ("TRC") and Entasis Therapeutics Holdings, Inc. (“Entasis”), 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

We held 15% of the economic interest of TRC as of March 31, 2022 and December 31, 2021. The primary source of revenue for TRC is the royalties generated from the net sales of TRELEGY® ELLIPTA® by GSK. As of March 31, 2022, TRC held equity and long-term investments in InCarda Therapeutics, Inc. (“InCarda”), ImaginAb, Inc. (“ImaginAb”), Gate Neurosciences, Inc. ("Gate") and Nanolive SA ("Nanolive"). Refer to Note 5, “Financial Instruments and Fair Value Measurements,” for more information.

The summarized financial information for TRC is presented as follows:

Balance sheets


	March 31,		December 31,
(In thousands)	2022		2021
Assets
Cash and cash equivalents	$	74,160	$	50,713
Receivables from collaborative arrangements		29,309		42,492
Prepaid expenses and other current assets		84		71
Equity and long-term investments		49,341		37,695
Total assets	$	152,894	$	130,971

Liabilities and LLC Members’ Equity
Current liabilities	$	289	$	252
LLC members’ equity		152,605		130,719
Total liabilities and LLC members’ equity	$	152,894	$	130,971

Income statements


	Three Months Ended March 31,
(In thousands)	2022		2021
Royalty revenue from a related party	$	29,309	$	22,084
Operating expenses		198		3,281
Income from operations		29,111		18,803
Income tax expense, net		1		—
Changes in fair values of equity and long-term investments		429		(483	)
Net income	$	29,541	$	18,320

Entasis Therapeutics Holdings, Inc.

We started investing in Entasis in 2020 as part of our capital allocation strategy of deploying cash generated from royalty income and investing in different life sciences companies. Entasis is a clinical-stage biotechnology company focused on the discovery and development of novel antibacterial products. 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 for approximately $35.0 million in cash. 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. Effective in June 2020, after certain conditions were met with respect to the sales of Entasis equity shares, Innoviva has a right to designate two members to Entasis’ board. During the second quarter of 2021, Innoviva’s wholly owned subsidiary, Innoviva Strategic Opportunities, LLC ("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 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.

On February 17, 2022, ISO entered into a securities purchase agreement with Entasis pursuant to which ISO purchased a convertible promissory note for a total purchase price of $15.0 million. The note bears an annual interest rate of 0.59% and will mature and become payable on August 18, 2022 unless it is converted at a conversion price of $1.48 before the maturity date. The financing is expected to support Entasis’ product development and operations into August 2022. With this financing, we determined that we have both (i) the power to direct the economically significant activities of Entasis and (ii) the obligation to absorb the losses, or the right to receive the benefits, that could potentially be significant to Entasis and therefore, we are the primary beneficiary of Entasis. Accordingly, we consolidated Entasis’ financial position and results of operations effective on February 17, 2022. Our equity interest remained at 59.9% as of February 17, 2022, and the fair values of our holdings of Entasis common stock and warrants were remeasured and estimated at $64.5 million and $31.4 million, respectively. The remeasurement resulted in a $7.7 million loss which was included in changes in fair values of equity and long-term investments, net on the consolidated statement of income.

The fair values assigned to assets acquired and liabilities assumed are based on management’s best estimates and assumptions as of the reporting date. The Company has completed a preliminary valuation and expects to finalize it as soon as practical, but no later than one year from the acquisition date. The purchase accounting for this transaction is not yet finalized.

The following table summarizes the preliminary allocation of the fair values assigned to the assets acquired and liabilities assumed as of the date of the consolidation:


(In thousands)	February 17, 2022
Cash and cash equivalents	$	23,070
Prepaid expenses		5,554
Other current assets		1,959
Property and equipment, net		185
Right-of-use assets		527
Goodwill		5,544
Intangible assets		105,000
Other assets		302
Total assets acquired	$	142,141

Accounts payable	$	1,583
Accrued personnel-related expenses		1,057
Other current liabilities		5,096
Total liabilities assumed	$	7,736

Total assets acquired, net	$	134,405

Entasis’ assets can only be used to settle its obligations. The following table provides the assets and liabilities of Entasis:


(In thousands)	March 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	33,547
Prepaid expenses		4,490
Other current assets		1,841
Total current assets		39,878
Property and equipment, net		183
Right-of-use assets		3,724
Goodwill		5,544
Intangible assets		105,000
Other assets		303
Total assets	$	154,632

Liabilities
Current liabilities:
Accounts payable	$	1,781
Accrued personnel-related expenses		1,529
Other accrued liabilities		5,824
Total current liabilities		9,134
Lease liabilities, long-term		3,299
Total liabilities	$	12,433

As a result of the consolidation, we recognized a non-controlling interest of $38.5 million as of February 17, 2022. Our consolidated net income for the three months ended March 31, 2022 included the net loss since the consolidation date of $4.5 million for Entasis.

The following table sets forth the pro-forma consolidated results of operations for the three months ended March 31, 2022 and 2021 as if the consolidation of Entasis occurred on January 1, 2021. The unaudited supplemental pro forma information includes adjustments for (i) increases in fair value related to the equity investments in Entasis’ common stock and warrants of $7.8 million and $11.5 million for the three months ended March 31, 2022 and 2021, respectively, and (ii) an increase for acquisition-related costs of $0.1 million for the three months ended March 31, 2021 and a corresponding decrease related to such costs for the three months ended March 31, 2022, as if the expenses were incurred in 2021 instead of 2022. The pro forma results of operations are presented for informational purposes only and are not indicative of the results of operations that would have been achieved if the consolidation had taken place on the dates noted above, or of results that may occur in the future.


	Three Months Ended March 31,
(In thousands)	2022		2021
Revenue	$	90,059	$	85,518
Net income	$	38,027	$	110,350
Net income attributable to Innoviva stockholders	$	19,033	$	99,067

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.

The Partnership Agreement provides for Sarissa Capital to receive management fees from the Partnership, payable quarterly in advance, measured based on the Net Asset Value of Strategic Partners’ capital account in the Partnership. In addition, General Partner is entitled to an annual performance fee based on the Net Profits of the Partnership during the annual measurement period.

The Partnership Agreement includes a lock-up period of thirty-six months after which Strategic Partners is entitled to make withdrawals from the Partnership as of such lock-up expiration date and each anniversary thereafter, subject to certain limitations.

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. On March 30, 2022, Strategic Partners made an additional capital contribution of $110.0 million to the Partnership pursuant to the letter agreement entered into between Strategic Partners, the Partnership and Sarissa Capital Fund GP LP on May 20, 2021. The capital contribution is subject to a 36-month lock up period from the contribution date.

As of March 31, 2022, we held approximately 100% of the economic interest of the Partnership. As of March 31, 2022 and December 31, 2021, total assets of the Partnership were $307.6 million and $195.8 million, respectively, of which all were attributable to equity and long-term investments, and total liabilities were $0.1 million and $0.2 million, respectively. The partnership’s assets can only be used to settle its own obligations. During the three months ended March 31, 2022 and 2021, we recorded $0.3 million and $0.4 million, respectively, of net investment-related expenses incurred by the Partnership, and $2.1 million and $5.8 million, respectively, of net positive changes in fair values of equity and long-term investments on the consolidated statements of income.

Financial Instruments and Fair Value Measurements

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

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 as well as warrants to purchase 8,710,800 additional shares of common stock of Armata Pharmaceuticals, Inc. (“Armata”) for approximately $25.0 million in cash. Armata is a clinical stage biotechnology company focused on precisely targeted bacteriophage therapeutics for antibiotic-resistant infections.

During the first quarter of 2021, ISO 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. Armata also 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 for voting on the matters related to election or removal of Armata’s board members. The voting agreement will expire the earlier of the second anniversary of the agreement effective date and approval by the FDA of any of Armata’s product candidates for marketing and commercial distribution. During the fourth quarter of 2021, ISO also purchased an additional 1,212,122 shares of Armata common stock for approximately $4.0 million.

On February 9, 2022, ISO entered into a securities purchase agreement with Armata to acquire 9,000,000 shares of Armata common stock and warrants to purchase 4,500,000 additional shares of common stock with an exercise price of $5.00 per share for $45.0 million. The investment closed in two tranches on February 9, 2022 and March 31, 2022. The investment is intended to aid Armata in advancing its clinical pipeline and strengthening its bacteriophage platform. On February 9, 2022, Armata also entered a second amended and restated 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 for voting on the matters related to election or removal of Armata’s board members or amend the bylaws of Armata to reduce the maximum number of directors or set the number of directors who may serve on the board of Armata. The voting agreement will expire the earlier of the second anniversary of the agreement effective date and approval by the FDA of any of Armata’s product candidates for marketing and commercial distribution. In addition, as of February 9, 2022, Armata entered into an amended and restated investor rights agreement with the Company and ISO, pursuant to which for as long as the Company and ISO hold at least 12.5% of the outstanding shares of Armata’s common stock on a fully-diluted, the Company and ISO shall have the right to designate two directors to Armata’s board of directors, and for so long as the Company and ISO hold at least 8%, but less than 12.5%, of the outstanding shares of Armata’s common stock on a fully-diluted basis, the Company and ISO shall have the right to designate one director to Armata’s board of directors, subject to certain conditions and qualifications set forth in the amended and restated investor rights agreement. As of March 31, 2022, three of the eight members of Armata’s board of directors are also members of the board of directors of Innoviva. As of March 31, 2022 and December 31, 2021, we owned approximately 69.4% and 59.3%, respectively, of Armata’s common stock.

The investments in Armata provide Innoviva and ISO the ability to have significant influence, but not control over Armata’s operations. Armata’s business and affairs are managed under the direction of its board of directors, which Innoviva and ISO do not control. 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, 2021 and 2022 have an exercise price of $2.87, $3.25 and $5.00 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 March 31, 2022, the fair values of our holdings of Armata common stock and warrants were estimated at $122.6 million and $64.9 million, respectively. As of December 31, 2021, the fair values of our holdings of Armata common stock and warrants were estimated at $88.1 million and $58.6 million, respectively. The total fair value of both financial instruments in the amount of $187.5 million and $146.7 million was recorded as equity and long-term investments on the consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively. We recorded $4.2 million unrealized loss and $61.2 million unrealized gain as changes in fair values of equity and long-term investments, net on the consolidated statements of income for the three months ended March 31, 2022 and 2021, respectively.

The summarized financial information, including the portion we do not own, is presented for Armata on a one quarter lag regardless of the date of our investments as follows:

Income Statement Information


	For the Three Months Ended December 31,
(In thousands)	2021			2020
Revenue	$	989		$	504
Loss from operations	$	(6,048	)	$	(6,453	)
Net loss	$	(6,047	)	$	(6,624	)

Equity Investment in InCarda

During the third quarter of 2020, TRC purchased 20,469,432 shares of Series C preferred stock and a warrant to purchase 5,117,358 additional shares of Series C preferred stock of InCarda Therapeutics, Inc. (“InCarda”) (the “InCarda 2020 Warrant”) for $15.8 million, which includes $0.8 million of transaction costs. InCarda is a privately held biopharmaceutical company focused on developing inhaled therapies for cardiovascular diseases. The investment is intended to fund the ongoing clinical development of InRhythmTM (flecainide for inhalation), the company’s lead program, for the treatment of a recent-onset episode of paroxysmal atrial fibrillation. TRC has the right to designate one member to InCarda’s board. As of March 31, 2022, one of InCarda’s eight board members was designated by TRC. The InCarda 2020 Warrant is 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 InCarda 2020 Warrant from October 6, 2021 to March 31, 2022. On March 9, 2022, TRC and InCarda entered into an amendment to further extend the expiration date of the InCarda 2020 Warrant from March 31, 2022 to March 31, 2023. The InCarda 2020 Warrant is recorded at fair value and subject to remeasurement at each balance sheet date.

On March 9, 2022, TRC entered into a Note and Warrant Purchase Agreement (the “InCarda Agreement”) with InCarda to acquire a convertible promissory note (the “InCarda Convertible Note”) and warrants (the “InCarda 2022 Warrant”) for $0.7 million. The InCarda Convertible Note bears an annual interest rate of 6% and will convert into Series D preferred stock upon a qualified financing, non-qualified financing, or maturity conversion. A qualified financing is defined as the first issuance or series of related issuances by InCarda of its equity securities following March 9, 2022 from which InCarda receives immediately available gross proceeds of at least $10.0 million (excluding the aggregate amount of any notes converted into equity securities pursuant to the conversion of notes or any other debt securities converted into equity securities) (the “Qualified Financing Amount”). A non-qualified financing is defined as the first issuance or series of related issuances by InCarda of its equity securities following March 9, 2022 from which InCarda receives immediately available gross proceeds of less than the Qualified Financing Amount. The InCarda 2022 Warrant entitles TRC to purchase a number of shares of equity securities equal to 100% of the principal amount of the InCarda Convertible Note divided by the number of shares issued in InCarda’s next equity financing, which is defined as the earliest to occur of specific financing events, including capital raises through public offerings. The InCarda 2022 Warrant expires on March 9, 2027. The InCarda Convertible Note and InCarda 2022 Warrant are measured at fair value, but the changes in fair value were immaterial for the period ended March 31, 2022.

As of March 31, 2022 and December 31, 2021, TRC held 13.0% of InCarda equity ownership. 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 the InCarda Convertible Note as a trading security, measured at fair value. We account for the investment in InCarda’s Series C preferred stock using the measurement alternative because the securities are not publicly traded and do not have a readily determinable fair value. Under the measurement alternative, the equity investment is initially recorded at its allocated cost, but the carrying value may be adjusted through earnings upon an impairment or when there is an observable price change involving the same or a similar investment with the same issuer. As of March 31, 2022 and December 31, 2021, we recorded $16.5 million and $15.8 million, respectively, from our investments in InCarda’s Series C preferred stock and InCarda Convertible Note as equity and long-term investments on the consolidated balance sheets. There was no impairment to the value of our investments in InCarda as of March 31, 2022 and December 31, 2021.

We use the Black-Scholes-Merton pricing model to estimate the fair value of the InCarda 2020 Warrant 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.

Black-Scholes-Merton assumptions used in calculating the estimated fair value of the InCarda 2020 Warrant as of March 31, 2022 and December 31, 2021 were as follows:


	March 31,			December 31,
(In thousands)	2022			2021
Risk-free interest rate		1.63	%		0.06	%
Expected volatility		69.37	%		55.44	%
Expected dividend yield		—			—
Expected term (in years)		1.00			0.25

As of March 31, 2022 and December 31, 2021, the fair value of InCarda’s warrants was estimated at $1.0 million and $0.4 million, respectively, and recorded as equity and long-term investments on the consolidated balance sheets. As of March 31, 2022, the fair value of InCarda’s Convertible Note was approximately the purchase price of $0.7 million and recorded as equity and long-term investments on the consolidated balance sheets. During the three months ended March 31, 2022 and 2021, we recorded $0.6 million unrealized gain and $0.5 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

During the first quarter of 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 March 31, 2022, one of ImaginAb’s five board members is designated by TRC. As of March 31, 2022 and December 31, 2021, TRC held 14.4% and 14.5% of ImaginAb equity ownership, respectively.

The investment in ImaginAb does not provide TRC the ability to control or have significant influence over ImaginAb’s operations. Based on our evaluation, we determined that ImaginAb is a VIE, but TRC is not the primary beneficiary of the VIE. Because ImaginAb’s equity securities are not publicly traded and do not have a readily determinable fair value, we have accounted for our investment in ImaginAb’s Series C preferred stock and common stock using the measurement alternative. Under the measurement alternative, the equity investment is initially recorded at its allocated cost, but the carrying value may be adjusted through earnings upon an impairment or when there is an observable price change involving the same or a similar investment with the same issuer. As of March 31, 2022 and December 31, 2021, $6.4 million was recorded as equity and long-term investments on the consolidated balance sheets and there was no change to the fair value of our investment.

Convertible Promissory Note in Gate Neurosciences

During the fourth quarter of 2021, TRC entered into a Convertible Promissory Note Purchase Agreement with Gate Neurosciences, Inc. (“Gate”) to acquire a convertible promissory note (the “Gate Convertible Note”) with a principal amount of $15.0 million. Gate is a privately held biopharmaceutical company focused on developing the next generation of targeted nervous system therapies, leveraging precision medicine approaches to develop breakthrough drugs for psychiatric and neurologic diseases. The investment is intended to fund its ongoing development and research. The Gate Convertible Note bears an annual interest rate of 8% and will convert into shares of common stock of Gate upon a qualified event or into shares of shadow preferred stock of Gate (“Shadow Preferred”) upon a qualified financing. A qualifying event can be a qualified initial price offering, a qualified merger, or a merger with a special-purpose acquisition company (“SPAC”).

The number of common stock shares to be issued in a qualified event shall be equal to the amount due on the conversion date divided by the lesser of a capped conversion price (the “Capped Conversion Price”) and the qualified event price (the “Qualified Event Price”). The Capped Conversion Price is calculated as $50.0 million divided by the number of shares of common stock outstanding at such time on a fully diluted basis. The Qualified Event Price is the price per share determined by the qualified event. A qualified financing is a sale or series of sales of preferred stock where (i) at least 50 percent of counterparties are not existing shareholders, (ii) net proceeds to Gate are at least $35.0 million, and (iii) the stated or implied equity valuation of Gate is at least $80.0 million. Shadow Preferred means preferred stock having identical rights, preferences and restrictions as the preferred stock that would be issued in a qualified financing.

The investment in Gate does not provide TRC the ability to control or have significant influence over Gate’s operations. Based on our evaluation, we determined that Gate is a VIE, but TRC is not the primary beneficiary of the VIE. We have accounted for the Gate Convertible Note as a trading security, measured at fair value using a Monte Carlo simulation model with the probability of certain qualified events and the assumptions of equity value of Gate, risk-free rate, expected stock price volatility of its peer companies, and the time until a financing is raised. TRC has the right to designate one board member to Gate’s board. As of March 31, 2022, TRC has designated a board member to Gate’s board, which currently consists of three directors. As of March 31, 2022 and December 31, 2021, the fair value of the Gate Convertible Note was estimated at $14.9 million and $15.1 million, respectively, and recorded as equity and long-term investments on the consolidated balance sheets. We recorded $0.2 million unrealized loss as changes in fair values of equity and long-term investments, net on the consolidated statement of income for the three months ended March 31, 2022.

Equity Investment in Nanolive

On February 18, 2022, TRC entered into an investment and shareholders agreement with Nanolive SA ("Nanolive") to purchase 18,750,000 shares of Nanolive Series C preferred stock for $9.8 million (equivalent to 9.0 million CHF). Nanolive SA is a Swiss privately held life sciences company focused on developing breakthrough imaging solutions that accelerate research in growth industries such as drug discovery and cell therapy. $0.7 million was incurred for investment due diligence costs and execution and recorded as part of the equity and long-term investment on the consolidated balance sheets. TRC has the right to designate one member to Nanolive’s board. TRC also has the right to designate another member, who will be mutually acceptable to TRC and another majority common stockholder, to Nanolive’s board. As of March 31, 2022, no Innoviva designees are serving on Nanolive’s seven-member board. As of March 31, 2022, TRC held 16.1% of Nanolive equity ownership.

The investment in Nanolive does not provide TRC the ability to control or have significant influence over Nanolive’s operations. Based on our evaluation, we determined that Nanolive is a VIE, but TRC is not the primary beneficiary of the VIE. Because Nanolive’s equity securities are not publicly traded and do not have a readily determinable fair value, we have accounted for our investment in Nanolive’s Series C preferred stock using the measurement alternative. Under the measurement alternative, the equity investment is initially recorded at its allocated cost, but the carrying value may be adjusted through earnings upon an impairment or when there is an observable price change involving the same or a similar investment with the same issuer. As of March 31, 2022, $10.6 million was recorded as equity and long-term investments on the consolidated balance sheets and there was no change to the fair value of our investment.

Fair Value Measurements

Our equity and long-term investments are measured at fair value on a recurring basis and our debt is carried at amortized cost basis. Equity investments accounted for using the measurement alternative are valued using Level 3 inputs.


	Estimated Fair Value Measurements as of March 31, 2022 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	$	103,181	$	—	$	—	$	103,181
Investments held by ISP Fund LP (1)		305,516		—		2,060		307,576
Equity investment - Armata Common Stock		122,625		—		—		122,625
Equity investment - Armata Warrants		—		64,894		—		64,894
Equity investment - InCarda Warrants		—		—		1,040		1,040
Convertible debt investment - InCarda Note						652		652
Convertible debt investment - Gate Note		—		—		14,900		14,900
Total assets measured at estimated fair value	$	531,322	$	64,894	$	18,652	$	614,868
Debt
2023 Notes	$	—	$	106,499	$	—	$	106,499
2025 Notes		—		253,497		—		253,497
2028 Notes		—		260,815		—		260,815
Total fair value of debt	$	—	$	620,811	$	—	$	620,811

(1)

The investments held by ISP Fund LP, consisted of $172.1 million in equity investments, which included $2.1 million in a private placement position, $25.2 million in money market funds and $110.3 million in cash. Our total capital contribution of $300.0 million is subject to a 36-month lock-up period from the date of such capital contributions.


	Estimated Fair Value Measurements as of December 31, 2021 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	$	145,132	$	—	$	—	$	145,132
Investments held by ISP Fund LP (1)		193,677		—		2,068		195,745
Equity investment - Armata Common Stock		88,101		—		—		88,101
Equity investment - Armata Warrants		—		58,595		—		58,595
Equity investment - Entasis Common Stock		62,794		—		—		62,794
Equity investment - Entasis Warrants		—		40,914		—		40,914
Equity investment - InCarda Warrants		—		—		411		411
Convertible debt investment - Gate Note		—		—		15,100		15,100
Total assets measured at estimated fair value	$	489,704	$	99,509	$	17,579	$	606,792
Debt
2023 Notes	$	—	$	261,769	$	—	$	261,769
2025 Notes		—		234,498		—		234,498
Total fair value of debt	$	—	$	496,267	$	—	$	496,267

(1)

The investments held by ISP Fund LP, consisted of $192.2 million equity investments and $3.5 million money market funds, 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’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 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 convertible note and warrants, Gate’s convertible note, and private placement positions held by 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, 2025 Notes and 2028 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

Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

6. Goodwill and Intangible Assets

Goodwill and intangible assets acquired in our consolidation of Entasis were recognized at fair value as of the consolidation date, February 17, 2022. The carrying amount of goodwill as of March 31, 2022 was $5.5 million. Intangible assets with definite lives are amortized over their estimated useful lives. The carrying basis and accumulated amortization of recognized intangible assets as of March 31, 2022 were as follows:


	March 31, 2022
	Carrying
(In thousands)	Amount
Intangible assets with indefinite life	$	69,500
Intangible asset with determinable life		35,500
Total	$	105,000

All intangible assets are related to in-process research and development. The intangible assets with indefinite life consist of antibacterial therapeutic products. The intangible asset with determinable life consists of a contract, which commences in 2023. The useful life of this intangible asset will be determined upon commercialization of the underlying product candidate. Thus, no amortization expense of determinable assets was recognized during the period ended March 31, 2022.

Goodwill and indefinite-lived intangible assets are not amortized but are tested at least annually for impairment, or more frequently if triggering events occur, based on the estimated fair value of the intangible asset.

Balance Sheet Components

3 Months Ended

Mar. 31, 2022

Balance Sheet Related Disclosures [Abstract]

Balance Sheet Components

7. Balance Sheet Components

Other Accrued Liabilities

Other accrued liabilities, which included $5.8 million related to Entasis as of March 31, 2022, consisted of the following:


	March 31,		December 31,
(in thousands)	2022		2021
Accrued contract manufacturing	$	2,610	$	—
Accrued clinical		1,273		—
Accrued research		361		—
Accrued professional services		2,935		894
Current portion of lease liabilities		622		106
Other		272		9
Total other accrued liabilities	$	8,073	$	1,009

Stock-Based Compensation

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

. Stock-Based Compensation

Stock- Based Compensation Expense

The following table summarizes stock-based compensation expense which included $0.3 million related to Entasis’ equity awards for the three months ended March 31, 2022:


	Three Months Ended March 31,
(In thousands)	2022		2021
General and administrative	$	788	$	451
Research and development		166		—
Total	$	954	$	451

Valuation Assumptions

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


	Three Months Ended March 31,
	2022			2021
Risk-free interest rate		1.6	%	1.1 %
Expected term (in years)		6.11			6.11
Volatility		40.5	%		45.6	%
Dividend yield		0.0	%		0.0	%
Weighted-average estimated fair value of stock options granted	$	7.73		$	5.42

Debt

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

Debt

9. Debt

Our debt consisted of:


	March 31,			December 31,
(In thousands)	2022			2021
2023 Notes	$	96,207		$	240,984
2025 Notes		192,500			192,500
2028 Notes		261,000			—
Total debt		549,707			433,484
Less: Unamortized debt discount and issuance costs		(10,960	)		(38,831	)
Total debt, net	$	538,747		$	394,653
Less: Current portion of long-term debt, net		96,016			—
Total long-term debt, net	$	442,731		$	394,653

Convertible Subordinated Notes Due 2023

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

At the option of the holders, the 2023 Notes may be converted into fully paid and non-assessable shares of our common stock prior to the close of the business on the second business day immediately preceding the final maturity date. The initial conversion rate was 35.9903 shares per $1,000 principal amount of the 2023 Notes, subject to customary anti-dilution adjustment in certain circumstances, which represented an initial conversion price of approximately $27.79 per share.

In event of default or a fundamental change (as defined in the indenture governing the 2023 Notes), holders of the 2023 Notes may require us to repurchase all or a portion of their 2023 Notes at price equal to 100% of the principal amount of the 2023 Notes, plus any accrued and unpaid interest.

In connection with the offering of the 2023 Notes, we entered into two privately negotiated capped call option transactions with a single counterparty. The capped call option transaction is an integrated instrument consisting of a call option on our common stock purchased by us with a strike price equal to the initial conversion price of $27.79 per share for the underlying number of shares and a cap price of $38.00 per share, both of which are subject to adjustments consistent with the 2023 Notes. The cap component is economically equivalent to a call option sold by us for the underlying number of shares with an initial strike price of $38.00 per share. As an integrated instrument, the settlement of the capped call coincides with the due date of the convertible debt. Upon settlement, we would receive from our hedge counterparty a number of shares of our common shares that would range from zero, if the stock price was below $27.79 per share, to a maximum of 2,779,659 shares, if the stock price is above $38.00 per share. However, if the market price of our common stock, as measured under the terms of the capped call transactions, exceeds $38.00 per share, there is no incremental anti-dilutive benefit from the capped call.

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

During 2016, we retired a portion of our 2023 Notes with a face value of $14.1 million and carrying value of $13.9 million by way of purchase in the open market.

On March 7, 2022, we used $165.6 million from the sale of the 2028 Notes to repurchase 60% of the 2023 Notes with a face value of $144.8 million. The carrying value of the repurchased 2023 Notes was $144.5 million. Accrued interest was $0.4 million and unamortized debt issuance costs were $0.3 million on the date of repurchase. We recognized a loss on the extinguishment of the 2023 Notes of $20.7 million in other expense, net in the consolidated statement of operations. The repurchase reduced the outstanding principal balance to $96.2 million and unamortized debt issuance costs to $0.2 million. The effective interest rate of the 2023 Notes changed to 2.37%.

Our outstanding 2023 Notes balances consisted of the following:


	March 31,			December 31,
(In thousands)	2022			2021
Liability component
Principal	$	96,207		$	240,984
Debt issuance costs, net		(191	)		(620	)
Net carrying amount	$	96,016		$	240,364

The following table sets forth total interest expense recognized related to the 2023 Notes for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,
(In thousands)	2022		2021
Contractual interest expense	$	1,084	$	1,280
Amortization of debt issuance costs		122		141
Total interest and amortization expense	$	1,206	$	1,421

Convertible Senior Notes Due 2025

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

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

Holders of the 2025 Notes may convert all or a portion of their 2025 Notes prior to the close of business on February 15, 2025 only under the following circumstances:

•

after September 30, 2017, if our closing common stock price for at least 20 days out of the most recent 30 consecutive trading days of the preceding quarter is greater than 130% of the current conversion price of the 2025 Notes;

•

for five consecutive business days, if the average trading price per $1,000 of Notes during the prior 10 consecutive trading days is less than 98% of the product of the our closing common stock price and the conversion rate of the 2025 Notes on such day;

•

upon the occurrence of specified corporate events, including certain distributions, the occurrence of a fundamental changes (as defined in the indenture governing the 2025 Notes) or a transaction resulting in our common stock converting into other securities or property or assets.

On or after February 15, 2025, holders of the 2025 Notes may convert their 2025 Notes at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2025 Notes.

In event of default or a fundamental change (as defined above), holders of the 2025 Notes may require us to repurchase all or a portion of their 2025 Notes at price equal to 100% of the principal amount of the 2025 Notes, plus any accrued and unpaid interest.

Effective January 1, 2022, we adopted ASU 2020-06 using a modified retrospective method, under which financial results reported in prior periods were not adjusted. The adoption of ASU 2020-06 had a material impact on the 2025 notes.

Prior to the adoption of the standard, we separately account for the liability and equity components of the 2025 Notes by allocating the proceeds between the liability component and the embedded conversion option (“equity component”) due to our ability to settle the conversion obligation of the 2025 Notes in cash, common stock or a combination of cash and common stock, at our option. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature using the income approach. The allocation was performed in a manner that reflected our non-convertible debt borrowing rate for similar debt. The equity component of the 2025 Notes of $67.3 million was recognized as a debt discount and represents the difference between the proceeds from the issuance of the 2025 Notes and the fair value of the liability of the 2025 Notes on the date of issuance. The excess of the principal amount of the liability component over its carrying amount (“debt discount”) is amortized to interest expense using the effective interest method over the term of the 2025 Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. Additionally, we separated the total issuance costs of $5.4 million incurred into liability and equity components in proportion to the allocation of the initial proceeds, resulting in liability issuance costs of $3.5 million and equity issuance costs of $1.9 million. Issuance costs attributable to the liability component were amortized on a straight-line basis, which approximated the effective interest rate method, to interest expense over the term of the 2025 Notes. The issuance costs attributable to the equity component were netted against the equity component in additional paid-in capital. The effective interest rate of the liability component of the 2025 Notes was 8.87%.

Upon adoption of ASU 2020-06 on January 1, 2022, we combined the liability and equity components of the 2025 Notes assuming that the instrument was accounted for as a single liability from inception to the date of adoption. We similarly combined the liability and equity components of the issuance costs. The issuance costs are presented as a deduction from the outstanding principal balance of the 2025 Notes, and are amortized on a straight-line basis over the term of the 2025 Notes under the effective interest rate method. As of January 1, 2022, the effective interest rate on the 2025 Notes was 2.88%.

Our outstanding 2025 Notes balances consisted of the following:


	March 31,			December 31,
(In thousands)	2022			2021
Liability component
Principal	$	192,500		$	192,500
Debt discount and issuance costs, net		(2,437	)		(38,211	)
Net carrying amount	$	190,063		$	154,289
Equity component, net	$	—		$	65,361

The following table sets forth total interest expense recognized related to the 2025 Notes for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,
(In thousands)	2022		2021
Contractual interest expense	$	1,203	$	1,203
Amortization of debt issuance costs		171		159
Amortization of debt discount		—		1,911
Total interest and amortization expense	$	1,374	$	3,273

Convertible Senior Notes Due 2028

In March 2022, we completed a private placement of $261.0 million aggregate principal amount of our 2028 Notes, which will mature on March 15, 2028. The proceeds include the 2028 Notes sold pursuant to the $45.0 million over-allotment option granted by us to the initial purchasers, of which $36.0 million was exercised. The 2028 Notes were sold in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act.

The net proceeds from the sale of the $261.0 million aggregate principal amount of 2028 Notes were approximately $252.6 million after deducting the initial purchasers’ discounts and commissions and our estimated offering expenses. We used approximately $21.0 million of the net proceeds from the offering to fund the cost of entering into the capped call transactions described below. In addition, we used $165.6 million of the remaining net proceeds to repurchase $144.8 million aggregate principal amount of the 2023 Notes in separate and individually negotiated transactions with certain holders of the 2023 Notes, which closed concurrently with the issuance of the 2028 Notes. We expect to use the remaining net proceeds for general corporate purposes.

The 2028 Notes bear interest at an annual rate of 2.125% that is payable semi-annually in arrears in cash on March 15 and September 15 of each year, beginning on September 15, 2022.

The 2028 Notes are convertible, based on the applicable conversion rate, into cash, shares of our common stock or a combination thereof, at our election. The initial conversion rate was 38.1432 shares per $1,000 principal amount of the 2028 Notes, subject to customary anti-dilution adjustment in certain circumstances, which represented an initial conversion price of approximately $26.22 per share.

Prior to September 15, 2027, the 2028 Notes will be convertible at the option of the holders only upon the occurrence of specified events and during certain periods, and will be convertible on or after September 15, 2027, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of the Notes.

Holders of the 2028 Notes may convert all or a portion of their 2028 Notes prior to the close of business on September 15, 2027, only under the following circumstances:

•

after March 31, 2022, if our closing common stock price for at least 20 days out of the most recent 30 consecutive trading days of the preceding quarter is greater than 130% of the current conversion price of the 2028 Notes;

•

for five consecutive business days, if the average trading price per $1,000 of Notes during the prior 10 consecutive trading days is less than 98% of the product of our closing common stock price and the conversion rate of the 2028 Notes on such day;

•

upon the occurrence of specified corporate events, including certain distributions, the occurrence of a fundamental changes (as defined in the indenture governing the 2028 Notes) or a transaction resulting in our common stock converting into other securities or property or assets.

On or after September 15, 2027, holders of the 2028 Notes may convert their 2028 Notes at any time until the close of the business on the second day immediately preceding the maturity date of the 2028 Notes.

The 2028 Notes will be redeemable, in whole or in part, at our option at any time, and from time to time, on or after March 20, 2025, and on or before the 75th scheduled trading day immediately before the maturity date but only if the last reported sale price per share of our common stock exceeds 130% of the conversion price for a specified period of time. The redemption price will be equal to the principal amount of the 2028 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, calling any 2028 Note for redemption will constitute a make-whole fundamental change (as defined in the indenture governing the 2028 Notes) with respect to that 2028 Note, in which case the conversion rate applicable to the conversion of that 2028 Note will be increased in certain circumstances if it is converted after it is called for redemption.

If we undergo a fundamental change, subject to certain conditions, holders may require us to purchase for cash all or any portion of their 2028 Notes. The fundamental change purchase price will be 100% of the principal amount of the 2028 Notes to be purchased plus any accrued and unpaid interest to, but excluding, the fundamental change purchase date.

The indenture governing the 2028 Notes contains customary terms and covenants, including a merger covenant and that upon certain events of default occurring and continuing, either the Trustee or the holders of at least 25% of the aggregate principal amount of the outstanding Notes may declare 100% of the principal of, and accrued and unpaid interest, if any, on, all the Notes to be due and payable immediately.

In connection with the offering of the 2028 Notes, we entered into privately negotiated capped call transactions. The cap price of the capped call transaction is initially $33.9850 per share and is subject to certain adjustments under the terms of the capped call transactions. The capped call transactions cover, subject to customary adjustments, the number of shares of common stock initially underlying the 2028 Notes. The capped call transactions are expected generally to reduce potential dilution to our common stock upon conversion of the 2028 Notes or at our election (subject to certain conditions) offset any cash payments we are required to make in excess of the aggregate principal amount of converted 2028 Notes, as the case may be, with such reduction or offset subject to a cap.

As of March 31, 2022, the effective interest rate on the 2028 Notes was 2.69%.

Our outstanding 2028 Notes balance as of March 31, 2022 consisted of the following:



(In thousands)
Liability component
Principal	$	261,000
Debt issuance costs, net		(8,332	)
Net carrying amount	$	252,668

The following table sets forth total interest expense recognized related to the 2028 Notes from the date of issuance through March 31, 2022:



(In thousands)
Contractual interest expense	$	346
Amortization of debt issuance costs		84
Total interest and amortization expense	$	430

Debt Maturities

The aggregate scheduled maturities of our convertible debt as of March 31, 2022 were as follows:


(In thousands)
Years ending December 31:
Remainder of 2022	$	—
2023		96,207
2024		—
2025		192,500
2026		—
Thereafter		261,000
Total	$	549,707

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Commitments and Contingencies

3 Months Ended

Mar. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

. Commitments and Contingencies

Operating Lease

Our operating leases include Entasis’ facility lease (“Entasis Lease”) consisting of 20,062 square feet of office and laboratory space in Waltham, Massachusetts. In February 2022, Entasis decided to exercise a renewal option for the Entasis Lease to extend the lease term for three additional years through 2025 and subsequently signed the Second Amendment in April 2022. As of March 31, 2022, the weighted average remaining lease term was 3.8 years and the weighted-average incremental borrowing rate used to determine the operating lease right-of-use assets was 7.8%.

We also lease approximately 2,111 square feet of office space in Burlingame, California.

The following table summarizes our operating leases as presented in the consolidated balance sheets:


	March 31,		December 31,
(In thousands)	2022		2021
Assets
Right-of-use assets	$	3,794	$	97
Liabilities
Lease liabilities, current	$	622	$	106
Lease liabilities, long-term		3,299		—
Total lease liabilities	$	3,921	$	106

Future minimum operating lease payments on the Entasis Lease as of March 31, 2022 were as follows:


(In thousands)
Years ending December 31:
Remainder of 2022	$	553
2023		1,249
2024		1,269
2025		1,289
Total undiscounted lease payments		4,360
Less: imputed interest	$	(516	)
Total operating lease liabilities	$	3,844

Future minimum operating lease payments on our corporate headquarters in Burlingame, California as of March 31, 2022 were as follows:


(In thousands)
Years ending December 31:
Remainder of 2022	$	76
Thereafter		—
Total	$	76

Legal Proceedings

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

Income Taxes

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

Provisional income tax expense for the three months ended March 31, 2022 and 2021 was $6.9 million and $19.7 million, respectively. The Company’s effective income tax rate for the three months ended March 31, 2022 was 15.3%, compared to 15.2% for the same period in 2021. The income tax expense for the three months ended March 31, 2022 and 2021 was determined based upon estimates of the Company’s effective income tax rates in various jurisdictions. Our effective income tax rate for the three months ended March 31, 2022 was lower than the benefit computed at the U.S. federal statutory income tax rate due primarily to noncontrolling interest.

- Definition

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

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Description of Operations and Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
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, 2022 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 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, 2021 filed with the Securities and Exchange Commission (“SEC”) on February 28, 2022, and as amended on March 17, 2022 (“2021 Form 10-K”).
Prior Period Immaterial Correction	Prior Period Immaterial Correction Subsequent to the issuance of the consolidated financial statements for the three months ended March 31, 2021, the Company identified that (i) sales of equity investments managed by ISP Fund LP for $2.4 million, and (ii) purchase and sales of other investments managed by ISP Fund LP, net for $110.2 million were incorrectly netted in the consolidated statement of cash flows within the line item purchases of equity and long-term investments, net. The Company has corrected the presentation in the accompanying consolidated statement of cash flows for the three months ended March 31, 2021 from amounts previously reported to present such line items separately. The correction did not impact total cash flows from investing activities or the consolidated balance sheet, statement of income, or statement of comprehensive income. Management assessed the correction on a quantitative and qualitative basis and determined that it is immaterial to the prior period consolidated financial statements. The Company additionally reclassified purchases of equity investments managed by ISP Fund LP of $112.6 million from purchases of equity and long-term investments to be presented in a separate line item in the consolidated statement of cash flows, to conform with the current period presentation.
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 and Long-Term Investments	Equity and Long-Term Investments We invest from time to time in equity and debt 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 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 the security without a readily determinable fair value using the measurement alternative under ASC Topic 312, Investments - Equity Securities. 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.
Research and Development Costs	Research and Development Costs Research and development costs are expensed in the period that services are rendered or goods are received. Research and development costs consist of salaries and benefits, laboratory supplies and facility costs, as well as fees paid to third parties that conduct certain research and development activities on behalf of the Company’s consolidated variable interest entity, net of certain external research and development costs reimbursed under the collaboration arrangements of the Company’s consolidated variable interest entity. Non-refundable pre-payments for goods or services that will be used or rendered for future research and development activities are deferred. The Company’s consolidated variable interest entity also records accruals for estimated ongoing research costs based on the progress of the studies with significant judgement and estimates.
Goodwill and Intangible Assets	Goodwill and Intangible Assets Goodwill is recognized as the excess of the purchase price of an acquired entity over the fair value of amount assigned to assets acquired and liabilities assumed in a business combination. Goodwill and intangible assets with indefinite lives is subject to impairment testing at least annually and will be tested for impairment between annual tests if a triggering event occurs, such as changes due to circumstances that would indicate an impairment of the carrying value. Significant judgments are involved in determining if an indicator of impairment has occurred. Intangible assets with definite lives are amortized on a straight-line basis over the remaining useful life of the intangible asset.
Operating Leases	Operating Leases We account for our leases in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 842, “Leases” (“ASC 842”). Right-of-use assets represent our right to use an underlying asset over the lease term and include any lease payments made prior to the lease commencement date and are reduced by lease incentives. Lease liabilities represent the present value of the total lease payments over the lease term, calculated using the incremental borrowing rate. Lease expense is recognized on a straight-line basis over the expected lease term.
Accounting Pronouncement Adopted by the Company	Accounting Pronouncement Adopted by the Company 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. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new standard also requires the if-converted method to be used to calculate diluted earnings per share (“EPS”) 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. Effective January 1, 2022, we adopted the new standard using the modified retrospective approach and assessed the effect of this adoption on the accounting for our outstanding convertible notes. The effect of the adoption on our 2025 Notes (as defined below) resulted in a decrease to the opening balance of accumulated deficit of $37.2 million, a reduction to additional paid-in capital of $65.4 million, an increase to the balance of the notes by an aggregate amount of $35.6 million, and an increase to deferred tax assets of $7.4 million. The dilutive EPS of our 2025 Notes will be computed under the if-converted method going forward. There was no financial impact from the implementation of the standard for our 2023 Notes (as defined below). Refer to Note 8, “Debt” for more information.

Net Income Per Share (Tables)

3 Months Ended

Mar. 31, 2022

Earnings Per Share [Abstract]

Schedule of computation of basic and diluted net income per share

The following table shows the computation of basic and diluted net income per share for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,
(In thousands except per share data)	2022		2021
Numerator:
Net income attributable to Innoviva stockholders, basic	$	15,773	$	94,123
Add: interest expense on 2023 Notes		1,021		1,204
Add: interest expense on 2025 Notes		1,164		—
Add: interest expense on 2028 Notes		384		—
Net income attributable to Innoviva stockholders, diluted	$	18,342	$	95,327
Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders		69,544		101,365
Dilutive effect of 2023 Notes		10,155		12,189
Dilutive effect of 2025 Notes		11,150		—
Dilutive effect of 2028 Notes		2,765		—
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan		116		70
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders		93,730		113,624
Net income per share attributable to Innoviva stockholders
Basic	$	0.23	$	0.93
Diluted	$	0.20	$	0.84

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 for the periods presented:


	Three Months Ended March 31,
(In thousands)	2022		2021
Outstanding options and awards granted under equity incentive plan and employee stock purchase plan		386		1,159

Revenue Recognition and Collaborative Arrangements (Tables)

3 Months Ended

Mar. 31, 2022

Revenue from Contract with Customer [Abstract]

Schedule of net revenue from collaborative arrangements

Net revenue recognized under our GSK Agreements was as follows:


	Three Months Ended March 31,
(In thousands)	2022			2021
Royalties from a related party - RELVAR/BREO	$	55,764		$	56,390
Royalties from a related party - ANORO		8,442			10,500
Royalties from a related party - TRELEGY		29,309			22,084
Total royalties from a related party		93,515			88,974
Less: amortization of capitalized fees paid to a related party		(3,456	)		(3,456	)
Royalty revenue from GSK	$	90,059		$	85,518

Consolidated Entities (Tables)

3 Months Ended

Mar. 31, 2022

Theravance Respiratory Company, LLC

Consolidated Entities

Schedule of Balance Sheets and Income Statements of VIE

The summarized financial information for TRC is presented as follows:

Balance sheets


	March 31,		December 31,
(In thousands)	2022		2021
Assets
Cash and cash equivalents	$	74,160	$	50,713
Receivables from collaborative arrangements		29,309		42,492
Prepaid expenses and other current assets		84		71
Equity and long-term investments		49,341		37,695
Total assets	$	152,894	$	130,971

Liabilities and LLC Members’ Equity
Current liabilities	$	289	$	252
LLC members’ equity		152,605		130,719
Total liabilities and LLC members’ equity	$	152,894	$	130,971

Income statements


	Three Months Ended March 31,
(In thousands)	2022		2021
Royalty revenue from a related party	$	29,309	$	22,084
Operating expenses		198		3,281
Income from operations		29,111		18,803
Income tax expense, net		1		—
Changes in fair values of equity and long-term investments		429		(483	)
Net income	$	29,541	$	18,320

Entasis Therapeutics Holdings Inc

Consolidated Entities

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The following table summarizes the preliminary allocation of the fair values assigned to the assets acquired and liabilities assumed as of the date of the consolidation:


(In thousands)	February 17, 2022
Cash and cash equivalents	$	23,070
Prepaid expenses		5,554
Other current assets		1,959
Property and equipment, net		185
Right-of-use assets		527
Goodwill		5,544
Intangible assets		105,000
Other assets		302
Total assets acquired	$	142,141

Accounts payable	$	1,583
Accrued personnel-related expenses		1,057
Other current liabilities		5,096
Total liabilities assumed	$	7,736

Total assets acquired, net	$	134,405

Entasis’ assets can only be used to settle its obligations. The following table provides the assets and liabilities of Entasis:


(In thousands)	March 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	33,547
Prepaid expenses		4,490
Other current assets		1,841
Total current assets		39,878
Property and equipment, net		183
Right-of-use assets		3,724
Goodwill		5,544
Intangible assets		105,000
Other assets		303
Total assets	$	154,632

Liabilities
Current liabilities:
Accounts payable	$	1,781
Accrued personnel-related expenses		1,529
Other accrued liabilities		5,824
Total current liabilities		9,134
Lease liabilities, long-term		3,299
Total liabilities	$	12,433

As a result of the consolidation, we recognized a non-controlling interest of $38.5 million as of February 17, 2022.

Pro Forma Information


	Three Months Ended March 31,
(In thousands)	2022		2021
Revenue	$	90,059	$	85,518
Net income	$	38,027	$	110,350
Net income attributable to Innoviva stockholders	$	19,033	$	99,067

- 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)

3 Months Ended

Mar. 31, 2022

Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]

Summary of Black-Scholes-Merton assumptions used in calculating the estimated fair value

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


	Three Months Ended March 31,
	2022			2021
Risk-free interest rate		1.6	%	1.1 %
Expected term (in years)		6.11			6.11
Volatility		40.5	%		45.6	%
Dividend yield		0.0	%		0.0	%
Weighted-average estimated fair value of stock options granted	$	7.73		$	5.42

Schedule of Available-for-Sale Securities Measured at Fair Value on a Recurring Basis


	Estimated Fair Value Measurements as of March 31, 2022 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	$	103,181	$	—	$	—	$	103,181
Investments held by ISP Fund LP (1)		305,516		—		2,060		307,576
Equity investment - Armata Common Stock		122,625		—		—		122,625
Equity investment - Armata Warrants		—		64,894		—		64,894
Equity investment - InCarda Warrants		—		—		1,040		1,040
Convertible debt investment - InCarda Note						652		652
Convertible debt investment - Gate Note		—		—		14,900		14,900
Total assets measured at estimated fair value	$	531,322	$	64,894	$	18,652	$	614,868
Debt
2023 Notes	$	—	$	106,499	$	—	$	106,499
2025 Notes		—		253,497		—		253,497
2028 Notes		—		260,815		—		260,815
Total fair value of debt	$	—	$	620,811	$	—	$	620,811

(1)


	Estimated Fair Value Measurements as of December 31, 2021 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	$	145,132	$	—	$	—	$	145,132
Investments held by ISP Fund LP (1)		193,677		—		2,068		195,745
Equity investment - Armata Common Stock		88,101		—		—		88,101
Equity investment - Armata Warrants		—		58,595		—		58,595
Equity investment - Entasis Common Stock		62,794		—		—		62,794
Equity investment - Entasis Warrants		—		40,914		—		40,914
Equity investment - InCarda Warrants		—		—		411		411
Convertible debt investment - Gate Note		—		—		15,100		15,100
Total assets measured at estimated fair value	$	489,704	$	99,509	$	17,579	$	606,792
Debt
2023 Notes	$	—	$	261,769	$	—	$	261,769
2025 Notes		—		234,498		—		234,498
Total fair value of debt	$	—	$	496,267	$	—	$	496,267

(1)

Armata

Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]

Schedule of Income Statement Information

The summarized financial information, including the portion we do not own, is presented for Armata on a one quarter lag regardless of the date of our investments as follows:

Income Statement Information


	For the Three Months Ended December 31,
(In thousands)	2021			2020
Revenue	$	989		$	504
Loss from operations	$	(6,048	)	$	(6,453	)
Net loss	$	(6,047	)	$	(6,624	)

InCarda

Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]

Summary of Black-Scholes-Merton assumptions used in calculating the estimated fair value

Black-Scholes-Merton assumptions used in calculating the estimated fair value of the InCarda 2020 Warrant as of March 31, 2022 and December 31, 2021 were as follows:


	March 31,			December 31,
(In thousands)	2022			2021
Risk-free interest rate		1.63	%		0.06	%
Expected volatility		69.37	%		55.44	%
Expected dividend yield		—			—
Expected term (in years)		1.00			0.25

- 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

Goodwill and Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Summary of Accumulated Amortization of Recognized Intangible Assets

The carrying basis and accumulated amortization of recognized intangible assets as of March 31, 2022 were as follows:


	March 31, 2022
	Carrying
(In thousands)	Amount
Intangible assets with indefinite life	$	69,500
Intangible asset with determinable life		35,500
Total	$	105,000

Balance Sheet Components (Tables)

3 Months Ended

Mar. 31, 2022

Balance Sheet Related Disclosures [Abstract]

Schedule Of Other Accrued Liabilities

Other accrued liabilities, which included $5.8 million related to Entasis as of March 31, 2022, consisted of the following:


	March 31,		December 31,
(in thousands)	2022		2021
Accrued contract manufacturing	$	2,610	$	—
Accrued clinical		1,273		—
Accrued research		361		—
Accrued professional services		2,935		894
Current portion of lease liabilities		622		106
Other		272		9
Total other accrued liabilities	$	8,073	$	1,009

Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

Schedule of stock-based compensation expense

compensation expense which included $0.3 million related to Entasis’ equity awards for the three months ended March 31, 2022:


	Three Months Ended March 31,
(In thousands)	2022		2021
General and administrative	$	788	$	451
Research and development		166		—
Total	$	954	$	451

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

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


	Three Months Ended March 31,
	2022			2021
Risk-free interest rate		1.6	%	1.1 %
Expected term (in years)		6.11			6.11
Volatility		40.5	%		45.6	%
Dividend yield		0.0	%		0.0	%
Weighted-average estimated fair value of stock options granted	$	7.73		$	5.42

Debt (Tables)

3 Months Ended

Mar. 31, 2022

Debt

Schedule of debt

Our debt consisted of:


	March 31,			December 31,
(In thousands)	2022			2021
2023 Notes	$	96,207		$	240,984
2025 Notes		192,500			192,500
2028 Notes		261,000			—
Total debt		549,707			433,484
Less: Unamortized debt discount and issuance costs		(10,960	)		(38,831	)
Total debt, net	$	538,747		$	394,653
Less: Current portion of long-term debt, net		96,016			—
Total long-term debt, net	$	442,731		$	394,653

Aggregate scheduled maturities of convertible debt

Debt Maturities

The aggregate scheduled maturities of our convertible debt as of March 31, 2022 were as follows:


(In thousands)
Years ending December 31:
Remainder of 2022	$	—
2023		96,207
2024		—
2025		192,500
2026		—
Thereafter		261,000
Total	$	549,707

2023 Notes

Debt

Summary of liability and equity components of convertible notes

Our outstanding 2023 Notes balances consisted of the following:


	March 31,			December 31,
(In thousands)	2022			2021
Liability component
Principal	$	96,207		$	240,984
Debt issuance costs, net		(191	)		(620	)
Net carrying amount	$	96,016		$	240,364

Schedule of components of interest expense

The following table sets forth total interest expense recognized related to the 2023 Notes for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,
(In thousands)	2022		2021
Contractual interest expense	$	1,084	$	1,280
Amortization of debt issuance costs		122		141
Total interest and amortization expense	$	1,206	$	1,421

2025 Notes

Debt

Summary of liability and equity components of convertible notes

Our outstanding 2025 Notes balances consisted of the following:


	March 31,			December 31,
(In thousands)	2022			2021
Liability component
Principal	$	192,500		$	192,500
Debt discount and issuance costs, net		(2,437	)		(38,211	)
Net carrying amount	$	190,063		$	154,289
Equity component, net	$	—		$	65,361

Schedule of components of interest expense

The following table sets forth total interest expense recognized related to the 2025 Notes for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,
(In thousands)	2022		2021
Contractual interest expense	$	1,203	$	1,203
Amortization of debt issuance costs		171		159
Amortization of debt discount		—		1,911
Total interest and amortization expense	$	1,374	$	3,273

2028 Notes

Debt

Summary of liability and equity components of convertible notes

Our outstanding 2028 Notes balance as of March 31, 2022 consisted of the following:



(In thousands)
Liability component
Principal	$	261,000
Debt issuance costs, net		(8,332	)
Net carrying amount	$	252,668

Schedule of components of interest expense

The following table sets forth total interest expense recognized related to the 2028 Notes from the date of issuance through March 31, 2022:



(In thousands)
Contractual interest expense	$	346
Amortization of debt issuance costs		84
Total interest and amortization expense	$	430

- Definition

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

+ References

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+ Details

Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2022

Lessee, Lease, Description [Line Items]

Schedule of Operating Lease Information Presented In Balance Sheet

The following table summarizes our operating leases as presented in the consolidated balance sheets:


	March 31,		December 31,
(In thousands)	2022		2021
Assets
Right-of-use assets	$	3,794	$	97
Liabilities
Lease liabilities, current	$	622	$	106
Lease liabilities, long-term		3,299		—
Total lease liabilities	$	3,921	$	106

EntasisLease

Lessee, Lease, Description [Line Items]

Schedule of Future Minimum Lease Payments

Future minimum operating lease payments on the Entasis Lease as of March 31, 2022 were as follows:


(In thousands)
Years ending December 31:
Remainder of 2022	$	553
2023		1,249
2024		1,269
2025		1,289
Total undiscounted lease payments		4,360
Less: imputed interest	$	(516	)
Total operating lease liabilities	$	3,844

Burlingame, California

Lessee, Lease, Description [Line Items]

Schedule of Future Minimum Lease Payments

Future minimum operating lease payments on our corporate headquarters in Burlingame, California as of March 31, 2022 were as follows:


(In thousands)
Years ending December 31:
Remainder of 2022	$	76
Thereafter		—
Total	$	76

Description of Operations and Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Description of Operations and Summary of Significant Accounting Policies
Decrease to accumulated deficit	$ 37,200
Reduction to Additional Paid in Capital	65,400
Equity and long-term investments	544,437		$ 483,845
Sale 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 equity investments managed by ISP Fund LP	(2,015)	(112,587)
Increase in Deferred Tax Assets	7,400
Prior Period Immaterial Correction
Description of Operations and Summary of Significant Accounting Policies
Sale of equity investments managed by ISP FUND LP		2,400
Purchase and sales of other investments managed by ISP Fund LP, net		110,200
Purchases of equity investments managed by ISP Fund LP		$ (112,600)
Convertible senior notes
Description of Operations and Summary of Significant Accounting Policies
Increase in convertible notes	$ 35,600
Long-Acting Beta2 Agonist (LABA) Collaboration \| GSK
Description of Operations and Summary of Significant Accounting Policies
Percentage of economic interest in any future payments made under the agreements	15.00%
Long-Acting Beta2 Agonist (LABA) Collaboration \| GSK \| RELVAR/BREO
Description of Operations and Summary of Significant Accounting Policies
Royalty rate for first level of annual global net sales (as a percent)	15.00%
Annual global sales level used to determine royalty rate	$ 3,000,000
Royalty rate for sales above first level of annual global net sales (as a percent)	5.00%
Long-Acting Beta2 Agonist (LABA) Collaboration \| GSK \| ANORO \| Minimum
Description of Operations and Summary of Significant Accounting Policies
Royalty rate for combination products (as a percent)	6.50%
Long-Acting Beta2 Agonist (LABA) Collaboration \| GSK \| ANORO \| Maximum
Description of Operations and Summary of Significant Accounting Policies
Royalty rate for combination products (as a percent)	10.00%

Net Income Per Share (Details) - 2025 Notes - Convertible senior notes - $ / shares	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Aug. 07, 2017
Debt Instrument [Line Items]
Dilutive effect of the assumed conversion premium		0
Dilutive EPS of note	$ 0.03
Common Stock [Member]
Debt Instrument [Line Items]
Conversion price (dollars per share)	$ 17.26	$ 17.26	$ 17.26

Net Income Per Share - Basic and Diluted EPS (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Numerator:
Net income attributable to Innoviva stockholders, basic	$ 15,773	$ 94,123
Net income attributable to Innoviva stockholders, diluted	$ 18,342	$ 95,327
Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders	69,544,000	101,365,000
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan	116,000	70,000
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders	93,730,000	113,624,000
Net income per share attributable to Innoviva stockholders
Basic net income per share	$ 0.23	$ 0.93
Diluted net income per share	$ 0.20	$ 0.84
2023 Notes
Numerator:
Add: interest expense on Notes	$ 1,021	$ 1,204
Denominator:
Dilutive effect	10,155,000	12,189,000
2025 Notes
Numerator:
Add: interest expense on Notes	$ 1,164	$ 0
Denominator:
Dilutive effect	11,150,000	0
2028 Notes
Numerator:
Add: interest expense on Notes	$ 384	$ 0
Denominator:
Dilutive effect	2,765	0

Net Income Per Share - Anti-Dilutive Securities (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Equity incentive plans and ESPP
Anti-Dilutive Securities
Anti-dilutive securities (in shares)	386	1,159

Revenue Recognition and Collaborative Arrangements (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Revenue Recognition and Collaborative Arrangements
Net revenue	$ 90,059	$ 85,518
GSK \| Royalty revenue from a related party
Revenue Recognition and Collaborative Arrangements
Royalties from a related party	93,515	88,974
Less: amortization of capitalized fees paid to a related party	(3,456)	(3,456)
Net revenue	90,059	85,518
GSK \| RELVAR/BREO
Revenue Recognition and Collaborative Arrangements
Royalties from a related party	55,764	56,390
GSK \| ANORO
Revenue Recognition and Collaborative Arrangements
Royalties from a related party	8,442	10,500
GSK \| TRELEGY
Revenue Recognition and Collaborative Arrangements
Royalties from a related party	$ 29,309	$ 22,084

- Definition

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

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-URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130545-203045

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 924
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SAB Topic 11.L)
-URI http://asc.fasb.org/extlink&oid=6472922&loc=d3e499488-122856

+ Details

Consolidated Entities - Theravance Respiratory Company, LLC (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Assets
Cash and cash equivalents	$ 216,802		$ 201,525
Receivables from collaborative arrangements	93,515		110,711
Prepaid expenses	5,576		1,367
Equity and long-term investments	544,437		483,845
Total assets	1,107,474		926,395
Liabilities and LLC Members' Equity
Current liabilities	109,227		5,807
Total liabilities and stockholders' equity	1,107,474		$ 926,395
Income statements
Total revenue	90,059	$ 85,518
Operating expenses	12,330	6,035
Income from operations	77,729	79,483
Income tax expense, net	6,860	19,736
Changes in fair values of equity and long-term investments	(9,411)	55,045
Net income	$ 37,858	109,695
Theravance Respiratory Company, LLC
CONSOLIDATED ENTITIES
Economic interest in LLC (in percent)	15.00%		15.00%
Assets
Cash and cash equivalents	$ 74,160		$ 50,713
Receivables from collaborative arrangements	29,309		42,492
Prepaid expenses	84		71
Equity and long-term investments	49,341		37,695
Total assets	152,894		130,971
Liabilities and LLC Members' Equity
Current liabilities	289		252
LLC members' equity	152,605		130,719
Total liabilities and stockholders' equity	152,894		$ 130,971
Income statements
Operating expenses	198	3,281
Income from operations	29,111	18,803
Income tax expense, net	1	0
Changes in fair values of equity and long-term investments	429	(483)
Net income	29,541	18,320
Theravance Respiratory Company, LLC \| Royalty revenue from a related party
Income statements
Total revenue	$ 29,309	$ 22,084

Consolidated Entities - Entasis Therapeutics Holdings, Inc. (Details) $ / shares in Units, $ in Thousands		3 Months Ended
	Feb. 17, 2022 USD ($) $ / shares	Mar. 31, 2022 USD ($) Director	Jun. 30, 2021 USD ($) $ / shares shares	Mar. 31, 2021 USD ($)	Sep. 30, 2020 USD ($) $ / shares shares	Jun. 30, 2020 USD ($) $ / shares shares	Dec. 31, 2021 USD ($)
Subsidiary or Equity Method Investee [Line Items]
Total debt		$ 549,707					$ 433,484
Noncontrolling interest		165,575					$ 111,192
Net income attributable to noncontrolling interest		$ 22,085		$ 15,572
Remeasurement loss	$ 7,700
Entasis Therapeutics Holdings Inc
Subsidiary or Equity Method Investee [Line Items]
Number of investee's board members which may be designated by the Company \| Director		2
Equity interest rate	59.90%
Noncontrolling interest	$ 38,500
Net income attributable to noncontrolling interest		$ 4,500
Increase in fair value related to equity method investments		7,800		11,500
Decrease for acquisition related costs				$ 100
Increase foe acquisition related costs		$ 100
Entasis Therapeutics Holdings Inc \| Securities Purchase Agreement \| Convertible Promissory Note
Subsidiary or Equity Method Investee [Line Items]
Total debt	$ 15,000
Debt instrument maturity date	Aug. 18, 2022
Debt Instrument, annual interest rate	0.59%
Conversion price (dollars per share) \| $ / shares	$ 1.48
Entasis Therapeutics Holdings Inc \| Common stock
Subsidiary or Equity Method Investee [Line Items]
Number of shares to be purchased under the securities purchase agreement \| shares					4,672,897	14,000,000
Fair value of equity securities	$ 64,500
Entasis Therapeutics Holdings Inc \| Common stock \| Innoviva Strategic Opportunities, LLC
Subsidiary or Equity Method Investee [Line Items]
Number of shares to be purchased under the securities purchase agreement \| shares			10,000,000
Entasis Therapeutics Holdings Inc \| Warrants
Subsidiary or Equity Method Investee [Line Items]
Number of warrants purchased under the securities purchase agreement \| shares					4,672,897	14,000,000
Fair value of equity securities	$ 31,400
Entasis Therapeutics Holdings Inc \| Warrants \| Innoviva Strategic Opportunities, LLC
Subsidiary or Equity Method Investee [Line Items]
Payments to acquire equity securities			$ 20,000
Number of shares to be purchased under the securities purchase agreement \| shares			10,000,000
Entasis Therapeutics Holdings Inc \| Common stock and warrants
Subsidiary or Equity Method Investee [Line Items]
Payments to acquire equity securities					$ 12,500	$ 35,000
Entasis Therapeutics Holdings Inc \| Warrants acquired in second quarter of 2021
Subsidiary or Equity Method Investee [Line Items]
Exercise price of warrants \| $ / shares			$ 2.00			$ 2.50
Term of warrants		5 years
Entasis Therapeutics Holdings Inc \| Warrants acquired in third quarter of 2020
Subsidiary or Equity Method Investee [Line Items]
Exercise price of warrants \| $ / shares					$ 2.675
Term of warrants		5 years

Consolidated Entities - Schedule of Recognized Identified Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Feb. 17, 2022	Dec. 31, 2021
Business Acquisition [Line Items]
Goodwill	$ 5,544		$ 0
Entasis Therapeutics Holdings Inc [Member]
Business Acquisition [Line Items]
Cash and cash equivalents		$ 23,070
Prepaid expenses		5,554
Other current assets		1,959
Property and equipment, net		185
Right of use assets		527
Goodwill	$ 5,544	5,544
Intangible assets		105,000
Other assets		302
Total assets acquired		142,141
Accounts payable		1,583
Accrued personnel-related expenses		1,057
Other current liabilities		5,096
Total liabilities assumed		7,736
Total assets acquired, net		$ 134,405

Consolidated Entities - Schedule of Assets and Liabilities of Entasis (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Feb. 17, 2022	Dec. 31, 2021
Current assets:
Other current assets	$ 1,930		$ 70
Total current assets	317,823		313,673
Property and equipment, net	191		12
Right-of-use assets	3,794		97
Goodwill	5,544		0
Intangible assets	105,000		0
Other assets	313		11
Total assets	1,107,474		926,395
Current liabilities:
Accounts payable	1,808		27
Accrued personnel-related expenses	1,933		619
Total current liabilities	109,227		5,807
Lease Liabilities, long-term	3,299		$ 0
Entasis Therapeutics Holdings Inc [Member]
Current assets:
Cash and cash equivalents	33,547
Prepaid expenses	4,490
Other current assets	1,841
Total current assets	39,878
Property and equipment, net	183
Right-of-use assets	3,724
Goodwill	5,544	$ 5,544
Intangible assets	105,000
Other assets	303
Total assets	154,632
Current liabilities:
Accounts payable	1,781
Accrued personnel-related expenses	1,529
Other accrued liabilities	5,824
Total current liabilities	9,134
Lease Liabilities, long-term	3,299
Liabilities, Total	$ 12,433

Consolidated Entities - Pro Forma Information (Details) - Entasis Therapeutics Holdings Inc - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Business Acquisition [Line Items]
Revenue	$ 90,059	$ 85,518
Net income	38,027	110,350
Net income attributable to Innoviva stockholders	$ 19,033	$ 99,067

Consolidated Entities - ISP Fund LP (Details) - USD ($) $ in Thousands		3 Months Ended
	Mar. 30, 2022	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	May 31, 2021	Dec. 31, 2020
CONSOLIDATED ENTITIES
Total assets		$ 1,107,474		$ 926,395
Changes in fair values of equity and long-term investments		$ (9,411)	$ 55,045
ISP Fund LP
CONSOLIDATED ENTITIES
Contributed to partnership for investing						$ 300,000
Distribution from partnership					$ 110,000
Economic interest of the Partnership (in percent)		100.00%
Total assets		$ 307,600		195,800
Total liabilities		100		$ 200
Investment-related expenses, net of investment-related income		300	400
Changes in fair values of equity and long-term investments		$ 2,100	$ 5,800
Commitment for future contribution	$ 110,000
Lock-up period	36 months

Financial Instruments and Fair Value Measurements - Equity Investment in Armata (Details) - Armata $ / shares in Units, $ in Millions		3 Months Ended
	Feb. 09, 2022 USD ($) $ / shares shares	Mar. 31, 2022 USD ($) Director Tranche $ / shares	Dec. 31, 2021 USD ($) $ / shares shares	Mar. 31, 2021 USD ($) shares	Mar. 31, 2020 USD ($) shares	Dec. 31, 2020 $ / shares
Equity investment
Number of tranches \| Tranche		2
Equity investment ownership percentage		69.40%	59.30%
Percentage of maximum voting rights	49.50%	49.50%
Number of Investee's Board members currently representing the Company \| Director		3
Number of the Investee's Board members \| Director		8
Unrealized gain from fair value changes in equity investments				$ 61.2
Unrealized loss from fair value changes in equity investments		$ 4.2
Director
Equity investment
Armata outstanding shares percentage	12.50%
Common stock and warrants
Equity investment
Amount of securities purchase agreement					$ 25.0
Equity and long-term investments at fair value		$ 187.5	$ 146.7
Warrants purchased in 2020
Equity investment
Exercise price of warrants \| $ / shares						$ 2.87
Warrants purchased in 2021
Equity investment
Exercise price of warrants \| $ / shares			$ 3.25
Warrants purchased in 2022 Member
Equity investment
Exercise price of warrants \| $ / shares		$ 5.00
Warrants
Equity investment
Number of warrants purchased under the securities purchase agreement \| shares					8,710,800
Term of warrants		5 years
Equity and long-term investments at fair value		$ 64.9	$ 58.6
Common stock
Equity investment
Number of shares to be purchased under the securities purchase agreement \| shares					8,710,800
Number of shares to be purchased under the securities purchase agreement \| shares			1,212,122
Amount of securities purchase agreement			$ 4.0
Equity and long-term investments at fair value		$ 122.6	$ 88.1
Minimum [Member]
Equity investment
Armata outstanding shares percentage	8.00%
Maximum [Member]
Equity investment
Armata outstanding shares percentage	12.50%
Innoviva Strategic Opportunities, LLC \| Common stock and warrants
Equity investment
Amount of securities purchase agreement	$ 45.0			$ 20.0
Innoviva Strategic Opportunities, LLC \| Warrants
Equity investment
Number of warrants to be purchased under the securities purchase agreement \| shares	4,500,000			6,153,847
Exercise price of warrants \| $ / shares	$ 5.00
Innoviva Strategic Opportunities, LLC \| Common stock
Equity investment
Number of shares to be purchased under the securities purchase agreement \| shares	9,000,000			6,153,847

Financial Instruments and Fair Value Measurements - Schedule of Balance Sheets and Income Statements of VIE (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021	Dec. 31, 2020
Equity Investment
Net revenue	$ 90,059		$ 85,518
Loss from operations	77,729		79,483
Net Income	$ 37,858		$ 109,695
Armata
Equity Investment
Net revenue		$ 989		$ 504
Loss from operations		(6,048)		(6,453)
Net Income		$ (6,047)		$ (6,624)

- Definition

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

Financial Instruments and Fair Value Measurements - Equity Investment in InCarda (Details)		3 Months Ended			12 Months Ended
	Mar. 09, 2022 USD ($)	Mar. 31, 2022 USD ($) Director $ / shares shares	Mar. 31, 2021 USD ($)	Sep. 30, 2020 USD ($) shares	Dec. 31, 2021 USD ($) shares
Equity Investment
Equity and long-term investments		$ 544,437,000			$ 483,845,000
Preferred stock, shares issued \| shares		0			0
InCarda
Equity Investment
Number of Investee's Board members currently representing the Company \| Director		1
Number of the Investee's Board members \| Director		8
Equity investment ownership percentage		13.00%			13.00%
Unrealized loss from fair value changes in equity investments			$ 500,000
Unrealized gain from fair value changes in equity investments		$ 600,000
InCarda \| Series C preferred stock and warrants
Equity Investment
Amount of securities purchase agreement				$ 15,800,000
InCarda \| Warrants
Equity Investment
Maximum number of additional shares into which warrants may be converted under the securities purchase agreement \| shares				5,117,358
Equity and long-term investments at fair value		$ 1,000,000.0			$ 400,000
Exercise price of warrants \| $ / shares		$ 0.7328
Extended expiration date		Mar. 31, 2023
InCarda \| Series C preferred stock
Equity Investment
Transaction cost				$ 800,000
Impairment of equity investments		$ 0			0
Preferred stock, shares issued \| shares				20,469,432
InCarda Convertible Note
Equity Investment
Equity and long-term investments at fair value		$ 700,000
Debt Instrument, annual interest rate	6.00%
Gross Proceeds from sale of equity	$ 10,000,000.0
Debt instrument principal amount percentage		100.00%
InCarda Convertible Note \| Series C preferred stock
Equity Investment
Equity and long-term investments		$ 16,500,000			$ 15,800,000
InCarda 2022 Warrants
Equity Investment
Amount of securities purchase agreement	$ 700,000

Financial Instruments and Fair Value Measurements - Summary of Black Scholes Merton Assumptions used in Calculating the Estimated Fair Value (Details) - Incarda [Member] - Warrant [Member]	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Risk-free interest rate	1.63%	0.06%
Expected Volatility	69.37%	55.44%
Expected dividend yield	0.00%	0.00%
Expected term (in years)	1 year	3 months

Financial Instruments and Fair Value Measurements - Equity Investment in ImaginAb (Details) - ImaginAb $ in Millions	3 Months Ended
	Mar. 31, 2021 USD ($) shares	Mar. 31, 2022 USD ($) Director	Dec. 31, 2021 USD ($)
Equity Investment
Transaction costs to acquire equity securities	$ 0.4
Equity investment ownership percentage		14.40%	14.50%
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	$ 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 - Convertible Promissory Note in Gate Neuroscience (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Equity Investment
Equity and long-term investments	$ 544,437	$ 483,845
Gate Neuroscience Member
Equity Investment
Number Of Common Stock Issued Description		The number of common stock shares to be issued in a qualified event shall be equal to the amount due on the conversion date divided by the lesser of a capped conversion price (the “Capped Conversion Price”) and the qualified event price (the “Qualified Event Price”). The Capped Conversion Price is calculated as $50.0 million divided by the number of shares of common stock outstanding at such time on a fully diluted basis. The Qualified Event Price is the price per share determined by the qualified event. A qualified financing is a sale or series of sales of preferred stock where (i) at least 50 percent of counterparties are not existing shareholders, (ii) net proceeds to Gate are at least $35.0 million, and (iii) the stated or implied equity valuation of Gate is at least $80.0 million. Shadow Preferred means preferred stock having identical rights, preferences and restrictions as the preferred stock that would be issued in a qualified financing.
Equity and long-term investments	14,900	$ 15,100
Unrealized loss from fair value changes in equity investments	$ 200
Convertible Promissory Note Purchase Agreement \| Gate Neuroscience Member
Equity Investment
Convertable notes Face Value		$ 15,000
Debt Instrument, Interest Rate, Effective Percentage		8.00%

Financial Instruments and Fair Value Measurements - Equity Investment in Nanolive (Details) - Nanolive SFr in Millions, $ in Millions	Feb. 18, 2022 CHF (SFr) shares	Feb. 18, 2022 USD ($) shares	Mar. 31, 2022 USD ($) Director
Equity Investment
Transaction costs to acquire equity securities \| $		$ 0.7
Number of the Investee's Board members \| Director			7
Number of Investee's Board members currently representing the Company \| Director			0
Equity investment ownership percentage			16.10%
Fair value of equity securities \| $			$ 10.6
Series C preferred stock
Equity Investment
Number of shares to be purchased under the securities purchase agreement \| shares	18,750,000	18,750,000
Amount of securities purchase agreement	SFr 9.0	$ 9.8

Financial Instruments and Fair Value Measurements - Schedule of Available-for-Sale Securities Measured at Fair Value on a Recurring Basis (Details) - USD ($)
$ in Thousands

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

ISP Fund LP

Assets

Lock-up period

36 months

Contributed to partnership for investing

$ 300,000

Cash | ISP Fund LP

Assets

Total assets measured at estimated fair value

110,300

Money market funds | ISP Fund LP

Assets

Total assets measured at estimated fair value

25,200

$ 3,500

Equity investment | ISP Fund LP

Assets

Total assets measured at estimated fair value

172,100

192,200

Private Placement Positions | ISP Fund LP

Assets

Total assets measured at estimated fair value

2,100

Recurring basis

Assets

Total assets measured at estimated fair value

614,868

606,792

Recurring basis | Money market funds

Assets

Total assets measured at estimated fair value

103,181

145,132

Recurring basis | Equity investments and money market funds | ISP Fund LP

Assets

Total assets measured at estimated fair value

307,576

^[1]

195,745

^[2]

Recurring basis | Quoted Price in Active Markets for Identical Assets, Level 1

Assets

Total assets measured at estimated fair value

531,322

489,704

Recurring basis | Quoted Price in Active Markets for Identical Assets, Level 1 | Money market funds

Assets

Total assets measured at estimated fair value

103,181

145,132

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

305,516

^[1]

193,677

^[2]

Recurring basis | Significant Other Observable Inputs, Level 2

Assets

Total assets measured at estimated fair value

64,894

99,509

Recurring basis | Significant Unobservable Inputs, Level 3

Assets

Total assets measured at estimated fair value

18,652

17,579

Recurring basis | Significant Unobservable Inputs, Level 3 | Equity investments and money market funds | ISP Fund LP

Assets

Total assets measured at estimated fair value

2,060

^[1]

2,068

^[2]

Nonrecurring basis | Debt

Fair Value Measurements

2023 Notes

106,499

261,769

2025 Notes

253,497

234,498

2028 Notes

260,815

Total fair value of debt

620,811

496,267

Nonrecurring basis | Significant Other Observable Inputs, Level 2 | Debt

Fair Value Measurements

2023 Notes

106,499

261,769

2025 Notes

253,497

234,498

2028 Notes

260,815

Total fair value of debt

620,811

496,267

Armata | Recurring basis | Equity investment | Common stock

Assets

Total assets measured at estimated fair value

122,625

88,101

Armata | Recurring basis | Equity investment | Warrants

Assets

Total assets measured at estimated fair value

64,894

58,595

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

122,625

88,101

Armata | Recurring basis | Significant Other Observable Inputs, Level 2 | Equity investment | Warrants

Assets

Total assets measured at estimated fair value

64,894

58,595

Entasis Therapeutics Holdings Inc | Recurring basis | Equity investment | Common stock

Assets

Total assets measured at estimated fair value

62,794

Entasis Therapeutics Holdings Inc | Recurring basis | Equity investment | Warrants

Assets

Total assets measured at estimated fair value

40,914

Entasis Therapeutics Holdings Inc | Recurring basis | Quoted Price in Active Markets for Identical Assets, Level 1 | Equity investment | Common stock

Assets

Total assets measured at estimated fair value

62,794

Entasis Therapeutics Holdings Inc | Recurring basis | Significant Other Observable Inputs, Level 2 | Equity investment | Warrants

Assets

Total assets measured at estimated fair value

40,914

InCarda | Recurring basis | Convertible Debt Member

Assets

Total assets measured at estimated fair value

652

InCarda | Recurring basis | Equity investment | Warrants

Assets

Total assets measured at estimated fair value

1,040

411

InCarda | Recurring basis | Significant Unobservable Inputs, Level 3 | Convertible Debt Member

Assets

Total assets measured at estimated fair value

652

InCarda | Recurring basis | Significant Unobservable Inputs, Level 3 | Equity investment | Warrants

Assets

Total assets measured at estimated fair value

1,040

411

Gate Neuroscience Member | Recurring basis | Convertible Debt Member

Assets

Total assets measured at estimated fair value

14,900

15,100

Gate Neuroscience Member | Recurring basis | Significant Unobservable Inputs, Level 3 | Convertible Debt Member

Assets

Total assets measured at estimated fair value

$ 14,900

$ 15,100

[1]	The investments held by ISP Fund LP, consisted of $172.1 million in equity investments, which included $2.1 million in a private placement position, $25.2 million in money market funds and $110.3 million in cash. Our total capital contribution of $300.0 million is subject to a 36-month lock-up period from the date of such capital contributions.
[2]	The investments held by ISP Fund LP, consisted of $192.2 million equity investments and $3.5 million money market funds, are subject to a 36-month lock-up period from our initial contribution date, December 11, 2020.

Goodwill and Intangible Assets (Additional Information) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Feb. 17, 2022	Dec. 31, 2021
Goodwill [Line Items]
Goodwill	$ 5,544		$ 0
Amortization expense	0
Entasis Therapeutics Holdings Inc
Goodwill [Line Items]
Goodwill	$ 5,544	$ 5,544

Goodwill and Intangible Assets - Summary of Accumulated Amortization of Recognized Intangible Assets (Details) $ in Thousands	Mar. 31, 2022 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Intangible asset with indefinite life, net carrying amount	$ 69,500
Intangible asset with determinable life, net carrying amount	35,500
Net Carrying Amount	$ 105,000

Balance Sheet Components (Additional Information) (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Total other accrued liabilities	$ 8,073	$ 1,009
Entasis Therapeutics Holdings Inc [Member]
Other accrued liabilities	5,824
Total other accrued liabilities	$ 5,800

Balance Sheet Components - Schedule of Other Accrued Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Balance Sheet Related Disclosures [Abstract]
Accrued contract manufacturing	$ 2,610
Accrued clinical	1,273
Accrued research	361
Accrued Professional Services	2,935	894
Current portion of lease liabilities	622	106
Other	272	9
Total other accrued liabilities	$ 8,073	$ 1,009

Stock-Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended
Stock-Based Compensation (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Mar. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation expense	$ 954	$ 451
Entasis Therapeutics Holdings Inc [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation expense	$ 300

Stock-Based Compensation - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Stock-based compensation
Total stock-based compensation expense	$ 954	$ 451
General and administrative
Stock-based compensation
Total stock-based compensation expense	788	451
Research and development
Stock-based compensation
Total stock-based compensation expense	$ 166	$ 0

Stock-Based Compensation - Valuation Assumptions (Details) - Stock options - Innoviva [Member] - Weighted-average - $ / shares	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Valuation Assumptions
Risk-free interest rate	1.60%	1.10%
Expected term (in years)	6 years 1 month 9 days	6 years 1 month 9 days
Volatility	40.50%	45.60%
Dividend yield	0.00%	0.00%
Weighted-average estimated fair value of shares granted (in dollars per share)	$ 7.73	$ 5.42

Debt - Summary (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Debt
Total debt	$ 549,707	$ 433,484
Less: Unamortized debt discount and issuance costs	(10,960)	(38,831)
Total debt, net	538,747	394,653
Less: Current portion of long-term debt, net	96,016	0
Total long-term debt, net	442,731	394,653
2023 Notes \| Convertible subordinated notes
Debt
Total debt	96,207	240,984
2025 Notes \| Convertible senior notes
Debt
Total debt	192,500	192,500
Less: Unamortized debt discount and issuance costs	(2,437)	$ (38,211)
2028 Notes \| Convertible senior notes
Debt
Total debt	261,000
Less: Unamortized debt discount and issuance costs	$ (8,332)

Debt - Convertible Subordinated Notes (Details) $ / shares in Units, $ in Thousands			1 Months Ended		3 Months Ended
	Mar. 07, 2022 USD ($)	Jul. 31, 2014 $ / shares $ / Item	Jul. 31, 2014 $ / shares $ / Item shares	Jan. 31, 2013 USD ($) Item $ / shares $ / Item shares	Mar. 31, 2022 USD ($)	Mar. 31, 2021 USD ($)	Dec. 31, 2021 USD ($)	Dec. 31, 2016 USD ($)
Debt
Payment for repurchase of debt instrument					$ 165,131	$ 0
Accrued interest payable					1,397		$ 4,152
Loss on extinguishment of debt					(20,662)	0
Liability component
Principal					549,707		433,484
Debt discount and issuance costs, net					$ (10,960)		(38,831)
Convertible subordinated notes \| Privately-negotiated capped call option
Debt
Cap price for the underlying number of shares (in dollars per share) \| $ / Item		27.04	27.04
2023 Notes \| Convertible subordinated notes
Debt
Loan amount				$ 287,500
Proceeds from issuance of notes payable, net of debt issuance costs				$ 281,200
Debt Instrument, annual interest rate				2.125%
Initial conversion, shares per $1,000 principal amount \| shares \| shares				35.9903
Adjusted conversion, shares per $1,000 principal amount \| shares			50.5818
Conversion price of convertible notes into common stock (in dollars per share) \| $ / shares		$ 19.77	$ 19.77	$ 27.79
Ratio of repurchase price to the principal amount					100.00%
Portion of debt retired, face value	$ 144,800				$ 144,800			$ 14,100
Portion of debt retired, carrying value					144,500			$ 13,900
Payment for repurchase of debt instrument	$ 165,600				165,600
Percentage of notes repurchased	60.00%
Accrued interest payable	$ 400
Unamortized debt issuance cost	300
Loss on extinguishment of debt	$ 20,700
Effective interest rate	2.37%
Liability component
Principal	$ 96,200				96,207		240,984
Debt discount and issuance costs, net	$ (200)				191		620
Net Carrying Amount					96,016
Net Carrying Amount							$ 240,364
Interest expense
Contractual interest expense					1,084	1,280
Amortization of debt issuance costs					122	141
Total interest and amortization expense					$ 1,206	$ 1,421
2023 Notes \| Convertible subordinated notes \| Privately-negotiated capped call option
Debt
Payments for capped call options				$ 36,800
Number of derivative instruments purchased \| Item				2
Strike price for the underlying number of shares (in dollars per share) \| $ / shares		$ 27.79	$ 19.77	$ 27.79
Cap price for the underlying number of shares (in dollars per share) \| $ / Item		38.00	38.00	38.00
2023 Notes \| Convertible subordinated notes \| Stock prices below $27.79 per share \| Minimum
Debt
Net shares settlement payable to the entity \| shares				0
2023 Notes \| Convertible subordinated notes \| Stock prices above $38.00 per share \| Maximum
Debt
Net shares settlement payable to the entity \| shares				2,779,659

Debt - Convertible Senior Notes (Details) $ / shares in Units, $ in Thousands			1 Months Ended		3 Months Ended		12 Months Ended
	Aug. 07, 2017 USD ($) $ / shares	Jul. 31, 2014 $ / shares $ / Item	Jul. 31, 2014 $ / shares $ / Item	Jan. 31, 2013 USD ($) $ / shares $ / Item shares	Mar. 31, 2022 USD ($) $ / shares $ / Item	Mar. 31, 2021 USD ($) $ / shares	Dec. 31, 2021 USD ($)	Mar. 07, 2022 USD ($)	Jan. 01, 2022	Aug. 01, 2017 $ / shares	Dec. 31, 2016 USD ($)
Debt
Net increase (decrease) in cash and cash equivalents					$ 15,277	$ 36,403
Liability component
Principal					549,707		$ 433,484
Debt discount and issuance costs, net					$ (10,960)		(38,831)
2025 Notes
Debt
Debt discount							67,300
Common stock price to current conversion price ratio					130.00%
Average trading price percentage					98.00%
Total issuance costs							5,400
Liability issuance costs							3,500
Equity issuance costs							$ 1,900
Effective interest rate							8.87%
2025 Notes \| ASU 2020-06
Debt
Effective interest rate									2.88%
2025 Notes \| Common stock
Debt
Share Price \| $ / shares										$ 13.28
Convertible senior notes \| 2025 Notes
Debt
Ratio of repurchase price to the principal amount					100.00%
Liability component
Principal					$ 192,500		$ 192,500
Debt discount and issuance costs, net					(2,437)		(38,211)
Net Carrying Amount					190,063		154,289
Equity component, net					0		65,361
Interest expense
Contractual interest expense					1,203	1,203
Amortization of debt issuance costs					171	159
Amortization of debt discount					0	1,911
Total interest and amortization expense					$ 1,374	$ 3,273
Convertible senior notes \| 2025 Notes \| Over-Allotment Option
Debt
Loan amount	$ 17,500
Convertible senior notes \| 2025 Notes \| Private Placement
Debt
Loan amount	$ 192,500
Debt Instrument, annual interest rate	2.50%
Convertible senior notes \| 2025 Notes \| Common stock
Debt
Conversion rate for shares of common stock per $1,000 principal	57.9240
Conversion price (dollars per share) \| $ / shares	$ 17.26				$ 17.26	$ 17.26
Conversion premium (as a percent)	30.00%
Convertible senior notes \| 2028 Notes
Debt
Loan amount					$ 261,000
Debt instrument maturity date					Mar. 15, 2028
Proceeds from issuance of convertible notes, net of issuance costs					$ 252,600
Common stock price to current conversion price ratio					130.00%
Average trading price percentage					98.00%
Ratio of repurchase price to the principal amount					100.00%
Portion of debt instrument face amount, Exercised					$ 36,000
Effective interest rate					2.69%
Liability component
Principal					$ 261,000
Debt discount and issuance costs, net					(8,332)
Net Carrying Amount					252,668
Interest expense
Contractual interest expense					346
Amortization of debt issuance costs					84
Total interest and amortization expense					$ 430
Convertible senior notes \| 2028 Notes \| Privately-negotiated capped call option
Debt
Cap price for the underlying number of shares (in dollars per share) \| $ / Item					33.9850
Purchases of capped calls in connection with convertible senior notes due 2028					$ 21,000
Convertible senior notes \| 2028 Notes \| Over-Allotment Option
Debt
Loan amount					$ 45,000
Convertible senior notes \| 2028 Notes \| Private Placement
Debt
Debt Instrument, annual interest rate					2.125%
Convertible senior notes \| 2028 Notes \| Common stock
Debt
Conversion rate for shares of common stock per $1,000 principal					38.1432
Conversion price (dollars per share) \| $ / shares					$ 26.22
Convertible subordinated notes \| Privately-negotiated capped call option
Debt
Cap price for the underlying number of shares (in dollars per share) \| $ / Item		27.04	27.04
Convertible subordinated notes \| 2023 Notes
Debt
Loan amount				$ 287,500
Debt Instrument, annual interest rate				2.125%
Conversion price (dollars per share) \| $ / shares		$ 19.77	$ 19.77	$ 27.79
Ratio of repurchase price to the principal amount					100.00%
Effective interest rate								2.37%
Proceeds from issuance of notes payable, net of debt issuance costs				$ 281,200
Debt Instrument, Repurchased Face Amount					$ 144,800			$ 144,800			$ 14,100
Liability component
Principal					96,207		240,984	96,200
Debt discount and issuance costs, net					191		620	$ (200)
Net Carrying Amount							$ 240,364
Interest expense
Contractual interest expense					1,084	$ 1,280
Amortization of debt issuance costs					122	141
Total interest and amortization expense					$ 1,206	$ 1,421
Convertible subordinated notes \| 2023 Notes \| Privately-negotiated capped call option
Debt
Strike price for the underlying number of shares (in dollars per share) \| $ / shares		$ 27.79	$ 19.77	$ 27.79
Cap price for the underlying number of shares (in dollars per share) \| $ / Item		38.00	38.00	38.00
Convertible subordinated notes \| 2023 Notes \| Stock prices below $26.22 per share \| Minimum
Debt
Net shares settlement payable to the entity \| shares				0

Debt - Debt Maturities (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Long-term debt maturities for years ending December 31:
Remainder of 2022	$ 0
2023	96,207
2024	0
2025	192,500
2026	0
Thereafter	261,000
Total	$ 549,707	$ 433,484

Commitments and Contingencies (Additional Information) (Details)	3 Months Ended
	Mar. 31, 2022 ft²
Entasis Lease
Lessee, Lease, Description [Line Items]
Operating lease, Weighted average remaining lease term	3 years 9 months 18 days
Operating lease, weighted average incremental borrowing rate	7.80%
Waltham, Massachusetts
Lessee, Lease, Description [Line Items]
Lease space	20,062
Burlingame, California
Lessee, Lease, Description [Line Items]
Lease space	2,111

Commitments and Contingencies - Schedule of Operating Lease Information Presented In Balance Sheet (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Leases, Operating [Abstract]
Right of use assets	$ 3,794	$ 97
Operating Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration]	Liabilities, Current	Liabilities, Current
Lease liabilities, current	$ 622	$ 106
Liabilities, Current	$ 109,227	$ 5,807
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible Enumeration]	Other Liabilities, Noncurrent	Other Liabilities, Noncurrent
Lease Liabilities, long-term	$ 3,299	$ 0
Other Liabilities, Noncurrent	3,299	0
Total operating lease liabilities	$ 3,921	$ 106

- Definition

Total obligations incurred as part of normal operations that are expected to be paid during the following twelve months or within one business cycle, if longer.

+ References

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-Publisher FASB
-Name Accounting Standards Codification
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-Section 55
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-Name Accounting Standards Codification
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Commitments and Contingencies (Entasis Lease) (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Future minimum lease payments for years ending December 31:
Total operating lease liabilities	$ 3,921	$ 106
Entasis Therapeutics Holdings Inc
Future minimum lease payments for years ending December 31:
Remainder of 2022	553
2023	1,249
2024	1,269
2025	1,289
Total	4,360
Less: imputed interest	(516)
Total operating lease liabilities	$ 3,844

Commitments and Contingencies (Burlingame, California) (Details) - Burlingame, California $ in Thousands	Mar. 31, 2022 USD ($)
Lessee, Lease, Description [Line Items]
Remainder of 2022	$ 76
Thereafter	0
Total	$ 76

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Mar. 31, 2021
Income Tax Disclosure [Abstract]
Provisional income tax expense	$ 6,860	$ 19,736
Effective tax rate (as a percent)	15.30%	15.20%

- Definition

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

+ References + Details