0000950170-23-057530 | 10-Q | XBRL Viewer

Net Income Per Share

9 Months Ended

Sep. 30, 2023

2. Net Income Per Share

Basic net income per share attributable to Innoviva stockholders is computed by dividing net income attributable to Innoviva stockholders by the weighted-average number of shares of common stock outstanding. Diluted net income per share attributable to Innoviva stockholders is computed by dividing net income attributable to Innoviva stockholders by the weighted-average number of shares of common stock and dilutive potential common stock equivalents then outstanding. Dilutive potential common stock equivalents include the assumed exercise, vesting and issuance of employee stock awards using the treasury stock method, as well as common stock issuable upon assumed conversion of our convertible subordinated notes due 2023 (the “2023 Notes”) up until its maturity date on January 15, 2023, our convertible senior notes due 2025 (the “2025 Notes”) and our convertible senior notes due 2028 (the “2028 Notes”) using the if-converted method.

The following table shows the computation of basic and diluted net income per share for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands except per share data)	2023		2022		2023		2022
Numerator:
Net income attributable to Innoviva stockholders, basic	$	82,046	$	265,523	$	118,191	$	282,235
Add: interest expense on 2023 Notes, net of tax effect		—		412		86		2,003
Add: interest expense on 2025 Notes, net of tax effect		1,236		994		3,703		3,533
Add: interest expense on 2028 Notes, net of tax effect		1,543		1,769		4,618		3,862
Net income attributable to Innoviva stockholders, diluted	$	84,825	$	268,698	$	126,598	$	291,633
Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders		64,953		69,731		66,016		69,640
Dilutive effect of 2023 Notes		—		4,866		250		6,629
Dilutive effect of 2025 Notes		11,150		11,150		11,150		11,150
Dilutive effect of 2028 Notes		9,955		9,955		9,955		7,559
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan		106		128		133		94
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders		86,164		95,830		87,504		95,072
Net income per share attributable to Innoviva stockholders
Basic	$	1.26	$	3.81	$	1.79	$	4.05
Diluted	$	0.98	$	2.80	$	1.45	$	3.07

Anti-Dilutive Securities

The following common stock equivalents were not included in the computation of diluted net income per share because their effect was anti-dilutive for the periods presented:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2023		2022		2023		2022
Outstanding options and awards granted under equity incentive plan and employee stock purchase plan		1,389		705		1,284		577
Outstanding stock warrant		591		526		591		177
Total		1,980		1,231		1,875		754

Balance Sheet Component - Schedule of Other Long-term Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Balance Sheet Related Disclosures [Abstract]
Long-term portion of deferred royalty obligation	$ 66,142	$ 67,947
Long-term portion of lease liabilities	1,953	2,376
Contingent value rights liability	595	595
Total other long-term liabilities	$ 68,690	$ 70,918

Equity and Long-term Investments and Fair Value Measurements - Equity Investment in InCarda (Details) $ / shares in Units, $ in Millions			3 Months Ended				9 Months Ended
	Jun. 15, 2022 USD ($) $ / shares shares	Mar. 09, 2022 USD ($)	Jun. 30, 2023 USD ($)	Sep. 30, 2022 USD ($)	Jun. 30, 2022 USD ($)	Sep. 30, 2020 USD ($) shares	Sep. 30, 2023 USD ($) Director	Sep. 30, 2022 USD ($)	Dec. 31, 2022 USD ($)
Series C preferred stock
Equity Investment
Impairment of equity investments			$ 2.9
InCarda
Equity Investment
Number of Investee's Board members currently representing the Company \| Director							0
Unrealized gain loss from fair value changes in equity investments							$ 3.0
Unrealized gain				$ 0.2
Unrealized loss								$ 8.8
Carrying value wrote off warrant exercise							$ 0.1
InCarda \| Consolidated Investees [Member]
Equity Investment
Equity investment ownership percentage							8.10%		9.00%
InCarda \| Series C preferred stock and warrants
Equity Investment
Amount of securities purchase agreement						$ 15.8
InCarda \| Warrants
Equity Investment
Maximum number of additional shares into which warrants may be converted under the securities purchase agreement \| shares						5,117,358
Extended expiration date							Mar. 31, 2023
InCarda \| Convertible note and warrants
Equity Investment
Amount of securities purchase agreement		$ 0.7
InCarda \| Common stock
Equity Investment
Number of shares issued resulting from recapitalization of equity structure \| shares	4,093,886
InCarda \| Series A1 preferred stock
Equity Investment
Debt Conversion, Converted Instrument, Shares Issued \| shares	37,350
InCarda \| Series D 1 Preferred Stock
Equity Investment
Debt Conversion, Converted Instrument, Shares Issued \| shares	8,771,780
InCarda \| Series D 2 Preferred Stock
Equity Investment
Debt Conversion, Converted Instrument, Shares Issued \| shares	3,369,802
InCarda \| Series D1 Warrant
Equity Investment
Debt Conversion, Converted Instrument, Shares Issued \| shares	2,490,033
Exercise price of warrants \| $ / shares	$ 0.2
InCarda \| Series C preferred stock
Equity Investment
Number of shares issued resulting from recapitalization of equity structure \| shares						20,469,432
Debt Conversion, Converted Instrument, Shares Issued \| shares	5,117,358
Transaction cost						$ 0.8
Equity and long-term investments at fair value							$ 4.8		$ 6.8
Impairment of equity investments					$ 9.0
Exercise price of warrants \| $ / shares	$ 0.73
InCarda \| Series D warrants
Equity Investment
Equity and long-term investments at fair value							0.2		0.6
InCarda \| Series D Preferred Stock
Equity Investment
Payments to acquire equity securities	$ 2.3
InCarda \| Series D1 Preferred Stock, Series D2 Preferred Stock and Common Stock
Equity Investment
Equity and long-term investments at fair value							$ 2.7		$ 3.2
InCarda \| Significant Unobservable Inputs, Level 3 \| Backsolve Valuation
Equity Investment
Expected holding period			2 years		2 years
Risk free interest rate			4.90%		3.20%
Dividend yield			0.00%		0.00%
Estimated volatility			114.20%		122.00%

Revenue Recognition (Details) - USD ($) $ in Thousands		1 Months Ended	3 Months Ended		9 Months Ended
Revenue Recognition (Details) - USD ($) $ in Thousands	Jul. 13, 2022	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Disaggregation of Revenue [Line Items]
Net revenue			$ 67,259	$ 67,257	$ 224,623	$ 265,536
UNITED STATES \| Net Product Sales \| Geographic Concentration Risk
Disaggregation of Revenue [Line Items]
Concentration Risk, Percentage			86.00%		93.00%
GIAPREZA
Disaggregation of Revenue [Line Items]
Net revenue			$ 8,000		$ 28,200
XERAVA
Disaggregation of Revenue [Line Items]
Net revenue			5,100		12,100
XACDURO
Disaggregation of Revenue [Line Items]
Net revenue			600		600
GSK
Disaggregation of Revenue [Line Items]
Percentage of royalty payments not entitled to receive	15.00%
Net revenue			53,558	$ 62,150	172,681	$ 260,429
La Jolla
Disaggregation of Revenue [Line Items]
Net revenue		$ 5,100	$ 13,700		$ 40,900
La Jolla \| GIAPREZA
Disaggregation of Revenue [Line Items]
Net revenue		3,800
La Jolla \| XERAVA
Disaggregation of Revenue [Line Items]
Net revenue		$ 1,300

License and Collaboration Arrangements

9 Months Ended

Sep. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

License and Collaboration Arrangements

4. License and Collaboration Arrangements

Out-License Agreements

Zai Lab

Entasis entered into a license and collaboration agreement with Zai Lab (Shanghai) Co., Ltd. (“Zai Lab”) (Nasdaq: ZLAB), pursuant to which Zai Lab licensed exclusive rights to durlobactam and SUL-DUR, in the Asia-Pacific region (“the Zai Agreement”). Under the terms of the Zai Agreement, Zai Lab will fund most of the registrational clinical trial costs in China for SUL-DUR, with the exception of Phase 3 patient drug supply of licensed products. Zai Lab will conduct development activities and plan and obtain regulatory approval in a specified number of countries in the Asia-Pacific region beyond China after receipt of regulatory approval of a licensed product in China. Zai Lab is also solely responsible for commercializing licensed products in the Asia-Pacific region and will commercialize licensed products for which it has obtained regulatory approval. We are obligated to supply Zai Lab with the licensed products for clinical development and, if the licensed product is approved, for commercial use for a certain period unless Zai Lab notifies otherwise. Zai Lab may take over manufacturing responsibilities for its own commercialization activities within a specified time period following the effective date of the Zai Agreement.

We are eligible to receive up to an aggregate of $91.0 million in research and development support payments and development, regulatory and sales milestone payments related to SUL-DUR, imipenem and other combinations with the licensed products. Zai Lab will pay us a tiered royalty equal to from a high-single digit to low-double digit percentage based on annual net sales of licensed products in the territory, subject to specified reductions for the market entry of competing products, loss of patent coverage of licensed products and for payments owed to third parties for additional rights necessary to commercialize licensed products in the territory. Payments received for research support and reimbursable clinical trial costs are recorded as a reduction to research and development expense during the period in which the qualifying expenses are incurred. Such amounts recorded for the three and nine months ended September 30, 2023 and 2022 were not material. Following the approval of XACDURO® by the FDA in May 2023, we recognized $3.0 million in license revenue for the nine months ended September 30, 2023.

GARDP

Entasis entered into a collaboration agreement with the Global Antibiotic Research and Development Partnership (“GARDP”) for the development, manufacture and commercialization of the product candidate zoliflodacin in certain countries (“the GARDP Collaboration Agreement”). Under the terms of the GARDP Collaboration Agreement, GARDP will use commercially reasonable endeavors to perform and fully fund the Phase 3 registrational trial, including the manufacture and supply of the product candidate containing zoliflodacin, in uncomplicated gonorrhea. We recorded reimbursements from GARDP under this agreement as reduction to research and development expense. Relevant amounts for the three and nine months ended September 30, 2023 and 2022 were not material.

In addition, under the GARDP Collaboration Agreement, GARDP was granted a worldwide, fully paid, exclusive and royalty-free license, with the right to sublicense, to use our zoliflodacin technology in connection with GARDP’s development, manufacture and commercialization of zoliflodacin in low-income and specified middle-income countries. We retained commercial rights in all other countries worldwide, including the major markets in North America, Europe and Asia-Pacific. We also retained the right to use and grant licenses to our zoliflodacin technology to perform our obligations under the GARDP Collaboration Agreement and for any purpose other than gonorrhea or community-acquired indications. If we believe that the results of the Phase 3 registrational trial of zoliflodacin would be supportive of an application for marketing approval, we are obligated to use our best efforts to file an application for marketing approval with the FDA within six months of the completion of the trial and to use commercially reasonable endeavors to file an application for marketing approval with the European Medicines Agency (“EMA”). Each party is responsible for using commercially reasonable efforts to obtain marketing authorizations for the product candidate in their respective territories.

PAION AG

Pursuant to the PAION AG (“PAION”) License, La Jolla granted PAION an exclusive license to commercialize GIAPREZA® and XERAVA® in the European Economic Area, the United Kingdom and Switzerland (collectively, the “PAION Territory”). We are entitled to receive potential commercial milestone payments of up to $109.5 million and double-digit tiered royalty payments. Royalties payable in a given jurisdiction under the PAION License will be subject to reduction on account of generic competition and after patent expiration in that jurisdiction. Pursuant to the PAION License, PAION will be solely responsible for the future development and commercialization of GIAPREZA® and XERAVA® in the PAION Territory. PAION is required to use commercially reasonable efforts to commercialize GIAPREZA® and XERAVA® in the PAION Territory. We have not recognized any revenue from PAION related to commercial milestones from the date of acquisition of La Jolla to September 30, 2023. Royalty revenue recognized under this agreement for the three and nine months ended September 30, 2023 was not material.

La Jolla also entered into the PAION commercial supply agreement (the “PAION Supply Agreement”) whereby La Jolla will supply PAION a minimum quantity of GIAPREZA® and XERAVA® through July 13, 2024. The PAION supply agreement will automatically renew until the earlier of July 13, 2027, or until a new supply agreement is executed. During the initial term of the supply agreement, we will be reimbursed for direct and certain indirect manufacturing costs at cost. We recognized $1.0 million in cost reimbursements under this agreement for the three and nine months ended September 30, 2023.

Everest Medicines Limited

Pursuant to the Everest Medicines Limited (“Everest”) License, La Jolla granted Everest an exclusive license to develop and commercialize XERAVA® for the treatment of complicated intra-abdominal infections (“cIAI”) and other indications in mainland China, Taiwan, Hong Kong, Macau, South Korea, Singapore, the Malaysian Federation, the Kingdom of Thailand, the Republic of Indonesia, the Socialist Republic of Vietnam and the Republic of the Philippines (collectively, the “Everest Territory”). Under the Everest License, we recognized $8.0 million in license revenue for the nine months ended September 30, 2023 as a result of our achievement of a regulatory milestone during the period. We are eligible to receive additional sales milestone payments of up to an aggregate of $20.0 million.

We are also entitled to receive tiered royalties from Everest at percentages in the low double digits on sales, if any, in the Everest Territory of products containing eravacycline. Royalties are payable with respect to each jurisdiction in the Everest Territory until the latest to occur of: (i) the last-to-expire of specified patent rights in such jurisdiction in the Everest Territory; (ii) expiration of marketing or regulatory exclusivity in such jurisdiction in the Everest Territory; or (iii) 10 years after the first commercial sale of a product in such jurisdiction in the Everest Territory. Royalty revenue recognized under this agreement for the three and nine months ended September 30, 2023 was not material.

La Jolla also entered into the Everest commercial supply agreement (the “Everest Supply Agreement”) whereby La Jolla will supply Everest a minimum quantity of XERAVA® through December 31, 2023 and will transfer to Everest certain XERAVA®-related manufacturing know-how. We will be reimbursed for direct and certain indirect manufacturing costs at 110% of cost through December 31, 2023. We recognized a $0.9 million and $1.6 million in revenue under this agreement for the three and nine months ended September 30, 2023, respectively.

In-License Agreements

George Washington University

Pursuant to the George Washington University (“GW”) License, GW exclusively licensed to La Jolla certain intellectual property rights relating to GIAPREZA®, including the exclusive rights to certain issued patents and patent applications covering GIAPREZA®. Under the GW License, we are obligated to use commercially reasonable efforts to develop, commercialize, market and sell GIAPREZA®. We are obligated to pay a 6% royalty on net sales of GIAPREZA® and 15% on payments received from sublicensees. The obligation to pay royalties under this agreement extends through the last-to-expire patent covering GIAPREZA®. Amounts recognized under this agreement for the three and nine months ended September 30, 2023 were $0.5 million and $1.7 million, respectively.

Harvard University

Pursuant to the Harvard University (“Harvard”) License, Harvard exclusively licensed to La Jolla certain intellectual property rights relating to tetracycline-based products, including XERAVA®, including the exclusive rights to certain issued patents and patent applications covering such products. Under the Harvard License, we are obligated to use commercially reasonable efforts to develop, commercialize, market and sell tetracycline-based products, including XERAVA®. For each product covered by the Harvard License, we are obligated to make certain payments for the following: (i) up to approximately $15.1 million upon the achievement of certain clinical development and regulatory milestones; (ii) a 5% royalty on direct U.S. net sales of XERAVA®; (iii) a single-digit tiered royalty on direct ex-U.S. net sales of XERAVA®, starting at a minimum royalty rate of 4.5%, with step-ups to a maximum royalty of 7.5% based on the achievement of annual net product sales thresholds; and (iv) 20% on payments received from sublicensees. The obligation to pay royalties under this agreement extends through the last-to-expire patent covering tetracycline-based products, including XERAVA®. For the nine months ended September 30, 2023, we recognized $1.6 million in cost of license revenue under this agreement as a result of the license revenue we earned under the out-licensing agreement with Everest for the same period.

Paratek Pharmaceuticals, Inc.

Pursuant to the Paratek Pharmaceuticals, Inc. (“Paratek”) License, Paratek non-exclusively licensed to La Jolla certain intellectual property rights relating to XERAVA®, including non-exclusive rights to certain issued patents and patent applications covering XERAVA®. We are obligated to pay Paratek a 2.25% royalty based on direct U.S. net sales of XERAVA®. Our obligation to pay royalties with respect to the licensed product is retroactive to the date of the first commercial sale of XERAVA® and shall continue until there are no longer any valid claims of the Paratek patents, which expires in October 2023. Amounts recognized under this agreement for the three and nine months ended September 30, 2023 were not material.

Balance Sheet Components - Schedule of Other Accrued Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Balance Sheet Related Disclosures [Abstract]
Accrued contract manufacturing expenses	$ 5,645	$ 8,382
Accrued clinical expenses	712	692
Accrued research expenses	211	349
Accrued professional services	9,796	3,977
Current portion of lease liabilities	1,211	1,316
Current portion of deferred royalty obligation	3,976	2,639
Accrued license fees and royalties	730	943
Other	2,418	2,909
Total other accrued liabilities	$ 24,699	$ 21,207

Description of Operations and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Operations and Summary of Significant Accounting Policies

1. Description of Operations and Summary of Significant Accounting Policies

Description of Operations

Innoviva, Inc. (and where context requires, together with its subsidiaries referred to as “Innoviva”, the “Company”, or “we” and other similar pronouns) is a company with a portfolio of royalties and innovative healthcare assets. Our royalty portfolio contains respiratory assets partnered with Glaxo Group Limited (“GSK”), including RELVAR®/BREO® ELLIPTA® (fluticasone furoate/vilanterol, “FF/VI”) and ANORO® ELLIPTA® (umeclidinium bromide/ vilanterol, “UMEC/VI”), and up until July 2022, TRELEGY® ELLIPTA® (the combination FF/UMEC/VI). We sold our 15% ownership interest in Theravance Respiratory Company, LLC (“TRC”) on July 20, 2022, and are no longer entitled to receive royalties on sales of TRELEGY® ELLIPTA® products. Under the Long-Acting Beta2 Agonist (“LABA”) Collaboration Agreement, Innoviva is entitled to receive royalties from GSK on sales of RELVAR®/BREO® ELLIPTA® as follows: 15% on the first $3.0 billion of annual global net sales and 5% for all annual global net sales above $3.0 billion; and royalties from the sales of ANORO® ELLIPTA®, which tier upward at a range from 6.5% to 10%.

We expanded our portfolio of royalties and innovative healthcare assets through the acquisition of Entasis Therapeutics Holdings Inc. (“Entasis”) on July 11, 2022 and the acquisition of La Jolla Pharmaceutical Company (“La Jolla”) on August 22, 2022. Our commercial and marketed products include GIAPREZA® (angiotensin II), approved to increase blood pressure in adults with septic or other distributive shock, and XERAVA® (eravacycline) for the treatment of complicated intra-abdominal infections in adults. Our new product, XACDURO® (formerly known as sulbactam-durlobactam or SUL-DUR), was approved by the United States Food and Drug Administration (“FDA”) on May 23, 2023 and we commenced commercial sales of XACDURO® in the third quarter of 2023. Our development pipeline includes medicines for the treatment of bacterial infections. As such, we have a wholly owned robust infectious disease and hospital operating platform, as well as other assets in these areas, such as a large equity stake in Armata Pharmaceuticals, a leader in bacteriophage development with potential use across a range of infectious and other serious diseases. We also have economic interests in other healthcare companies.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The unaudited condensed consolidated financial statements have been prepared on the same basis as audited consolidated financial statements and, in our opinion, include all adjustments, consisting of all normal recurring adjustments, necessary for the fair presentation of our financial position, results of operations, comprehensive income and cash flows. The interim results are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2023, or any other periods.

The accompanying unaudited condensed consolidated financial statements include the accounts of Innoviva, our wholly-owned subsidiaries, and certain variable interest entities (“VIEs”) for which we are the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. For consolidated entities where we own or are exposed to less than 100% of the economics, we record net income attributable to noncontrolling interest in our unaudited condensed consolidated statements of income equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (“SEC”) on February 28, 2023, and as amended on March 20, 2023.

Presentation Reclassification

Amounts in equity and long-term investments and changes in fair value of equity and long-term investments, net, reported in the Company's comparative financial statements have been reclassified to conform to the current year presentation. Certain reclassifications have been made to the condensed consolidated statement of cash flows for the nine months ended September 30,

2022 to conform to the current year’s presentation. These reclassifications had no net effect on the net income or net cash flows as previously reported.

Factors Affecting Comparability

Our historical financial condition and results of operations for the periods presented may not be comparable, either between periods or going forward due to the factors below and as discussed in Note 5, “Consolidated Entities and Acquisitions”.

•

Accounting consolidation of Entasis on February 17, 2022 and purchase of remaining noncontrolling interest in Entasis on July 11, 2022;

•

Sale of our 15% ownership interest in Theravance Respiratory Company, LLC (“TRC”) on July 20, 2022, and

•

Acquisition of La Jolla on August 22, 2022.

Use of Management’s Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. Management evaluates its significant accounting policies and estimates on an ongoing basis. We base our estimates on historical experience and other relevant assumptions that we believe to be reasonable under the circumstances. These estimates also form the basis for making judgments about the carrying values of assets and liabilities when these values are not readily apparent from other sources.

Concentrations of Credit Risk and of Significant Suppliers and Partner

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and equity and long-term investments. Although we deposit our cash with multiple financial institutions, our deposits, at times, may exceed federally insured limits.

We are dependent on third-party manufacturers to supply active pharmaceutical ingredients (“API”) and drug products for research and development and commercial programs. These programs could be adversely affected by significant interruption in the supply of API or drug products.

Currently, we derive most of our revenues from GSK and our near-term success depends in large part on GSK’s ability to successfully develop and commercialize the products in the respiratory programs partnered with GSK. Our near-term success depends in large part upon the performance by GSK of its commercial obligations under the GSK Agreements and the commercial success of RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA®. If GSK does not devote sufficient resources to the commercialization or development of these products, is unsuccessful in its efforts, or chooses to reprioritize its commercial programs, our business would be materially harmed. GSK is responsible for all clinical and other product development, regulatory, manufacturing and commercialization activities for products developed under the GSK Agreements, including RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA®. Our quarterly royalty revenues may fluctuate due to a variety of factors, many of which are outside of our control. Our royalty revenues under the GSK Agreements may not meet our analysts’ or investors’ expectations due to a number of important factors.

We also started recognizing revenue from product sales of GIAPREZA® and XERAVA® as a result of our acquisition of La Jolla and XACDURO®, which was commercially launched in September 2023. Hospitals and other healthcare organizations generally purchase our products through a network of specialty distributors. These specialty distributors, which are located in the U.S., are considered our customers for accounting purposes. We do not believe that the loss of one of these distributors would significantly impact our ability to distribute our products, as we expect that sales volume would be absorbed by new or remaining distributors. Three of our customers each account for 27%, 28% and 26%, respectively, of our net product sales for the three months ended September 30, 2023, and 32%, 28% and 27%, respectively, for the nine months ended September 30, 2023. These same customers account for 29%, 28% and 14%, respectively, of our receivables from net product sales, which are included in “Accounts receivables, net” in our unaudited condensed consolidated balance sheet as of September 30, 2023.

Refer to Item 1A. “Risk Factors” disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

Segment Reporting

We operate in a single segment, which is to provide capital return to stockholders by maximizing the potential value of our portfolio of royalties and innovative healthcare assets. Our Chief Operating Decision Maker (“CODM”) is our Chief Executive Officer. The CODM allocates resources and evaluates the performance of Innoviva at the consolidated level using information about our revenues, operating results and other key financial data as needed. Our revenues are generated primarily from our collaborative arrangements and royalty payments from GSK, located in Great Britain. Refer to Note 3, “Revenue Recognition”, for more information on our revenues for the periods presented. We also generate revenue from net product sales of GIAPREZA®, XERAVA®, and XACDURO®. Our long-term assets are located within the United States.

Variable Interest Entities

The primary beneficiary of a variable interest entity (“VIE”) is required to consolidate the assets and liabilities of the VIE. When we obtain a variable interest in another entity, we assess at the inception of the relationship and upon occurrence of certain significant events whether the entity is a VIE and, if so, whether we are the primary beneficiary of the VIE based on our power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and our obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

To assess whether we have the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, we consider all the facts and circumstances, including our role in establishing the VIE and our ongoing rights and responsibilities. This assessment includes identifying the activities that most significantly impact the VIE’s economic performance and identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE (management and representation on the Board of Directors) and have the right to unilaterally remove those decision-makers are deemed to have the power to direct the activities of a VIE.

To assess whether we have the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, we consider all of our economic interests that are deemed to be variable interests in the VIE. This assessment requires us to apply judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE.

Business Combination

When we acquire an entity in a business combination, we recognize the fair value of all assets acquired, liabilities assumed, and any non-controlling interest in the acquiree and establish the acquisition date as the fair value measurement point. We recognize and measure goodwill as of the acquisition date, as the excess of the fair value of the consideration paid over the fair value of the identified net assets acquired. Acquisition-related expenses and related restructuring costs are expensed as incurred.

Several valuation methods may be used to determine the fair value of assets acquired and liabilities assumed. For intangible assets, we typically use the income method. This method starts with a forecast of all of the expected future net cash flows for each asset. These cash flows are then adjusted to present value by applying an appropriate discount rate that reflects the risk factors associated with the cash flow streams. Some of the more significant estimates and assumptions inherent in the income method or other methods include the amount and timing of projected future cash flows, the discount rate selected to measure the risks inherent in the future cash flows and the assessment of the asset’s life cycle and the competitive trends impacting the asset, including consideration of any technical, legal, regulatory, or economic barriers to entry. Determining the useful life of an intangible asset also requires judgment as different types of intangible assets will have different useful lives and certain assets may even be considered to have indefinite useful lives.

Cash and Cash Equivalents

We consider all highly liquid investments purchased with a maturity of three months or less on the date of purchase to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.

Accounts Receivable

Accounts receivable are recorded net of estimates for prompt-pay discounts, chargebacks, returns and rebates. Allowances for prompt-pay discounts and chargebacks are based on contractual terms. We estimate the allowance for credit losses based on existing contractual payment terms, actual payment patterns of customers and individual customer circumstances.

Inventory

Inventory is stated at the lower of cost or estimated net realizable value on a first in, first out basis. We periodically analyze inventory levels and write down inventory as cost of products sold when the following occurs: inventory has become obsolete, inventory has a cost basis in excess of its estimated net realizable value, or inventory quantities are in excess of expected product sales.

Goodwill and Intangible Assets

Goodwill is recognized as the excess of the purchase consideration of an acquired entity over the fair value assigned to assets acquired and liabilities assumed in a business combination. Goodwill and intangible assets with an indefinite useful life are not amortized and are tested for impairment at least annually on the first day of December of each year or more frequently if indicators for potential impairment exist or whenever events or changes in circumstances indicate that the asset’s carrying asset amount may not be recoverable. Intangible assets with definite useful lives are amortized on a straight-line basis over their respective remaining useful lives and are tested for impairment only if indicators for potential impairment exist or whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. Significant judgment may be involved in determining if an indicator of impairment has occurred.

Operating Leases

Right-of-use assets represent our right to use an underlying asset over the lease term and include any lease payments made prior to the lease commencement date and are reduced by lease incentives. Lease liabilities represent the present value of the total lease payments over the lease term, calculated using an estimated incremental borrowing rate. Lease expense is recognized on a straight-line basis over the expected lease term.

Equity and Long-Term Investments

We invest from time to time in equity and debt securities of private or public companies. If we determine that we have control over these companies under either voting or VIE models, we consolidate them in our unaudited condensed consolidated financial statements. If we determine that we do not have control over these companies under either voting or VIE models, we then determine if we have an ability to exercise significant influence via voting interests, board representation or other business relationships.

We may account for the investments where we exercise significant influence using either an equity method of accounting or at fair value by electing the fair value option under Accounting Standards Codification (“ASC”) Topic 825, Financial Instruments. If the fair value option is applied to an investment that would otherwise be accounted for under the equity method, we apply it to all our financial interests in the same entity (equity and debt, including guarantees) that are eligible items. All gains and losses from fair value changes, unrealized and realized, are presented as changes in fair values of equity method investments, net, and changes in fair values of equity and long-term investments, net, within the unaudited condensed consolidated statements of income.

If we conclude that we do not have an ability to exercise significant influence over an investee, we may elect to account for the security without a readily determinable fair value using the measurement alternative method under ASC 321, Investments - Equity Securities. This measurement alternative method allows us to measure the equity investment at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

We also invest in ISP Fund LP, which investments consist of money market funds, trading and equity and debt securities in the healthcare, pharmaceutical and biotechnology industries. Pursuant to the Partnership Agreement entered in December 2020, we became a limited partner of this partnership, and our contributions are subject to a 36-month lock-up period which restriction prevents us from having control and access to the contributions and related investments. These investments are classified as long-term investments in the unaudited condensed consolidated balance sheets.

Revenue Recognition

We apply the guidance on principal versus agent considerations under ASC Topic 606, Revenue from Contracts with Customers, to determine the appropriate treatment for the transactions between us and third parties. The classification of transactions under our arrangements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants. Any consideration related to activities in which we are considered the principal, which includes being in control of the good or service before such good or service is transferred to the customer, are accounted for as product sales.

Revenue is recognized when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. Revenue is recognized through a five-step process: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price for the contract; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue as a performance obligation is satisfied.

Royalty Revenue

We recognize the royalty revenue on net sales of products with respect to which we have contractual royalty rights in the period in which the royalties are earned. The net sales reports provided by our partner are based on its methodology and assumptions to estimate rebates and returns, which it monitors and adjusts regularly in light of contractual and legal obligations, historical trends, past experience and projected market conditions. Our partner may make significant adjustments to its sales based on actual results recorded, which could cause our royalty revenue to fluctuate. We conduct periodic royalty audits to evaluate the information provided by our partner. Royalties are recognized net of amortization of capitalized fees associated with any approval and launch milestone payments made to GSK.

Revenue from Product Sales

Revenue from product sales is recognized when our customers obtain control of the product and is recorded at the transaction price, net of estimates for variable consideration consisting of chargebacks, discounts, returns and rebates. Variable consideration is estimated using the expected-value amount method, which is the sum of probability-weighted amounts in a range of possible consideration amounts. Actual amounts of consideration ultimately received may differ from our estimates. If actual results vary materially from our estimates, we will adjust these estimates, which will affect revenue from product sales and earnings in the period such estimates are adjusted. These items may include:

•

Chargebacks: Chargebacks are discounts we provide to distributors in the event that the sales prices to end users are below the distributors’ acquisition price. This may occur due to a direct contract with a health system, a group purchasing organization (“GPO”) agreement or a sale to a government facility. Chargebacks are estimated based on known chargeback rates and recorded as a reduction of revenue on delivery to our customers.

•

Discounts: We offer customers various forms of incentives and consideration, including prompt-pay and other discounts. We estimate discounts primarily based on contractual terms. These discounts are recorded as a reduction of revenue on delivery to our customers.

•

Returns: We offer customers a limited right of return, generally for damaged or expired product. We estimate returns based on an internal analysis, which includes actual experience. The estimates for returns are recorded as a reduction of revenue on delivery to our customers.

•

Rebates: We participate in Medicaid rebate programs, which provide assistance to certain low-income patients based on each individual state’s guidelines regarding eligibility and services. Under the Medicaid rebate programs, we pay a rebate to each participating state, generally within three months after the quarter in which product was sold. Additionally, we may offer customer incentives and consideration in the form of volume-based or other rebates. The estimates for rebates are recorded as a reduction of revenue on delivery to our customers.

We continue to assess our estimates of variable consideration as we accumulate additional historical data and will adjust these estimates accordingly.

License Revenue

At the inception of a licensing arrangement that includes development and regulatory milestone payments, we evaluate whether the milestones are considered probable of being achieved and estimate the amount to be included in the transaction price. We generally include these milestone payments in the transaction price when they are achieved because there is considerable uncertainty in the research and development processes that trigger receipt of these payments under our agreements. Similarly, we include approval milestone payments in the transaction price once the product is approved by the applicable regulatory agency.

Research and Development Expenses

Research and development expenses are recognized in the period that services are rendered or goods are received. Research and development expenses consist of salaries and benefits, laboratory supplies, facilities and other overhead costs, research-related manufacturing costs, contract service and clinical-related service costs performed by third party research organizations, research institutions and other outside service providers. Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts are recognized as an expense as the related goods are delivered or the related services are performed. We also utilize significant judgment and estimates to record accruals for estimated ongoing research costs based on the progress of the studies and progress of research manufacturing activities.

Interest Expense on Deferred Royalty Obligation

Interest expense related to the deferred royalty obligation is recognized over the expected repayment term of the deferred royalty obligation using the effective interest method. The assumptions used in determining the expected repayment term of the deferred royalty obligation require us to make estimates that could impact the effective interest rate. Each reporting period, we estimate the expected repayment term of the deferred royalty obligation based on forecasted net sales of GIAPREZA®. Changes in interest expense resulting from changes in the effective interest rate, if any, are recorded on a prospective basis. Refer to Note 11, “Debt” for more information.

Consolidated Entities and Acquisitions - Theravance Respiratory Company, LLC (Details) - USD ($) $ in Thousands		3 Months Ended						9 Months Ended		12 Months Ended
	Jul. 20, 2022	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Income statements
Total revenue		$ 67,259			$ 67,257			$ 224,623	$ 265,536
Other income, net		1,047			28			(4,289)	(750)
Income tax expense, net		3,906			57,077			14,706	63,061
Net income (loss)		82,046	$ 1,280	$ 34,865	229,347	$ 21,371	$ 37,858	118,191	288,576
Royalty revenue
Income statements
Total revenue		$ 53,558			62,150			$ 172,681	260,429
Theravance Respiratory Company, LLC
CONSOLIDATED ENTITIES
Ownership interest in LLC										15.00%
Proceeds from sale of economic interest under Equity Purchase Agreement	$ 277,500
Contingent sales based milestone payment	50,000
Cash distribution	4,400
Equity method investments	$ 39,400
Income statements
Operating expenses					(5)				332
Income (loss) from operations					5				71,697
Other income, net					0				10
Realized loss					(39,386)				(39,386)
Income tax expense, net					0				1
Changes in fair values of equity and long-term investments					0				(8,884)
Net income (loss)					39,381				23,438
Theravance Respiratory Company, LLC \| Royalty revenue
Income statements
Total revenue					$ 0				$ 72,029

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Statement of Comprehensive Income [Abstract]
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	0	(36,176)	0	6,341
Comprehensive income attributable to Innoviva stockholders	$ 82,046	$ 265,523	$ 118,191	$ 282,235

- Definition

Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income (loss) and other comprehensive income (loss), attributable to noncontrolling interests. Excludes changes in equity resulting from investments by owners and distributions to owners.

+ References + Details

- Definition

Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income and other comprehensive income. Excludes changes in equity resulting from investments by owners and distributions to owners.

+ References + Details

- Definition

The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

+ References

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+ Details

Debt - Convertible Senior Notes (Details) $ / shares in Units, $ in Thousands		3 Months Ended			9 Months Ended
	Aug. 07, 2017 USD ($) $ / shares	Sep. 30, 2023 USD ($)	Sep. 30, 2022 USD ($)	Mar. 31, 2022 USD ($) $ / shares $ / Item	Sep. 30, 2023 USD ($)	Sep. 30, 2022 USD ($)	Dec. 31, 2022 USD ($)	Aug. 01, 2017 $ / shares	Jan. 31, 2013 USD ($)
Debt
Payment for repurchase of debt instrument					$ 96,204	$ 165,131
Debt discount and issuance costs, net		$ (7,782)			(7,782)		$ (9,331)
2023 Notes
Debt
Loan amount		$ 96,200			$ 96,200
2025 Notes
Debt
Common stock price to current conversion price ratio					130.00%
Average trading price percentage					98.00%
2025 Notes \| Common stock
Debt
Share Price \| $ / shares								$ 13.28
2028 Notes
Debt
Debt instrument, covenant terms description					The indenture governing the 2028 Notes contains customary terms and covenants, including a merger covenant and that upon certain events of default occurring and continuing, either the Trustee or the holders of at least 25% of the aggregate principal amount of the outstanding Notes may declare 100% of the principal of, and accrued and unpaid interest, if any, on, all the Notes to be due and payable immediately.
Convertible senior notes \| 2025 Notes
Debt
Ratio of repurchase price to the principal amount					100.00%
Effective interest rate		2.88%			2.88%
Principal		$ 192,500			$ 192,500		192,500
Debt discount and issuance costs, net		(1,385)			(1,385)		(1,917)
Net carrying amount		191,115			191,115		190,583
Interest expense
Contractual interest expense		1,203	$ 1,203		3,609	3,609
Amortization of debt issuance costs		179	174		532	517
Total interest and amortization expense		$ 1,382	1,377		$ 4,141	4,126
Convertible senior notes \| 2025 Notes \| Over-Allotment Option
Debt
Loan amount	$ 17,500
Portion of debt instrument face amount, Exercised	17,500
Convertible senior notes \| 2025 Notes \| Private Placement
Debt
Loan amount	$ 192,500
Debt Instrument, annual interest rate	2.50%
Convertible senior notes \| 2025 Notes \| Common stock
Debt
Conversion rate for shares of common stock per $1,000 principal	57.924
Conversion price (dollars per share) \| $ / shares	$ 17.26
Debt instrument maturity date	Aug. 15, 2025
Conversion premium (as a percent)	30.00%
Convertible senior notes \| 2028 Notes
Debt
Loan amount				$ 261,000
Debt instrument maturity date				Mar. 15, 2028
Proceeds from issuance of convertible notes, net of issuance costs				$ 252,600
Common stock price to current conversion price ratio				130.00%
Average trading price percentage				98.00%
Ratio of repurchase price to the principal amount				100.00%
Effective interest rate		2.70%			2.70%
Principal		$ 261,000			$ 261,000		261,000
Debt discount and issuance costs, net		(6,397)			(6,397)		(7,403)
Net carrying amount		254,603			254,603		253,597
Interest expense
Contractual interest expense		1,387	1,371		4,160	3,127
Amortization of debt issuance costs		340	328		1,006	735
Total interest and amortization expense		1,727	1,699		5,166	3,862
Convertible senior notes \| 2028 Notes \| Privately-negotiated capped call option
Debt
Cap price for the underlying number of shares (in dollars per share) \| $ / Item				33.985
Purchases of capped calls in connection with convertible senior notes due 2028				$ 21,000
Convertible senior notes \| 2028 Notes \| Over-Allotment Option
Debt
Loan amount				45,000
Portion of debt instrument face amount, Exercised				$ 36,000
Convertible senior notes \| 2028 Notes \| Private Placement
Debt
Debt Instrument, annual interest rate				2.125%
Convertible senior notes \| 2028 Notes \| Common stock
Debt
Conversion rate for shares of common stock per $1,000 principal				38.1432
Conversion price (dollars per share) \| $ / shares				$ 26.22
Convertible subordinated notes \| 2023 Notes
Debt
Loan amount									$ 287,500
Debt Instrument, Repurchased Face Amount				$ 144,800
Payment for repurchase of debt instrument				$ 165,600
Principal		0			0		$ 96,204
Interest expense
Contractual interest expense		0	511		85	2,106
Amortization of debt issuance costs		0	59		11	240
Total interest and amortization expense		$ 0	$ 570		$ 96	$ 2,346

Balance Sheet Components - Schedule of Inventory (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Inventory Disclosure [Abstract]
Raw materials	$ 8,859	$ 5,757
Work-in-progress	13,231	25,052
Finished goods	18,425	25,088
Total inventory	$ 40,515	$ 55,897

Revenue Recognition

9 Months Ended

Sep. 30, 2023

Revenue from Contract with Customer [Abstract]

Revenue Recognition

3. Revenue Recognition

Net Revenue from Collaboration Arrangement

On July 13, 2022, Innoviva’s wholly-owned subsidiary, Innoviva TRC Holdings, LLC (“ITH”) entered into an equity purchase agreement (“TRC Equity Purchase Agreement”) with Royalty Pharma Investments 2019 ICAV (“Royalty Pharma”) to sell our ownership interest in TRC. As a result of the sale of our ownership interest in TRC, which was consummated on July 20, 2022, we are no longer entitled to receive 15% of royalty payments made by GSK stemming from sales of TRELEGY® ELLIPTA®. We retained our royalty rights with respect to RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA®.

Net revenue recognized under our GSK Agreements was as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2023			2022			2023			2022
Royalties - RELVAR/BREO	$	45,585		$	55,663		$	150,922		$	170,753
Royalties - ANORO		11,429			9,943			32,127			28,015
Royalties - TRELEGY		—			—			—			72,029
Total royalties		57,014			65,606			183,049			270,797
Less: amortization of capitalized fees paid		(3,456	)		(3,456	)		(10,368	)		(10,368	)
Total net royalty revenue	$	53,558		$	62,150		$	172,681		$	260,429

Net Product Sales

Our net product sales were $13.7 million, consisting of net sales of GIAPREZA®, XERAVA®, and XACDURO® for $8.0 million, $5.1 million, and $0.6 million, respectively, for the three months ended September 30, 2023. Our net product sales were $40.9 million, consisting of net sales of GIAPREZA®, XERAVA®, and XACDURO® for $28.2 million, $12.1 million, and $0.6 million, respectively, for the nine months ended September 30, 2023. We derived over 86% and 93% of our net product sales from customers located in the U.S for the three and nine months ended September 30, 2023, respectively.

For the comparative periods in 2022, our net product sales amounted to $5.1 million, consisting of $3.8 million in net sales of GIAPREZA® and $1.3 million in net sales of XERAVA®. These sales were recognized from the date of our acquisition of La Jolla, which took place on August 22, 2022, through September 30, 2022.

License Revenue

Refer to the out-license agreement with Zai Lab and Everest in Note 4, “License and Collaboration Arrangements”.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 9
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-9

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 10
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-10

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 15
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-15

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-13

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Name Accounting Standards Codification
-Topic 606
-Publisher FASB
-URI https://asc.fasb.org//606/tableOfContent

+ Details

Consolidated Entities and Acquisitions

9 Months Ended

Sep. 30, 2023

Consolidated Entities

Consolidated Entities and Acquisitions

5. Consolidated Entities and Acquisitions

Consolidated Entities

Theravance Respiratory Company, LLC

Up until July 20, 2022, we consolidated TRC under the VIE model as we determined that TRC was a VIE and we were the primary beneficiary of the entity because we had the power to direct the economically significant activities of TRC and the obligation to absorb losses of, or the right to receive benefits from, TRC. We held 15% ownership interest of TRC. The primary source of revenue for TRC is the royalties generated from the net sales of TRELEGY® ELLIPTA® by GSK.

As discussed in Note 3, “Revenue Recognition”, on July 13, 2022, ITH entered into the TRC Equity Purchase Agreement to sell our ownership interest in TRC. Upon the closing of the transaction on July 20, 2022, we received $277.5 million in cash from Royalty Pharma. We are also entitled to receive up to $50.0 million in contingent sales-based milestone payments in the future. As part of the closing of the transaction, we also received our portion of TRC’s remaining cash balance of $4.4 million from Royalty Pharma rather than through a cash distribution from TRC.

Prior to the closing of the transaction and as part of the agreement, TRC distributed its ownership interests and investments in InCarda Therapeutics, Inc. (“InCarda”), ImaginAb, Inc. (“ImaginAb”), Gate Neurosciences, Inc. (“Gate”) and Nanolive SA (“Nanolive”), which had a total carrying value of $39.4 million, to ITH.

The summarized financial information of TRC for the three and nine months ended September 30, 2022 are presented as follows:


	Three Months Ended September 30,			Nine Months Ended September 30,
(In thousands)	2022			2022
Royalty revenue	$	—		$	72,029
Operating expenses		(5	)		332
Income (loss) from operations		5			71,697
Other income, net		—			10
Realized loss		(39,386	)		(39,386	)
Income tax expense, net		—			1
Changes in fair values of equity and long-term investments		—			(8,884	)
Net income (loss)	$	(39,381	)	$	23,438

ISP Fund LP

In December 2020, Innoviva Strategic Partners LLC, our wholly owned subsidiary (“Strategic Partners”), contributed $300.0 million to ISP Fund LP (the “Partnership”) for investing in “long” positions in the healthcare, pharmaceutical and biotechnology sectors and became a limited partner. The general partner of the Partnership (“General Partner”) is an affiliate of Sarissa Capital.

The Partnership Agreement provides for Sarissa Capital to receive management fees from the Partnership, payable quarterly in advance, measured based on the Net Asset Value of Strategic Partners’ capital account in the Partnership. In addition, General Partner is entitled to an annual performance fee based on the Net Profits of the Partnership during the annual measurement period.

The Partnership Agreement includes a lock-up period of thirty-six months after which Strategic Partners is entitled to make withdrawals from the Partnership as of such lock-up expiration date and each anniversary thereafter, subject to certain limitations.

In May 2021, Strategic Partners received a distribution of $110.0 million from the Partnership to provide funding to Innoviva for a strategic repurchase of shares held by GSK. On March 30, 2022, Strategic Partners made an additional capital contribution of $110.0 million to the Partnership pursuant to the letter agreement entered into between Strategic Partners, the Partnership and Sarissa Capital Fund GP LP on May 20, 2021. The capital contribution is subject to a 36-month lock up period from the contribution date.

We consolidate ISP Fund LP under the VIE model as we have determined that ISP Fund LP is a VIE and we are the primary beneficiary of the entity via our related party relationships with Sarissa Capital entities. Our maximum exposure to loss is equal to the amount we invested in the entity.

As of September 30, 2023, we held approximately 100% of the economic interest of the Partnership. As of September 30, 2023 and December 31, 2022, total assets of the Partnership were $298.6 million and $320.6 million, respectively, of which the majority was attributable to equity, debt and long-term investments. As of September 30, 2023 and December 31, 2022, total liabilities were $1.1 million and $1.6 million, respectively. The partnership’s assets can only be used to settle its own obligations. During the three and nine months ended September 30, 2023, we recorded $1.1 million and $1.2 million, respectively, of net investment-related income earned by the Partnership, and $22.4 million and $22.7 million of net negative changes, respectively, in fair values of equity and long-term investments in the unaudited condensed consolidated statements of income. During the three and nine months ended September 30, 2022, we recorded $0.3 million and $1.0 million, respectively, of net investment-related expenses incurred by the Partnership, and $10.5 million and $14.9 million, respectively, of net negative changes in fair values of equity and long-term investments in the unaudited condensed consolidated statements of income.

Acquisitions

Entasis Therapeutics Holdings Inc.

We started investing in Entasis in 2020 as part of our capital allocation strategy of deploying cash generated from royalty income and investing in different life sciences companies. Entasis is an advanced, late clinical-stage biopharmaceutical company focused on the discovery and development of novel antibacterial products. Effective in June 2020, after certain conditions were met with respect to the sales of Entasis equity shares, Innoviva had the right to designate two members to Entasis’ board. Our investments in Entasis consisted of shares of common stock and warrants to purchase shares of Entasis common stock.

The fair value of Entasis’ common stock was measured based on its closing market price at each balance sheet date. We used the Black-Scholes-Merton pricing model to estimate the fair value of the warrants.

On February 17, 2022, Innoviva Strategic Opportunities, LLC (“ISO”) entered into a securities purchase agreement with Entasis pursuant to which ISO purchased a convertible promissory note for a total purchase price of $15.0 million. The note bore an annual interest rate of 0.59% and was due to mature and become payable on August 18, 2022 unless it was converted at a conversion price of $1.48 before the maturity date. With this financing, we determined that we had both (i) the power to direct the economically significant activities of Entasis and (ii) the obligation to absorb the losses, or the right to receive the benefits, that could potentially be significant to Entasis and therefore, we were the primary beneficiary of Entasis. Accordingly, we consolidated Entasis’ financial position and results of operations effective on February 17, 2022. Our equity ownership interest remained at 59.9% as of February 17, 2022, and the fair values of our holdings of Entasis common stock and warrants were remeasured and estimated at $64.5 million and $31.4 million, respectively.

The remeasurement resulted in a $7.8 million loss in the first quarter of 2022 which was included in changes in fair values of equity method investments, net, in the unaudited condensed consolidated statement of income for the period.

We completed our acquisition of Entasis’ minority interest on July 11, 2022. No payments were made toward the convertible promissory note through the date of acquisition of Entasis. In connection with the acquisition, all of the Entasis warrants were replaced with Innoviva warrants (the “Replacement Warrants”) of equivalent value and bearing the same terms. The Replacement Warrants are classified as equity.

We recognized the difference between the acquisition price and the carrying value of the acquired minority interest on July 11, 2022 in our additional paid-in capital.

The fair values assigned to assets acquired and liabilities assumed as of February 17, 2022 were based on management’s best estimates and assumptions. After the acquisition in July 2022, we adjusted the purchase price allocation based on new and additional information related to product sales forecast provided by Entasis and deferred tax liabilities.

In February 2023, we recorded a measurement period adjustment of $1.2 million increase in goodwill, primarily related to a decrease in intangible assets of $0.8 million and an increase in deferred tax liabilities of $0.4 million. The measurement period adjustment did not impact the consolidated net income for the periods presented.

The following table represents the adjusted fair values of the assets acquired and liabilities assumed by us in the transaction:


(In thousands)	February 17, 2022
Cash and cash equivalents	$	23,070
Prepaid expenses		5,554
Other current assets		1,959
Property and equipment, net		185
Right-of-use assets		959
Goodwill		11,493
Intangible assets		106,700
Other assets		302
Total assets acquired	$	150,222

Accounts payable	$	1,583
Accrued personnel-related expenses		1,058
Other current liabilities		5,096
Deferred tax liabilities		7,769
Total liabilities assumed	$	15,506

Total assets acquired, net	$	134,716

The goodwill arising from the acquisition of Entasis is primarily attributable to Entasis’ assembled workforce and the value associated with growing our business more efficiently. The goodwill from this acquisition is not expected to be deductible for tax purposes.

Refer to Note 7, “Goodwill and Intangible Assets” for more discussion on the intangible assets recognized as part of this acquisition.

As a result of the consolidation, we recognized a non-controlling interest of $38.5 million as of February 17, 2022. Our consolidated net income for the three and nine months ended September 30, 2022 included the net loss attributable to Innoviva stockholders since the consolidation date of $2.7 million and $13.6 million, respectively, from the results of operations of Entasis.

La Jolla Pharmaceutical Company

On August 22, 2022, ISO acquired La Jolla for a total consideration of $206.6 million. ISO acquired La Jolla at a price of $6.23 per share. La Jolla is dedicated to the commercialization of innovative therapies that improve outcomes in patients suffering from life-threatening diseases. La Jolla brought to Innoviva an established product portfolio, including GIAPREZA® (angiotensin II), approved to increase blood pressure in adults with septic or other distributive shock and XERAVA® (eravacycline) for the treatment of complicated intra-abdominal infections (cIAIs). We incurred approximately $5.3 million in acquisition-related costs in connection with this acquisition during the year ended December 31, 2022.

The fair values assigned to assets acquired and liabilities assumed as of August 22, 2022 were based on management’s best estimates and assumptions.

In June 2023, we recorded a measurement period adjustment of $13.1 million decrease in goodwill, primarily related to an increase in deferred tax assets of $10.5 million and a decrease in deferred tax liabilities of $2.6 million. In August 2023, we recorded a

measurement period adjustment of $3.0 million increase in goodwill, primarily related to a decrease in deferred tax assets of $2.4 million and an increase in deferred tax liabilities of $0.6 million.

The following table represents the adjusted fair values of the assets acquired and liabilities assumed by us in the transaction:


(In thousands)	August 22, 2022
Cash and cash equivalents	$	47,415
Short-term marketable securities		471
Accounts receivable		5,876
Inventory		66,200
Prepaid expenses		1,261
Other current assets		907
Property and equipment, net		13
Right-of-use assets		226
Goodwill		6,411
Intangible assets		151,000
Deferred tax assets		7,461
Other assets		710
Total assets acquired	$	287,951

Accounts payable	$	1,237
Deferred revenue, current		2,849
Other accrued liabilities		11,362
Other long-term liabilities		65,944
Total liabilities assumed	$	81,392

Total assets acquired, net	$	206,559

The goodwill arising from the acquisition of La Jolla is primarily attributable to La Jolla’s assembled workforce and the value associated with leveraging the workforce to develop and commercialize new drug products in the future and growing our business more efficiently. The goodwill from this acquisition is not expected to be deductible for tax purposes.

Refer to Note 7, “Goodwill and Intangible Assets” for more discussion on the intangible assets recognized as part of this acquisition.

Pro Forma Financial Information

The following table presents certain unaudited pro-forma financial information for the three and nine months ended September 30, 2022 as if the consolidation of Entasis and La Jolla occurred on January 1, 2021. The unaudited pro forma financial information is presented for informational purposes only, and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place on January 1, 2021, or of results that may occur in the future. The unaudited pro forma financial information combines the historical results of the Entasis and La Jolla with the Company’s consolidated historical results and includes certain adjustments including, but not limited to, fair value adjustments to equity investments in Entasis’ common stock and warrants, fair value adjustments to inventory, amortization of intangible assets, and interest expense on deferred royalty obligations and acquisition-related costs.


	Three Months Ended September 30,		Nine Months Ended September 30,
(In thousands)	2022		2022
Revenue	$	72,830	$	292,077
Net income	$	223,082	$	273,301
Net income attributable to Innoviva stockholders	$	274,407	$	282,704

Commitments and Contingencies - Schedule of Components of Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Lease, Cost [Abstract]
Straight line operating lease costs	$ 361	$ 640	$ 1,080	$ 1,101
Variable lease costs	49	35	144	110
Total lease costs	$ 410	$ 675	$ 1,224	$ 1,211

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	230,000	230,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	64,384,000	69,188,000
Common stock, shares outstanding	64,384,000	69,188,000
Treasury stock, shares	32,005,000	32,005,000

Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Schedule of stock-based compensation expense

The following table summarizes stock-based compensation expense:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2023		2022		2023		2022
Selling, general and administrative	$	1,308	$	2,422	$	3,502	$	4,240
Research and development		134		1,295	$	1,058		1,781
Total	$	1,442	$	3,717	$	4,560	$	6,021

Summary of weighted-average assumptions used to calculate estimated value of stock options

Black-Scholes-Merton assumptions used in calculating the estimated value of stock options granted by Innoviva on the date of grant were as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022(1)	2023	2022
Risk-free interest rate	4.13% - 4.21%	—%	3.50% - 4.21%	1.60% - 3.03%
Expected term (in years)	6.01 - 6.22	—	5.16 - 6.22	5.50 - 6.11
Volatility	37.3% - 37.8%	—%	37.3% - 38.5%	38.8% - 40.5%
Dividend yield	—%	—%	—%	—%
Weighted-average estimated fair value of stock options granted	$5.66 - $5.97	$—	$5.22 - $5.97	$6.98 - $7.73

(1)

There were no options granted for the three months ended September 30, 2022.

Description of Operations and Summary of Significant Accounting Policies (Details) $ in Billions	3 Months Ended	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2023 USD ($) Customer	Jul. 20, 2022
Description of Operations and Summary of Significant Accounting Policies
Number of customers \| Customer		3
Theravance Respiratory Company, LLC
Description of Operations and Summary of Significant Accounting Policies
Equity method investment ownership percentage			15.00%
Customer Concentration Risk \| Net Product Sales \| La Jolla \| Customer One
Description of Operations and Summary of Significant Accounting Policies
Concentration Risk, Percentage	27.00%	32.00%
Customer Concentration Risk \| Net Product Sales \| La Jolla \| Customer Two
Description of Operations and Summary of Significant Accounting Policies
Concentration Risk, Percentage	28.00%	28.00%
Customer Concentration Risk \| Net Product Sales \| La Jolla \| Customer Three
Description of Operations and Summary of Significant Accounting Policies
Concentration Risk, Percentage	26.00%	27.00%
Customer Concentration Risk \| Receivables from Net Product Sales \| La Jolla \| Customer One
Description of Operations and Summary of Significant Accounting Policies
Concentration Risk, Percentage		29.00%
Customer Concentration Risk \| Receivables from Net Product Sales \| La Jolla \| Customer Two
Description of Operations and Summary of Significant Accounting Policies
Concentration Risk, Percentage		28.00%
Customer Concentration Risk \| Receivables from Net Product Sales \| La Jolla \| Customer Three
Description of Operations and Summary of Significant Accounting Policies
Concentration Risk, Percentage		14.00%
Long-Acting Beta2 Agonist (LABA) Collaboration \| GSK \| RELVAR/BREO
Description of Operations and Summary of Significant Accounting Policies
Royalty rate for first level of annual global net sales (as a percent)		15.00%
Annual global sales level used to determine royalty rate \| $		$ 3.0
Royalty rate for sales above first level of annual global net sales (as a percent)		5.00%
Long-Acting Beta2 Agonist (LABA) Collaboration \| GSK \| ANORO \| Minimum
Description of Operations and Summary of Significant Accounting Policies
Royalty rate for combination products (as a percent)		6.50%
Long-Acting Beta2 Agonist (LABA) Collaboration \| GSK \| ANORO \| Maximum
Description of Operations and Summary of Significant Accounting Policies
Royalty rate for combination products (as a percent)		10.00%

Commitments and Contingencies - Schedule of Supplemental Cash Flow Information Related to Leases (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Commitments and Contingencies Disclosure [Abstract]
Cash paid for amounts included in the measurement of operating lease liabilities:	$ 1,157	$ 540
Operating lease right-of-use assets obtained in exchange for operating lease obligations	463	3,323
Right-of-use assets obtained through acquisitions	$ 0	$ 1,185

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common stock	Additional Paid-In Capital	Accumulated Deficit	Treasury Stock	Noncontrolling Interest	Cumulative Effect, Period of Adoption, Adjustment [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member] Common stock	Cumulative Effect, Period of Adoption, Adjustment [Member] Additional Paid-In Capital	Cumulative Effect, Period of Adoption, Adjustment [Member] Accumulated Deficit	Cumulative Effect, Period of Adoption, Adjustment [Member] Treasury Stock	Cumulative Effect, Period of Adoption, Adjustment [Member] Noncontrolling Interest
Balance at Dec. 31, 2021	$ 525,935	$ 696	$ 1,264,024	$ (456,148)	$ (393,829)	$ 111,192
Balance (in shares) at Dec. 31, 2021		69,566,000			32,005,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Accounting Standards Update [Extensible Enumeration]			Accounting Standards Update 2020-06 [Member]	Accounting Standards Update 2020-06 [Member]			Accounting Standards Update 2020-06 [Member]
Distributions to noncontrolling interest	(6,507)	$ 0	$ 0	$ 0	$ 0	(6,507)
Distributions to noncontrolling interest (in shares)		0			0
Equity activity of noncontrolling interest from a consolidated variable interest entity	38,471	$ 0	0	0	$ 0	38,471
Equity activity of noncontrolling interest from a consolidated variable interest entity (in shares)		0			0
Issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding	214	$ 0	214	0	$ 0	0
Exercise of stock options and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding		28,000			0
Stock-based compensation	954	$ 0	620	0	$ 0	334
Stock-based compensation (in shares)		0			0
Capped call options associated with convertible senior notes due 2028	(16,585)	$ 0	(16,585)	0	$ 0	0
Capped call options associated with convertible senior notes due 2028 (in shares)		0			0
Net income	37,858	$ 0	0	15,773	$ 0	22,085
Net Income (Shares)		0			0
Balance at Mar. 31, 2022	552,217	$ 696	1,182,912	(403,137)	$ (393,829)	165,575	$ (28,123)	$ 0	$ (65,361)	$ 37,238	$ 0	$ 0
Balance (in shares) at Mar. 31, 2022		69,594,000			32,005,000			0			0
Balance at Dec. 31, 2021	525,935	$ 696	1,264,024	(456,148)	$ (393,829)	111,192
Balance (in shares) at Dec. 31, 2021		69,566,000			32,005,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	288,576
Balance at Sep. 30, 2022	641,368	$ 698	1,171,096	(136,597)	$ (393,829)	0
Balance (in shares) at Sep. 30, 2022		69,776			32,005
Balance at Mar. 31, 2022	552,217	$ 696	1,182,912	(403,137)	$ (393,829)	165,575	$ (28,123)	$ 0	$ (65,361)	$ 37,238	$ 0	$ 0
Balance (in shares) at Mar. 31, 2022		69,594,000			32,005,000			0			0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Distributions to noncontrolling interest	(9,545)	$ 0	0	0	$ 0	(9,545)
Distributions to noncontrolling interest (in shares)					0
Equity activity of noncontrolling interest from a consolidated variable interest entity	(2)	$ 0	0	0	$ 0	(2)
Equity activity of noncontrolling interest from a consolidated variable interest entity (in shares)		0			0
Issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding	68	$ 1	67	0	$ 0	0
Exercise of stock options and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding		112,000			0
Conversion of convertible subordinated notes due 2023	3	$ 0	3	0	$ 0	0
Conversion of convertiblesubordinated notes due 2023 (in shares)		0			0
Stock-based compensation	1,350	$ 0	685	0	$ 0	665
Stock-based compensation (in shares)		0			0
Net income	21,371	$ 0	0	939	$ 0	20,432
Net Income (Shares)		0			0
Balance at Jun. 30, 2022	565,462	$ 697	1,183,667	(402,198)	$ (393,829)	177,125
Balance (in shares) at Jun. 30, 2022		69,706			32,005,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Distributions to noncontrolling interest	(53,759)	$ 0	0	0	$ 0	(53,759)
Distributions to noncontrolling interest (in shares)					0
Derecognition of noncontrolling interests upon sale of TRC	(61,226)	$ 0	0	78	$ 0	(61,304)
Derecognition of noncontrolling interests upon sale of TRC (in shares)		0			0
Derecognition of noncontrolling interests upon acquisition of Entasis Therapeutics Holdings Inc. ("Entasis") minority interest	(42,162)	$ 0	(14,153)	0	$ 0	(28,009)
Derecognition of noncontrolling interests upon acquisition of Entasis Therapeutics Holdings Inc ("Entasis") minority interest (in shares)		0			0
Issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding	(11)	$ 1	(12)	0	$ 0
Exercise of stock options and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding		70			0
Stock-based compensation	3,717	$ 0	1,594	0	$ 0	2,123
Stock-based compensation (in shares)		0			0
Net income	229,347	$ 0	0	265,523	$ 0	(36,176)
Net Income (Shares)		0			0
Balance at Sep. 30, 2022	641,368	$ 698	1,171,096	(136,597)	$ (393,829)	$ 0
Balance (in shares) at Sep. 30, 2022		69,776			32,005
Balance at Jun. 30, 2023	555,087	$ 653	1,117,029	(168,766)	$ (393,829)
Balance (in shares) at Jun. 30, 2023		65,225,000			32,005,000
Balance at Dec. 31, 2022	$ 565,788	$ 692	1,163,836	(204,911)	$ (393,829)
Balance (in shares) at Dec. 31, 2022	69,188,000	69,188,000			32,005,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding	$ (23)	$ 1	(24)	0	$ 0
Exercise of stock options and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding		55,000			0
Repurchase of common stock	(40,735)	$ (34)	(40,701)	0	$ 0
Repurchase of common stock (in shares)		(3,419,000)			0
Stock-based compensation	1,598	$ 0	1,598	0	$ 0
Stock-based compensation (in shares)		0			0
Net income	34,865	$ 0	0	34,865	$ 0
Net Income (Shares)		0			0
Balance at Mar. 31, 2023	561,493	$ 659	1,124,709	(170,046)	$ (393,829)
Balance (in shares) at Mar. 31, 2023		65,824,000			32,005,000
Balance at Dec. 31, 2022	$ 565,788	$ 692	1,163,836	(204,911)	$ (393,829)
Balance (in shares) at Dec. 31, 2022	69,188,000	69,188,000			32,005,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	$ 118,191
Balance at Sep. 30, 2023	$ 627,493	$ 644	1,107,398	(86,720)	$ (393,829)
Balance (in shares) at Sep. 30, 2023	64,384,000	64,384,000			32,005,000
Balance at Mar. 31, 2023	$ 561,493	$ 659	1,124,709	(170,046)	$ (393,829)
Balance (in shares) at Mar. 31, 2023		65,824,000			32,005,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding	80	$ 2	78	0	$ 0
Exercise of stock options and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding		177,000			0
Repurchase of common stock	(9,286)	$ (8)	(9,278)	0	$ 0
Repurchase of common stock (in shares)		(776,000)			0
Stock-based compensation	1,520	$ 0	1,520	0	$ 0
Stock-based compensation (in shares)		0			0
Net income	1,280	$ 0	0	1,280	$ 0
Net Income (Shares)		0			0
Balance at Jun. 30, 2023	555,087	$ 653	1,117,029	(168,766)	$ (393,829)
Balance (in shares) at Jun. 30, 2023		65,225,000			32,005,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding	(11)	$ 0	(11)	0	$ 0
Exercise of stock options and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding		16,000			0
Repurchase of common stock	(11,071)	$ (9)	(11,062)	0	$ 0
Repurchase of common stock (in shares)		(857,000)			0
Stock-based compensation	1,442	$ 0	1,442	0	$ 0
Stock-based compensation (in shares)		0			0
Net income	82,046	$ 0	0	82,046	$ 0
Net Income (Shares)		0			0
Balance at Sep. 30, 2023	$ 627,493	$ 644	$ 1,107,398	$ (86,720)	$ (393,829)
Balance (in shares) at Sep. 30, 2023	64,384,000	64,384,000			32,005,000

Balance Sheet Components

9 Months Ended

Sep. 30, 2023

Balance Sheet Related Disclosures [Abstract]

Balance Sheet Components

8. Balance Sheet Components

Inventory

Inventory consisted of the following:


	September 30,		December 31,
(in thousands)	2023		2022
Raw materials	$	8,859	$	5,757
Work-in-progress		13,231		25,052
Finished goods		18,425		25,088
Total inventory	$	40,515	$	55,897

As of September 30, 2023 and December 31, 2022, total inventory included net fair value adjustments resulting from the acquisition of La Jolla of approximately $31.0 million and $49.5 million, respectively, which will be amortized and recognized as cost of products sold when sales occur in future periods. The fair value adjustments recorded as part of cost of products sold amounted to $5.4 million and $19.2 million for the three and nine months ended September 30, 2023, respectively. The fair value adjustments recorded as part of cost of products sold amounted to $2.7 million for the three and nine months ended September 30, 2022.

Other Accrued Liabilities

Other accrued liabilities consisted of the following:


	September 30,		December 31,
(in thousands)	2023		2022
Accrued contract manufacturing expenses	$	5,645	$	8,382
Accrued clinical expenses		712		692
Accrued research expenses		211		349
Accrued professional services		9,796		3,977
Current portion of lease liabilities		1,211		1,316
Current portion of deferred royalty obligations		3,976		2,639
Accrued license fees and royalties		730		943
Other		2,418		2,909
Total other accrued liabilities	$	24,699	$	21,207

Other Long-term Liabilities

Other long-term liabilities consisted of the following:


	September 30,		December 31,
(in thousands)	2023		2022
Long-term portion of deferred royalty obligation	$	66,142	$	67,947
Long-term portion of lease liabilities		1,953	$	2,376
Contingent value rights liability		595		595
Total other long-term liabilities	$	68,690	$	70,918

Debt (Tables)

9 Months Ended

Sep. 30, 2023

Debt

Schedule of Debt

Our debt consists of the following:


	September 30,			December 31,
(In thousands)	2023			2022
2023 Notes	$	—		$	96,204
2025 Notes		192,500			192,500
2028 Notes		261,000			261,000
Total debt		453,500			549,704
Less: Unamortized debt discount and issuance costs		(7,782	)		(9,331	)
Total debt, net	$	445,718		$	540,373
Less: Current portion of long-term debt, net		—			96,193
Total long-term debt, net	$	445,718		$	444,180

Aggregate Scheduled Maturities of Convertible Debt

The aggregate scheduled maturities of our convertible debt as of September 30, 2023 were as follows:


(In thousands)	September 30, 2023
Years ending December 31:
Remainder of 2023	$	—
2024		—
2025		192,500
2026		—
2027		—
Thereafter		261,000
Total	$	453,500

2023 Notes

Debt

Schedule of Components of Interest Expense

The following table sets forth total interest expense recognized related to the 2023 Notes:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2023		2022		2023		2022
Contractual interest expense	$	—	$	511	$	85	$	2,106
Amortization of debt issuance costs		—		59		11		240
Total interest and amortization expense	$	—	$	570	$	96	$	2,346

2025 Notes

Debt

Summary of Liability and Equity Components of Convertible Notes

Our outstanding 2025 Notes balances consisted of the following:


	September 30,			December 31,
(In thousands)	2023			2022
Principal	$	192,500		$	192,500
Debt discount and issuance costs, net		(1,385	)		(1,917	)
Net carrying amount	$	191,115		$	190,583

Schedule of Components of Interest Expense

The following table sets forth total interest expense recognized related to the 2025 Notes for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2023		2022		2023		2022
Contractual interest expense	$	1,203	$	1,203	$	3,609	$	3,609
Amortization of debt issuance costs		179		174		532		517
Total interest and amortization expense	$	1,382	$	1,377	$	4,141	$	4,126

2028 Notes

Debt

Summary of Liability and Equity Components of Convertible Notes

Our outstanding 2028 Notes balance consisted of the following:


	September 30,			December 31,
(In thousands)	2023			2022
Principal	$	261,000		$	261,000
Debt issuance costs, net		(6,397	)		(7,403	)
Net carrying amount	$	254,603		$	253,597

Schedule of Components of Interest Expense

The following table sets forth total interest expense recognized related to the 2028 Notes for the three and nine months ended September 30, 2023 and 2022:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2023		2022		2023		2022
Contractual interest expense	$	1,387	$	1,371	$	4,160	$	3,127
Amortization of debt issuance costs		340		328		1,006		735
Total interest and amortization expense	$	1,727	$	1,699	$	5,166	$	3,862

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

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Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

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+ Details

Commitments and Contingencies - Schedule of Future Minimum Lease Payments (Details) $ in Thousands	Sep. 30, 2023 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Remainder of 2023	$ 377
2024	1,373
2025	1,428
Thereafter	291
Total undiscounted lease payments	3,469
Less: imputed interest	(305)
Total operating lease liabilities	$ 3,164

Net Income Per Share - Basic and Diluted EPS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Numerator:
Net income attributable to Innoviva stockholders, basic	$ 82,046	$ 265,523	$ 118,191	$ 282,235
Net income attributable to Innoviva stockholders, diluted	$ 84,825	$ 268,698	$ 126,598	$ 291,633
Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders	64,953	69,731	66,016	69,640
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan	106	128	133	94
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders	86,164	95,830	87,504	95,072
Net income per share attributable to Innoviva stockholders
Basic net income per share	$ 1.26	$ 3.81	$ 1.79	$ 4.05
Diluted net income per share	$ 0.98	$ 2.8	$ 1.45	$ 3.07
2023 Notes
Numerator:
Add: interest expense on 2025 Notes, net of tax effect	$ 0	$ 412	$ 86	$ 2,003
Denominator:
Dilutive effect	0	4,866	250	6,629
2025 Notes
Numerator:
Add: interest expense on 2025 Notes, net of tax effect	$ 1,543	$ 1,769	$ 4,618	$ 3,862
Denominator:
Dilutive effect	11,150	11,150	11,150	11,150
2028 Notes
Numerator:
Add: interest expense on 2025 Notes, net of tax effect	$ 1,236	$ 994	$ 3,703	$ 3,533
Denominator:
Dilutive effect	9,955	9,955	9,955	7,559

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2023	Oct. 26, 2023
Cover [Abstract]
Entity Registrant Name	INNOVIVA, INC.
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2023
Document Transition Report	false
Securities Act File Number	000-30319
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	94-3265960
Entity Address, Address Line One	1350 Old Bayshore Highway Suite 400
Entity Address, City or Town	Burlingame
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94010
City Area Code	650
Local Phone Number	238-9600
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	INVA
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		64,086,675
Entity Central Index Key	0001080014
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3
Amendment Flag	false

Description of Operations and Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Description of Operations	Description of Operations Innoviva, Inc. (and where context requires, together with its subsidiaries referred to as “Innoviva”, the “Company”, or “we” and other similar pronouns) is a company with a portfolio of royalties and innovative healthcare assets. Our royalty portfolio contains respiratory assets partnered with Glaxo Group Limited (“GSK”), including RELVAR®/BREO® ELLIPTA® (fluticasone furoate/vilanterol, “FF/VI”) and ANORO® ELLIPTA® (umeclidinium bromide/ vilanterol, “UMEC/VI”), and up until July 2022, TRELEGY® ELLIPTA® (the combination FF/UMEC/VI). We sold our 15% ownership interest in Theravance Respiratory Company, LLC (“TRC”) on July 20, 2022, and are no longer entitled to receive royalties on sales of TRELEGY® ELLIPTA® products. Under the Long-Acting Beta2 Agonist (“LABA”) Collaboration Agreement, Innoviva is entitled to receive royalties from GSK on sales of RELVAR®/BREO® ELLIPTA® as follows: 15% on the first $3.0 billion of annual global net sales and 5% for all annual global net sales above $3.0 billion; and royalties from the sales of ANORO® ELLIPTA®, which tier upward at a range from 6.5% to 10%. We expanded our portfolio of royalties and innovative healthcare assets through the acquisition of Entasis Therapeutics Holdings Inc. (“Entasis”) on July 11, 2022 and the acquisition of La Jolla Pharmaceutical Company (“La Jolla”) on August 22, 2022. Our commercial and marketed products include GIAPREZA® (angiotensin II), approved to increase blood pressure in adults with septic or other distributive shock, and XERAVA® (eravacycline) for the treatment of complicated intra-abdominal infections in adults. Our new product, XACDURO® (formerly known as sulbactam-durlobactam or SUL-DUR), was approved by the United States Food and Drug Administration (“FDA”) on May 23, 2023 and we commenced commercial sales of XACDURO® in the third quarter of 2023. Our development pipeline includes medicines for the treatment of bacterial infections. As such, we have a wholly owned robust infectious disease and hospital operating platform, as well as other assets in these areas, such as a large equity stake in Armata Pharmaceuticals, a leader in bacteriophage development with potential use across a range of infectious and other serious diseases. We also have economic interests in other healthcare companies.
Basis of Presentation	Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The unaudited condensed consolidated financial statements have been prepared on the same basis as audited consolidated financial statements and, in our opinion, include all adjustments, consisting of all normal recurring adjustments, necessary for the fair presentation of our financial position, results of operations, comprehensive income and cash flows. The interim results are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2023, or any other periods. The accompanying unaudited condensed consolidated financial statements include the accounts of Innoviva, our wholly-owned subsidiaries, and certain variable interest entities (“VIEs”) for which we are the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. For consolidated entities where we own or are exposed to less than 100% of the economics, we record net income attributable to noncontrolling interest in our unaudited condensed consolidated statements of income equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (“SEC”) on February 28, 2023, and as amended on March 20, 2023.
Presentation Reclassification	Presentation Reclassification Amounts in equity and long-term investments and changes in fair value of equity and long-term investments, net, reported in the Company's comparative financial statements have been reclassified to conform to the current year presentation. Certain reclassifications have been made to the condensed consolidated statement of cash flows for the nine months ended September 30, 2022 to conform to the current year’s presentation. These reclassifications had no net effect on the net income or net cash flows as previously reported.
Factors Affecting Comparability	Factors Affecting Comparability Our historical financial condition and results of operations for the periods presented may not be comparable, either between periods or going forward due to the factors below and as discussed in Note 5, “Consolidated Entities and Acquisitions”. • Accounting consolidation of Entasis on February 17, 2022 and purchase of remaining noncontrolling interest in Entasis on July 11, 2022; • Sale of our 15% ownership interest in Theravance Respiratory Company, LLC (“TRC”) on July 20, 2022, and • Acquisition of La Jolla on August 22, 2022.
Use of Management's Estimates	Use of Management’s Estimates The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. Management evaluates its significant accounting policies and estimates on an ongoing basis. We base our estimates on historical experience and other relevant assumptions that we believe to be reasonable under the circumstances. These estimates also form the basis for making judgments about the carrying values of assets and liabilities when these values are not readily apparent from other sources.
Concentrations of Credit Risk and of Significant Suppliers and Partner	Concentrations of Credit Risk and of Significant Suppliers and Partner Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and equity and long-term investments. Although we deposit our cash with multiple financial institutions, our deposits, at times, may exceed federally insured limits. We are dependent on third-party manufacturers to supply active pharmaceutical ingredients (“API”) and drug products for research and development and commercial programs. These programs could be adversely affected by significant interruption in the supply of API or drug products. Currently, we derive most of our revenues from GSK and our near-term success depends in large part on GSK’s ability to successfully develop and commercialize the products in the respiratory programs partnered with GSK. Our near-term success depends in large part upon the performance by GSK of its commercial obligations under the GSK Agreements and the commercial success of RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA®. If GSK does not devote sufficient resources to the commercialization or development of these products, is unsuccessful in its efforts, or chooses to reprioritize its commercial programs, our business would be materially harmed. GSK is responsible for all clinical and other product development, regulatory, manufacturing and commercialization activities for products developed under the GSK Agreements, including RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA®. Our quarterly royalty revenues may fluctuate due to a variety of factors, many of which are outside of our control. Our royalty revenues under the GSK Agreements may not meet our analysts’ or investors’ expectations due to a number of important factors. We also started recognizing revenue from product sales of GIAPREZA® and XERAVA® as a result of our acquisition of La Jolla and XACDURO®, which was commercially launched in September 2023. Hospitals and other healthcare organizations generally purchase our products through a network of specialty distributors. These specialty distributors, which are located in the U.S., are considered our customers for accounting purposes. We do not believe that the loss of one of these distributors would significantly impact our ability to distribute our products, as we expect that sales volume would be absorbed by new or remaining distributors. Three of our customers each account for 27%, 28% and 26%, respectively, of our net product sales for the three months ended September 30, 2023, and 32%, 28% and 27%, respectively, for the nine months ended September 30, 2023. These same customers account for 29%, 28% and 14%, respectively, of our receivables from net product sales, which are included in “Accounts receivables, net” in our unaudited condensed consolidated balance sheet as of September 30, 2023. Refer to Item 1A. “Risk Factors” disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.
Segment Reporting	Segment Reporting We operate in a single segment, which is to provide capital return to stockholders by maximizing the potential value of our portfolio of royalties and innovative healthcare assets. Our Chief Operating Decision Maker (“CODM”) is our Chief Executive Officer. The CODM allocates resources and evaluates the performance of Innoviva at the consolidated level using information about our revenues, operating results and other key financial data as needed. Our revenues are generated primarily from our collaborative arrangements and royalty payments from GSK, located in Great Britain. Refer to Note 3, “Revenue Recognition”, for more information on our revenues for the periods presented. We also generate revenue from net product sales of GIAPREZA®, XERAVA®, and XACDURO®. Our long-term assets are located within the United States.
Variable Interest Entities	Variable Interest Entities The primary beneficiary of a variable interest entity (“VIE”) is required to consolidate the assets and liabilities of the VIE. When we obtain a variable interest in another entity, we assess at the inception of the relationship and upon occurrence of certain significant events whether the entity is a VIE and, if so, whether we are the primary beneficiary of the VIE based on our power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and our obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. To assess whether we have the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, we consider all the facts and circumstances, including our role in establishing the VIE and our ongoing rights and responsibilities. This assessment includes identifying the activities that most significantly impact the VIE’s economic performance and identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE (management and representation on the Board of Directors) and have the right to unilaterally remove those decision-makers are deemed to have the power to direct the activities of a VIE. To assess whether we have the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, we consider all of our economic interests that are deemed to be variable interests in the VIE. This assessment requires us to apply judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE.
Business Combination	Business Combination When we acquire an entity in a business combination, we recognize the fair value of all assets acquired, liabilities assumed, and any non-controlling interest in the acquiree and establish the acquisition date as the fair value measurement point. We recognize and measure goodwill as of the acquisition date, as the excess of the fair value of the consideration paid over the fair value of the identified net assets acquired. Acquisition-related expenses and related restructuring costs are expensed as incurred. Several valuation methods may be used to determine the fair value of assets acquired and liabilities assumed. For intangible assets, we typically use the income method. This method starts with a forecast of all of the expected future net cash flows for each asset. These cash flows are then adjusted to present value by applying an appropriate discount rate that reflects the risk factors associated with the cash flow streams. Some of the more significant estimates and assumptions inherent in the income method or other methods include the amount and timing of projected future cash flows, the discount rate selected to measure the risks inherent in the future cash flows and the assessment of the asset’s life cycle and the competitive trends impacting the asset, including consideration of any technical, legal, regulatory, or economic barriers to entry. Determining the useful life of an intangible asset also requires judgment as different types of intangible assets will have different useful lives and certain assets may even be considered to have indefinite useful lives.
Cash and Cash Equivalents	Cash and Cash Equivalents We consider all highly liquid investments purchased with a maturity of three months or less on the date of purchase to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.
Accounts Receivable	Accounts Receivable Accounts receivable are recorded net of estimates for prompt-pay discounts, chargebacks, returns and rebates. Allowances for prompt-pay discounts and chargebacks are based on contractual terms. We estimate the allowance for credit losses based on existing contractual payment terms, actual payment patterns of customers and individual customer circumstances.
Inventory	Inventory Inventory is stated at the lower of cost or estimated net realizable value on a first in, first out basis. We periodically analyze inventory levels and write down inventory as cost of products sold when the following occurs: inventory has become obsolete, inventory has a cost basis in excess of its estimated net realizable value, or inventory quantities are in excess of expected product sales.
Goodwill and Intangible Assets	Goodwill and Intangible Assets Goodwill is recognized as the excess of the purchase consideration of an acquired entity over the fair value assigned to assets acquired and liabilities assumed in a business combination. Goodwill and intangible assets with an indefinite useful life are not amortized and are tested for impairment at least annually on the first day of December of each year or more frequently if indicators for potential impairment exist or whenever events or changes in circumstances indicate that the asset’s carrying asset amount may not be recoverable. Intangible assets with definite useful lives are amortized on a straight-line basis over their respective remaining useful lives and are tested for impairment only if indicators for potential impairment exist or whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. Significant judgment may be involved in determining if an indicator of impairment has occurred.
Operating Leases	Operating Leases Right-of-use assets represent our right to use an underlying asset over the lease term and include any lease payments made prior to the lease commencement date and are reduced by lease incentives. Lease liabilities represent the present value of the total lease payments over the lease term, calculated using an estimated incremental borrowing rate. Lease expense is recognized on a straight-line basis over the expected lease term.
Equity and Long-Term Investments	Equity and Long-Term Investments We invest from time to time in equity and debt securities of private or public companies. If we determine that we have control over these companies under either voting or VIE models, we consolidate them in our unaudited condensed consolidated financial statements. If we determine that we do not have control over these companies under either voting or VIE models, we then determine if we have an ability to exercise significant influence via voting interests, board representation or other business relationships. We may account for the investments where we exercise significant influence using either an equity method of accounting or at fair value by electing the fair value option under Accounting Standards Codification (“ASC”) Topic 825, Financial Instruments. If the fair value option is applied to an investment that would otherwise be accounted for under the equity method, we apply it to all our financial interests in the same entity (equity and debt, including guarantees) that are eligible items. All gains and losses from fair value changes, unrealized and realized, are presented as changes in fair values of equity method investments, net, and changes in fair values of equity and long-term investments, net, within the unaudited condensed consolidated statements of income. If we conclude that we do not have an ability to exercise significant influence over an investee, we may elect to account for the security without a readily determinable fair value using the measurement alternative method under ASC 321, Investments - Equity Securities. This measurement alternative method allows us to measure the equity investment at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. We also invest in ISP Fund LP, which investments consist of money market funds, trading and equity and debt securities in the healthcare, pharmaceutical and biotechnology industries. Pursuant to the Partnership Agreement entered in December 2020, we became a limited partner of this partnership, and our contributions are subject to a 36-month lock-up period which restriction prevents us from having control and access to the contributions and related investments. These investments are classified as long-term investments in the unaudited condensed consolidated balance sheets.
Revenue Recognition	Revenue Recognition We apply the guidance on principal versus agent considerations under ASC Topic 606, Revenue from Contracts with Customers, to determine the appropriate treatment for the transactions between us and third parties. The classification of transactions under our arrangements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants. Any consideration related to activities in which we are considered the principal, which includes being in control of the good or service before such good or service is transferred to the customer, are accounted for as product sales. Revenue is recognized when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. Revenue is recognized through a five-step process: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price for the contract; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue as a performance obligation is satisfied. Royalty Revenue We recognize the royalty revenue on net sales of products with respect to which we have contractual royalty rights in the period in which the royalties are earned. The net sales reports provided by our partner are based on its methodology and assumptions to estimate rebates and returns, which it monitors and adjusts regularly in light of contractual and legal obligations, historical trends, past experience and projected market conditions. Our partner may make significant adjustments to its sales based on actual results recorded, which could cause our royalty revenue to fluctuate. We conduct periodic royalty audits to evaluate the information provided by our partner. Royalties are recognized net of amortization of capitalized fees associated with any approval and launch milestone payments made to GSK. Revenue from Product Sales Revenue from product sales is recognized when our customers obtain control of the product and is recorded at the transaction price, net of estimates for variable consideration consisting of chargebacks, discounts, returns and rebates. Variable consideration is estimated using the expected-value amount method, which is the sum of probability-weighted amounts in a range of possible consideration amounts. Actual amounts of consideration ultimately received may differ from our estimates. If actual results vary materially from our estimates, we will adjust these estimates, which will affect revenue from product sales and earnings in the period such estimates are adjusted. These items may include: • Chargebacks: Chargebacks are discounts we provide to distributors in the event that the sales prices to end users are below the distributors’ acquisition price. This may occur due to a direct contract with a health system, a group purchasing organization (“GPO”) agreement or a sale to a government facility. Chargebacks are estimated based on known chargeback rates and recorded as a reduction of revenue on delivery to our customers. • Discounts: We offer customers various forms of incentives and consideration, including prompt-pay and other discounts. We estimate discounts primarily based on contractual terms. These discounts are recorded as a reduction of revenue on delivery to our customers. • Returns: We offer customers a limited right of return, generally for damaged or expired product. We estimate returns based on an internal analysis, which includes actual experience. The estimates for returns are recorded as a reduction of revenue on delivery to our customers. • Rebates: We participate in Medicaid rebate programs, which provide assistance to certain low-income patients based on each individual state’s guidelines regarding eligibility and services. Under the Medicaid rebate programs, we pay a rebate to each participating state, generally within three months after the quarter in which product was sold. Additionally, we may offer customer incentives and consideration in the form of volume-based or other rebates. The estimates for rebates are recorded as a reduction of revenue on delivery to our customers. We continue to assess our estimates of variable consideration as we accumulate additional historical data and will adjust these estimates accordingly. License Revenue At the inception of a licensing arrangement that includes development and regulatory milestone payments, we evaluate whether the milestones are considered probable of being achieved and estimate the amount to be included in the transaction price. We generally include these milestone payments in the transaction price when they are achieved because there is considerable uncertainty in the research and development processes that trigger receipt of these payments under our agreements. Similarly, we include approval milestone payments in the transaction price once the product is approved by the applicable regulatory agency.
Research and Development Expenses	Research and Development Expenses Research and development expenses are recognized in the period that services are rendered or goods are received. Research and development expenses consist of salaries and benefits, laboratory supplies, facilities and other overhead costs, research-related manufacturing costs, contract service and clinical-related service costs performed by third party research organizations, research institutions and other outside service providers. Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts are recognized as an expense as the related goods are delivered or the related services are performed. We also utilize significant judgment and estimates to record accruals for estimated ongoing research costs based on the progress of the studies and progress of research manufacturing activities.
Interest Expense on Deferred Royalty Obligation	Interest Expense on Deferred Royalty Obligation Interest expense related to the deferred royalty obligation is recognized over the expected repayment term of the deferred royalty obligation using the effective interest method. The assumptions used in determining the expected repayment term of the deferred royalty obligation require us to make estimates that could impact the effective interest rate. Each reporting period, we estimate the expected repayment term of the deferred royalty obligation based on forecasted net sales of GIAPREZA®. Changes in interest expense resulting from changes in the effective interest rate, if any, are recorded on a prospective basis. Refer to Note 11, “Debt” for more information.

License and Collaboration Arrangements (Additional Information) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Net revenue	$ 67,259	$ 67,257	$ 224,623	$ 265,536
Zai Lab \| Research and Development Support
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Future potential milestone payment receivable	91,000		91,000
License revenue recognized			3
PAION AG
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Future potential milestone payment receivable	109,500		109,500
PAION AG \| Cost Reimbursement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Revenues	1,000		1,000
Everest Medicines Limited
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Revenues	900		1,600
Sales milestone payments receivable	20,000		20,000
License revenue recognized			$ 8,000
Royalties payable period after first commercial sale of product			10 years
Everest Medicines Limited \| Commercial Supply Agreement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Percentage of reimbursed for direct and certain indirect manufacturing costs			110.00%
George Washington University
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Percentage of royalty payable on net sales			6.00%
Percentage of royalty on payments received from sublicensees			15.00%
Obligation to pay royalties	$ 500		$ 1,700
Harvard University
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Percentage of royalty payable on net sales			5.00%
Percentage of royalty on payments received from sublicensees			20.00%
Cost of license revenue			$ 1,600
Clinical development and regulatory milestones amount payable			$ 15,100
Percentage of minimum royalty rate			4.50%
Percentage of maximum royalty based on achievement of annual net product sales thresholds			7.50%
Paratek Pharmaceuticals, Inc.
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Percentage of royalty payable on net sales			2.25%
Claim expiration			2023-10

Debt - Debt Maturities (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Long-term debt maturities for years ending December 31:
Remainder of 2023	$ 0
2024	0
2025	192,500
2026	0
2027	0
Thereafter	261,000
Total	$ 453,500	$ 549,704

Stock-Based Compensation

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

9. Stock-Based Compensation

Stock- Based Compensation Expense

The following table summarizes stock-based compensation expense:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2023		2022		2023		2022
Selling, general and administrative	$	1,308	$	2,422	$	3,502	$	4,240
Research and development		134		1,295	$	1,058		1,781
Total	$	1,442	$	3,717	$	4,560	$	6,021

Valuation Assumptions

Black-Scholes-Merton assumptions used in calculating the estimated value of stock options granted by Innoviva on the date of grant were as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022(1)	2023	2022
Risk-free interest rate	4.13% - 4.21%	—%	3.50% - 4.21%	1.60% - 3.03%
Expected term (in years)	6.01 - 6.22	—	5.16 - 6.22	5.50 - 6.11
Volatility	37.3% - 37.8%	—%	37.3% - 38.5%	38.8% - 40.5%
Dividend yield	—%	—%	—%	—%
Weighted-average estimated fair value of stock options granted	$5.66 - $5.97	$—	$5.22 - $5.97	$6.98 - $7.73

(1)

There were no options granted for the three months ended September 30, 2022.

Stock-Based Compensation - Summary of weighted-average assumptions used to calculate estimated value of stock options (Parenthetical) (Details) - $ / shares

3 Months Ended

Sep. 30, 2022

Mar. 31, 2022

Stock options | Innoviva [Member]

Valuation Assumptions

Weighted-average estimated fair value of stock options granted

$ 0

^[1]

$ 0

[1]	There were no options granted for the three months ended September 30, 2022.

Income Taxes - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Income Tax Disclosure [Abstract]
Income tax expense, net	$ 3,906	$ 57,077	$ 14,706	$ 63,061
Effective tax rate (as a percent)			10.60%	18.30%

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

Debt

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Debt

11. Debt

Our debt consists of the following:


	September 30,			December 31,
(In thousands)	2023			2022
2023 Notes	$	—		$	96,204
2025 Notes		192,500			192,500
2028 Notes		261,000			261,000
Total debt		453,500			549,704
Less: Unamortized debt discount and issuance costs		(7,782	)		(9,331	)
Total debt, net	$	445,718		$	540,373
Less: Current portion of long-term debt, net		—			96,193
Total long-term debt, net	$	445,718		$	444,180

Convertible Subordinated Notes Due 2023

In January 2013, we completed an underwritten public offering of $287.5 million aggregate principal amount of our 2023 Notes, which matured on January 15, 2023.

The remaining balance of the 2023 Notes in the amount of $96.2 million was fully paid upon the maturity date in January 2023.

The following table sets forth total interest expense recognized related to the 2023 Notes:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2023		2022		2023		2022
Contractual interest expense	$	—	$	511	$	85	$	2,106
Amortization of debt issuance costs		—		59		11		240
Total interest and amortization expense	$	—	$	570	$	96	$	2,346

Convertible Senior Notes Due 2025

On August 7, 2017, we completed a private placement of $192.5 million aggregate principal amount of our 2025 Notes. The proceeds include the 2025 Notes sold pursuant to the $17.5 million over-allotment option granted by us to the initial purchasers, which option was exercised in full. The 2025 Notes were sold in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The 2025 Notes are senior unsecured obligations and bear interest at a rate of 2.5% per year, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2018.

The 2025 Notes are convertible, based on the applicable conversion rate, into cash, shares of our common stock or a combination thereof, at our election. The initial conversion rate for the 2025 Notes is 57.9240 shares of our common stock per $1,000 principal amount of the 2025 Notes (which is equivalent to an initial conversion price of approximately $17.26 per share), representing a 30.0% conversion premium over the last reported sale price of the Company’s common stock on August 1, 2017, which was $13.28 per share. The conversion rate is subject to customary anti-dilution adjustments in certain circumstances. The 2025 Notes will mature on August 15, 2025, unless repurchased or converted in accordance with their terms prior to such date. Prior to February 15, 2025, the 2025 Notes will be convertible at the option of the holders only upon the occurrence of specified events and during certain periods, as described below. From, and including, February 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, the 2025 Notes will be convertible at any time.

Holders of the 2025 Notes may convert all or a portion of their 2025 Notes prior to the close of business on February 15, 2025 only under the following circumstances:

•

after September 30, 2017, if our closing common stock price for at least 20 days out of the most recent 30 consecutive trading days of the preceding quarter is greater than 130% of the current conversion price of the 2025 Notes;

•

for five consecutive business days, if the average trading price per $1,000 of Notes during the prior 10 consecutive trading days is less than 98% of the product of our closing common stock price and the conversion rate of the 2025 Notes on such day; and,

•

upon the occurrence of specified corporate events, including certain distributions, the occurrence of a fundamental changes (as defined in the indenture governing the 2025 Notes) or a transaction resulting in our common stock converting into other securities or property or assets.

On or after February 15, 2025, holders of the 2025 Notes may convert their 2025 Notes at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2025 Notes.

In the event of default or a fundamental change (as defined above), holders of the 2025 Notes may require us to repurchase all or a portion of their 2025 Notes at price equal to 100% of the principal amount of the 2025 Notes, plus any accrued and unpaid interest.

The annual effective interest rate on the 2025 Notes is 2.88%.

Our outstanding 2025 Notes balances consisted of the following:


	September 30,			December 31,
(In thousands)	2023			2022
Principal	$	192,500		$	192,500
Debt discount and issuance costs, net		(1,385	)		(1,917	)
Net carrying amount	$	191,115		$	190,583

The following table sets forth total interest expense recognized related to the 2025 Notes for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2023		2022		2023		2022
Contractual interest expense	$	1,203	$	1,203	$	3,609	$	3,609
Amortization of debt issuance costs		179		174		532		517
Total interest and amortization expense	$	1,382	$	1,377	$	4,141	$	4,126

Convertible Senior Notes Due 2028

In March 2022, we completed a private placement of $261.0 million aggregate principal amount of our 2028 Notes, which will mature on March 15, 2028. The proceeds include the 2028 Notes sold pursuant to the $45.0 million over-allotment option granted by us to the initial purchasers, of which $36.0 million was exercised. The 2028 Notes were sold in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act.

The net proceeds from the sale of the $261.0 million aggregate principal amount of 2028 Notes were approximately $252.6 million after deducting the initial purchasers’ discounts and commissions and our estimated offering expenses. We used approximately $21.0 million of the net proceeds from the offering to fund the cost of entering into the capped call transactions described below. In addition, we used $165.6 million of the remaining net proceeds to repurchase $144.8 million aggregate principal amount of the 2023 Notes in separate and individually negotiated transactions with certain holders of the 2023 Notes, which closed concurrently with the issuance of the 2028 Notes. We expect to use the remaining net proceeds for general corporate purposes.

The 2028 Notes bear interest at an annual rate of 2.125% that is payable semi-annually in arrears in cash on March 15 and September 15 of each year, beginning on September 15, 2022.

The 2028 Notes are convertible, based on the applicable conversion rate, into cash, shares of our common stock or a combination thereof, at our election. The initial conversion rate was 38.1432 shares per $1,000 principal amount of the 2028 Notes, subject to customary anti-dilution adjustment in certain circumstances, which represented an initial conversion price of approximately $26.22 per share.

Prior to September 15, 2027, the 2028 Notes will be convertible at the option of the holders only upon the occurrence of specified events and during certain periods, and will be convertible on or after September 15, 2027, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2028 Notes.

Holders of the 2028 Notes may convert all or a portion of their 2028 Notes prior to the close of business on September 15, 2027, only under the following circumstances:

•

after March 31, 2022, if our closing common stock price for at least 20 days out of the most recent 30 consecutive trading days of the preceding quarter is greater than 130% of the current conversion price of the 2028 Notes;

•

upon the occurrence of specified corporate events, including certain distributions, the occurrence of a fundamental changes (as defined in the indenture governing the 2028 Notes) or a transaction resulting in our common stock converting into other securities or property or assets.

On or after September 15, 2027, holders of the 2028 Notes may convert their 2028 Notes at any time until the close of the business on the second day immediately preceding the maturity date of the 2028 Notes.

The 2028 Notes will be redeemable, in whole or in part, at our option at any time, and from time to time, on or after March 20, 2025, and on or before the 75th scheduled trading day immediately before the maturity date but only if the last reported sale price per share of our common stock exceeds 130% of the conversion price for a specified period of time. The redemption price will be equal to the principal amount of the 2028 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, calling any 2028 Note for redemption will constitute a make-whole fundamental change (as defined in the indenture governing the 2028 Notes) with respect to that 2028 Note, in which case the conversion rate applicable to the conversion of that 2028 Note will be increased in certain circumstances if it is converted after it is called for redemption.

If we undergo a fundamental change, subject to certain conditions, holders may require us to purchase for cash all or any portion of their 2028 Notes. The fundamental change purchase price will be 100% of the principal amount of the 2028 Notes to be purchased plus any accrued and unpaid interest to, but excluding, the fundamental change purchase date.

The indenture governing the 2028 Notes contains customary terms and covenants, including a merger covenant and that upon certain events of default occurring and continuing, either the Trustee or the holders of at least 25% of the aggregate principal amount of the outstanding Notes may declare 100% of the principal of, and accrued and unpaid interest, if any, on, all the Notes to be due and payable immediately.

In connection with the offering of the 2028 Notes, we entered into privately negotiated capped call transactions. The cap price of the capped call transaction is initially $33.9850 per share and is subject to certain adjustments under the terms of the capped call transactions. The capped call transactions cover, subject to customary adjustments, the number of shares of common stock initially underlying the 2028 Notes. The capped call transactions are expected generally to reduce potential dilution to our common stock upon conversion of the 2028 Notes or at our election (subject to certain conditions) offset any cash payments we are required to make in excess of the aggregate principal amount of converted 2028 Notes, as the case may be, with such reduction or offset subject to a cap.

The annual effective interest rate on the 2028 Notes is 2.70%.

Our outstanding 2028 Notes balance consisted of the following:


	September 30,			December 31,
(In thousands)	2023			2022
Principal	$	261,000		$	261,000
Debt issuance costs, net		(6,397	)		(7,403	)
Net carrying amount	$	254,603		$	253,597

The following table sets forth total interest expense recognized related to the 2028 Notes for the three and nine months ended September 30, 2023 and 2022:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2023		2022		2023		2022
Contractual interest expense	$	1,387	$	1,371	$	4,160	$	3,127
Amortization of debt issuance costs		340		328		1,006		735
Total interest and amortization expense	$	1,727	$	1,699	$	5,166	$	3,862

Debt Maturities

The aggregate scheduled maturities of our convertible debt as of September 30, 2023 were as follows:


(In thousands)	September 30, 2023
Years ending December 31:
Remainder of 2023	$	—
2024		—
2025		192,500
2026		—
2027		—
Thereafter		261,000
Total	$	453,500

Deferred Royalty Obligation

As part of our acquisition of La Jolla, we recorded the fair value of its deferred royalty obligation in connection with La Jolla’s royalty financing agreement (“La Jolla Royalty Agreement”) with HealthCare Royalty Partners (“HCR”). Under the terms of the La Jolla Royalty Agreement, HCR is entitled to receive quarterly royalties on worldwide net sales of GIAPREZA® until either January 1, 2031 or when the maximum aggregate royalty payments have been made, whichever occurs first. Quarterly payments to HCR under the Royalty Agreement start at a maximum royalty rate, with step-downs based on the achievement of annual net product sales thresholds. The current maximum royalty rate is 14%. Starting January 1, 2024, the maximum royalty rate may increase by an additional 4%, if an agreed-upon cumulative net product sales threshold has not been met. The La Jolla Royalty Agreement is subject to maximum aggregate royalty payments to HCR of $225.0 million.

For the three and nine months ended September 30, 2023, we recognized interest expense of $1.2 million and $3.7 million, respectively. For the three and nine months ended September 30, 2022, we recognized interest expense of $1.5 million. The carrying value of the deferred royalty obligation as of September 30, 2023 was $70.1 million, $66.1 million of which was classified as part of other long-term liabilities and the remaining $4.0 million was classified as other accrued liabilities in the condensed consolidated balance sheet. The carrying value of the deferred royalty obligation as of December 31, 2022 was $70.6 million, $67.9 million of which was classified as part of other long-term liabilities and the remaining $2.7 million was classified as other accrued liabilities in the condensed consolidated balance sheet. During the nine months ended September 30, 2023, we made royalty payments to HCR of $4.3 million. The deferred royalty obligation was valued using Level 3 inputs, and its carrying value as of September 30, 2023 approximates fair value. The fair value of the deferred royalty obligation was calculated as the discounted deferred royalty obligations based on risk-adjusted revenue projections for GIAPREZA®. The annual effective interest rate of the deferred royalty obligation for the current period is 7.40%.

Under the terms of the La Jolla Royalty Agreement, if we are unable to meet certain obligations, including the obligation to use commercially reasonable and diligent efforts to commercialize GIAPREZA®, HCR would have the right to terminate the La Jolla Royalty Agreement and demand payment of either $125.0 million or $225.0 million (depending on which obligation we have failed to meet) less aggregate royalties already paid to HCR. As of September 30, 2023, inclusive of the aggregate royalties paid to HCR by La Jolla under the La Jolla Royalty Agreement prior to our acquisition, La Jolla paid $17.0 million of aggregate royalties to HCR. In the event that we fail to pay such amount if and when due in a timely manner, HCR would have the right to foreclose on the GIAPREZA®-related assets. HCR has no recourse against any asset other than GIAPREZA®.

Certain contract provisions within the La Jolla Royalty Agreement that could result in an acceleration of amounts due under the La Jolla Royalty Agreement are recognized as embedded derivatives that require bifurcation from the deferred royalty obligation and fair value recognition. We determined the fair value of each derivative by assessing the probability of each event occurring, as well as the potential repayment amounts and timing of such repayments that would result under various scenarios. As a result of this assessment, we determined that the fair value of the embedded derivatives is immaterial and, therefore, not recognized as of September 30, 2023 and December 31, 2022. We estimate the fair value of the embedded derivatives for each reporting period until either the features lapse or the La Jolla Royalty Agreement is terminated, whichever occurs first. Any material change in the fair value of the embedded derivatives will be recorded as either a gain or loss in the unaudited condensed consolidated statements of income.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(c))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Topic 470
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//470/tableOfContent

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (g)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (i)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1C
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1C
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1C
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1E
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1E

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1I
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1I
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1I
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

+ Details

Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

Schedule of Components of Lease Cost

The components of lease cost are as follows:


	Three Months Ended September 30,				Nine months ended September 30,
(In thousands)	2023		2022		2023		2022
Straight line operating lease costs	$	361	$	640	$	1,080	$	1,101
Variable lease costs		49		35		144		110
Total lease costs	$	410	$	675	$	1,224	$	1,211

Supplemental cash flow information related to leases are as follows:


	Nine months ended September 30,
(In thousands)	2023		2022
Cash paid for amounts included in the measurement of operating lease liabilities:	$	1,157	$	540
Operating lease right-of-use assets obtained in exchange for operating lease obligations		463		3,323
Right-of-use assets obtained through acquisitions		—		1,185

Schedule of Supplemental Cash Flow Information Related to Leases

Supplemental cash flow information related to leases are as follows:


	Nine months ended September 30,
(In thousands)	2023		2022
Cash paid for amounts included in the measurement of operating lease liabilities:	$	1,157	$	540
Operating lease right-of-use assets obtained in exchange for operating lease obligations		463		3,323
Right-of-use assets obtained through acquisitions		—		1,185

Schedule of Future Minimum Lease Payments

Future minimum payments on our operating leases as of September 30, 2023 were as follows:


(In thousands)
Years ending December 31:
Remainder of 2023	$	377
2024		1,373
2025		1,428
Thereafter		291
Total undiscounted lease payments		3,469
Less: imputed interest		(305	)
Total operating lease liabilities	$	3,164

Revenue Recognition (Tables)

9 Months Ended

Sep. 30, 2023

Revenue from Contract with Customer [Abstract]

Schedule of net revenue from collaborative arrangements

Net revenue recognized under our GSK Agreements was as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2023			2022			2023			2022
Royalties - RELVAR/BREO	$	45,585		$	55,663		$	150,922		$	170,753
Royalties - ANORO		11,429			9,943			32,127			28,015
Royalties - TRELEGY		—			—			—			72,029
Total royalties		57,014			65,606			183,049			270,797
Less: amortization of capitalized fees paid		(3,456	)		(3,456	)		(10,368	)		(10,368	)
Total net royalty revenue	$	53,558		$	62,150		$	172,681		$	260,429

Consolidated Entities and Acquisitions (Tables)

9 Months Ended

Sep. 30, 2023

Consolidated Entities

Pro Forma Information


	Three Months Ended September 30,		Nine Months Ended September 30,
(In thousands)	2022		2022
Revenue	$	72,830	$	292,077
Net income	$	223,082	$	273,301
Net income attributable to Innoviva stockholders	$	274,407	$	282,704

Entasis Therapeutics Holdings Inc

Consolidated Entities

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The following table represents the adjusted fair values of the assets acquired and liabilities assumed by us in the transaction:


(In thousands)	February 17, 2022
Cash and cash equivalents	$	23,070
Prepaid expenses		5,554
Other current assets		1,959
Property and equipment, net		185
Right-of-use assets		959
Goodwill		11,493
Intangible assets		106,700
Other assets		302
Total assets acquired	$	150,222

Accounts payable	$	1,583
Accrued personnel-related expenses		1,058
Other current liabilities		5,096
Deferred tax liabilities		7,769
Total liabilities assumed	$	15,506

Total assets acquired, net	$	134,716

La Jolla Pharmaceutical Company

Consolidated Entities

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The following table represents the adjusted fair values of the assets acquired and liabilities assumed by us in the transaction:


(In thousands)	August 22, 2022
Cash and cash equivalents	$	47,415
Short-term marketable securities		471
Accounts receivable		5,876
Inventory		66,200
Prepaid expenses		1,261
Other current assets		907
Property and equipment, net		13
Right-of-use assets		226
Goodwill		6,411
Intangible assets		151,000
Deferred tax assets		7,461
Other assets		710
Total assets acquired	$	287,951

Accounts payable	$	1,237
Deferred revenue, current		2,849
Other accrued liabilities		11,362
Other long-term liabilities		65,944
Total liabilities assumed	$	81,392

Total assets acquired, net	$	206,559

Theravance Respiratory Company, LLC

Consolidated Entities

Schedule of Income Statements of VIE

The summarized financial information of TRC for the three and nine months ended September 30, 2022 are presented as follows:


	Three Months Ended September 30,			Nine Months Ended September 30,
(In thousands)	2022			2022
Royalty revenue	$	—		$	72,029
Operating expenses		(5	)		332
Income (loss) from operations		5			71,697
Other income, net		—			10
Realized loss		(39,386	)		(39,386	)
Income tax expense, net		—			1
Changes in fair values of equity and long-term investments		—			(8,884	)
Net income (loss)	$	(39,381	)	$	23,438

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

+ References + Details

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References + Details

Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

7. Goodwill and Intangible Assets

Goodwill and intangible assets acquired are recognized at fair value as of the acquisition date. The carrying amount of goodwill as of September 30, 2023 and December 31, 2022 was $17.9 million and $26.7 million, respectively. We have not recognized any impairment losses related to goodwill during the periods presented.

Intangible assets with definite lives are amortized over their estimated useful lives. The carrying basis and accumulated amortization of recognized intangible assets as of September 30, 2023 and December 31, 2022 were as follows:


	September 30, 2023
	Useful Life	Gross		Accumulated			Net Carrying
(In thousands)	(Years)	Amount		Amortization			Amount
Marketed products	8-10	$	219,700	$	(19,586	)	$	200,114
In-process research and development			2,600		—		$	2,600
Collaboration agreement	10		35,400		(1,269	)	$	34,131
Total		$	257,700	$	(20,855	)	$	236,845


	December 31, 2022
	Useful Life	Gross		Accumulated			Net Carrying
(In thousands)	(Years)	Amount		Amortization			Amount
Marketed products	8-10	$	151,000	$	(5,581	)	$	145,419
In-process research and development			72,100		—			72,100
Collaboration agreement			35,400		—			35,400
Total		$	258,500	$	(5,581	)	$	252,919

Intangible assets recognized as a result of the acquisition of Entasis amounted to $106.7 million, which consisted of Entasis’ in-process research and development related to its antibacterial therapeutic product candidates and a collaboration agreement amounting to $71.3 million and $35.4 million, respectively. Following the FDA approval of XACDURO® in May 2023, we started amortizing $68.7 million of the then in-process research and development as a marketed product, as well as the collaboration agreement, over their estimated useful lives. The useful life of the remaining in-process research and development of $2.6 million will be determined upon commercialization of the underlying product candidate; thus, no amortization expense for this intangible asset was recognized for the periods presented.

Intangible assets recognized as a result of the acquisition of La Jolla amounting to $151.0 million pertain to product rights and developed technologies on La Jolla’s currently marketed products. These are intangible assets with determinable lives and are amortized over their estimated useful lives.

We recognized amortization expense of $6.5 million and $15.3 million for the three and nine months ended September 30, 2023, respectively. We recognized amortization expense of $1.5 million for the three and nine months ended September 30, 2022. Future amortization expense is expected to be $6.5 million for the remainder of 2023, $25.8 million for each of the years from 2024 to 2027 and $124.5 million thereafter.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Cash flows from operating activities
Net income (loss)	$ 118,191	$ 288,576
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes	(1,115)	29,258
Amortization of capitalized fees and depreciation of property and equipment	10,437	10,447
Amortization of acquired intangible assets	15,274	1,511
Inventory fair value step-up adjustment included in cost of products sold	19,179	2,743
Stock-based compensation	4,560	6,021
Amortization of debt discount and issuance costs	1,549	1,491
Changes in fair values of equity method investments, net	(67,886)	44,475
Changes in fair values of other equity and long-term investments, net	4,887	21,973
Loss on extinguishment of debt	0	20,662
Net gain on sale of TRC	0	(266,696)
Accrued interest income added to long-term investments	(1,482)	0
Other non-cash items	(770)	2,026
Changes in operating assets and liabilities:
Accounts receivable	(1,351)	(867)
Receivables from collaboration arrangement	(2,341)	2,385
Inventory	(3,797)	350
Prepaid expenses	14,830	277
Other assets	1,795	(2,932)
Accounts payable	844	958
Accrued personnel-related expenses and other accrued liabilities	(1,072)	(1,709)
Accrued interest payable	(3,526)	(1,926)
Income tax payable	148	33,804
Deferred revenue	(546)	0
Net cash provided by operating activities	107,808	192,827
Cash flows from investing activities
Purchases of equity method investments	0	(45,000)
Purchases of trading securities	(60,132)	0
Purchases of equity and long-term investments	(1,218)	(13,725)
Purchases of equity investments managed by ISP Fund LP	(24,914)	(92,951)
Sales of equity investments managed by ISP Fund LP	39,642	24,281
Purchase and sales of other investments managed by ISP Fund LP, net	(14,728)	(41,330)
Purchases of property and equipment	(260)	(33)
Proceeds from sale of ownership interest in TRC, net	0	248,191
Cash acquired through the consolidation of Entasis	0	23,070
Cash paid for the acquisition of La Jolla Pharmaceutical Company, net of cash acquired	0	(150,459)
Net cash used in investing activities	(61,610)	(47,956)
Cash flows from financing activities
Distributions to noncontrolling interests	0	(69,811)
Purchase of Entasis minority interest	0	(42,395)
Repurchase of common stock	(61,092)	0
Repurchase of shares to satisfy tax withholding	(65)	(71)
Proceeds from issuances of common stock, net	111	342
Payment for repurchase of convertible subordinated notes due 2023	(96,204)	(165,131)
Purchases of capped call options associated with convertible senior notes due 2028	0	(21,037)
Proceeds from issuance of convertible senior notes due 2028, net of issuance costs	0	252,536
Net cash used in financing activities	(157,250)	(45,567)
Net (decrease) increase in cash and cash equivalents	(111,052)	99,304
Cash and cash equivalents at beginning of period	291,049	201,525
Cash and cash equivalents at end of period	179,997	300,829
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	11,381	11,736
Cash paid for income taxes	0	3,859
Supplemental Disclosure of Non-cash Investing and Financing Activities:
Adoption of ASU 2020-06	0	28,123
Right-of-use asset obtained through the consolidation of Entasis Therapeutics Holdings, Inc.	463	3,323
Reconciliation of Cash, Cash Equivalents and Restricted Cash:
Cash and cash equivalents	179,997	300,789
Restricted cash, included in "Other assets"	0	40
Total cash, cash equivalents and restricted cash at end of period shown in the condensed consolidated statements of cash flows	$ 179,997	$ 300,829

Equity and Long-term Investments and Fair Value Measurements - Available-for-Sale Securities (Details) - USD ($)

Sep. 30, 2023

Dec. 31, 2022

Available-for-Sale Securities

Amortized Cost

$ 134,287,000

$ 263,469,000

Gross Unrealized Gains

Gross Unrealized Losses

Estimated Fair Value

134,287,000

263,469,000

Credit loss

Money market funds

Available-for-Sale Securities

Amortized Cost

134,287,000

^[1]

263,469,000

^[2]

Gross Unrealized Gains

^[1]

^[2]

Gross Unrealized Losses

^[1]

^[2]

Estimated Fair Value

$ 134,287,000

^[1]

$ 263,469,000

^[2]

[1]	Money market funds are included in cash and cash equivalents in the condensed consolidated balance sheets
[2]	Money market funds are included in cash and cash equivalents in the condensed consolidated balance sheets

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-2

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-2

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (aa)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-2

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (aaa)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-2

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-2

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-2

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-2

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-3

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-3

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 320
-SubTopic 10
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-Section 50
-Paragraph 3
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-3

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 320
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Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 320
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-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-3

+ Details

Consolidated Entities and Acquisitions - ISP Fund LP (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
	Mar. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022	May 31, 2021	Dec. 31, 2020
CONSOLIDATED ENTITIES
Total assets		$ 1,188,104		$ 1,188,104		$ 1,231,497
ISP Fund LP
CONSOLIDATED ENTITIES
Distribution from partnership							$ 110,000
Economic interest of the Partnership (in percent)				100.00%
Total assets		298,600		$ 298,600		320,600
Total liabilities		1,100		1,100		$ 1,600
Gain (Loss) on Investments		22,400	$ 10,500	22,700	$ 14,900
Net investment-related income (expense) earned (incurred)		$ 1,100	$ 300	$ 1,200	$ 1,000
Capital contribution	$ 110,000							$ 300,000
Lock-up period	36 months

Consolidated Entities and Acquisitions - Entasis Therapeutics Holdings, Inc. (Details) $ / shares in Units, $ in Thousands			3 Months Ended			9 Months Ended
	Jul. 11, 2022 USD ($)	Feb. 17, 2022 USD ($) $ / shares	Sep. 30, 2023 USD ($)	Sep. 30, 2022 USD ($)	Mar. 31, 2022 USD ($)	Sep. 30, 2023 USD ($) Director	Sep. 30, 2022 USD ($)	Dec. 31, 2022 USD ($)
Subsidiary or Equity Method Investee [Line Items]
Total debt			$ 453,500			$ 453,500		$ 549,704
Remeasurement loss					$ 7,800
Net loss attributable to Innoviva stockholders			82,046	$ 265,523		118,191	$ 282,235
Net income (loss) attributable to noncontrolling interests			$ 0	(36,176)		$ 0	6,341
Entasis Therapeutics Holdings Inc
Subsidiary or Equity Method Investee [Line Items]
Number of investee's board members which may be designated by the Company \| Director						2
Payment towards convertible promissory note	$ 0
Net loss attributable to Innoviva stockholders				$ 2,700			$ 13,600
Measurement period adjustments for change in value of goodwill						$ 1,200
Measurement period adjustments for change in value of intangible assets						800
Noncontrolling interest		$ 38,500
Measurement period adjustments for change in value of deferred tax liabilities						$ 400
Entasis Therapeutics Holdings Inc \| Consolidated Investees [Member]
Subsidiary or Equity Method Investee [Line Items]
Equity method investment ownership percentage		59.90%
Entasis Therapeutics Holdings Inc \| Securities Purchase Agreement \| Convertible Promissory Note
Subsidiary or Equity Method Investee [Line Items]
Total debt		$ 15,000
Debt instrument maturity date		Aug. 18, 2022
Debt Instrument, annual interest rate		0.59%
Conversion price (dollars per share) \| $ / shares		$ 1.48
Entasis Therapeutics Holdings Inc \| Common stock
Subsidiary or Equity Method Investee [Line Items]
Fair value of equity securities		$ 64,500
Entasis Therapeutics Holdings Inc \| Warrants
Subsidiary or Equity Method Investee [Line Items]
Fair value of equity securities		$ 31,400

Equity and Long-term Investments and Fair Value Measurements - Equity Investment in ImaginAb (Details) - ImaginAb $ in Millions	Sep. 14, 2023 USD ($) shares	Mar. 14, 2023 USD ($) shares	Mar. 18, 2021 USD ($) shares	Sep. 30, 2023 USD ($) Director	Dec. 31, 2022 USD ($)
Equity Investment
Transaction costs to acquire equity securities			$ 0.4
Number of Investee's Board members currently representing the Company \| Director				1
Equity and long-term investments at fair value				$ 7.6	$ 6.4
Consolidated Investees [Member]
Equity Investment
Equity investment ownership percentage				11.80%	12.70%
Series C preferred stock
Equity Investment
Number of shares to be purchased under the securities purchase agreement \| shares			4,051,724
Amount of securities purchase agreement			$ 4.7
Series C-2 preferred stock
Equity Investment
Number of shares to be purchased under the securities purchase agreement \| shares	405,852	270,568
Amount of securities purchase agreement	$ 0.6	$ 0.6
One of ImaginAb's Common Stockholders \| Common stock
Equity Investment
Number of shares to be purchased under the securities purchase agreement \| shares			4,097,157
Amount of securities purchase agreement			$ 1.3

Equity and Long-term Investments and Fair Value Measurements - Convertible Promissory Note in Gate Neuroscience (Details) - USD ($) $ in Thousands			3 Months Ended		9 Months Ended
	Feb. 02, 2023	Nov. 24, 2021	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Equity Investment
Additional cash investment					$ 1,218	$ 13,725
Gate Neuroscience [Member]
Equity Investment
Number Of Common Stock Issued Description		The number of common stock shares to be issued in a qualified event shall be equal to the amount due on the conversion date divided by the lesser of a capped conversion price (the “Capped Conversion Price”) and the qualified event price (the “Qualified Event Price”). The Capped Conversion Price is calculated as $50.0 million divided by the number of shares of common stock outstanding at such time on a fully diluted basis. The Qualified Event Price is the price per share determined by the qualified event. A qualified financing is a sale or series of sales of preferred stock where (i) at least 50 percent of counterparties are not existing shareholders, (ii) net proceeds to Gate are at least $35.0 million, and (iii) the stated or implied equity valuation of Gate is at least $80.0 million.
Additional cash investment	$ 5,000
Equity and long-term investments at fair value			$ 22,300		22,300		$ 15,700
Unrealized gain			$ 100	$ 200	$ 800	$ 300
Convertible Promissory Note Purchase Agreement \| Gate Neuroscience [Member]
Equity Investment
Convertible notes Face Value		$ 15,000
Debt Instrument, Interest Rate, Effective Percentage		8.00%
Note Amendment Agreement \| Gate Neuroscience [Member]
Equity Investment
Convertible notes Face Value	$ 21,500

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
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 Investment	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	0
Other assets	3,444	4,299
Total assets	1,188,104	1,231,497
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	0	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	0	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	0	0
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	644	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	1,107,398	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

Consolidated Entities and Acquisitions - Pro Forma Information (Details) - Entasis Therapeutics Holdings Inc - La Jolla Pharmaceutical Company - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2022
Business Acquisition [Line Items]
Revenue	$ 72,830	$ 292,077
Net income	223,082	273,301
Net income attributable to Innoviva stockholders	$ (274,407)	$ 282,704

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

13. Income Taxes

We recorded a provision for income tax expense of $3.9 million and $14.7 million for the three and nine months ended September 30, 2023, respectively, compared to the recorded provision for income tax expense of $57.1 million and $63.1 million for the three and nine months ended September 30, 2022, respectively. The Company’s effective income tax rate for the nine months ended September 30, 2023 was 10.6% compared to 18.3% for the same period in 2022. The income tax expense for the nine months ended September 30, 2023 and 2022 was determined based upon estimates of the Company’s effective income tax rates in various jurisdictions. Our effective tax rate for the nine months ended September 30, 2023 was lower than the U.S. federal statutory income tax rate due primarily to non-deductible expenses.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-13

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//740/tableOfContent

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-14

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 21
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-21

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
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-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482526/740-270-50-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 17
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-17

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SAB TOPIC 6.I.5.Q1)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 30
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482603/740-30-50-2

+ Details

Debt - Schedule of Debt (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Debt - Schedule of Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Debt
Total	$ 453,500		$ 453,500		$ 549,704
Less: Unamortized debt discount and issuance costs	(7,782)		(7,782)		(9,331)
Total debt, net	445,718		445,718		540,373
Less: Current portion of long-term debt, net	0		0		96,193
Total long-term debt, net	445,718		$ 445,718		444,180
HealthCare Royalty Partners
Debt
Maximum potential royalty payout			14.00%
Increase in maximum potential payout percent			4.00%
Maximum aggregate royalty payments			$ 225,000
Required payment for breach of agreement, payment one			125,000
Payment for royalty agreement			17,000
2023 Notes \| Convertible subordinated notes
Debt
Total debt	0		0		96,204
2025 Notes \| Convertible senior notes
Debt
Total debt	192,500		192,500		192,500
Less: Unamortized debt discount and issuance costs	(1,385)		(1,385)		(1,917)
2028 Notes \| Convertible senior notes
Debt
Total debt	261,000		261,000		261,000
Less: Unamortized debt discount and issuance costs	(6,397)		(6,397)		(7,403)
Royalty Financing Agreement \| Loans Payable [Member] \| HealthCare Royalty Partners
Debt
Interest expense	1,200	$ 1,500	3,700	$ 1,500
Deferred Royalty Obligations	70,100		70,100		70,600
Royalty Payments			$ 4,300
Interest Rate of Deferred Royalty Obligation			7.40%
Royalty Financing Agreement \| Loans Payable [Member] \| HealthCare Royalty Partners \| Other Long Term Liabilities
Debt
Royalty Obligation Payable	66,100		$ 66,100		67,900
Royalty Financing Agreement \| Loans Payable [Member] \| HealthCare Royalty Partners \| Other Accrued Liabilities
Debt
Short term accrued interest	$ 4,000		$ 4,000		$ 2,700

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Royalty revenue \| GSK
Amortization of capitalized fees paid to a related party	$ 3,456	$ 3,456	$ 10,368	$ 10,368

Commitments and Contingencies

9 Months Ended

Sep. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

12. Commitments and Contingencies

Operating Lease

We have operating leases for our corporate headquarters, office spaces and laboratory facilities.

The components of lease cost are as follows:


	Three Months Ended September 30,				Nine months ended September 30,
(In thousands)	2023		2022		2023		2022
Straight line operating lease costs	$	361	$	640	$	1,080	$	1,101
Variable lease costs		49		35		144		110
Total lease costs	$	410	$	675	$	1,224	$	1,211

Supplemental cash flow information related to leases are as follows:


	Nine months ended September 30,
(In thousands)	2023		2022
Cash paid for amounts included in the measurement of operating lease liabilities:	$	1,157	$	540
Operating lease right-of-use assets obtained in exchange for operating lease obligations		463		3,323
Right-of-use assets obtained through acquisitions		—		1,185

As of September 30, 2023, our operating leases have weighted-average remaining term of approximately 2.5 years and the weighted average discount rate on our operating lease liabilities was 7.5%.

Future minimum payments on our operating leases as of September 30, 2023 were as follows:


(In thousands)
Years ending December 31:
Remainder of 2023	$	377
2024		1,373
2025		1,428
Thereafter		291
Total undiscounted lease payments		3,469
Less: imputed interest		(305	)
Total operating lease liabilities	$	3,164

Legal Proceedings

From time to time, the Company is involved in legal proceedings in the ordinary course of its business. We are not currently a party to any material legal proceedings except as discussed below.

On February 15, 2022, La Jolla received a paragraph IV notice of certification (the “First Notice Letter”) from Gland Pharma Limited (“Gland”) advising that Gland had submitted an Abbreviated New Drug Application (“ANDA”) to the FDA seeking approval to manufacture, use or sell a generic version of GIAPREZA® in the U.S. prior to the expiration of U.S. Patent Nos.: 9,220,745; 9,572,856; 9,867,863; 10,028,995; 10,335,451; 10,493,124; 10,500,247; 10,548,943; 11,096,983; and 11,219,662 (the “GIAPREZA® Patents”), which are listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (the “Orange Book”). The First Notice Letter alleges that the GIAPREZA® Patents are invalid, unenforceable and/or will not be infringed by the commercial manufacture, use or sale of the generic product described in Gland’s ANDA.

On March 29, 2022, La Jolla filed a complaint for patent infringement of the GIAPREZA® Patents against Gland and certain related entities in the United States District Court for the District of New Jersey in response to Gland’s ANDA filing. In accordance with the Hatch-Waxman Act, because GIAPREZA® is a new chemical entity and La Jolla filed a complaint for patent infringement within 45 days of receipt of the First Notice Letter, the FDA cannot approve Gland’s ANDA any earlier than 7.5 years from the approval of the GIAPREZA® NDA unless the District Court finds that all of the asserted claims of the patents-in-suit are invalid, unenforceable and/or not infringed.

On February 22, 2023, La Jolla received a paragraph IV notice of certification (the “Second Notice Letter”) from Gland advising that Gland had amended its ANDA filing to include a paragraph IV certification alleging that all claims of the newly-issued and Orange Book-listed U.S. Patent No. 11,559,559 (“the ’559 Patent”), which covers GIAPREZA®, are invalid, unenforceable and/or not infringed.

On March 22, 2023, La Jolla filed a First Amended Complaint in this litigation adding Gland’s marketing and distribution partners for its ANDA angiotensin II product, Fresenius Kabi USA LLC and Fresenius Kabi SwissBiosim GmbH, as co-defendants. On April 7, 2023, La Jolla filed a Second Amended Complaint in response to the Second Notice Letter, adding claims that the manufacture, use, sale, offer for sale, or import of Gland’s ANDA angiotensin II product will infringe the ’559 Patent. We intend to vigorously enforce our intellectual property rights relating to GIAPREZA®.

The parties have completed claim construction briefing, and a claim construction hearing is set for November 9, 2023. Fact discovery is set to conclude on December 8, 2023 and expert discovery will be complete by April 19, 2024. A trial date has not yet been set in this matter.

Given the early stage of this matter, we cannot reasonably estimate a potential future loss or a range of potential future losses, if any, and have not recorded a contingent liability accrual as of September 30, 2023.

Indemnification

In the ordinary course of business, we may provide indemnifications of varying scope and terms to vendors, directors, officers, and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by us, our negligence or willful misconduct, violations of law, or intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with directors and certain officers and employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. No material demands have been made upon us to provide indemnification under such agreements, and thus, there are no claims that we are aware of that could have a material effect on our unaudited condensed consolidated financial statements. We also maintain director and officer insurance, which may cover certain liabilities arising from our obligation to indemnify our directors. To date, we have not incurred any material costs and have not accrued any material liabilities in the condensed consolidated financial statements as a result of these provisions.

Stockholders' Equity (Details) - Common stock - USD ($) $ / shares in Units, $ in Millions	1 Months Ended	9 Months Ended
	Oct. 26, 2023	Sep. 30, 2023	Oct. 31, 2022
Amount of shares repurchased			$ 100.0
Stock repurchased and retired during period, shares		5,051,730
Shares repurchased average price per share		$ 11.97
Stock repurchased and retired during period, value		$ 60.5
Subsequent Event
Stock repurchased and retired during period, shares	447,838
Shares repurchased average price per share	$ 13.07
Stock repurchased and retired during period, value	$ 5.9

Equity and Long-term Investments and Fair Value Measurements - Equity Investment in Nanolive (Details) - Nanolive SFr in Millions, $ in Millions	Feb. 18, 2022 CHF (SFr) shares	Feb. 18, 2022 USD ($) shares	Sep. 30, 2023 USD ($) Director	Dec. 31, 2022 USD ($)
Equity Investment
Transaction costs to acquire equity securities \| $		$ 0.7
Number of Investee's Board members currently representing the Company \| Director			1
Number of the Investee's Board members \| Director			7
Fair value of equity securities \| $			$ 10.6	$ 10.6
Consolidated Investees [Member]
Equity Investment
Equity investment ownership percentage			15.30%	15.50%
Series C preferred stock
Equity Investment
Number of shares to be purchased under the securities purchase agreement \| shares	18,750,000	18,750,000
Amount of securities purchase agreement	SFr 9.0	$ 9.8

Subsequent Events

9 Months Ended

Sep. 30, 2023

Subsequent Events [Abstract]

Subsequent Events

14. Subsequent Events

On October 6, 2023, ITH entered into a Second Note Amendment Agreement (the “Second Note Amendment Agreement”) with Gate to amend the Gate Convertible Note. Pursuant to the Second Note Amendment Agreement, the principal amount of the Gate Convertible Note was increased from $21.5 million to $27.7 million, which represents the principal and accrued interest as of the amendment date and an additional cash investment of $5.0 million. All other material terms of the Gate Convertible Note were unchanged.

Balance Sheet Components (Tables)

9 Months Ended

Sep. 30, 2023

Balance Sheet Related Disclosures [Abstract]

Schedule of Inventory

Inventory consisted of the following:


	September 30,		December 31,
(in thousands)	2023		2022
Raw materials	$	8,859	$	5,757
Work-in-progress		13,231		25,052
Finished goods		18,425		25,088
Total inventory	$	40,515	$	55,897

Schedule Of Other Accrued Liabilities

Other accrued liabilities consisted of the following:


	September 30,		December 31,
(in thousands)	2023		2022
Accrued contract manufacturing expenses	$	5,645	$	8,382
Accrued clinical expenses		712		692
Accrued research expenses		211		349
Accrued professional services		9,796		3,977
Current portion of lease liabilities		1,211		1,316
Current portion of deferred royalty obligations		3,976		2,639
Accrued license fees and royalties		730		943
Other		2,418		2,909
Total other accrued liabilities	$	24,699	$	21,207

Schedule of Other Long-term Liabilities

Other long-term liabilities consisted of the following:


	September 30,		December 31,
(in thousands)	2023		2022
Long-term portion of deferred royalty obligation	$	66,142	$	67,947
Long-term portion of lease liabilities		1,953	$	2,376
Contingent value rights liability		595		595
Total other long-term liabilities	$	68,690	$	70,918

Stock-Based Compensation - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Stock-based compensation
Total stock-based compensation expense	$ 1,442	$ 3,717	$ 4,560	$ 6,021
Selling, general and administrative
Stock-based compensation
Total stock-based compensation expense	1,308	2,422	3,502	4,240
Research and development
Stock-based compensation
Total stock-based compensation expense	$ 134	$ 1,295	$ 1,058	$ 1,781

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 718
-SubTopic 10
-Name Accounting Standards Codification
-Section 35
-Paragraph 1D
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Balance Sheet Components (Additional Information) (Details) - La Jolla Pharmaceutical Company - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Inventory [Line Items]
Net fair value adjustment of inventory from acquisition	$ 31.0		$ 31.0		$ 49.5
Amortization of fair value adjustments of Cost of products sold	$ 5.4	$ 2.7	$ 19.2	$ 2.7

Stockholders' Equity

9 Months Ended

Sep. 30, 2023

Equity [Abstract]

Stockholders' Equity

10. Stockholders' Equity

On October 31, 2022, our board of directors authorized a new share repurchase program under which we may repurchase up to $100.0 million of our outstanding shares of common stock. The repurchase program authorizes the repurchase by the Company of its common stock in open market transactions, including pursuant to a trading plan in accordance with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), privately negotiated transactions, in block trades, accelerated share repurchase transactions, exchange transactions, or any combination thereof or by other means in accordance with federal securities laws. The authorization permits management to repurchase shares of the Company’s common stock from time to time at management’s discretion. Repurchases may also be made pursuant to a trading plan under Rule 10b5-1 under the Exchange Act, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so because of self-imposed trading blackout periods or other regulatory restrictions. The actual means and timing of any shares purchased under the program will depend on a variety of factors, including ongoing assessments of the capital needs of the business, the market price of our common stock, prevailing stock prices, general market conditions and other considerations. This program has no termination date, may be suspended or discontinued at any time at our discretion, and does not obligate us to acquire any amount of common stock. For the nine months ended September 30, 2023, we have repurchased 5,051,730 shares in the open market at an average price of $11.97 per share for a total amount of approximately $60.5 million. All the repurchased shares were retired. Subsequent to September 30, 2023 and through October 26, 2023, we have repurchased 447,838 shares in the open market at an average price of $13.07 per share for a total amount of approximately $5.9 million.

- Definition

The entire disclosure for equity.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-14

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481062/946-235-50-2

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 235
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481062/946-235-50-2

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 505
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481004/946-505-50-6

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 815
-SubTopic 40
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480237/815-40-50-6

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.3-04)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480008/505-10-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(e)(1))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
-Topic 505
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//505/tableOfContent

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-Name Accounting Standards Codification
-Section 50
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-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (g)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (i)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-14

Reference 15: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Subparagraph (c)
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Reference 16: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-Name Accounting Standards Codification
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-Publisher FASB
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Reference 17: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-18

Reference 18: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-Name Accounting Standards Codification
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-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-18

Reference 19: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 18
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-18

+ Details

Subsequent Events - Additional Information (Details) - USD ($) $ in Thousands				9 Months Ended
	Oct. 06, 2023	Jul. 10, 2023	Feb. 02, 2023	Sep. 30, 2023	Sep. 30, 2022	Nov. 24, 2021
Subsequent Event [Line Items]
Proceeds from issuance of convertible senior notes due 2028, net of issuance costs				$ 0	$ 252,536
Additional cash investment				$ 1,218	$ 13,725
Armata \| Credit and Security Agreement
Subsequent Event [Line Items]
Term loan facility in aggregate amount		$ 25,000
Debt Instrument, annual interest rate		14.00%
Debt instrument maturity date		Jan. 10, 2025
Gate Neuroscience [Member]
Subsequent Event [Line Items]
Additional cash investment			$ 5,000
Gate Neuroscience [Member] \| Convertible Promissory Note Purchase Agreement
Subsequent Event [Line Items]
Convertible notes Face Value						$ 15,000
Gate Neuroscience [Member] \| Note Amendment Agreement [Member]
Subsequent Event [Line Items]
Convertible notes Face Value			$ 21,500
Subsequent Event \| Gate Neuroscience [Member]
Subsequent Event [Line Items]
Additional cash investment	$ 5,000
Subsequent Event \| Gate Neuroscience [Member] \| Convertible Promissory Note Purchase Agreement
Subsequent Event [Line Items]
Convertible notes Face Value	21,500
Subsequent Event \| Gate Neuroscience [Member] \| Note Amendment Agreement [Member]
Subsequent Event [Line Items]
Convertible notes Face Value	$ 27,700

Equity and Long-term Investments and Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2023

Financial Instruments and Fair Value Measurements

Schedule of amortized cost and estimated fair values for available-for-sale securities

The estimated fair value of available-for-sale securities is based on quoted market prices for these or similar investments that were based on prices obtained from a commercial pricing service. Available-for-sale securities are summarized below:


	September 30, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
(In thousands)	Cost		Gains		Losses		Fair Value
Money market funds(1)	$	134,287	$	—	$	—	$	134,287
Total	$	134,287	$	—	$	—	$	134,287

(1) Money market funds are included in cash and cash equivalents in the condensed consolidated balance sheets.


	December 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
(In thousands)	Cost		Gains		Losses		Fair Value
Money market funds (1)	$	263,469	$	—	$	—	$	263,469
Total	$	263,469	$	—	$	—	$	263,469

(1) Money market funds are included in cash and cash equivalents in the condensed consolidated balance sheets

Schedule of Available-for-Sale Securities Measured at Fair Value on a Recurring Basis

Our available-for-sale securities, equity and long-term investments and contingent value rights are measured at fair value on a recurring basis and our debt is carried at amortized cost basis.


	Estimated Fair Value Measurements as of September 30, 2023 Using:
	Quoted Price in Active Markets for		Significant Other		Significant
	Identical		Observable		Unobservable
Types of Instruments	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	134,287	$	—	$	—	$	134,287
Investments held by ISP Fund LP (1)		239,058		—		2,330		241,388
Equity investment - Armata Common Stock		75,230		—		—		75,230
Equity investment - Armata Warrants		—		31,810		—		31,810
Convertible debt investment - Armata Note		—		—		49,684		49,684
Term loan investment - Armata Term Loan		—		—		26,199		26,199
Convertible debt investment - Gate Note		—		—		22,276		22,276
Total assets measured at estimated fair value	$	448,575	$	31,810	$	100,489	$	580,874
Liabilities
Debt
2025 Notes	$	—	$	191,923	$	—	$	191,923
2028 Notes		—		217,745		—		217,745
Total fair value of debt	$	—	$	409,668	$	—	$	409,668
Contingent value rights		—		—		595		595
Total liabilities measured at estimated fair value	$	—	$	409,668	$	595	$	410,263

(1)

The investments held by ISP Fund LP consisted of $298.5 million in equity investments, which included $36.9 million in money market funds, and $57.1 million receivable from the maturity of convertible notes. Our total capital contribution of $300 million is subject to a 36-month lock-up period from the date of such capital contributions.


	Estimated Fair Value Measurements as of December 31, 2022 Using:
	Quoted Price
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
Types of Instruments	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	263,469	$	—	$	—	$	263,469
Investments held by ISP Fund LP (1)		265,982		—		54,578		320,560
Equity investment - Armata Common Stock		31,095		—		—		31,095
Equity investment - Armata Warrants		—		8,059		—		8,059
Equity investment - InCarda Warrants		—		—		605		605
Convertible debt investment - Gate Note		—		—		15,700		15,700
Total assets measured at estimated fair value	$	560,546	$	8,059	$	70,883	$	639,488
Liabilities
Debt
2023 Notes	$	—	$	96,089	$	—	$	96,089
2025 Notes		—		197,807		—		197,807
2028 Notes		—		211,768		—		211,768
Total fair value of debt	$	—	$	505,664	$	—	$	505,664
Contingent value rights		—		—		595		595
Total liabilities at estimated fair value	$	—	$	505,664	$	595	$	506,259

(1)

The investments held by ISP Fund LP consisted of $295.4 million equity investments, which included private placement positions and convertible notes of $54.6 million, and $25.1 million in money market funds. Our total capital contributions of $300.0 million is subject to a 36-month lock-up period from the date of such capital contributions.

Armata

Financial Instruments and Fair Value Measurements

Schedule of Income Statements of VIE

The summarized financial information, including the portion we do not own, is presented for Armata on a one quarter lag as follows:

Income Statement Information


	Three Months Ended June 30,						Nine Months Ended June 30,
(In thousands)	2023			2022			2023			2022
Revenue	$	980		$	1,883		$	2,827		$	4,108
Loss from operations	$	(9,629	)	$	(9,220	)	$	(31,303	)	$	(24,043	)
Net loss	$	(3,547	)	$	(9,215	)	$	(28,351	)	$	(24,036	)

- Definition

Tabular disclosure of investment in debt security measured at fair value with change in fair value recognized in other comprehensive income (available-for-sale).

+ References

Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 9
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-9

Reference 2: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-3

Reference 3: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-2

Reference 4: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-2

Reference 5: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-2

Reference 6: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (aa)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-2

Reference 7: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
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-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-2

Reference 8: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-2

Reference 9: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-3

Reference 10: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-3

Reference 11: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-3

Reference 12: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 320
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481800/320-10-50-3

+ Details

- Definition

+ References + Details

Equity and Long-term Investments and Fair Value Measurements - Equity Investment in Armata (Details) - Armata $ / shares in Units, $ in Millions				3 Months Ended					6 Months Ended	9 Months Ended
	Jul. 10, 2023 USD ($)	Jan. 10, 2023 USD ($) $ / shares	Feb. 09, 2022 USD ($) $ / shares shares	Sep. 30, 2023 USD ($) Director	Sep. 30, 2022 USD ($)	Dec. 31, 2021 USD ($) shares	Mar. 31, 2021 USD ($) shares	Mar. 31, 2020 USD ($) shares	Jun. 30, 2023 Tranche	Sep. 30, 2023 USD ($) Director	Sep. 30, 2022 USD ($)	Dec. 31, 2022 USD ($)
Equity investment
Number of tranches \| Tranche									2
Percentage of maximum voting rights			49.50%						49.50%
Number of Investee's Board members currently representing the Company \| Director				3						3
Special terms on re-designating board member to board of investee			In addition, as of February 9, 2022, Armata entered into an amended and restated investor rights agreement with the Company and ISO, pursuant to which for as long as the Company and ISO hold at least 12.5% of the outstanding shares of Armata’s common stock on a fully-diluted, the Company and ISO shall have the right to designate two directors to Armata’s board of directors, and for so long as the Company and ISO hold at least 8%, but less than 12.5%, of the outstanding shares of Armata’s common stock on a fully-diluted basis, the Company and ISO shall have the right to designate one director to Armata’s board of directors, subject to certain conditions and qualifications set forth in the amended and restated investor rights agreement.
Credit and Security Agreement
Equity investment
Term loan facility in aggregate amount	$ 25.0
Debt Instrument, annual interest rate	14.00%
Debt instrument maturity date	Jan. 10, 2025
Consolidated Investees
Equity investment
Equity method investment ownership percentage				69.40%						69.40%		69.40%
Two Directors
Equity investment
Armata outstanding shares percentage			12.50%
Secured Convertible Credit Agreement
Equity investment
Debt instrument, description		On January 10, 2023, we entered into a Secured Convertible Credit Agreement (the “Credit Agreement”) with Armata, under which we extended a one-year convertible note (the "Armata Convertible Note") in an aggregate amount of $30.0 million at an interest rate of 8.0% per annum.
Term loan facility in aggregate amount		$ 30.0
Debt Instrument, annual interest rate		8.00%
Debt instrument, term		1 year
Common stock and warrants
Equity investment
Amount of securities purchase agreement								$ 25.0
Unrealized loss											$ 35.3
Unrealized gain					$ 11.7
Warrants purchased in 2020
Equity investment
Number of warrants purchased under the securities purchase agreement \| shares								8,710,800
Exercise price of warrants \| $ / shares		$ 2.87
Term of warrants		5 years
Warrants purchased in 2021
Equity investment
Exercise price of warrants \| $ / shares		$ 3.25
Term of warrants		5 years
Warrants purchased in 2022
Equity investment
Exercise price of warrants \| $ / shares		$ 5
Term of warrants		5 years
Warrants
Equity investment
Equity method investments at fair value				$ 31.8						$ 31.8		$ 8.1
Unrealized gain										67.9
Common stock
Equity investment
Number of shares to be purchased under the securities purchase agreement \| shares								8,710,800
Equity method investments at fair value				75.2						75.2		$ 31.1
Unrealized gain				72.0
Armata Convertible Note
Equity investment
Equity method investments at fair value				49.7						49.7
Unrealized gain				18.5						19.6
Armata Term Loan
Equity investment
Equity method investments at fair value				26.2						26.2
Unrealized gain				$ 1.1						$ 1.1
Minimum [Member] \| One Director
Equity investment
Armata outstanding shares percentage			8.00%
Maximum [Member] \| One Director
Equity investment
Armata outstanding shares percentage			12.50%
Innoviva Strategic Opportunities, LLC \| Common stock and warrants
Equity investment
Amount of securities purchase agreement			$ 45.0				$ 20.0
Innoviva Strategic Opportunities, LLC \| Warrants
Equity investment
Number of warrants to be purchased under the securities purchase agreement \| shares			4,500,000				6,153,847
Exercise price of warrants \| $ / shares			$ 5
Innoviva Strategic Opportunities, LLC \| Common stock
Equity investment
Number of shares to be purchased under the securities purchase agreement \| shares						1,212,122
Number of shares to be purchased under the securities purchase agreement \| shares			9,000,000
Number of warrants to be purchased under the securities purchase agreement \| shares							6,153,847
Amount of securities purchase agreement						$ 4.0

Goodwill and Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Summary of Accumulated Amortization of Recognized Intangible Assets

The carrying basis and accumulated amortization of recognized intangible assets as of September 30, 2023 and December 31, 2022 were as follows:


	September 30, 2023
	Useful Life	Gross		Accumulated			Net Carrying
(In thousands)	(Years)	Amount		Amortization			Amount
Marketed products	8-10	$	219,700	$	(19,586	)	$	200,114
In-process research and development			2,600		—		$	2,600
Collaboration agreement	10		35,400		(1,269	)	$	34,131
Total		$	257,700	$	(20,855	)	$	236,845


	December 31, 2022
	Useful Life	Gross		Accumulated			Net Carrying
(In thousands)	(Years)	Amount		Amortization			Amount
Marketed products	8-10	$	151,000	$	(5,581	)	$	145,419
In-process research and development			72,100		—			72,100
Collaboration agreement			35,400		—			35,400
Total		$	258,500	$	(5,581	)	$	252,919

Goodwill and Intangible Assets (Additional Information) (Details) - USD ($)	1 Months Ended	3 Months Ended		6 Months Ended	9 Months Ended
	May 31, 2023	Sep. 30, 2023	Sep. 30, 2022	Jun. 30, 2023	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022	Aug. 22, 2022	Feb. 17, 2022
Goodwill [Line Items]
Goodwill		$ 17,905,000			$ 17,905,000		$ 26,713,000
Amortization expense		6,511,000	$ 1,511,000		15,274,000	$ 1,511,000
Goodwill, impairment losses				$ 0
Collaboration agreement
Goodwill [Line Items]
Amortization expense		6,500,000	$ 1,500		15,300,000	$ 1,500
In-process research and development
Goodwill [Line Items]
Useful life of Remaining In Process Research and Development	$ 2,600,000
In-process research and development \| Collaboration agreement
Goodwill [Line Items]
Amortization expense	$ 68,700,000			$ 0
La Jolla Pharmaceutical Company
Goodwill [Line Items]
Goodwill								$ 6,411,000
Future amortization expense, remainder of 2023		6,500			6,500
Future amortization expense, 2024		25,800,000			25,800,000
Future amortization expense, 2025		25,800,000			25,800,000
Future amortization expense, 2026		25,800,000			25,800,000
Future amortization expense, 2027		25,800,000			25,800,000
Future amortization expense, thereafter		124,500,000			124,500,000
Intangible assets pertain to product rights and developed technologies		151,000,000			151,000,000			$ 151,000,000
Entasis Therapeutics Holdings Inc
Goodwill [Line Items]
Goodwill									$ 11,493,000
Intangible assets pertain to product rights and developed technologies		106,700,000			106,700,000				$ 106,700,000
Entasis Therapeutics Holdings Inc \| Collaboration agreement
Goodwill [Line Items]
Intangible assets pertain to product rights and developed technologies		35,400,000			35,400,000
Entasis Therapeutics Holdings Inc \| In-process research and development
Goodwill [Line Items]
Intangible assets pertain to product rights and developed technologies		$ 71,300,000			$ 71,300,000

Revenue Recognition - Schedule of net revenue from collaborative arrangements (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Revenue Recognition and Collaboration Arrangements
Total net royalty revenue	$ 67,259	$ 67,257	$ 224,623	$ 265,536
Royalty revenue
Revenue Recognition and Collaboration Arrangements
Total net royalty revenue	53,558	62,150	172,681	260,429
GSK
Revenue Recognition and Collaboration Arrangements
Total net royalty revenue	53,558	62,150	172,681	260,429
GSK \| Royalty revenue
Revenue Recognition and Collaboration Arrangements
Royalties	57,014	65,606	183,049	270,797
Less: amortization of capitalized fees paid to a related party	(3,456)	(3,456)	(10,368)	(10,368)
GSK \| RELVAR/BREO
Revenue Recognition and Collaboration Arrangements
Royalties	45,585	55,663	150,922	170,753
GSK \| ANORO
Revenue Recognition and Collaboration Arrangements
Royalties	11,429	9,943	32,127	28,015
GSK \| TRELEGY
Revenue Recognition and Collaboration Arrangements
Royalties	$ 0	$ 0	$ 0	$ 72,029

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References + Details

- Definition

Amount, excluding tax collected from customer, of revenue from satisfaction of performance obligation by transferring promised good or service to customer. Tax collected from customer is tax assessed by governmental authority that is both imposed on and concurrent with specific revenue-producing transaction, including, but not limited to, sales, use, value added and excise.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 924
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SAB Topic 11.L)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479941/924-10-S99-1

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 5
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-5

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 30
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-30

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 42
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-42

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 22
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-22

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 32
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-32

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 40
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-40

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 22
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-22

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 32
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-32

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 41
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-41

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 4
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-4

+ Details

Stock-Based Compensation - Summary of weighted-average assumptions used to calculate estimated value of stock options (Details) - Stock options - Innoviva [Member] - $ / shares

3 Months Ended

9 Months Ended

Sep. 30, 2023

Sep. 30, 2022

Mar. 31, 2022

Sep. 30, 2023

Sep. 30, 2022

Valuation Assumptions

Risk-free interest rate

^[1]

0.00%

Volatility

^[1]

0.00%

Weighted-average estimated fair value of stock options granted

$ 0

^[1]

$ 0

Weighted-average

Valuation Assumptions

Dividend yield

0.00%

^[1]

0.00%

Minimum

Valuation Assumptions

Risk-free interest rate

4.13%

3.50%

1.60%

Expected term (in years)

6 years 3 days

5 years 1 month 28 days

5 years 6 months

Volatility

37.30%

38.80%

Weighted-average estimated fair value of stock options granted

$ 5.66

$ 5.22

$ 6.98

Maximum

Valuation Assumptions

Risk-free interest rate

4.21%

3.03%

Expected term (in years)

6 years 2 months 19 days

6 years 1 month 9 days

Volatility

37.80%

38.50%

40.50%

Weighted-average estimated fair value of stock options granted

$ 5.97

$ 7.73

[1]	There were no options granted for the three months ended September 30, 2022.

Goodwill and Intangible Assets - Summary of Accumulated Amortization of Recognized Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Finite-Lived Intangible Assets [Line Items]
Marketed products, Useful Life	10 years
Marketed products, gross carrying amount	$ 219,700	$ 151,000
In-process research and development, gross carrying amount	2,600	72,100
Collaboration agreement, gross carrying amount	35,400	35,400
Total gross carrying amount	257,700	258,500
Marketed products, Accumulated amortization	(19,586)	(5,581)
In-process research and development, accumulated amortization	0	0
Collaboration agreement, accumulated amortization	(1,269)	0
Accumulated amortization	(20,855)	(5,581)
Marketed products, net carrying amount	200,114	145,419
In-process research and development, net carrying amount	2,600	72,100
Collaboration agreement, net carrying amount	34,131	35,400
Net carrying amount	$ 236,845	$ 252,919
Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Marketed products, Useful Life	10 years	10 years
Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Marketed products, Useful Life	8 years	8 years

Consolidated Entities and Acquisitions - La Jolla Pharmaceutical Company (Details) - La Jolla Pharmaceutical Company - USD ($) $ / shares in Units, $ in Millions			6 Months Ended	12 Months Ended
	Aug. 31, 2023	Aug. 22, 2022	Jun. 30, 2023	Dec. 31, 2022
CONSOLIDATED ENTITIES
Measurement period adjustments for change in value of goodwill	$ 3.0		$ 13.1
Decrease in deferred tax liabilities	0.6		2.6
Increase in deferred tax assets	$ 2.4		$ 10.5
Total consideration paid		$ 206.6
Acquisition share price		$ 6.23
Acquisition-related costs				$ 5.3

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References + Details

Net Income Per Share (Tables)

9 Months Ended

Sep. 30, 2023

Earnings Per Share [Abstract]

Schedule of computation of basic and diluted net income per share

The following table shows the computation of basic and diluted net income per share for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands except per share data)	2023		2022		2023		2022
Numerator:
Net income attributable to Innoviva stockholders, basic	$	82,046	$	265,523	$	118,191	$	282,235
Add: interest expense on 2023 Notes, net of tax effect		—		412		86		2,003
Add: interest expense on 2025 Notes, net of tax effect		1,236		994		3,703		3,533
Add: interest expense on 2028 Notes, net of tax effect		1,543		1,769		4,618		3,862
Net income attributable to Innoviva stockholders, diluted	$	84,825	$	268,698	$	126,598	$	291,633
Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders		64,953		69,731		66,016		69,640
Dilutive effect of 2023 Notes		—		4,866		250		6,629
Dilutive effect of 2025 Notes		11,150		11,150		11,150		11,150
Dilutive effect of 2028 Notes		9,955		9,955		9,955		7,559
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan		106		128		133		94
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders		86,164		95,830		87,504		95,072
Net income per share attributable to Innoviva stockholders
Basic	$	1.26	$	3.81	$	1.79	$	4.05
Diluted	$	0.98	$	2.80	$	1.45	$	3.07

Schedule of anti-dilutive securities

The following common stock equivalents were not included in the computation of diluted net income per share because their effect was anti-dilutive for the periods presented:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2023		2022		2023		2022
Outstanding options and awards granted under equity incentive plan and employee stock purchase plan		1,389		705		1,284		577
Outstanding stock warrant		591		526		591		177
Total		1,980		1,231		1,875		754

Equity and Long-term Investments and Fair Value Measurements - Schedule of Income Statement Information (Details) - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2023	Jun. 30, 2023	Sep. 30, 2022	Jun. 30, 2022
Equity Investment
Net revenue	$ 67,259			$ 67,257			$ 224,623		$ 265,536
Net loss	$ 82,046	$ 1,280	$ 34,865	$ 229,347	$ 21,371	$ 37,858	$ 118,191		$ 288,576
Armata
Equity Investment
Net revenue		980			1,883			$ 2,827		$ 4,108
Loss from operations		(9,629)			(9,220)			(31,303)		(24,043)
Net loss		$ (3,547)			$ (9,215)			$ (28,351)		$ (24,036)

- Definition

The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Revenue:
Total revenue	$ 67,259	$ 67,257	$ 224,623	$ 265,536
Expenses:
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")	0	(266,696)	0	(266,696)
Loss on extinguishment of debt	0	0	0	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 (loss)	82,046	229,347	118,191	288,576
Net income (loss) attributable to noncontrolling interests	0	(36,176)	0	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	$ 2.8	$ 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
Royalty revenue
Revenue:
Total revenue	$ 53,558	$ 62,150	$ 172,681	$ 260,429
Net product sales
Revenue:
Total revenue	13,701	5,107	40,942	5,107
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
License revenue
Revenue:
Total revenue	0	0	11,000	0
License
Expenses:
Cost of license revenue	$ 0	$ 0	$ 1,600	$ 0

Consolidated Entities and Acquisitions - Schedule of Recognized Identified Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022	Aug. 22, 2022	Feb. 17, 2022
Business Acquisition [Line Items]
Goodwill	$ 17,905	$ 26,713
La Jolla Pharmaceutical Company
Business Acquisition [Line Items]
Cash and cash equivalents			$ 47,415
Short-term marketable securities			471
Accounts receivable			5,876
Inventory			66,200
Prepaid expenses			1,261
Other current assets			907
Property and equipment, net			13
Right-of-use assets			226
Goodwill			6,411
Intangible assets	151,000		151,000
Deferred tax assets			7,461
Other assets			710
Total assets acquired			287,951
Accounts payable			1,237
Deferred revenue, current			2,849
Other accrued liabilities			11,362
Other long-term liabilities			65,944
Total liabilities assumed			81,392
Total assets acquired, net			$ 206,559
Entasis Therapeutics Holdings Inc
Business Acquisition [Line Items]
Cash and cash equivalents				$ 23,070
Prepaid expenses				5,554
Other current assets				1,959
Property and equipment, net				185
Right-of-use assets				959
Goodwill				11,493
Intangible assets	$ 106,700			106,700
Other assets				302
Total assets acquired				150,222
Accounts payable				1,583
Accrued personnel-related expenses				1,058
Other current liabilities				5,096
Deferred tax liabilities				7,769
Total liabilities assumed				15,506
Total assets acquired, net				$ 134,716

Equity and Long-term Investments and Fair Value Measurements

9 Months Ended

Sep. 30, 2023

Fair Value Disclosures [Abstract]

Equity and Long-term Investments and Fair Value Measurements

6. Equity and Long-term Investments and Fair Value Measurements

Equity Investment in Armata

During the first quarter of 2020, Innoviva acquired 8,710,800 shares of common stock as well as warrants to purchase 8,710,800 additional shares of common stock of Armata Pharmaceuticals, Inc. (“Armata”) for approximately $25.0 million in cash. Armata is a clinical stage biotechnology company focused on precisely targeted bacteriophage therapeutics for antibiotic-resistant infections.

During the first quarter of 2021, ISO entered into a securities purchase agreement with Armata to acquire 6,153,847 shares of Armata common stock and warrants to purchase 6,153,847 additional shares of Armata common stock for approximately $20.0 million. Armata also entered into a voting agreement with the Company and ISO, pursuant to which the Company and ISO agreed not to vote or take any action by written consent with respect to any common shares held by the Company and ISO that represent, in the aggregate, more than 49.5% of the total number of shares of Armata’s common stock for voting on the matters related to election or removal of Armata’s board members. The voting agreement will expire the earlier of the second anniversary of the agreement effective date and approval by the FDA of any of Armata’s product candidates for marketing and commercial distribution. During the fourth quarter of 2021, ISO also purchased an additional 1,212,122 shares of Armata common stock for approximately $4.0 million.

On February 9, 2022, ISO entered into a securities purchase agreement with Armata to acquire 9,000,000 shares of Armata common stock and warrants to purchase 4,500,000 additional shares of common stock with an exercise price of $5.00 per share for $45.0 million. The investment closed in two tranches on February 9, 2022 and March 31, 2022. The investment is intended to aid Armata in advancing its clinical pipeline and strengthening its bacteriophage platform. On February 9, 2022, Armata also entered a second amended and restated voting agreement with the Company and ISO, pursuant to which the Company and ISO agreed not to vote or take any action by written consent with respect to any common shares held by the Company and ISO that represent, in the aggregate, more than 49.5% of the total number of shares of Armata’s common stock for voting on the matters related to election or removal of Armata’s board members or amend the bylaws of Armata to reduce the maximum number of directors or set the number of directors who may serve on the board of Armata. The voting agreement will expire the earlier of the second anniversary of the agreement effective date and approval by the FDA of any of Armata’s product candidates for marketing and commercial distribution. In addition, as of February 9, 2022, Armata entered into an amended and restated investor rights agreement with the Company and ISO, pursuant to which for as long as the Company and ISO hold at least 12.5% of the outstanding shares of Armata’s common stock on a fully-diluted, the Company and ISO shall have the right to designate two directors to Armata’s board of directors, and for so long as the Company and ISO hold at least 8%, but less than 12.5%, of the outstanding shares of Armata’s common stock on a fully-diluted basis, the Company and ISO shall have the right to designate one director to Armata’s board of directors, subject to certain conditions and qualifications set forth in the amended and restated investor rights agreement. On July 10, 2023, Armata entered into an amendment to the amended and restated investor rights agreement with the Company and ISO, pursuant to which the Company and ISO agreed that the voting agreement will expire on the earlier of the fifth anniversary of the original agreement's effective date, January 26, 2021, or the approval by the FDA of any of Armata’s product candidates for marketing and commercial distribution. As of September 30, 2023, three of the seven members of Armata’s board of directors are also members of the board of directors of Innoviva. As of September 30, 2023 and December 31, 2022, the Company and ISO owned approximately 69.4%, of Armata’s common stock.

On January 10, 2023, we entered into a Secured Convertible Credit Agreement (the “Credit Agreement”) with Armata, under which we extended a one-year convertible note (the "Armata Convertible Note") in an aggregate amount of $30.0 million at an interest rate of 8.0% per annum. Pursuant to the Credit Agreement, the balance on the Armata Convertible Note, including all accrued and unpaid interest thereon, will convert into shares of Armata's common stock upon the occurrence of a qualified financing, as defined in the Credit Agreement. Any portion of the balance on the Armata Convertible Note, including all accrued and unpaid interest thereon, may also be converted into shares of Armata's common stock at our option once a registration statement covering the resale of such securities has been declared effective by the SEC. The Armata Convertible Note is secured by substantially all of the assets of Armata and its domestic and foreign material subsidiaries. On July 10, 2023, ISO and Armata executed an amendment to the Armata Convertible Note extending the maturity date from January 10, 2024 to January 10, 2025.

On July 10, 2023, ISO and Armata entered into a Credit and Security Agreement (the “Credit and Security Agreement"), under which we extended a term loan to Armata (the “Armata Term Loan”) in an aggregate amount of $25.0 million. The Armata Term Loan is subject to an interest rate of 14% per annum and is due to mature on January 10, 2025. The Credit and Security Agreement is secured by substantially all of the assets of Armata and its domestic and foreign material subsidiaries.

The investments in Armata's common stock and warrants provide Innoviva and ISO the ability to have significant influence, but not control over Armata’s operations. Armata’s business and affairs are managed under the direction of its board of directors, which Innoviva and ISO do not control. Based on our evaluation, we determined that Armata is a VIE, but Innoviva and ISO are not the primary beneficiary of the VIE. We have not provided financial or other support that we were not previously contractually required to provide during the periods presented. Our maximum exposure to loss is equal to the amount we invested in the entity.

We account for Armata’s common stock and warrants under the equity method using the fair value option. The fair value of Armata’s common stock is measured based on its closing market price. The warrants purchased in 2020, 2021 and 2022 have an exercise price of $2.87, $3.25 and $5.00 per share, respectively. All warrants are exercisable immediately within five years from the issuance date of the warrants and include a cashless exercise option. We use the Black-Scholes-Merton pricing model to estimate the fair value of these warrants with the following input assumptions: Armata’s closing market price on the valuation date, the risk-free interest rate computed based on the U.S. Treasury yield, the remaining contractual term as the expected term, and the expected stock price volatility calculated based on the historical volatility of the common stock of Armata and its peer companies. We account for the Armata Convertible Note as a trading security, measured at fair value using a Monte Carlo simulation model with the probability of certain qualified events and the assumptions of risk-free rate, volatility of stock price and timing of certain qualified events. We account for the Armata Term Loan as a trading security, measured at fair value using an income approach based on the discounted value of expected future cash flows.

As of September 30, 2023, the fair values of our holdings of Armata common stock, warrants, the Armata Convertible Note and the Armata Term Loan were estimated at $75.2 million, $31.8 million, $49.7 million and $26.2 million, respectively. As of December 31, 2022, the fair values of our holdings of Armata common stock and warrants were estimated at $31.1 million and $8.1 million, respectively. For the Armata common stock and warrants, we recorded $72.0 million and $67.9 million in unrealized gain for the three and nine months ended September 30, 2023, respectively, as changes in fair values of equity method investments, net, in the unaudited condensed consolidated statements of income. During the three and nine months ended September 30, 2022, we recorded $11.7 million unrealized gain and $35.3 million unrealized loss, respectively, as changes in fair values of equity method investments, net, in the unaudited condensed consolidated statements of income. For the Armata Convertible Note, we recorded $18.5 million and $19.6 million unrealized gain as changes in fair values of equity and long-term investments, net, in the unaudited condensed consolidated statement of income for three and nine months ended September 30, 2023, respectively. For the Armata Term Loan, we recorded $1.1 million unrealized gain as changes in fair values of equity and long-term investments, net, in the unaudited condensed consolidated statement of income for three and nine months ended September 30, 2023.

The summarized financial information, including the portion we do not own, is presented for Armata on a one quarter lag as follows:

Income Statement Information


	Three Months Ended June 30,						Nine Months Ended June 30,
(In thousands)	2023			2022			2023			2022
Revenue	$	980		$	1,883		$	2,827		$	4,108
Loss from operations	$	(9,629	)	$	(9,220	)	$	(31,303	)	$	(24,043	)
Net loss	$	(3,547	)	$	(9,215	)	$	(28,351	)	$	(24,036	)

Equity Investment in InCarda

During the third quarter of 2020, TRC purchased 20,469,432 shares of Series C preferred stock and a warrant to purchase 5,117,358 additional shares of Series C preferred stock of InCarda Therapeutics, Inc. (“InCarda”) (the “InCarda 2020 Warrant”) for $15.8 million, which included $0.8 million of transaction costs. InCarda is a privately held biopharmaceutical company focused on developing inhaled therapies for cardiovascular diseases. The investment is intended to fund the ongoing clinical development of InRhythmTM (flecainide for inhalation), InCarda’s lead program, for the treatment of a recent-onset episode of paroxysmal atrial fibrillation. On July 20, 2022, under the terms of the TRC Equity Purchase Agreement, TRC transferred to Innoviva’s wholly-owned subsidiary, Innoviva TRC Holdings, LLC (“ITH”) all of TRC’s ownership interests and investments in InCarda. ITH has the right to designate one member to InCarda’s board of directors. As of September 30, 2023, none of InCarda’s six board members was designated by ITH. We did not exercise the InCarda 2020 Warrant which expired in March 2023 and wrote off its carrying value of $0.1 million during the nine months ended September 30, 2023.

On March 9, 2022, TRC entered into a Note and Warrant Purchase Agreement (the “InCarda Agreement”) with InCarda to acquire a convertible promissory note (the “InCarda Convertible Note”) and warrants (the “InCarda 2022 Warrant”) for $0.7 million. The InCarda 2022 Warrant expires on March 9, 2027 and is measured at fair value.

On June 15, 2022, the principal amount and the accrued interest of the InCarda Convertible Note were converted into equity securities. In addition, TRC participated in InCarda’s Series D preferred stock financing by investing $2.3 million. In connection with the new round of financing, InCarda recapitalized its equity structure resulting in TRC owning 4,093,886 shares of InCarda’s common stock, 37,350 shares of its Series A-1 preferred stock, 20,469,432 shares of its Series C preferred stock, 8,771,780 shares of its Series D-1 preferred stock, 3,369,802 shares of its Series D-2 preferred stock, a warrant to purchase 5,117,358 shares of its Series C preferred stock at $0.73 per share and a warrant to purchase 2,490,033 shares of its Series D-1 preferred stock at $0.20 per share.

As of September 30, 2023 and December 31, 2022, we held 8.1% and 9.0% of InCarda equity ownership, respectively. Our investment in InCarda does not provide us with the ability to control or have significant influence over InCarda’s operations. Based on our evaluation, we determined that InCarda is a VIE, but we are not the primary beneficiary of the VIE. We have not provided financial or other support that we were not previously contractually required to provide during the periods presented. Our maximum exposure to loss is equal to the amount we invested in the entity.

We account for our investments in InCarda under the measurement alternative. Under the measurement alternative, the equity investment is initially recorded at its allocated cost, but the carrying value may be adjusted through earnings upon an impairment or when there is an observable price change involving the same or a similar investment with the same issuer. Due to InCarda’s equity recapitalization in the second quarter of 2022, TRC reassessed the value of its investments in InCarda using the Option Pricing Model Backsolve valuation methodology. Key assumptions used in the valuation model included an expected holding period of two years, a risk-free interest rate of 3.2%, a dividend yield of 0.0% and an estimated volatility of 122.0%. The estimated volatility was calculated based on the historical volatility of a selected peer group of public companies comparable to InCarda. We recognized an impairment charge of $9.0 million during the second quarter of 2022.

Due to certain changes in InCarda’s business operations during the second quarter of 2023, TRC reassessed the value of its investments in InCarda using the Option Pricing Model methodology. Key assumptions used in the valuation model included an expected holding period of two years, a risk-free interest rate of 4.9%, a dividend yield of 0.0% and an estimated volatility of 114.2%. The estimated volatility was calculated based on the historical volatility of a selected peer group of public companies comparable to InCarda. We recognized an impairment charge of $2.9 million during the second quarter of 2023.

As of September 30, 2023, we recorded $4.8 million in fair value of InCarda’s Series C preferred stock and $0.2 million in fair value of Series D warrants (the “InCarda Preferred Stock Warrants”). As of December 31, 2022, we recorded $6.8 million in fair value of InCarda’s Series C preferred stock and $0.6 million in fair value of the InCarda Preferred Stock Warrants. As of September 30, 2023 and December 31, 2022, we recognized $2.7 million and $3.2 million, respectively, for InCarda’s Series D-1 preferred stock, Series D-2 preferred stock, and common stock using the measurement alternative. During the three months ended September 30, 2023, there was no change in the carrying amount of our investment. During the nine months ended September 30, 2023, we recorded a $3.0 million net unrealized loss, as a change in fair values of equity and long-term investments, net, in the unaudited condensed consolidated statements of income. During the three and nine months ended September 30, 2022, we recorded $0.2 million in net unrealized gain and $8.8 million in net unrealized loss, respectively, as changes in fair values of equity and long-term investments, net, in the unaudited condensed consolidated statements of income.

Equity Investment in ImaginAb

On March 18, 2021, TRC entered into a securities purchase agreement with ImaginAb, to purchase 4,051,724 shares of ImaginAb Series C preferred stock for $4.7 million. On the same day, TRC also entered into a securities purchase agreement with one of ImaginAb’s common stockholders to purchase 4,097,157 shares of ImaginAb common stock for $1.3 million. ImaginAb is a privately held biotechnology company focused on clinically managing cancer and autoimmune diseases via molecular imaging. $0.4 million was incurred for investment due diligence costs and execution and recorded as part of the equity investment in the condensed consolidated balance sheets.

On July 20, 2022, under the terms of the TRC Equity Purchase Agreement, TRC transferred to ITH all of TRC’s ownership interests and investments in ImaginAb.

On March 14, 2023, ITH entered into a securities purchase agreement with ImaginAb to purchase 270,568 shares of ImaginAb Series C-2 preferred stock for $0.6 million. On September 14, 2023, ITH entered into a securities purchase agreement with

ImaginAb to purchase another 405,852 shares of ImaginAb Series C-2 preferred stock for $0.6 million. As of September 30, 2023, one of ImaginAb’s six board members was designated by ITH. As of September 30, 2023 and December 31, 2022, we held 11.8% and 12.7%, respectively, of ImaginAb equity ownership.

Our investment in ImaginAb does not provide us with the ability to control or have significant influence over ImaginAb’s operations. Based on our evaluation, we determined that ImaginAb is a VIE, but we are not the primary beneficiary of the VIE. We have not provided financial or other support that we were not previously contractually required to provide during the periods presented. Our maximum exposure to loss is equal to the amount we invested in the entity.

Because ImaginAb’s equity securities are not publicly traded and do not have a readily determinable fair value, we account for our investment in ImaginAb’s Series C preferred stock, Series C-2 preferred stock and common stock using the measurement alternative. As of September 30, 2023 and December 31, 2022, $7.6 million and $6.4 million, respectively, was recorded as equity and long-term investments in the unaudited condensed consolidated balance sheets and there was no change in the carrying amount of our investments.

Convertible Promissory Note in Gate Neurosciences

On November 24, 2021, TRC entered into a Convertible Promissory Note Purchase Agreement with Gate to acquire a convertible promissory note (the “Gate Convertible Note”) with a principal amount of $15.0 million. Gate is a privately held biopharmaceutical company focused on developing the next generation of targeted nervous system therapies, leveraging precision medicine approaches to develop breakthrough drugs for psychiatric and neurologic diseases. The investment is intended to fund Gate's ongoing development and research. The Gate Convertible Note bears an annual interest rate of 8% and will convert into shares of common stock of Gate upon a qualified event or into shares of shadow preferred stock of Gate (“Shadow Preferred”) upon a qualified financing. A qualifying event can be a qualified initial price offering, a qualified merger, or a merger with a special-purpose acquisition company (“SPAC”). Shadow Preferred means preferred stock having identical rights, preferences and restrictions as the preferred stock that would be issued in a qualified financing.

The number of common stock shares to be issued in a qualified event shall be equal to the amount due on the conversion date divided by the lesser of a capped conversion price (the “Capped Conversion Price”) and the qualified event price (the “Qualified Event Price”). The Capped Conversion Price is calculated as $50.0 million divided by the number of shares of common stock outstanding at such time on a fully diluted basis. The Qualified Event Price is the price per share determined by the qualified event. A qualified financing is a sale or series of sales of preferred stock where (i) at least 50 percent of counterparties are not existing shareholders, (ii) net proceeds to Gate are at least $35.0 million, and (iii) the stated or implied equity valuation of Gate is at least $80.0 million.

On July 20, 2022, under the terms of the TRC Equity Purchase Agreement, TRC transferred to ITH all of TRC’s debt investments in Gate.

On February 2, 2023, ITH entered into a Note Amendment Agreement (the “Note Amendment Agreement”) with Gate to amend the Gate Convertible Note. Pursuant to the Note Amendment Agreement, the principal amount of the Gate Convertible Note was increased from $15.0 million to $21.5 million, which represents the original principal, accrued interest as of the amendment date and an additional cash investment of $5.0 million. All other material terms of the Gate Convertible Note were unchanged.

We have accounted for the Gate Convertible Note as a trading security, measured at fair value using a Monte Carlo simulation model with the probability of certain qualified events and the assumptions of equity value of Gate, risk-free rate, expected stock price, volatility of its peer companies, and the time until a financing is raised. As of September 30, 2023 and December 31, 2022, the fair value of the Gate Convertible Note was estimated at $22.3 million and $15.7 million, respectively, and recorded as equity and long-term investments in the unaudited condensed consolidated balance sheets. We recorded $0.1 million and $0.8 million unrealized gain as changes in fair values of equity and long-term investments, net in the unaudited condensed consolidated statement of income for the three and nine months ended September 30, 2023, respectively. We recorded $0.2 million and $0.3 million unrealized gain as changes in fair values of equity and long-term investments, net, in the unaudited condensed consolidated statement of income for the three and nine months ended September 30, 2022, respectively.

Equity Investment in Nanolive

On February 18, 2022, TRC entered into an investment and shareholders agreement with Nanolive to purchase 18,750,000 shares of Nanolive Series C preferred stock for $9.8 million (equivalent to 9.0 million CHF). Nanolive SA is a Swiss privately held life sciences company focused on developing breakthrough imaging solutions that accelerate research in growth industries such as drug discovery and cell therapy. $0.7 million was incurred for investment due diligence costs and execution and recorded as part of the equity and long-term investment in the condensed consolidated balance sheets. On July 20, 2022, under the terms of the TRC Equity Purchase Agreement, TRC transferred to ITH all of TRC’s ownership interests and investments in Nanolive. ITH has the right to designate one member to Nanolive’s board. ITH also has the right to designate another member, who will be mutually acceptable to ITH and another stockholder, to Nanolive’s board. As of September 30, 2023, one of Innoviva designees is serving on Nanolive’s seven-member board. As of September 30, 2023 and December 31, 2022, we held 15.3% and 15.5%, respectively, of Nanolive equity ownership.

Our investment in Nanolive does not provide us with the ability to control or have significant influence over Nanolive’s operations. Based on our evaluation, we determined that Nanolive is a VIE, but we are not the primary beneficiary of the VIE. We have not provided financial or other support that we were not previously contractually required to provide during the periods presented. Our maximum exposure to loss is equal to the amount we invested in the entity.

Because Nanolive’s equity securities are not publicly traded and do not have a readily determinable fair value, we account for our investment in Nanolive’s Series C preferred stock using the measurement alternative. As of September 30, 2023 and December 31, 2022, $10.6 million was recorded as equity and long-term investments in the unaudited condensed consolidated balance sheets and there was no change to the carrying amount of our investment.

Available-for-Sale Securities


	September 30, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
(In thousands)	Cost		Gains		Losses		Fair Value
Money market funds(1)	$	134,287	$	—	$	—	$	134,287
Total	$	134,287	$	—	$	—	$	134,287

(1) Money market funds are included in cash and cash equivalents in the condensed consolidated balance sheets.


	December 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
(In thousands)	Cost		Gains		Losses		Fair Value
Money market funds (1)	$	263,469	$	—	$	—	$	263,469
Total	$	263,469	$	—	$	—	$	263,469

(1) Money market funds are included in cash and cash equivalents in the condensed consolidated balance sheets.

As of September 30, 2023, all investments were money market funds, and there was no credit loss recognized.

Fair Value Measurements

Our available-for-sale securities, equity and long-term investments and contingent value rights are measured at fair value on a recurring basis and our debt is carried at amortized cost basis.


	Estimated Fair Value Measurements as of September 30, 2023 Using:
	Quoted Price in Active Markets for		Significant Other		Significant
	Identical		Observable		Unobservable
Types of Instruments	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	134,287	$	—	$	—	$	134,287
Investments held by ISP Fund LP (1)		239,058		—		2,330		241,388
Equity investment - Armata Common Stock		75,230		—		—		75,230
Equity investment - Armata Warrants		—		31,810		—		31,810
Convertible debt investment - Armata Note		—		—		49,684		49,684
Term loan investment - Armata Term Loan		—		—		26,199		26,199
Convertible debt investment - Gate Note		—		—		22,276		22,276
Total assets measured at estimated fair value	$	448,575	$	31,810	$	100,489	$	580,874
Liabilities
Debt
2025 Notes	$	—	$	191,923	$	—	$	191,923
2028 Notes		—		217,745		—		217,745
Total fair value of debt	$	—	$	409,668	$	—	$	409,668
Contingent value rights		—		—		595		595
Total liabilities measured at estimated fair value	$	—	$	409,668	$	595	$	410,263

(1)


	Estimated Fair Value Measurements as of December 31, 2022 Using:
	Quoted Price
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
Types of Instruments	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	263,469	$	—	$	—	$	263,469
Investments held by ISP Fund LP (1)		265,982		—		54,578		320,560
Equity investment - Armata Common Stock		31,095		—		—		31,095
Equity investment - Armata Warrants		—		8,059		—		8,059
Equity investment - InCarda Warrants		—		—		605		605
Convertible debt investment - Gate Note		—		—		15,700		15,700
Total assets measured at estimated fair value	$	560,546	$	8,059	$	70,883	$	639,488
Liabilities
Debt
2023 Notes	$	—	$	96,089	$	—	$	96,089
2025 Notes		—		197,807		—		197,807
2028 Notes		—		211,768		—		211,768
Total fair value of debt	$	—	$	505,664	$	—	$	505,664
Contingent value rights		—		—		595		595
Total liabilities at estimated fair value	$	—	$	505,664	$	595	$	506,259

(1)

The fair values of our equity investments in Armata’s common stock and publicly traded investments held by ISP Fund LP are based on the quoted prices in active markets and are classified as Level 1 financial instruments. The fair values of the warrants in Armata classified within Level 2 are based upon observable inputs that may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications.

The InCarda warrants, the Gate Convertible Note, the Armata Convertible Note, the Armata Term Loan, private placement positions and convertible notes held by ISP Fund LP, and contingent value rights are classified as Level 3 financial instruments as these securities are not publicly traded and the assumptions used in the valuation model for valuing these securities are based on significant unobservable and observable inputs including those of publicly traded peer companies.

The fair values of our 2025 Notes and 2028 Notes are based on recent trading prices of the respective instruments. The fair values of our 2023 Notes, which were fully paid off in January 2023, were also based on their trading prices.

Net Income Per Share - Anti-Dilutive Securities (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Anti-Dilutive Securities
Anti-dilutive securities (in shares)	1,980	1,231	1,875	754
Equity incentive plans and ESPP
Anti-Dilutive Securities
Anti-dilutive securities (in shares)	1,389	705	1,284	577
Outstanding Stock Warrant
Anti-Dilutive Securities
Anti-dilutive securities (in shares)	591	526	591	177

Debt - Convertible Subordinated Notes (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Mar. 31, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022	Jan. 31, 2013
Debt
Payment for repurchase of debt instrument				$ 96,204	$ 165,131
Accrued interest payable	$ 833			833		$ 4,359
Loss on extinguishment of debt	0	$ 0		0	(20,662)
Principal	453,500			453,500		549,704
Debt discount and issuance costs, net	(7,782)			(7,782)		(9,331)
2023 Notes
Debt
Loan amount	96,200			96,200
2023 Notes \| Convertible subordinated notes
Debt
Loan amount							$ 287,500
Portion of debt retired, face value			$ 144,800
Payment for repurchase of debt instrument			$ 165,600
Principal	0			0		$ 96,204
Interest expense
Contractual interest expense	0	511		85	2,106
Amortization of debt issuance costs	0	59		11	240
Total interest and amortization expense	$ 0	$ 570		$ 96	$ 2,346

Commitments and Contingencies (Additional Information) (Details)	Sep. 30, 2023
Lessee, Lease, Description [Line Items]
Operating lease, Weighted average remaining lease term	2 years 6 months
Weighted average discount rate	7.50%

Equity and Long-term Investments and Fair Value Measurements - Schedule of Available-for-Sale Securities Measured at Fair Value on a Recurring Basis (Details) - USD ($)
$ in Thousands

9 Months Ended

12 Months Ended

Sep. 30, 2023

Dec. 31, 2022

Financial Instruments and Fair Value Measurements

Contingent value rights

$ 595

ISP Fund LP

Liabilities

Lock-up period

36 months

Contributed to partnership for investing

$ 300,000

ISP Fund LP | Convertible Debt

Assets

Total assets measured at estimated fair value

57,100

Money market funds | ISP Fund LP

Assets

Total assets measured at estimated fair value

36,900

25,100

Equity investment | ISP Fund LP

Assets

Total assets measured at estimated fair value

298,500

295,400

Private Placement Positions and Convertible Notes | ISP Fund LP

Assets

Total assets measured at estimated fair value

54,600

Recurring basis

Assets

Total assets measured at estimated fair value

580,874

639,488

Recurring basis | Money market funds

Assets

Total assets measured at estimated fair value

134,287

263,469

Recurring basis | Equity investments and money market funds | ISP Fund LP

Assets

Total assets measured at estimated fair value

241,388

^[1]

320,560

^[2]

Recurring basis | Term loan investment

Assets

Total assets measured at estimated fair value

26,199

Recurring basis | Term loan investment | Armata Term Loan

Assets

Total assets measured at estimated fair value

Recurring basis | Quoted Price in Active Markets for Identical Assets, Level 1

Assets

Total assets measured at estimated fair value

448,575

560,546

Recurring basis | Quoted Price in Active Markets for Identical Assets, Level 1 | Money market funds

Assets

Total assets measured at estimated fair value

134,287

263,469

Recurring basis | Quoted Price in Active Markets for Identical Assets, Level 1 | Equity investments and money market funds | ISP Fund LP

Assets

Total assets measured at estimated fair value

239,058

^[1]

265,982

^[2]

Recurring basis | Significant Other Observable Inputs, Level 2

Assets

Total assets measured at estimated fair value

31,810

8,059

Recurring basis | Significant Other Observable Inputs, Level 2 | Money market funds

Assets

Total assets measured at estimated fair value

Recurring basis | Significant Other Observable Inputs, Level 2 | Equity investments and money market funds | ISP Fund LP

Assets

Total assets measured at estimated fair value

^[1]

^[2]

Recurring basis | Significant Other Observable Inputs, Level 2 | Term loan investment

Assets

Total assets measured at estimated fair value

Recurring basis | Significant Unobservable Inputs, Level 3

Assets

Total assets measured at estimated fair value

100,489

70,883

Recurring basis | Significant Unobservable Inputs, Level 3 | Money market funds

Assets

Total assets measured at estimated fair value

Recurring basis | Significant Unobservable Inputs, Level 3 | Equity investments and money market funds | ISP Fund LP

Assets

Total assets measured at estimated fair value

2,330

^[1]

54,578

^[2]

Recurring basis | Significant Unobservable Inputs, Level 3 | Term loan investment

Assets

Total assets measured at estimated fair value

26,199

Nonrecurring basis

Financial Instruments and Fair Value Measurements

Contingent value rights

595

Liabilities

Total liabilities measured at estimated fair value

410,263

506,259

Nonrecurring basis | Debt

Financial Instruments and Fair Value Measurements

2023 Notes

96,089

2025 Notes

191,923

197,807

2028 Notes

217,745

211,768

Total fair value of debt

409,668

505,664

Nonrecurring basis | Quoted Price in Active Markets for Identical Assets, Level 1

Financial Instruments and Fair Value Measurements

Contingent value rights

Liabilities

Total liabilities measured at estimated fair value

Nonrecurring basis | Quoted Price in Active Markets for Identical Assets, Level 1 | Debt

Financial Instruments and Fair Value Measurements

2023 Notes

2025 Notes

2028 Notes

Total fair value of debt

Nonrecurring basis | Significant Other Observable Inputs, Level 2

Financial Instruments and Fair Value Measurements

Contingent value rights

Liabilities

Total liabilities measured at estimated fair value

409,668

505,664

Nonrecurring basis | Significant Other Observable Inputs, Level 2 | Debt

Financial Instruments and Fair Value Measurements

2023 Notes

96,089

2025 Notes

191,923

197,807

2028 Notes

217,745

211,768

Total fair value of debt

409,668

505,664

Nonrecurring basis | Significant Unobservable Inputs, Level 3

Financial Instruments and Fair Value Measurements

Contingent value rights

595

Liabilities

Total liabilities measured at estimated fair value

595

Nonrecurring basis | Significant Unobservable Inputs, Level 3 | Debt

Financial Instruments and Fair Value Measurements

2023 Notes

2025 Notes

2028 Notes

Total fair value of debt

Armata | Recurring basis | Convertible Debt

Assets

Total assets measured at estimated fair value

49,684

Armata | Recurring basis | Equity investment | Common stock

Assets

Total assets measured at estimated fair value

75,230

31,095

Armata | Recurring basis | Equity investment | Warrants

Assets

Total assets measured at estimated fair value

31,810

8,059

Armata | Recurring basis | Quoted Price in Active Markets for Identical Assets, Level 1 | Convertible Debt

Assets

Total assets measured at estimated fair value

Armata | Recurring basis | Quoted Price in Active Markets for Identical Assets, Level 1 | Equity investment | Common stock

Assets

Total assets measured at estimated fair value

75,230

31,095

Armata | Recurring basis | Quoted Price in Active Markets for Identical Assets, Level 1 | Equity investment | Warrants

Assets

Total assets measured at estimated fair value

Armata | Recurring basis | Significant Other Observable Inputs, Level 2 | Convertible Debt

Assets

Total assets measured at estimated fair value

Armata | Recurring basis | Significant Other Observable Inputs, Level 2 | Equity investment | Common stock

Assets

Total assets measured at estimated fair value

Armata | Recurring basis | Significant Other Observable Inputs, Level 2 | Equity investment | Warrants

Assets

Total assets measured at estimated fair value

31,810

8,059

Armata | Recurring basis | Significant Unobservable Inputs, Level 3 | Convertible Debt

Assets

Total assets measured at estimated fair value

49,684

Armata | Recurring basis | Significant Unobservable Inputs, Level 3 | Equity investment | Common stock

Assets

Total assets measured at estimated fair value

Armata | Recurring basis | Significant Unobservable Inputs, Level 3 | Equity investment | Warrants

Assets

Total assets measured at estimated fair value

InCarda | Recurring basis | Equity investment | Warrants

Assets

Total assets measured at estimated fair value

605

InCarda | Recurring basis | Quoted Price in Active Markets for Identical Assets, Level 1 | Equity investment | Warrants

Assets

Total assets measured at estimated fair value

InCarda | Recurring basis | Significant Other Observable Inputs, Level 2 | Equity investment | Warrants

Assets

Total assets measured at estimated fair value

InCarda | Recurring basis | Significant Unobservable Inputs, Level 3 | Equity investment | Warrants

Assets

Total assets measured at estimated fair value

605

Gate Neuroscience [Member] | Recurring basis | Convertible Debt

Assets

Total assets measured at estimated fair value

22,276

15,700

Gate Neuroscience [Member] | Recurring basis | Quoted Price in Active Markets for Identical Assets, Level 1 | Convertible Debt

Assets

Total assets measured at estimated fair value

Gate Neuroscience [Member] | Recurring basis | Significant Other Observable Inputs, Level 2 | Convertible Debt

Assets

Total assets measured at estimated fair value

Gate Neuroscience [Member] | Recurring basis | Significant Unobservable Inputs, Level 3 | Convertible Debt

Assets

Total assets measured at estimated fair value

$ 22,276

$ 15,700

[1]	The investments held by ISP Fund LP consisted of $298.5 million in equity investments, which included $36.9 million in money market funds, and $57.1 million receivable from the maturity of convertible notes. Our total capital contribution of $300 million is subject to a 36-month lock-up period from the date of such capital contributions.
[2]	The investments held by ISP Fund LP consisted of $295.4 million equity investments, which included private placement positions and convertible notes of $54.6 million, and $25.1 million in money market funds. Our total capital contributions of $300.0 million is subject to a 36-month lock-up period from the date of such capital contributions.