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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)

 

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 October 28, 2022 was 69,783,185.

 

 

 

 


 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements (Unaudited)

3

 

 

Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021

3

Condensed Consolidated Statements of Income for the Three and Nine Months ended September 30, 2022 and 2021

4

Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months ended September 30, 2022 and 2021

5

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months ended September 30, 2022 and 2021

6

Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2022 and 2021

8

Notes to Condensed Consolidated Financial Statements

10

 

 

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

39

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

47

 

 

Item 4. Controls and Procedures

48

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

48

 

 

Item 1A. Risk Factors

49

 

 

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

49

 

 

Item 3. Defaults Upon Senior Securities

49

 

 

Item 4. Mine Safety Disclosure

49

 

 

Item 5. Other Information

49

 

 

Item 6. Exhibits

50

 

 

Signatures

52

 

 

 

 

 

 

 

 

 

2


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

INNOVIVA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

300,789

 

 

$

201,525

 

Short-term marketable securities

 

 

282

 

 

 

 

Accounts receivable, net

 

 

6,743

 

 

 

 

Receivables from collaboration arrangement

 

 

65,606

 

 

 

110,711

 

Inventory

 

 

70,807

 

 

 

 

Prepaid expenses

 

 

7,932

 

 

 

1,367

 

Other current assets

 

 

2,432

 

 

 

70

 

Total current assets

 

 

454,591

 

 

 

313,673

 

Property and equipment, net

 

 

165

 

 

 

12

 

Equity and long-term investments

 

 

489,111

 

 

 

483,845

 

Capitalized fees paid to a related party, net

 

 

101,062

 

 

 

111,430

 

Right-of-use assets

 

 

3,679

 

 

 

97

 

Goodwill

 

 

15,995

 

 

 

 

Intangible assets

 

 

258,489

 

 

 

 

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

)

 

$