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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 September 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)
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Delaware |
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94-3265960 |
(State or Other Jurisdiction of Incorporation or Organization) |
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(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:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
Common Stock, par value $0.01 per share |
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INVA |
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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.
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Large accelerated filer ☒ |
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Accelerated filer ☐ |
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Non-accelerated filer ☐ |
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Smaller reporting company ☐ |
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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 October 28, 2022 was 69,783,185.
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
INNOVIVA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
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September 30, |
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December 31, |
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2022 |
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2021 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
300,789 |
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$ |
201,525 |
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Short-term marketable securities |
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282 |
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— |
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Accounts receivable, net |
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6,743 |
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— |
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Receivables from collaboration arrangement |
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65,606 |
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110,711 |
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Inventory |
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70,807 |
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— |
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Prepaid expenses |
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7,932 |
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1,367 |
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Other current assets |
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2,432 |
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70 |
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Total current assets |
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454,591 |
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313,673 |
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Property and equipment, net |
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165 |
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12 |
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Equity and long-term investments |
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489,111 |
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483,845 |
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Capitalized fees paid to a related party, net |
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101,062 |
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111,430 |
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Right-of-use assets |
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3,679 |
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97 |
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Goodwill |
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15,995 |
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— |
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Intangible assets |
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258,489 |
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— |
|
Deferred tax assets, net |
|
|
— |
|
|
|
17,327 |
|
Other assets |
|
|
4,620 |
|
|
|
11 |
|
Total assets |
|
$ |
1,327,712 |
|
|
$ |
926,395 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
3,805 |
|
|
$ |
27 |
|
Accrued personnel-related expenses |
|
|
6,473 |
|
|
|
619 |
|
Accrued interest payable |
|
|
5,702 |
|
|
|
4,152 |
|
Deferred revenue |
|
|
2,849 |
|
|
|
— |
|
Convertible subordinated notes due 2023, net of issuance costs |
|
|
96,131 |
|
|
|
— |
|
Income tax payable |
|
|
33,804 |
|
|
|
— |
|
Other accrued liabilities |
|
|
15,120 |
|
|
|
1,009 |
|
Total current liabilities |
|
|
163,884 |
|
|
|
5,807 |
|
Long-term debt, net of discount and issuance costs |
|
|
443,679 |
|
|
|
394,653 |
|
Other long-term liabilities |
|
|
78,421 |
|
|
|
— |
|
Deferred tax liabilities |
|
|
360 |
|
|
|
— |
|
Commitments and contingencies (Note 11) |
|
|
|
|
|
|
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, 69,776 and 69,566 issued and outstanding as of September 30, 2022 and December 31, 2021 respectively |
|
|
698 |
|
|
|
696 |
|
Treasury stock: at cost, 32,005 shares as of September 30, 2022 and December 31, 2021, respectively |
|
|
(393,829 |
) |
|
|
(393,829 |
) |
Additional paid-in capital |
|
|
1,171,096 |
|
|
|
1,264,024 |
|
Accumulated deficit |
|
|
(136,597 |
) |
|
|
(456,148 |
) |
Total Innoviva stockholders’ equity |
|
|
641,368 |
|
|
|
414,743 |
|
Noncontrolling interest |
|
|
— |
|
|
|
111,192 |
|
Total stockholders’ equity |
|
|
641,368 |
|
|
|
525,935 |
|
Total liabilities and stockholders’ equity |
|
$ |
1,327,712 |
|
|
$ |
926,395 |
|
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 September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
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 September 30, 2022 and 2021, and $10,368 in the nine months ended September 30, 2022 and 2021 |
|
$ |
62,150 |
|
|
$ |
97,862 |
|
|
$ |
260,429 |
|
|
$ |
284,186 |
|
Net product sales |
|
|
5,107 |
|
|
|
— |
|
|
|
5,107 |
|
|
|
— |
|
Total revenue |
|
|
67,257 |
|
|
|
97,862 |
|
|
|
265,536 |
|
|
|
284,186 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold (inclusive of amortization of inventory fair value adjustments, excluding depreciation and amortization of intangible assets) |
|
|
3,680 |
|
|
|
— |
|
|
|
3,680 |
|
|
|
— |
|
Selling, general and administrative |
|
|
27,810 |
|
|
|
2,860 |
|
|
|
46,084 |
|
|
|
13,074 |
|
Research and development |
|
|
11,725 |
|
|
|
449 |
|
|
|
31,447 |
|
|
|
536 |
|
Amortization of acquired intangible assets |
|
|
1,511 |
|
|
|
— |
|
|
|
1,511 |
|
|
|
— |
|
Gain on sale of Theravance Respiratory Company, LLC (“TRC”) |
|
|
(266,696 |
) |
|
|
— |
|
|
|
(266,696 |
) |
|
|
— |
|
Loss on debt extinguishment |
|
|
— |
|
|
|
— |
|
|
|
20,662 |
|
|
|
— |
|
Changes in fair values of equity and long-term investments, net |
|
|
(130 |
) |
|
|
(33,613 |
) |
|
|
67,881 |
|
|
|
(133,973 |
) |
Interest and dividend income |
|
|
(2,135 |
) |
|
|
(453 |
) |
|
|
(3,181 |
) |
|
|
(503 |
) |
Interest expense |
|
|
5,096 |
|
|
|
4,790 |
|
|
|
11,761 |
|
|
|
14,229 |
|
Other expense (income), net |
|
|
(28 |
) |
|
|
652 |
|
|
|
750 |
|
|
|
2,036 |
|
Total expenses |
|
|
(219,167 |
) |
|
|
(25,315 |
) |
|
|
(86,101 |
) |
|
|
(104,601 |
) |
Income before income taxes |
|
|
286,424 |
|
|
|
123,177 |
|
|
|
351,637 |
|
|
|
388,787 |
|
Income tax expense, net |
|
|
57,077 |
|
|
|
20,531 |
|
|
|
63,061 |
|
|
|
65,600 |
|
Net income |
|
|
229,347 |
|
|
|
102,646 |
|
|
|
288,576 |
|
|
|
323,187 |
|
Net income (loss) attributable to noncontrolling interests |
|
|
(36,176 |
) |
|
|
30,208 |
|
|
|
6,341 |
|
|
|
67,678 |
|
Net income attributable to Innoviva stockholders |
|
$ |
265,523 |
|
|
$ |
72,438 |
|
|
$ |
282,235 |
|
|
$ |
255,509 |
|
Basic net income per share attributable to Innoviva stockholders |
|
$ |
3.81 |
|
|
$ |
1.04 |
|
|
$ |
4.05 |
|
|
$ |
2.96 |
|
Diluted net income per share attributable to Innoviva stockholders |
|
$ |
2.80 |
|
|
$ |
0.90 |
|
|
$ |
3.07 |
|
|
$ |
2.63 |
|
Shares used to compute Innoviva basic and diluted net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute basic net income per share |
|
|
69,731 |
|
|
|
69,458 |
|
|
|
69,640 |
|
|
|
86,298 |
|
Shares used to compute diluted net income per share |
|
|
95,830 |
|
|
|
81,699 |
|
|
|
95,072 |
|
|
|
98,536 |
|
See accompanying notes to condensed consolidated financial statements.
4
INNOVIVA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Net income |
|
$ |
229,347 |
|
|
$ |
102,646 |
|
|
$ |
288,576 |
|
|
$ |
323,187 |
|
Comprehensive income |
|
|
229,347 |
|
|
|
102,646 |
|
|
|
288,576 |
|
|
|
323,187 |
|
Comprehensive income (loss) attributable to noncontrolling interests |
|
|
(36,176 |
) |
|
|
30,208 |
|
|
|
6,341 |
|
|
|
67,678 |
|
Comprehensive income attributable to Innoviva stockholders |
|
$ |
265,523 |
|
|
$ |
72,438 |
|
|
$ |
282,235 |
|
|
$ |
255,509 |
|
See accompanying notes to condensed consolidated financial statements.
5
INNOVIVA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
Common Stock |
|
|
Paid-In |
|
|
Accumulated |
|
|
Treasury Stock |
|
|
Noncontrolling |
|
|
Stockholders’ |
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Shares |
|
|
Amount |
|
|
Interest |
|
|
Equity |
|
Balance as of January 1, 2022 |
|
|
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 interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6,507 |
) |
|
|
(6,507 |
) |
Fair value of noncontrolling interests 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 interests |
|