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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, 2023

 

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 26, 2023 was 64,086,675.

 

 

 

 


 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements (Unaudited)

3

 

 

Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022

3

Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2023 and 2022

4

Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2023 and 2022

5

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022

6

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022

8

Notes to Condensed Consolidated Financial Statements

11

 

 

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

41

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

49

 

 

Item 4. Controls and Procedures

49

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

50

 

 

Item 1A. Risk Factors

50

 

 

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

50

 

 

Item 3. Defaults Upon Senior Securities

51

 

 

Item 4. Mine Safety Disclosure

51

 

 

Item 5. Other Information

51

 

 

Item 6. Exhibits

52

 

 

Signatures

53

 

 

 

 

 

 

 

 

 

2


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

INNOVIVA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

 

(unaudited)

 

 

*

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

179,997

 

 

$

291,049

 

Accounts receivable, net

 

 

10,752

 

 

 

9,401

 

Receivables from collaboration arrangement

 

 

57,014

 

 

 

54,672

 

Inventory

 

 

40,515

 

 

 

55,897

 

Prepaid expenses

 

 

14,729

 

 

 

29,559

 

Other current assets

 

 

1,992

 

 

 

2,933

 

Total current assets

 

 

304,999

 

 

 

443,511

 

Property and equipment, net

 

 

361

 

 

 

170

 

Equity method investments

 

 

107,040

 

 

 

39,154

 

Equity and long-term investments

 

 

422,491

 

 

 

363,859

 

Capitalized fees paid, net

 

 

87,239

 

 

 

97,607

 

Right-of-use assets

 

 

2,828

 

 

 

3,265

 

Goodwill

 

 

17,905

 

 

 

26,713

 

Intangible assets

 

 

236,845

 

 

 

252,919

 

Deferred tax assets

 

 

4,952

 

 

 

 

Other assets

 

 

3,444

 

 

 

4,299

 

Total assets

 

$

1,188,104

 

 

$

1,231,497

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,783

 

 

$

2,939

 

Accrued personnel-related expenses

 

 

5,166

 

 

 

8,022

 

Accrued interest payable

 

 

833

 

 

 

4,359

 

Deferred revenue

 

 

1,548

 

 

 

2,094

 

Convertible subordinated notes due 2023, net of issuance costs

 

 

 

 

 

96,193

 

Income tax payable

 

 

154

 

 

 

154

 

Other accrued liabilities

 

 

24,699

 

 

 

21,207

 

Total current liabilities

 

 

36,183

 

 

 

134,968

 

Long-term debt, net of discount and issuance costs

 

 

445,718

 

 

 

444,180

 

Other long-term liabilities

 

 

68,690

 

 

 

70,918

 

Deferred tax liabilities, net

 

 

 

 

 

5,771

 

Income tax payable, long-term

 

 

10,020

 

 

 

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,
   
64,384 and 69,188 issued and outstanding as of
   September 30, 2023 and December 31, 2022, respectively

 

 

644

 

 

 

692

 

Treasury stock: at cost, 32,005 shares as of September 30, 2023
   and December 31, 2022

 

 

(393,829

)

 

 

(393,829

)

Additional paid-in capital

 

 

1,107,398

 

 

 

1,163,836

 

Accumulated deficit

 

 

(86,720

)

 

 

(204,911

)

Total stockholders’ equity

 

 

627,493

 

 

 

565,788

 

Total liabilities and stockholders’ equity

 

$

1,188,104

 

 

$

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.

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,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Royalty revenue, net of amortization of capitalized fees
   paid of $
3,456 in the three months ended September 30, 2023
   and 2022, and $
10,368 in the nine months ended
   September 30, 2023 and 2022

 

$

53,558

 

 

$

62,150

 

 

$

172,681

 

 

$

260,429

 

Net product sales

 

 

13,701

 

 

 

5,107

 

 

 

40,942

 

 

 

5,107

 

License revenue

 

 

 

 

 

 

 

 

11,000

 

 

 

 

Total revenue

 

 

67,259

 

 

 

67,257

 

 

 

224,623

 

 

 

265,536

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of products sold (inclusive of
   amortization of inventory fair value
   adjustments, excluding depreciation
   and amortization of intangible assets)

 

 

10,182

 

 

 

3,680

 

 

 

27,910

 

 

 

3,680

 

Cost of license revenue

 

 

 

 

 

 

 

 

1,600

 

 

 

 

Selling, general and administrative

 

 

28,636

 

 

 

27,810

 

 

 

71,913

 

 

 

46,084

 

Research and development

 

 

3,989

 

 

 

11,725

 

 

 

31,566

 

 

 

31,447

 

Amortization of acquired intangible assets

 

 

6,511

 

 

 

1,511

 

 

 

15,274

 

 

 

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 method
   investments, net

 

 

(71,980

)

 

 

(10,298

)

 

 

(67,886

)

 

 

44,475

 

Changes in fair values of other equity and
   long-term investments, net

 

 

2,640

 

 

 

10,168

 

 

 

4,887

 

 

 

23,406

 

Interest and dividend income

 

 

(4,114

)

 

 

(2,135

)

 

 

(11,032

)

 

 

(3,181

)

Interest expense

 

 

4,396

 

 

 

5,096

 

 

 

13,205

 

 

 

11,761

 

Other expense, net

 

 

1,047

 

 

 

(28

)

 

 

4,289

 

 

 

750

 

Total expenses

 

 

(18,693

)

 

 

(219,167

)

 

 

91,726

 

 

 

(86,101

)

Income before income taxes

 

 

85,952

 

 

 

286,424

 

 

 

132,897

 

 

 

351,637

 

Income tax expense, net

 

 

3,906

 

 

 

57,077

 

 

 

14,706

 

 

 

63,061

 

Net income

 

 

82,046

 

 

 

229,347

 

 

 

118,191

 

 

 

288,576

 

Net income (loss) attributable to
   noncontrolling interests

 

 

 

 

 

(36,176

)

 

 

 

 

 

6,341

 

Net income attributable to
   Innoviva stockholders

 

$

82,046

 

 

$

265,523

 

 

$

118,191

 

 

$

282,235

 

Basic net income per share attributable to
   Innoviva stockholders

 

$

1.26

 

 

$

3.81

 

 

$

1.79

 

 

$

4.05

 

Diluted net income per share attributable
   to Innoviva stockholders

 

$

0.98

 

 

$

2.80

 

 

$

1.45

 

 

$

3.07

 

Shares used to compute Innoviva basic and diluted
   net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Shares used to compute basic net income per share

 

 

64,953

 

 

 

69,731

 

 

 

66,016

 

 

 

69,640

 

Shares used to compute diluted net income per share

 

 

86,164

 

 

 

95,830

 

 

 

87,504

 

 

 

95,072

 

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,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income

 

$

82,046

 

 

$

229,347

 

 

$

118,191

 

 

$

288,576

 

Comprehensive income

 

 

82,046

 

 

 

229,347

 

 

 

118,191

 

 

 

288,576

 

Comprehensive income (loss) attributable to
   noncontrolling interests

 

 

 

 

 

(36,176

)

 

 

 

 

 

6,341

 

Comprehensive income attributable to
   Innoviva stockholders

 

$

82,046

 

 

$

265,523

 

 

$

118,191

 

 

$

282,235

 

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, 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

 

Issuance of common stock units
   and stock awards, net of repurchase
   of shares to satisfy tax withholding

 

 

16

 

 

 

 

 

 

(11

)

 

 

 

 

 

 

 

 

 

 

 

(11

)

Repurchase of common stock

 

 

(857

)

 

 

(9

)

 

 

(11,062

)

 

 

 

 

 

 

 

 

 

 

 

(11,071

)

Stock-based compensation

 

 

 

 

 

 

 

 

1,442

 

 

 

 

 

 

 

 

 

 

 

 

1,442

 

Net income

 

 

 

 

 

 

 

 

 

 

 

82,046

 

 

 

 

 

 

 

 

 

82,046

 

Balance as of September 30, 2023

 

 

64,384

 

 

$

644

 

 

$

1,107,398