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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended June 30, 2022

 

OR

 

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

 

For the transition period from to

 

Commission File Number: 000-30319

 

INNOVIVA, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

 

94-3265960

(State or Other Jurisdiction of
Incorporation or Organization)

 

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

 

1350 Old Bayshore Highway Suite 400

Burlingame, CA 94010

(Address of Principal Executive Offices)

 

(650) 238-9600

(Registrant’s Telephone Number, Including Area Code)

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

INVA

 

The NASDAQ Global Select Market

 

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

 

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

 

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

 

Large accelerated filer ☒

 

Accelerated filer ☐

 

 

 

Non-accelerated filer ☐

 

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

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

 

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

 

The number of shares of registrant’s common stock outstanding on 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

 

 

 

 

 

 

 

 

 

2


 

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.

3


 

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.

4


 

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.

5


 

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

 

 

$

697

 

 

$

1,183,667

 

 

$

 

 

$

(402,198

)

 

 

32,005

 

 

$

(393,829

)

 

$

177,125

 

 

$

565,462

 

 

6