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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2022

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

For the transition period from to

Commission File Number: 000-30319

INNOVIVA, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware		94-3265960
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

1350 Old Bayshore Highway Suite 400

Burlingame, CA 94010

(Address of Principal Executive Offices)

(650) 238-9600

(Registrant’s Telephone Number, Including Area Code)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	INVA	The NASDAQ Global Select Market

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

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

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


Large accelerated filer ☒		Accelerated filer ☐

Non-accelerated filer ☐		Smaller reporting company ☐

		Emerging growth company ☐

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

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

The number of shares of registrant’s common stock outstanding on July 15, 2022 was 69,705,967.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements	3

Condensed Consolidated Balance Sheets as of June 30, 2022 (Unaudited) and December 31, 2021	3
Unaudited Condensed Consolidated Statements of Income for the Three and Six Months ended June 30, 2022 and 2021	4
Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months ended June 30, 2022 and 2021	5
Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months ended June 30, 2022 and 2021	6
Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2022 and 2021	8
Notes to Unaudited Condensed Consolidated Financial Statements	9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

Item 3. Quantitative and Qualitative Disclosures About Market Risk	38

Item 4. Controls and Procedures	38

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	38

Item 1A. Risk Factors	38

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3. Defaults Upon Senior Securities	39

Item 4. Mine Safety Disclosure	39

Item 5. Other Information	39

Item 6. Exhibits	40

Signatures	42

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

INNOVIVA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)


	June 30,			December 31,
	2022			2021
	(unaudited)			*
Assets
Current assets:
Cash and cash equivalents	$	283,580		$	201,525
Related party receivables from collaborative arrangements		111,676			110,711
Prepaid expenses		3,953			1,367
Other current assets		1,119			70
Total current assets		400,328			313,673
Property and equipment, net		176			12
Equity and long-term investments		494,097			483,845
Capitalized fees paid to a related party, net		104,518			111,430
Right-of-use assets		3,545			97
Goodwill		5,544			—
Intangible assets		105,000			—
Deferred tax assets, net		23,274			17,327
Other assets		1,157			11
Total assets	$	1,137,639		$	926,395

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	4,323		$	27
Accrued personnel-related expenses		3,871			619
Accrued interest payable		4,498			4,152
Convertible subordinated notes due 2023, net of issuance costs		96,072			—
Other accrued liabilities		17,144			1,009
Total current liabilities		125,908			5,807
Long-term debt, net of discount and issuance costs		443,178			394,653
Lease liabilities, long-term		3,091			—
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock: $0.01 par value, 230 shares authorized, no shares issued and outstanding		—			—
Common stock: $0.01 par value, 200,000 shares authorized, 69,706 and 69,566 issued and outstanding as of June 30, 2022 and December 31, 2021 respectively		697			696
Treasury stock: at cost, 32,005 shares at June 30, 2022 and December 31, 2021, respectively		(393,829	)		(393,829	)
Additional paid-in capital		1,183,667			1,264,024
Accumulated deficit		(402,198	)		(456,148	)
Total Innoviva stockholders’ equity		388,337			414,743
Noncontrolling interest		177,125			111,192
Total stockholders’ equity		565,462			525,935
Total liabilities and stockholders’ equity	$	1,137,639		$	926,395

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

See accompanying notes to condensed consolidated financial statements.

INNOVIVA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Royalty revenue from a related party, net of amortization of capitalized fees paid to a related party of $3,456 in the three months ended June 30, 2022 and 2021, and $6,912 in the six months ended June 30, 2022 and 2021	$	108,220		$	100,806		$	198,279		$	186,324
Operating expenses:
Research and development		13,884			38			19,722			87
General and administrative		11,782			4,228			18,274			10,214
Total operating expenses		25,666			4,266			37,996			10,301
Income from operations		82,554			96,540			160,283			176,023
Interest and dividend income		724			20			1,046			50
Other expense, net		(528	)		(951	)		(778	)		(1,384	)
Interest expense		(3,655	)		(4,745	)		(6,665	)		(9,439	)
Loss on debt extinguishment		—			—			(20,662	)		—
Changes in fair values of equity and long-term investments, net		(58,600	)		45,315			(68,011	)		100,360
Income before income taxes		20,495			136,179			65,213			265,610
Income tax expense (benefit), net		(876	)		25,333			5,984			45,069
Net income		21,371			110,846			59,229			220,541
Net income attributable to noncontrolling interest		20,432			21,898			42,517			37,470
Net income attributable to Innoviva stockholders	$	939		$	88,948		$	16,712		$	183,071
Basic net income per share attributable to Innoviva stockholders	$	0.01		$	1.01		$	0.24		$	1.93
Diluted net income per share attributable to Innoviva stockholders	$	0.05		$	0.90		$	0.24		$	1.73
Shares used to compute Innoviva basic and diluted net income per share:
Shares used to compute basic net income per share		69,643			88,423			69,594			94,858
Shares used to compute diluted net income per share		95,653			100,639			94,692			107,096

See accompanying notes to condensed consolidated financial statements.

INNOVIVA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income	$	21,371	$	110,846	$	59,229	$	220,541
Comprehensive income		21,371		110,846		59,229		220,541
Comprehensive income attributable to noncontrolling interest		20,432		21,898		42,517		37,470
Comprehensive income attributable to Innoviva stockholders	$	939	$	88,948	$	16,712	$	183,071

See accompanying notes to condensed consolidated financial statements.

INNOVIVA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Six Months Ended June 30, 2022
					Additional			Accumulated Other													Total
	Common Stock				Paid-In			Comprehensive		Accumulated			Treasury Stock					Noncontrolling			Stockholders’
	Shares		Amount		Capital			Income (Loss)		Deficit			Shares		Amount			Interest			Equity
Balance as of December 31, 2021		69,566	$	696	$	1,264,024		$	—	$	(456,148	)		32,005	$	(393,829	)	$	111,192		$	525,935
Cumulative adjustment due to adoption of ASU 2020-06		—		—		(65,361	)		—		37,238			—		—			—			(28,123	)
Distributions to noncontrolling interest		—		—		—			—		—			—		—			(6,507	)		(6,507	)
Fair value of noncontrolling interest in a consolidated variable interest entity		—		—		—			—		—			—		—			38,471			38,471
Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding		28		—		214			—		—			—		—			—			214
Stock-based compensation		—		—		620			—		—			—		—			334			954
Capped call options associated with convertible senior notes due 2028		—		—		(16,585	)		—		—			—		—			—			(16,585	)
Net income		—		—		—			—		15,773			—		—			22,085			37,858
Balance as of March 31, 2022		69,594	$	696	$	1,182,912		$	—	$	(403,137	)		32,005	$	(393,829	)	$	165,575		$	552,217
Distributions to noncontrolling interest				—		—			—		—			—		—			(9,545	)		(9,545	)
Equity activity of noncontrolling interest in a consolidated variable interest entity		—		—		—			—		—			—		—			(2	)		(2	)
Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding		112		1		67			—		—			—		—			—			68
Conversion of convertible subordinated notes due 2023		—		—		3			—		—			—		—			—			3
Stock-based compensation		—		—		685			—		—			—		—			665			1,350
Net income		—		—		—			—		939			—		—			20,432			21,371
Balance as of June 30, 2022		69,706