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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 September 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 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

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.

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.

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.

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		$	(86,720	)		32,005