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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, 2023

☐ 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 26, 2023 was 65,098,020.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)	3

Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	3
Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2023 and 2022	4
Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2023 and 2022	5
Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022	6
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022	8
Notes to Condensed Consolidated Financial Statements	10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	40

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	50

Item 5. Other Information	50

Item 6. Exhibits	50

Signatures	51

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

INNOVIVA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)


	June 30,			December 31,
	2023			2022
	(unaudited)			*
Assets
Current assets:
Cash and cash equivalents	$	173,025		$	291,049
Accounts receivable, net		15,275			9,401
Receivables from collaboration arrangement		65,721			54,672
Inventory		46,846			55,897
Prepaid expenses		20,535			29,559
Other current assets		2,136			2,933
Total current assets		323,538			443,511
Property and equipment, net		161			170
Equity method investments		35,061			39,154
Equity and long-term investments		397,940			363,859
Capitalized fees paid, net		90,695			97,607
Right-of-use assets		2,719			3,265
Goodwill		14,882			26,713
Intangible assets		243,356			252,919
Deferred tax assets		6,327			—
Other assets		3,562			4,299
Total assets	$	1,118,241		$	1,231,497
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	4,592		$	2,939
Accrued personnel-related expenses		5,474			8,022
Accrued interest payable		3,422			4,359
Deferred revenue		3,254			2,094
Convertible subordinated notes due 2023, net of issuance costs		—			96,193
Income tax payable		154			154
Other accrued liabilities		22,502			21,207
Total current liabilities		39,398			134,968
Long-term debt, net of discount and issuance costs		445,201			444,180
Other long-term liabilities		68,584			70,918
Deferred tax liabilities, net		—			5,771
Income tax payable, long-term		9,971			9,872
Commitments and contingencies (Note 12)
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, 65,225 and 69,188 issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		653			692
Treasury stock: at cost, 32,005 shares as of June 30, 2023 and December 31, 2022, respectively		(393,829	)		(393,829	)
Additional paid-in capital		1,117,029			1,163,836
Accumulated deficit		(168,766	)		(204,911	)
Total stockholders’ equity		555,087			565,788
Total liabilities and stockholders’ equity	$	1,118,241		$	1,231,497

*Condensed consolidated balance sheet has been derived from audited consolidated financial statements as of December 31, 2022.

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,
	2023			2022			2023			2022
Revenue:
Royalty revenue, net of amortization of capitalized fees paid of $3,456 in the three months ended June 30, 2023 and 2022, and $6,912 in the six months ended June 30, 2023 and 2022	$	62,265		$	108,220		$	119,123		$	198,279
Net product sales		15,727			—			27,241			—
License revenue		3,000			—			11,000			—
Total revenue		80,992			108,220			157,364			198,279
Expenses:
Cost of products sold (inclusive of amortization of inventory fair value adjustments, excluding depreciation and amortization of intangible assets)		8,979			—			17,728			—
Cost of license revenue		—			—			1,600			—
Selling, general and administrative		23,542			11,782			43,277			18,274
Research and development		14,989			13,884			27,577			19,722
Amortization of acquired intangible assets		4,958			—			8,763			—
Loss on debt extinguishment		—			—			—			20,662
Changes in fair values of equity method investments, net		19,911			42,823			4,094			54,773
Changes in fair values of other equity and long-term investments, net		83			15,777			2,247			13,238
Interest and dividend income		(3,553	)		(724	)		(6,918	)		(1,046	)
Interest expense		4,382			3,655			8,809			6,665
Other expense, net		1,896			528			3,242			778
Total expenses		75,187			87,725			110,419			133,066
Income before income taxes		5,805			20,495			46,945			65,213
Income tax expense (benefit), net		4,525			(876	)		10,800			5,984
Net income		1,280			21,371			36,145			59,229
Net income attributable to noncontrolling interests		—			20,432			—			42,517
Net income attributable to Innoviva stockholders	$	1,280		$	939		$	36,145		$	16,712
Basic net income per share attributable to Innoviva stockholders	$	0.02		$	0.01		$	0.54		$	0.24
Diluted net income per share attributable to Innoviva stockholders	$	0.02		$	0.05		$	0.46		$	0.24
Shares used to compute Innoviva basic and diluted net income per share:
Shares used to compute basic net income per share		65,341			69,643			66,557			69,594
Shares used to compute diluted net income per share		65,489			95,653			88,175			94,692

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,
	2023		2022		2023		2022
Net income	$	1,280	$	21,371	$	36,145	$	59,229
Comprehensive income		1,280		21,371		36,145		59,229
Comprehensive income attributable to noncontrolling interests		—		20,432		—		42,517
Comprehensive income attributable to Innoviva stockholders	$	1,280	$	939	$	36,145	$	16,712

See accompanying notes to condensed consolidated financial statements.

INNOVIVA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Six Months Ended June 30, 2023
							Additional											Total
	Common Stock						Paid-In			Accumulated			Treasury Stock					Stockholders’
	Shares			Amount			Capital			Deficit			Shares		Amount			Equity
Balance as of January 1, 2023		69,188		$	692		$	1,163,836		$	(204,911	)		32,005	$	(393,829	)	$	565,788
Issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding		55			1			(24	)		—			—		—			(23	)
Repurchase of common stock		(3,419	)		(34	)		(40,701	)		—			—		—			(40,735	)
Stock-based compensation		—			—			1,598			—			—		—			1,598
Net income		—			—			—			34,865			—		—			34,865
Balance as of March 31, 2023		65,824			659			1,124,709			(170,046	)		32,005		(393,829	)		561,493
Issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding		177			2			78			—			—		—			80
Repurchase of common stock		(776	)		(8	)		(9,278	)		—			—		—			(9,286	)
Stock-based compensation		—			—			1,520			—			—		—			1,520
Net income		—			—			—			1,280			—		—			1,280
Balance as of June 30, 2023		65,225		$	653		$	1,117,029		$	(168,766	)		32,005	$	(393,829	)	$	555,087

Six Months Ended June 30, 2022

Additional