[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Innoviva, Inc.'s unaudited consolidated financial statements for the three months ended March 31, 2022 and 2021, including balance sheets, statements of income, comprehensive income, stockholders' equity, and cash flows [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This section presents the company's financial position, including assets, liabilities, and equity, as of March 31, 2022, and December 31, 2021 | (In thousands) | March 31, 2022 (unaudited) | December 31, 2021* | | :--------------------------------- | :------------------------- | :------------------- | | **Assets** | | | | Cash and cash equivalents | $ 216,802 | $ 201,525 | | Total current assets | $ 317,823 | $ 313,673 | | Equity and long-term investments | $ 544,437 | $ 483,845 | | Goodwill | $ 5,544 | $ — | | Intangible assets | $ 105,000 | $ — | | Total assets | $ 1,107,474 | $ 926,395 | | **Liabilities and Stockholders' Equity** | | | | Total current liabilities | $ 109,227 | $ 5,807 | | Long-term debt, net | $ 442,731 | $ 394,653 | | Total stockholders' equity | $ 552,217 | $ 525,935 | | Total liabilities and stockholders' equity | $ 1,107,474 | $ 926,395 | [Unaudited Consolidated Statements of Income](index=4&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Income) This section details the company's revenues, expenses, and net income for the three months ended March 31, 2022, and 2021, including per share data | (In thousands, except per share data) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Royalty revenue from a related party, net | $ 90,059 | $ 85,518 | | Total operating expenses | $ 12,330 | $ 6,035 | | Income from operations | $ 77,729 | $ 79,483 | | Loss on debt extinguishment | $ (20,662) | $ — | | Changes in fair values of equity and long-term investments, net | $ (9,411) | $ 55,045 | | Net income | $ 37,858 | $ 109,695 | | Net income attributable to Innoviva stockholders | $ 15,773 | $ 94,123 | | Basic net income per share attributable to Innoviva stockholders | $ 0.23 | $ 0.93 | | Diluted net income per share attributable to Innoviva stockholders | $ 0.20 | $ 0.84 | [Unaudited Consolidated Statements of Comprehensive Income](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents the company's comprehensive income, including net income and other comprehensive income, for the three months ended March 31, 2022, and 2021 | (In thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------- | :-------------------------------- | :-------------------------------- | | Net income | $ 37,858 | $ 109,695 | | Comprehensive income | $ 37,858 | $ 109,695 | | Comprehensive income attributable to Innoviva stockholders | $ 15,773 | $ 94,123 | [Unaudited Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section outlines changes in stockholders' equity, including net income, comprehensive income, and the impact of accounting standard adoptions, for the three months ended March 31, 2022, and 2021 - Total Innoviva stockholders' equity decreased from **$414,743 thousand** as of December 31, 2021, to **$386,642 thousand** as of March 31, 2022[18](index=18&type=chunk) - The adoption of ASU 2020-06 resulted in a cumulative adjustment decreasing additional paid-in capital by **$65.361 million** and increasing accumulated deficit by **$37.238 million**[18](index=18&type=chunk) - Net income attributable to Innoviva stockholders for the three months ended March 31, 2022, was **$15,773 thousand**, contributing to the accumulated deficit[18](index=18&type=chunk) [Unaudited Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) This section details the cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2022, and 2021 | (In thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $ 98,102 | $ 84,107 | | Net cash used in investing activities | $ (143,156) | $ (26,394) | | Net cash provided by (used in) financing activities | $ 60,331 | $ (21,310) | | Net increase in cash and cash equivalents | $ 15,277 | $ 36,403 | | Cash and cash equivalents at end of period | $ 216,802 | $ 282,890 | [Notes to Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited consolidated financial statements, covering accounting policies, revenue, debt, and other financial instruments [1. Description of Operations and Summary of Significant Accounting Policies](index=9&type=section&id=1.%20Description%20of%20Operations%20and%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines Innoviva's business operations, including its royalty portfolio, and summarizes key accounting policies and recent accounting standard adoptions - Innoviva's royalty portfolio includes respiratory assets partnered with GSK: RELVAR®/BREO® ELLIPTA®, ANORO® ELLIPTA®, and TRELEGY® ELLIPTA®[24](index=24&type=chunk) - The company adopted ASU 2020-06 on January 1, 2022, using the modified retrospective approach, simplifying accounting for convertible instruments and impacting the 2025 Notes by decreasing accumulated deficit by **$37.2 million** and reducing additional paid-in capital by **$65.4 million**[38](index=38&type=chunk)[39](index=39&type=chunk) [2. Net Income Per Share](index=11&type=section&id=2.%20Net%20Income%20Per%20Share) This section provides a breakdown of basic and diluted net income per share attributable to Innoviva stockholders for the periods presented | (In thousands except per share data) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net income attributable to Innoviva stockholders, basic | $ 15,773 | $ 94,123 | | Net income attributable to Innoviva stockholders, diluted | $ 18,342 | $ 95,327 | | Shares used to compute basic net income per share | 69,544 | 101,365 | | Shares used to compute diluted net income per share | 93,730 | 113,624 | | Basic net income per share attributable to Innoviva stockholders | $ 0.23 | $ 0.93 | | Diluted net income per share attributable to Innoviva stockholders | $ 0.20 | $ 0.84 | - The adoption of ASU 2020-06 resulted in a dilutive EPS of approximately **$0.03 per share** for the 2025 Notes for the three months ended March 31, 2022, using the if-converted method[41](index=41&type=chunk) [3. Revenue Recognition and Collaborative Arrangements](index=13&type=section&id=3.%20Revenue%20Recognition%20and%20Collaborative%20Arrangements) This section details the company's royalty revenue from GSK's respiratory products and the accounting treatment of related collaborative arrangements | (In thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Royalties from a related party - RELVAR/BREO | $ 55,764 | $ 56,390 | | Royalties from a related party - ANORO | $ 8,442 | $ 10,500 | | Royalties from a related party - TRELEGY | $ 29,309 | $ 22,084 | | Total royalties from a related party | $ 93,515 | $ 88,974 | | Less: amortization of capitalized fees paid to a related party | $ (3,456) | $ (3,456) | | Royalty revenue from GSK | $ 90,059 | $ 85,518 | [4. Consolidated Entities](index=13&type=section&id=4.%20Consolidated%20Entities) This section explains the consolidation of financial results for Variable Interest Entities, including Theravance Respiratory Company, Entasis Therapeutics, and ISP Fund LP - Innoviva consolidates the financial results of Theravance Respiratory Company, LLC (TRC), Entasis Therapeutics Holdings, Inc. (Entasis), and ISP Fund LP, as it is determined to be the primary beneficiary of these Variable Interest Entities (VIEs)[46](index=46&type=chunk) - Innoviva consolidated Entasis' financial position and results of operations effective February 17, 2022, after purchasing a **$15.0 million** convertible promissory note, determining Innoviva to be the primary beneficiary[52](index=52&type=chunk) Entasis Preliminary Allocation of Fair Values (February 17, 2022): | (In thousands) | Amount | | :-------------------------- | :----- | | Total assets acquired | $ 142,141 | | Total liabilities assumed | $ 7,736 | | Total assets acquired, net | $ 134,405 | [5. Financial Instruments and Fair Value Measurements](index=17&type=section&id=5.%20Financial%20Instruments%20and%20Fair%20Value%20Measurements) This section details the company's financial instruments, including equity and debt investments, and their fair value measurements categorized by valuation levels - Innoviva invested **$45.0 million** in Armata Pharmaceuticals, Inc. in Q1 2022, increasing its ownership to approximately **69.4%** of common stock, while maintaining significant influence but not control[66](index=66&type=chunk) Fair Values of Equity and Long-Term Investments (March 31, 2022): | Types of Instruments (In thousands) | Level 1 | Level 2 | Level 3 | Total | | :---------------------------------- | :------ | :------ | :------ | :------ | | Money market funds | $ 103,181 | $ — | $ — | $ 103,181 | | Investments held by ISP Fund LP | $ 305,516 | $ — | $ 2,060 | $ 307,576 | | Equity investment - Armata Common Stock | $ 122,625 | $ — | $ — | $ 122,625 | | Equity investment - Armata Warrants | $ — | $ 64,894 | $ — | $ 64,894 | | Equity investment - InCarda Warrants | $ — | $ — | $ 1,040 | $ 1,040 | | Convertible debt investment - InCarda Note | $ — | $ — | $ 652 | $ 652 | | Convertible debt investment - Gate Note | $ — | $ — | $ 14,900 | $ 14,900 | | Total assets measured at estimated fair value | $ 531,322 | $ 64,894 | $ 18,652 | $ 614,868 | - The fair value of Armata common stock and publicly traded ISP Fund LP investments are Level 1, while Armata warrants are Level 2. InCarda's convertible note and warrants, Gate's convertible note, and private placements in ISP Fund LP are Level 3[85](index=85&type=chunk)[86](index=86&type=chunk) [6. Goodwill and Intangible Assets](index=22&type=section&id=6.%20Goodwill%20and%20Intangible%20Assets) This section details the recognition and carrying amounts of goodwill and intangible assets following the consolidation of Entasis Therapeutics - Goodwill and intangible assets were recognized at fair value upon the consolidation of Entasis on February 17, 2022, with a carrying amount of goodwill of **$5.5 million** as of March 31, 2022[88](index=88&type=chunk) Carrying Amount of Intangible Assets (March 31, 2022): | (In thousands) | Carrying Amount | | :-------------------------------- | :-------------- | | Intangible assets with indefinite life | $ 69,500 | | Intangible asset with determinable life | $ 35,500 | | Total | $ 105,000 | [7. Balance Sheet Components](index=22&type=section&id=7.%20Balance%20Sheet%20Components) This section provides a detailed breakdown of various accrued liabilities and other balance sheet components for the periods presented Other Accrued Liabilities (in thousands): | (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------------- | :------------- | :---------------- | | Accrued contract manufacturing | $ 2,610 | $ — | | Accrued clinical | $ 1,273 | $ — | | Accrued research | $ 361 | $ — | | Accrued professional services | $ 2,935 | $ 894 | | Current portion of lease liabilities | $ 622 | $ 106 | | Other | $ 272 | $ 9 | | Total other accrued liabilities | $ 8,073 | $ 1,009 | [8. Stock-Based Compensation](index=23&type=section&id=8.%20Stock-Based%20Compensation) This section details the stock-based compensation expense recognized by the company, including amounts allocated to general and administrative and research and development Stock-Based Compensation Expense (in thousands): | (In thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | General and administrative | $ 788 | $ 451 | | Research and development | $ 166 | $ — | | Total | $ 954 | $ 451 | - Stock-based compensation expense increased to **$954 thousand** in Q1 2022 from **$451 thousand** in Q1 2021, including **$0.3 million** related to Entasis' equity awards[92](index=92&type=chunk) [9. Debt](index=23&type=section&id=9.%20Debt) This section provides a comprehensive overview of the company's debt instruments, including convertible notes, their carrying amounts, and recent financing activities Total Debt (in thousands): | (In thousands) | March 31, 2022 | December 31, 2021 | | :------------- | :------------- | :---------------- | | 2023 Notes | $ 96,207 | $ 240,984 | | 2025 Notes | $ 192,500 | $ 192,500 | | 2028 Notes | $ 261,000 | $ — | | Total debt | $ 549,707 | $ 433,484 | | Less: Unamortized debt discount and issuance costs | $ (10,960) | $ (38,831) | | Total debt, net | $ 538,747 | $ 394,653 | - In March 2022, Innoviva issued **$261.0 million** in 2028 Notes and used **$165.6 million** of the proceeds to repurchase **$144.8 million** (**60%**) of the 2023 Notes, resulting in a **$20.7 million** loss on debt extinguishment[101](index=101&type=chunk)[112](index=112&type=chunk) - The adoption of ASU 2020-06 on January 1, 2022, materially impacted the 2025 Notes by combining liability and equity components, changing the effective interest rate from **8.87%** to **2.88%**[107](index=107&type=chunk)[109](index=109&type=chunk) [10. Commitments and Contingencies](index=28&type=section&id=10.%20Commitments%20and%20Contingencies) This section outlines the company's contractual obligations, including operating lease liabilities assumed from consolidated entities - Innoviva assumed contractual obligations related to Entasis' operating lease for office and laboratory space in Waltham, Massachusetts, with total undiscounted future minimum lease payments of **$4.5 million** as of March 31, 2022[163](index=163&type=chunk) Operating Lease Liabilities (in thousands): | (In thousands) | March 31, 2022 | December 31, 2021 | | :------------- | :------------- | :---------------- | | Right-of-use assets | $ 3,794 | $ 97 | | Lease liabilities, current | $ 622 | $ 106 | | Lease liabilities, long-term | $ 3,299 | $ — | | Total lease liabilities | $ 3,921 | $ 106 | [11. Income Taxes](index=29&type=section&id=11.%20Income%20Taxes) This section reports the provisional income tax expense and effective tax rate for the three months ended March 31, 2022, and 2021 - Provisional income tax expense for the three months ended March 31, 2022, was **$6.9 million**, with an effective income tax rate of **15.3%**, compared to **$19.7 million** and **15.2%** for the same period in 2021[130](index=130&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Innoviva's financial condition and results of operations, highlighting key financial performance, recent strategic activities, and liquidity [Forward-Looking Statements](index=30&type=section&id=Forward-Looking%20Statements) This section cautions that the report contains forward-looking statements subject to substantial risks and uncertainties, including those related to royalty revenue and competition - The report contains forward-looking statements regarding strategy, future operations, financial position, revenue, costs, and objectives, which involve substantial risks and uncertainties[132](index=132&type=chunk) - Key risk factors include lower than expected royalty revenue from GSK respiratory products, substantial competition, and risks related to capital deployment and growth strategy[132](index=132&type=chunk) [OVERVIEW](index=31&type=section&id=OVERVIEW) This section provides an overview of Innoviva's business model, focusing on its royalty portfolio from GSK respiratory products and its capital allocation strategy - Innoviva manages a portfolio of royalties and healthcare assets, primarily from respiratory products partnered with GSK, including RELVAR®/BREO® ELLIPTA®, ANORO® ELLIPTA®, and TRELEGY® ELLIPTA®[135](index=135&type=chunk) - The company's structure is focused on managing GSK respiratory assets, optimizing capital allocation, and fulfilling public company reporting functions[136](index=136&type=chunk) [Recent Highlights](index=31&type=section&id=Recent%20Highlights) This section summarizes key recent events, including GSK product net sales performance, strategic investments, and debt financing activities GSK Net Sales (Q1 2022 vs Q1 2021): | Product | Q1 2022 Net Sales | Q1 2021 Net Sales | Change (%) | | :---------------- | :---------------- | :---------------- | :--------- | | RELVAR®/BREO® ELLIPTA® | $371.8 million | $375.9 million | -1% | | ANORO® ELLIPTA® | $129.9 million | $161.5 million | -20% | | TRELEGY® ELLIPTA® | $450.9 million | $339.8 million | +33% | - Innoviva Strategic Opportunities LLC invested **$45.0 million** in Armata, increasing ownership to approximately **69%**, and purchased a **$15.0 million** convertible note from Entasis, leading to Entasis' consolidation[138](index=138&type=chunk) - The company issued **$261.0 million** in 2028 Notes and used a portion to repurchase **$144.8 million** of 2023 Notes, resulting in a **$20.7 million** accounting loss on debt extinguishment[138](index=138&type=chunk) [Collaborative Arrangements with GSK](index=32&type=section&id=Collaborative%20Arrangements%20with%20GSK) This section describes Innoviva's long-standing collaboration with GSK for the development and commercialization of once-daily LABA products for respiratory conditions - Innoviva's LABA collaboration with GSK, initiated in 2002, focuses on developing and commercializing once-daily LABA products for COPD and asthma, including RELVAR®/BREO® ELLIPTA®, ANORO® ELLIPTA®, and TRELEGY® ELLIPTA®[139](index=139&type=chunk)[141](index=141&type=chunk) - Milestone fees of **$220.0 million** were paid to GSK in 2014 and are being amortized over the estimated useful lives of the products, with no further milestone payment obligations[139](index=139&type=chunk) [Critical Accounting Policies and Estimates](index=32&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights the significant accounting policies and estimates used in preparing the financial statements, noting any recent changes - The financial statements are prepared in accordance with US GAAP, requiring estimates and assumptions that affect reported amounts and disclosures[140](index=140&type=chunk) - Management believes there have been no significant changes in critical accounting policies from those described in the 2021 Form 10-K, other than those detailed in Note 1[140](index=140&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including revenue, expenses, and net income, for the three months ended March 31, 2022, compared to the prior year [Net Revenue](index=33&type=section&id=Net%20Revenue) This section details the company's royalty revenue from GSK products, highlighting changes in contributions from RELVAR/BREO, ANORO, and TRELEGY Royalty Revenue from GSK (in thousands): | (In thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change ($) | Change (%) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Royalties from a related party - RELVAR/BREO | $ 55,764 | $ 56,390 | $ (626) | (1)% | | Royalties from a related party - ANORO | $ 8,442 | $ 10,500 | $ (2,058) | (20)% | | Royalties from a related party - TRELEGY | $ 29,309 | $ 22,084 | $ 7,225 | 33% | | Total royalties from a related party | $ 93,515 | $ 88,974 | $ 4,541 | 5% | | Royalty revenue from GSK | $ 90,059 | $ 85,518 | $ 4,541 | 5% | - Total net revenue increased by **5%** to **$90.1 million** for Q1 2022, primarily driven by growth in TRELEGY® ELLIPTA® prescriptions[142](index=142&type=chunk) [Research & Development](index=33&type=section&id=Research%20%26%20Development) This section discusses the company's research and development expenses, primarily driven by product development efforts of consolidated entities - Research and development expenses were **$5.8 million** for Q1 2022, primarily due to Entasis' product development efforts, a significant increase from **$49 thousand** in Q1 2021[12](index=12&type=chunk)[143](index=143&type=chunk) [General & Administrative](index=33&type=section&id=General%20%26%20Administrative) This section analyzes the increase in general and administrative expenses, mainly attributed to the consolidation of Entasis' operating expenses - General and administrative expenses increased by **8%** to **$6.5 million** for Q1 2022, mainly due to the consolidation of Entasis' operating expenses (**$2.0 million**) starting February 17, 2022[144](index=144&type=chunk) [Interest and dividend income and other expense, net](index=34&type=section&id=Interest%20and%20dividend%20income%20and%20other%20expense,%20net) This section reports the increase in interest and dividend income, primarily driven by higher returns on investments managed by ISP Fund LP - Interest and dividend income increased to **$322 thousand** in Q1 2022 from **$30 thousand** in Q1 2021, driven by higher returns on investments, including those managed by ISP Fund LP[146](index=146&type=chunk) [Interest Expense](index=34&type=section&id=Interest%20Expense) This section explains the decrease in interest expense, primarily due to the accounting adjustment of debt discount associated with the 2025 Notes - Interest expense decreased by **36%** to **$3.0 million** for Q1 2022, primarily due to the adoption of ASU 2020-06, which adjusted the debt discount associated with the 2025 Notes to zero[147](index=147&type=chunk) [Loss on Debt Extinguishment](index=34&type=section&id=Loss%20on%20Debt%20Extinguishment) This section reports the significant loss recognized from the repurchase of 2023 Notes, including premium payment and write-off of debt issuance costs - A loss of **$20.7 million** was recognized in Q1 2022 due to the repurchase of **$144.8 million** of 2023 Notes, comprising a **$20.4 million** premium payment and a **$0.3 million** write-off of debt issuance costs[148](index=148&type=chunk) [Changes in Fair Values of Equity and Long-Term Investments](index=34&type=section&id=Changes%20in%20Fair%20Values%20of%20Equity%20and%20Long-Term%20Investments) This section discusses the net loss from changes in fair values of equity and long-term investments, primarily due to capital market volatility - Changes in fair values of equity and long-term investments resulted in a net loss of **$9.4 million** in Q1 2022, a significant decrease from a **$55.0 million** net gain in Q1 2021, mainly due to capital market volatility[149](index=149&type=chunk)[150](index=150&type=chunk) [Provision for Income Taxes](index=35&type=section&id=Provision%20for%20Income%20Taxes) This section reports the provisional income tax expense and effective tax rate, noting the impact of noncontrolling interest on the rate - Provisional income tax expense was **$6.9 million** in Q1 2022 (**15.3%** effective rate) compared to **$19.7 million** in Q1 2021 (**15.2%** effective rate), with the lower rate primarily due to noncontrolling interest[151](index=151&type=chunk) [Net Income Attributable to Noncontrolling Interest](index=35&type=section&id=Net%20Income%20Attributable%20to%20Noncontrolling%20Interest) This section details the increase in net income attributable to noncontrolling interest, primarily from TRC and Entasis - Net income attributable to noncontrolling interest increased by **42%** to **$22.1 million** in Q1 2022, primarily due to the **85%** share of net income in TRC and a **$3.0 million** net loss for Entasis' noncontrolling interest[152](index=152&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its financial obligations, discussing cash resources, financing activities, and future capital needs [Liquidity](index=35&type=section&id=Liquidity) This section describes how Innoviva's operations are financed, highlighting cash and cash equivalents and receivables from GSK - Innoviva's operations are financed primarily through equity and debt offerings and collaborative arrangements, generating **$93.5 million** in gross royalty revenues from GSK in Q1 2022[153](index=153&type=chunk) - As of March 31, 2022, cash and cash equivalents totaled **$216.8 million** (including Entasis' **$33.5 million**), and receivables from GSK were **$93.5 million**[153](index=153&type=chunk) [Adequacy of Cash Resources to Meet Future Needs](index=35&type=section&id=Adequacy%20of%20Cash%20Resources%20to%20Meet%20Future%20Needs) This section assesses management's belief regarding the sufficiency of current cash and projected royalty revenues to cover anticipated debt service and operating needs - Management believes current cash resources and projected royalty revenues will be sufficient to meet anticipated debt service and operating needs for at least the next **12 months**[154](index=154&type=chunk) - The company may seek additional funding through equity or debt financings if operating plans change or favorable opportunities arise, but availability and terms are not guaranteed[154](index=154&type=chunk) [Cash Flows](index=35&type=section&id=Cash%20Flows) This section summarizes the cash flows from operating, investing, and financing activities, highlighting key drivers for changes in each category Cash Flow Summary (in thousands): | (In thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change ($) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :--------- | | Net cash provided by operating activities | $ 98,102 | $ 84,107 | $ 13,995 | | Net cash used in investing activities | $ (143,156) | $ (26,394) | $ (116,762) | | Net cash provided by (used in) financing activities | $ 60,331 | $ (21,310) | $ 81,641 | - Operating cash flow increased to **$98.1 million** in Q1 2022, driven by net income, deferred income tax, depreciation, debt extinguishment loss, and a decrease in fair value of investments[156](index=156&type=chunk) - Investing activities used **$143.2 million** in Q1 2022, primarily for purchases of equity and other investments managed by ISP Fund LP and investments in Armata, InCarda, and Nanolive, partially offset by cash acquired from Entasis consolidation[158](index=158&type=chunk) - Financing activities provided **$60.3 million** in Q1 2022, mainly from the issuance of 2028 Notes, offset by capped call option purchases, 2023 Notes repurchase, and distributions to noncontrolling interest[160](index=160&type=chunk) [Contractual Obligations](index=36&type=section&id=Contractual%20Obligations) This section details the company's significant contractual obligations, including scheduled maturities of convertible debt and operating lease payments Aggregate Scheduled Maturities of Convertible Debt (as of March 31, 2022, in thousands): | Years ending December 31: | Amount | | :------------------------ | :----- | | 2023 | $ 96,207 | | 2025 | $ 192,500 | | Thereafter (2028 Notes) | $ 261,000 | | Total | $ 549,707 | - Innoviva's contractual obligations include **$549.7 million** in convertible debt, with maturities in 2023 (**$96.2 million**), 2025 (**$192.5 million**), and 2028 (**$261.0 million**)[162](index=162&type=chunk) - The company also assumed **$4.5 million** in total undiscounted future minimum lease payments related to Entasis' operating lease, expiring in 2025[163](index=163&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no significant changes in the company's market risk or its management compared to what was disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021 - No significant changes in market risk or market risk management have occurred since the 2021 Annual Report on Form 10-K[165](index=165&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures, concluding their effectiveness as of March 31, 2022 - Management, including the CEO and Chief Accounting Officer, concluded that disclosure controls and procedures were effective at reasonable assurance levels as of March 31, 2022[166](index=166&type=chunk) - Control systems provide reasonable, not absolute, assurance and are subject to inherent limitations, including resource constraints and the risk of deterioration over time[167](index=167&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2022[168](index=168&type=chunk) [PART II. OTHER INFORMATION](index=37&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) This section states that there have been no material changes to the company's legal proceedings from those reported in its fiscal year 2021 Annual Report on Form 10-K - No material changes to legal proceedings have occurred since the 2021 Annual Report on Form 10-K[169](index=169&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) This section indicates that there have been no material changes to the risk factors previously described in the company's 2021 Form 10-K - No material changes to risk factors have occurred since the 2021 Annual Report on Form 10-K[170](index=170&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports that there were no unregistered sales of equity securities or use of proceeds during the period - No unregistered sales of equity securities or use of proceeds occurred during the period[171](index=171&type=chunk) [Item 3. Defaults Upon Senior Securities](index=37&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities occurred during the period[172](index=172&type=chunk) [Item 4. Mine Safety Disclosure](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) This section indicates that there are no mine safety disclosures to report - No mine safety disclosures are applicable or reported[173](index=173&type=chunk) [Item 5. Other Information](index=38&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report - No other information is reported in this section[174](index=174&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Form 10-Q, including corporate documents, indentures for convertible notes, certifications, and XBRL-related documents - The exhibits include corporate governance documents (Certificate of Incorporation, Bylaws), debt instruments (Indentures for 2023, 2025, and 2028 Notes), and regulatory certifications (CEO/CFO certifications, XBRL documents)[175](index=175&type=chunk) [Signatures](index=39&type=section&id=Signatures) This section contains the required signatures of Innoviva, Inc.'s Chief Executive Officer and Chief Accounting Officer, certifying the filing of the report - The report is signed by Pavel Raifeld, Chief Executive Officer, and Marianne Zhen, Chief Accounting Officer, on May 05, 2022[179](index=179&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K | (Mark One) | | | --- | --- | | ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | | For the fiscal year ended December 31, 2021 | | | or | | | ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | | to | For the transition period from | | Commission File No. 000-30319 | | | INNOVIVA, INC. | | | (Exact name of registrant as spec ...

Entasis Therapeutics Holdings Inc. (ETTX) Q3 2021 Earnings Conference Call November 3, 2021 8:00 AM ET Company Participants Bruce Mackle - Managing Director, LifeSci Advisors Manoussos Perros - President and CEO Mike Gutch - CFO and Chief Business Officer David Altarac - Chief Medical Officer Conference Call Participants Carvey Leung - Cantor Fitzgerald James Molloy - Alliance Global Partners Thomas Yip - H.C. Wainwright & Co. Robert Driscoll - Wedbush Securities Operator Good day, and welcome to the Entasi ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section covers unaudited financial statements, management's discussion, market risk, and internal controls [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Assets decreased due to share repurchase, net income rose from royalties and investment gains, and operating cash flow was strong [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The balance sheet shows decreased total assets and cash due to a share repurchase, offset by increased equity investments Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $135,115 | $246,487 | | Equity and long-term investments | $507,116 | $438,258 | | **Total Assets** | **$887,239** | **$999,570** | | **Liabilities & Equity** | | | | Long-term debt, net | $392,295 | $385,517 | | Treasury stock | ($393,829) | $0 | | **Total Stockholders' Equity** | **$491,805** | **$607,837** | - The significant decrease in cash and cash equivalents and the appearance of treasury stock are primarily due to the repurchase of common stock during the period[8](index=8&type=chunk) [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Net income and EPS grew significantly, driven by increased revenue and positive fair value changes in investments Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Total net revenue | $97,862 | $88,694 | $284,186 | $246,318 | | Income from operations | $94,553 | $84,430 | $270,576 | $236,336 | | Changes in fair values of investments, net | $33,613 | ($29,368) | $133,973 | $39,245 | | Net income attributable to Innoviva | $72,438 | $28,218 | $255,509 | $170,499 | | Diluted EPS | $0.90 | $0.26 | $2.63 | $1.53 | - Net income growth was driven by a **10% YoY increase** in Q3 royalty revenue and significant positive swings in the fair value of equity and long-term investments compared to the prior year[11](index=11&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash flow statement shows strong operating cash, positive investing, and significant financing outflow from a share repurchase Consolidated Cash Flow Highlights (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $265,432 | $227,833 | | Net cash provided by investing activities | $63,627 | $544 | | Net cash used in financing activities | ($440,431) | ($27,280) | | **Net (decrease) increase in cash** | **($111,372)** | **$201,097** | - The significant use of cash in financing activities was primarily due to a **$394.1 million repurchase of common stock**[21](index=21&type=chunk)[119](index=119&type=chunk) - Investing activities were positive due to a **$110.0 million distribution** from equity investments, offsetting new purchases[21](index=21&type=chunk)[119](index=119&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail the company's royalty-based business, revenue, VIEs, equity investments, debt, and a major share repurchase - The company's primary business is managing a portfolio of royalties from respiratory assets partnered with Glaxo Group Limited (GSK), including RELVAR®/BREO® ELLIPTA®, ANORO® ELLIPTA®, and TRELEGY® ELLIPTA®[23](index=23&type=chunk) Royalty Revenue by Product (in thousands) | Product | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | RELVAR/BREO | $54,092 | $63,893 | $176,398 | $165,612 | | ANORO | $11,641 | $11,882 | $34,101 | $32,931 | | TRELEGY | $35,585 | $16,375 | $84,055 | $48,143 | - The company consolidates several Variable Interest Entities (VIEs), including Theravance Respiratory Company, LLC (TRC), Pulmoquine Therapeutics, Inc., and ISP Fund LP, a partnership with Sarissa Capital[42](index=42&type=chunk) - Significant equity investments are held in Armata Pharmaceuticals and Entasis Therapeutics, which are accounted for at fair value, leading to substantial unrealized gains recorded in the income statement[53](index=53&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk) - On May 20, 2021, the company repurchased all **32,005,260 shares** of its common stock held by GSK for a total of **$394.1 million**[82](index=82&type=chunk) - These shares are now held as treasury stock[82](index=82&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses royalty-based business, revenue growth, increased expenses, and strong liquidity after a share repurchase [Overview and Recent Highlights](index=24&type=section&id=Overview%20and%20Recent%20Highlights) This section provides an overview of the company's royalty portfolio and business structure, highlighting key product sales GSK Net Sales of Partnered Products - Q3 2021 | Product | Q3 2021 Net Sales | YoY Change | | :--- | :--- | :--- | | RELVAR®/BREO® ELLIPTA® | $360.6 million | -15% | | ANORO® ELLIPTA® | $179.1 million | -2% | | TRELEGY® ELLIPTA® | $445.6 million | +77% | - The company's royalty portfolio consists of respiratory assets partnered with GSK[88](index=88&type=chunk)[89](index=89&type=chunk) - The business structure is tailored to manage these assets, optimize operations, and manage capital allocation[88](index=88&type=chunk)[89](index=89&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) This section details revenue growth, operating expense changes, and fair value adjustments' impact on financial results - Total net revenue increased by **10% to $97.9 million** in Q3 2021 and by **15% to $284.2 million** for the nine months ended Sep 30, 2021, compared to the same periods in 2020[101](index=101&type=chunk) - The growth in revenue was primarily driven by a **117% YoY increase** in TRELEGY® royalties in Q3 2021, which more than offset a **15% decline** in RELVAR/BREO® royalties[101](index=101&type=chunk) - General and administrative expenses increased **55%** for the nine-month period, mainly due to business development advisory fees and legal expenses related to arbitration with Theravance Biopharma[103](index=103&type=chunk) - Changes in fair values of equity and long-term investments contributed a gain of **$33.6 million** in Q3 2021 and **$134.0 million** for the nine-month period, reflecting strong performance of investments in Armata, Entasis, and the ISP Fund[107](index=107&type=chunk)[108](index=108&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses cash position, liquidity outlook, and the impact of financing activities, including the share repurchase - As of September 30, 2021, the company had **$135.1 million** in cash and cash equivalents and **$101.3 million** in receivables from GSK[112](index=112&type=chunk) - Management believes that cash from future royalty revenues and existing cash reserves will be sufficient to meet operating and debt service needs for at least the next 12 months[113](index=113&type=chunk) Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash from operating activities | $265,432 | $227,833 | | Net cash from investing activities | $63,627 | $544 | | Net cash used in financing activities | ($440,431) | ($27,280) | - The primary use of cash in financing activities for the nine months of 2021 was the **$394.1 million repurchase of common stock** from GSK[119](index=119&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risk or its management are reported compared to the 2020 Annual Report on Form 10-K - There have been no significant changes in the company's market risk profile or its management since the year ended December 31, 2020[120](index=120&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control - Based on an evaluation as of September 30, 2021, the Chief Executive Officer and Chief Accounting Officer concluded that the company's disclosure controls and procedures were effective[121](index=121&type=chunk) - No material changes were made to the company's internal control over financial reporting during the quarter ended September 30, 2021[123](index=123&type=chunk) [PART II. OTHER INFORMATION](index=29&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, and a list of exhibits [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) The company won arbitration against Theravance Biopharma, confirming its authority to withhold TRC royalty proceeds for reinvestment - Theravance Biopharma initiated arbitration challenging Innoviva's authority, as manager of TRC, to withhold royalty proceeds from GSK for reinvestment[124](index=124&type=chunk)[127](index=127&type=chunk) - The arbitrator ruled that Innoviva did not breach the operating agreement or its fiduciary duties by withholding royalties to pursue investment opportunities, and the award was confirmed by the Delaware Court of Chancery[127](index=127&type=chunk)[128](index=128&type=chunk) - The arbitrator also ruled that Innoviva is entitled to indemnification from TRC for **100%** of its fees and expenses incurred in the second arbitration[127](index=127&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K - No material changes have been made to the risk factors described in the company's 2020 Form 10-K[129](index=129&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) None reported for the period - The company reported no unregistered sales of equity securities or use of proceeds during the period[130](index=130&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL data files - The report includes certifications from the Principal Executive Officer and Principal Financial Officer as exhibits[134](index=134&type=chunk)

Entasis Therapeutics Holdings Inc. (ETTX) Q2 2021 Earnings Conference Call August 12, 2021 8:00 AM ET Company Participants Bruce Mackle - Managing Director, LifeSci Advisors Manoussos Perros - President and CEO Mike Gutch - CFO and Chief Business Officer David Altarac - Chief Medical Officer Conference Call Participants Matthew Luchini - BMO Capital Markets Ed Arce - H.C. Wainwright & Co. Operator Good morning, ladies and gentlemen, and welcome to the Entasis Therapeutics' Second Quarter Results Conference ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) Commission File Number: 000-30319 INNOVIVA, INC. (Exact Name of Registrant as Specified in its Charter) (State or Other Jurisdiction of Incorporation or Organization) Delaware 94-3265960 (I.R.S. Employer Identification No.) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 000-30319 INNOVIVA, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 94-3265960 (State or Oth ...

Table of Contents | UNITED STATES | | --- | | SECURITIES AND EXCHANGE COMMISSION | | Washington, D.C. 20549 | | FORM 10-K | | (Mark One) | | ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | For the fiscal year ended December 31, 2020 | | or | | ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | For the transition period from to | | Commission File No. 000-30319 | | INNOVIVA, INC. | | (Exact name of registrant as specified ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 000-30319 Burlingame, CA 94010 (Address of Principal Executive Offices) (650) 238-9600 (Registrant's Telephon ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 000-30319 INNOVIVA, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 94-3265960 (State or Othe ...