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 ...

E ENTASIS Company Confidential Targeted Solutions for Antibacterial Resistance Precision antibiotics focused against critical pathogens June 2020 Disclaimer 1 This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as ''anticipate,'' ''believe,'' ''continue,'' ''could,'' ''estimate,'' ''expect,'' ''intend,'' ''may,'' ''plan,'' ''potential,'' ''predict,'' ''project,'' ''target,'' ''should,'' ''would,'' and similar expression ...

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) O F THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 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 Number: 000-30319 INNOVIVA, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 94-3265960 (State or Ot ...

PART I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Innoviva maximizes stockholder value via respiratory royalties partnered with GSK, optimizing assets and capital allocation - Innoviva's core business revolves around a portfolio of royalties from respiratory assets partnered with GSK, specifically **RELVAR®/BREO® ELLIPTA®**, **ANORO® ELLIPTA®**, and **TRELEGY® ELLIPTA®**[11](index=11&type=chunk)[160](index=160&type=chunk)[246](index=246&type=chunk) - The company's strategy is to **maximize stockholder value** by **optimizing its GSK-partnered respiratory assets and capital allocation**[13](index=13&type=chunk) - GSK beneficially owned approximately **31.6%** of Innoviva's outstanding common stock as of February 11, 2020[18](index=18&type=chunk) GSK Net Sales for Q4 2019 vs Q4 2018 | Product | Q4 2019 Net Sales ($M) | Q4 2018 Net Sales ($M) | Change (%) | | :---------------------- | :--------------------- | :--------------------- | :--------- | | RELVAR®/BREO® ELLIPTA® | 354.4 | 431.7 | -18% | | ANORO® ELLIPTA® | 182.7 | 186.2 | -2% | | TRELEGY® ELLIPTA® | 221.4 | 99.0 | Significant| [Overview](index=4&type=section&id=Overview) [Our Strategy](index=4&type=section&id=Our%20Strategy) [Our Relationship with GSK](index=4&type=section&id=Our%20Relationship%20with%20GSK) [Manufacturing](index=5&type=section&id=Manufacturing) [Government Regulation](index=5&type=section&id=Government%20Regulation) [Patents and Proprietary Rights](index=6&type=section&id=Patents%20and%20Proprietary%20Rights) [Competition](index=6&type=section&id=Competition) [Employees](index=8&type=section&id=Employees) [Information about our Executive Officers](index=8&type=section&id=Information%20about%20our%20Executive%20Officers) [Code of Business Conduct](index=8&type=section&id=Code%20of%20Business%20Conduct) [Available Information](index=9&type=section&id=Available%20Information) [Item 1A. Risk Factors](index=9&type=section&id=Item%201A.%20Risk%20Factors) Innoviva faces significant risks from reliance on GSK royalties, competition, regulatory changes, debt, and conflicts of interest - Innoviva's future success is **highly dependent on GSK's ability to successfully develop and commercialize partnered respiratory products**, as **all foreseeable royalty revenues are derived from GSK**[40](index=40&type=chunk) - The introduction of generic products poses a **material adverse impact on future royalty revenue, profitability, and cash flows** for RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA®[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk) - GSK's commercialization efforts for TRELEGY® ELLIPTA®, where Innoviva holds only a **15% economic interest**, may **reduce the overall value of Innoviva's remaining interests** in other GSK Agreements if TRELEGY® is prioritized[54](index=54&type=chunk)[68](index=68&type=chunk)[119](index=119&type=chunk) Total Debt Outstanding as of December 31, 2019 | Debt Type | Amount ($M) | | :---------------------------- | :---------- | | Convertible Subordinated Notes Due 2023 | 241.0 | | Convertible Senior Notes Due 2025 | 192.5 | | **Total Debt** | **433.5** | [Risks Related to our Business](index=9&type=section&id=Risks%20Related%20to%20our%20Business) [Risks Related to our Alliance with GSK](index=21&type=section&id=Risks%20Related%20to%20our%20Alliance%20with%20GSK) [Risks Related to Legal and Regulatory Uncertainty](index=23&type=section&id=Risks%20Related%20to%20Legal%20and%20Regulatory%20Uncertainty) [Risks Related to Ownership of our Common Stock](index=24&type=section&id=Risks%20Related%20to%20Ownership%20of%20our%20Common%20Stock) [Item 1B. Unresolved Staff Comments](index=26&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) No unresolved staff comments were reported for the fiscal year ended December 31, 2019 - **No unresolved staff comments** were reported[139](index=139&type=chunk) [Item 2. Properties](index=26&type=section&id=Item%202.%20Properties) Innoviva's headquarters is a 2,111 sq ft leased office in Burlingame, California, expiring November 2022 - Innoviva's headquarters is a leased office space of **2,111 square feet** in Burlingame, California, with the lease expiring in **November 2022**[140](index=140&type=chunk) [Item 3. Legal Proceedings](index=26&type=section&id=Item%203.%20Legal%20Proceedings) Innoviva faced arbitration over royalty reinvestment, ruled not to have breached fiduciary duties, and awarded **95%** indemnification - Theravance Biopharma initiated arbitration against Innoviva and TRC in **May 2019** concerning Innoviva's decision to explore reinvestment opportunities for royalty proceeds instead of distributing them[141](index=141&type=chunk) - The arbitrator ruled in **September 2019** that Innoviva **did not breach the Operating Agreement or its fiduciary duties** by withholding royalties or pursuing reinvestment opportunities[141](index=141&type=chunk) - Innoviva was found to have technically breached a provision requiring quarterly financial plans but this caused **no damages**, and is entitled to indemnification from TRC for **95%** of its arbitration fees and expenses[141](index=141&type=chunk) [Item 4. Mine Safety Disclosures](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine Safety Disclosures are not applicable to Innoviva, Inc - Mine Safety Disclosures are **not applicable** to the company[144](index=144&type=chunk) PART II [Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=27&type=section&id=Item%205.%20Market%20for%20the%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Innoviva's common stock trades on Nasdaq under 'INVA', with **74** stockholders of record and no equity repurchases in 2019 - Innoviva's common stock ticker symbol changed from **'THRX' to 'INVA'** effective **January 11, 2016**[146](index=146&type=chunk) - As of February 11, 2020, there were **74 stockholders of record**[147](index=147&type=chunk) - **No purchases of equity securities** by the issuer were made for the year ended December 31, 2019[148](index=148&type=chunk) [Market Information](index=27&type=section&id=Market%20Information) [Holders](index=27&type=section&id=Holders) [Purchases of Equity Securities by the Issuer](index=27&type=section&id=Purchases%20of%20Equity%20Securities%20by%20the%20Issuer) [Stock Performance Graph](index=27&type=section&id=Stock%20Performance%20Graph) [Item 6. Selected Financial Data](index=28&type=section&id=Item%206.%20Selected%20Financial%20Data) This section summarizes Innoviva's selected consolidated financial data for the past five fiscal years, highlighting key trends Consolidated Statements of Income Data (2015-2019) | Metric | 2019 ($K) | 2018 ($K) | 2017 ($K) | 2016 ($K) | 2015 ($K) | | :----------------------------------------- | :-------- | :-------- | :-------- | :-------- | :-------- | | Net revenue | 261,016 | 261,004 | 217,217 | 133,569 | 53,949 | | Total operating expenses | 14,656 | 22,753 | 33,613 | 24,581 | 22,369 | | Income from operations | 246,360 | 238,251 | 183,604 | 108,988 | 31,580 | | Net income (loss) attributable to Innoviva stockholders | 157,288 | 395,056 | 134,143 | 59,536 | (18,760) | | Basic net income (loss) per share | 1.55 | 3.92 | 1.25 | 0.54 | (0.16) | | Diluted net income (loss) per share | 1.43 | 3.53 | 1.17 | 0.53 | (0.16) | Consolidated Balance Sheets Data (as of December 31, 2015-2019) | Metric | 2019 ($K) | 2018 ($K) | 2017 ($K) | 2016 ($K) | 2015 ($K) | | :------------------------------------ | :-------- | :-------- | :-------- | :-------- | :-------- | | Cash, cash equivalents and marketable securities | 350,845 | 114,908 | 129,075 | 150,433 | 187,283 | | Total assets | 724,826 | 548,193 | 367,337 | 378,996 | 408,932 | | Total Innoviva stockholders' equity (deficit) | 313,495 | 153,583 | (242,859) | (352,991) | (342,645) | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Innoviva's 2019 financial condition and results, covering revenue, expenses, cash flows, and accounting policies - Innoviva's net income attributable to stockholders **decreased by $237.8 million to $157.3 million** in 2019, primarily due to a **$196.1 million income tax benefit** recognized in 2018 that did not recur[162](index=162&type=chunk) - Cash, cash equivalents, and marketable securities **increased by $235.9 million to $350.8 million** as of December 31, 2019, driven by **$257.5 million in cash provided by operating activities**[162](index=162&type=chunk) Net Revenue from GSK (2017-2019) | Metric | 2019 ($K) | 2018 ($K) | 2017 ($K) | YoY Change 2019 vs 2018 ($K) | YoY Change 2019 vs 2018 (%) | | :----------------------------------------- | :-------- | :-------- | :-------- | :--------------------------- | :-------------------------- | | Royalties from RELVAR/BREO | 189,424 | 220,162 | 198,726 | (30,738) | (14)% | | Royalties from ANORO | 42,625 | 41,286 | 29,036 | 1,339 | 3% | | Royalties from TRELEGY | 42,790 | 13,379 | 179 | 29,411 | * | | Total royalties from a related party | 274,839 | 274,827 | 227,941 | 12 | —% | | Less: amortization of capitalized fees | (13,823) | (13,823) | (13,823) | — | —% | | **Total net revenue from GSK** | **261,016** | **261,004** | **217,217** | **12** | **—%** | - Total net revenue **remained flat year-over-year** in 2019, with a **decrease in RELVAR®/BREO® ELLIPTA® royalties** due to pricing pressure offset by **significant growth in TRELEGY® ELLIPTA®**[184](index=184&type=chunk) [Management Overview](index=30&type=section&id=Management%20Overview) [Financial Highlights](index=30&type=section&id=Financial%20Highlights) [Collaborative Arrangements with GSK](index=30&type=section&id=Collaborative%20Arrangements%20with%20GSK) [Critical Accounting Policies and Estimates](index=31&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) [Off-Balance Sheet Arrangements](index=38&type=section&id=Off-Balance%20Sheet%20Arrangements) [Commitments and Contingencies](index=38&type=section&id=Commitments%20and%20Contingencies) [Contractual Obligations and Commercial Commitments](index=38&type=section&id=Contractual%20Obligations%20and%20Commercial%20Commitments) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Innoviva faces interest rate risk from investments and fixed-rate debt, with a short average maturity limiting exposure - Innoviva's exposure to interest rate risk on its investment portfolio is **not material**, with an average remaining maturity of approximately **three months** as of December 31, 2019[226](index=226&type=chunk) - The 2023 Notes and 2025 Notes bear **fixed interest rates (2.125% and 2.5% respectively)**, meaning cash flows are **not subject to variability** from interest rate changes[227](index=227&type=chunk) Fair Value of Debt as of December 31, 2019 | Debt Type | Fair Value ($M) | | :---------- | :-------------- | | 2023 Notes | 243.4 | | 2025 Notes | 209.0 | [Interest Rate Risk](index=38&type=section&id=Interest%20Rate%20Risk) [Item 8. Financial Statements and Supplementary Data](index=39&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Innoviva's audited consolidated financial statements and supplementary data for 2017-2019, covering balance sheets, income, and cash flows with detailed notes Consolidated Balance Sheets (as of December 31, 2019 and 2018) | Asset/Liability Category | 2019 ($K) | 2018 ($K) | | :----------------------------------- | :-------- | :-------- | | Cash and cash equivalents | 278,096 | 62,417 | | Short-term marketable securities | 72,749 | 52,491 | | Total current assets | 431,234 | 199,043 | | Total assets | 724,826 | 548,193 | | Total current liabilities | 5,371 | 5,700 | | Long-term debt, net | 377,120 | 382,855 | | Total Innoviva stockholders' equity | 313,495 | 153,583 | Consolidated Statements of Income (Years Ended December 31, 2019, 2018, 2017) | Metric | 2019 ($K) | 2018 ($K) | 2017 ($K) | | :----------------------------------------- | :-------- | :-------- | :-------- | | Total net revenue | 261,016 | 261,004 | 217,217 | | Total operating expenses | 14,656 | 22,753 | 33,613 | | Income from operations | 246,360 | 238,251 | 183,604 | | Income before income taxes | 232,895 | 210,255 | 134,276 | | Income tax benefit (expense), net | (41,902) | 196,073 | (4) | | Net income | 190,993 | 406,328 | 134,272 | | Net income attributable to Innoviva stockholders | 157,288 | 395,056 | 134,143 | | Diluted net income per share | 1.43 | 3.53 | 1.17 | Consolidated Statements of Cash Flows (Years Ended December 31, 2019, 2018, 2017) | Cash Flow Category | 2019 ($K) | 2018 ($K) | 2017 ($K) | | :------------------------------------- | :-------- | :-------- | :-------- | | Net cash provided by operating activities | 257,458 | 223,531 | 141,749 | | Net cash provided by (used in) investing activities | (18,003) | 3,519 | (23,236) | | Net cash used in financing activities | (23,776) | (237,969) | (163,193) | | Net increase (decrease) in cash and cash equivalents | 215,679 | (10,919) | (44,680) | | Cash and cash equivalents at end of period | 278,096 | 62,417 | 73,336 | [Consolidated Balance Sheets](index=40&type=section&id=Consolidated%20Balance%20Sheets) [Consolidated Statements of Income](index=41&type=section&id=Consolidated%20Statements%20of%20Income) [Consolidated Statements of Comprehensive Income](index=42&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) [Consolidated Statements of Stockholders' Equity (Deficit)](index=43&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)) [Consolidated Statements of Cash Flows](index=44&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) [Notes to Consolidated Financial Statements](index=45&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [Note 1. DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=45&type=section&id=Note%201.%20DESCRIPTION%20OF%20OPERATIONS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) [Note 2. NET INCOME PER SHARE](index=49&type=section&id=Note%202.%20NET%20INCOME%20PER%20SHARE) [Note 3. REVENUE RECOGNITION AND COLLABORATIVE ARRANGEMENTS](index=50&type=section&id=Note%203.%20REVENUE%20RECOGNITION%20AND%20COLLABORATIVE%20ARRANGEMENTS) [Note 4. AVAILABLE-FOR-SALE SECURITIES AND FAIR VALUE MEASUREMENTS](index=52&type=section&id=Note%204.%20AVAILABLE-FOR-SALE%20SECURITIES%20AND%20FAIR%20VALUE%20MEASUREMENTS) [Note 5. CAPITALIZED FEES PAID TO A RELATED PARTY](index=54&type=section&id=Note%205.%20CAPITALIZED%20FEES%20PAID%20TO%20A%20RELATED%20PARTY) [Note 6. STOCK-BASED COMPENSATION](index=54&type=section&id=Note%206.%20STOCK-BASED%20COMPENSATION) [Note 7. DEBT](index=58&type=section&id=Note%207.%20DEBT) [Note 8. COMMITMENTS AND CONTINGENCIES](index=60&type=section&id=Note%208.%20COMMITMENTS%20AND%20CONTINGENCIES) [Note 9. INCOME TAXES](index=61&type=section&id=Note%209.%20INCOME%20TAXES) [Note 10. SUBSEQUENT EVENTS](index=63&type=section&id=Note%2010.%20SUBSEQUENT%20EVENTS) [Supplementary Financial Data (Unaudited)](index=64&type=section&id=Supplementary%20Financial%20Data%20(Unaudited)) [Reports of Independent Registered Public Accounting Firm](index=65&type=section&id=Reports%20of%20Independent%20Registered%20Public%20Accounting%20Firm) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=67&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) No changes or disagreements with accountants on accounting and financial disclosure were reported for 2019 - **No changes in or disagreements** with accountants on accounting and financial disclosure were reported[397](index=397&type=chunk) [Item 9A. Controls and Procedures](index=67&type=section&id=Item%209A.%20Controls%20and%20Procedures) Innoviva's disclosure controls and internal control over financial reporting were effective as of December 31, 2019, with an unqualified opinion - Innoviva's disclosure controls and procedures were deemed **effective at reasonable assurance levels** as of December 31, 2019[398](index=398&type=chunk) - Management concluded that internal control over financial reporting was **effective** as of December 31, 2019, based on the **COSO 2013 framework**[400](index=400&type=chunk) - Grant Thornton LLP issued an **unqualified opinion** on the effectiveness of Innoviva's internal control over financial reporting[401](index=401&type=chunk)[406](index=406&type=chunk)[407](index=407&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=67&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) [Management's Report on Internal Control over Financial Reporting](index=67&type=section&id=Management's%20Report%20on%20Internal%20Control%20over%20Financial%20Reporting) [Limitations on the Effectiveness of Controls](index=67&type=section&id=Limitations%20on%20the%20Effectiveness%20of%20Controls) [Changes in Internal Control over Financial Reporting](index=67&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) [Item 9B. Other Information](index=69&type=section&id=Item%209B.%20Other%20Information) No other information is reported under this item - **No other information** was reported[413](index=413&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=69&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2019 Proxy Statement - Information for this item is **incorporated by reference** from the 2019 Proxy Statement[414](index=414&type=chunk) [Item 11. Executive Compensation](index=69&type=section&id=Item%2011.%20Executive%20Compensation) Information on executive compensation is incorporated by reference from the 2019 Proxy Statement - Information for this item is **incorporated by reference** from the 2019 Proxy Statement[415](index=415&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=69&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section details security ownership of beneficial owners and management, largely incorporated by reference from the 2019 Proxy Statement, and includes equity compensation plan data - Most information for this item is **incorporated by reference** from the 2019 Proxy Statement[416](index=416&type=chunk) Securities Authorized for Issuance under Equity Compensation Plans (as of December 31, 2019) | Plan Category | Number of securities to be issued upon exercise of outstanding options and vesting of outstanding restricted stock units and restricted stock awards (a) | Weighted‑average exercise price of outstanding options (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | | :---------------------------------------------- | :------------------------------------------------------------------------------------------------------------------------------------------------ | :--------------------------------------------------------- | :---------------------------------------------------------------------------------------------------------------------------------------------------- | | Equity compensation plans approved by security holders | 1,181,499 | $24.18 | 5,210,527 | [Securities Authorized for Issuance under Equity Compensation Plans](index=69&type=section&id=Securities%20Authorized%20for%20Issuance%20under%20Equity%20Compensation%20Plans) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=69&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2019 Proxy Statement - Information for this item is **incorporated by reference** from the 2019 Proxy Statement[419](index=419&type=chunk) [Item 14. Principal Accountant Fees and Services](index=69&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services is incorporated by reference from the 2019 Proxy Statement - Information for this item is **incorporated by reference** from the 2019 Proxy Statement[420](index=420&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=70&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements and schedules filed as part of the Annual Report on Form 10-K, referencing the exhibit index - The financial statements and schedules are contained in **Part II, Item 8** of this Annual Report[422](index=422&type=chunk) - All financial statement schedules have been **omitted** due to absence of conditions requiring them or because information is already presented in financial statements/notes[422](index=422&type=chunk) - Exhibits required by Item 601 of Regulation S-K are set forth in the **exhibit index** following the signature page[423](index=423&type=chunk) [Item 16. Form 10-K Summary](index=70&type=section&id=Item%2016.%20Form%2010-K%20Summary) Innoviva, Inc. does not provide a Form 10-K Summary - **No Form 10-K Summary** is provided[424](index=424&type=chunk)

**PART I — FINANCIAL INFORMATION** [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Innoviva's unaudited condensed consolidated financial statements, including balance sheets, statements of income, comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, revenue recognition, debt, and other financial disclosures for the periods ended September 30, 2019 and December 31, 2018 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Innoviva's balance sheet shows significant growth in total assets and stockholders' equity from December 31, 2018, to September 30, 2019, driven by increases in cash, marketable securities, and a reduction in accumulated deficit Condensed Consolidated Balance Sheet Data | Metric | Sep 30, 2019 (Unaudited) (in thousands) | Dec 31, 2018 (Audited) (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------------------------- | :----------------------------------- | :-------------------- | :------- | | Total Assets | $675,953 | $548,193 | $127,760 | 23.3% | | Cash and cash equivalents | $172,946 | $62,417 | $110,529 | 177.1% | | Short-term marketable securities | $124,255 | $52,491 | $71,764 | 136.7% | | Total Stockholders' Equity | $283,763 | $159,052 | $124,711 | 78.4% | | Accumulated Deficit | $(992,353) | $(1,103,692) | $111,339 | -10.1% | [Unaudited Condensed Consolidated Statements of Income](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income) Innoviva reported increased royalty revenue for both the three and nine months ended September 30, 2019, compared to the prior year, primarily driven by TRELEGY® ELLIPTA®. However, net income attributable to Innoviva stockholders decreased due to higher income tax expense in 2019 Unaudited Condensed Consolidated Statements of Income Data | Metric (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Royalty revenue from a related party, net | $65,755 | $61,680 | $185,045 | $181,146 | | Income from operations | $60,793 | $57,661 | $172,721 | $161,031 | | Income before income taxes | $57,609 | $50,167 | $162,630 | $137,113 | | Income tax expense, net | $10,558 | $0 | $29,499 | $0 | | Net income attributable to Innoviva stockholders | $39,809 | $47,089 | $111,339 | $131,296 | | Basic net income per share | $0.39 | $0.47 | $1.10 | $1.30 | | Diluted net income per share | $0.36 | $0.43 | $1.01 | $1.19 | [Unaudited Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income attributable to Innoviva stockholders decreased for both the three and nine months ended September 30, 2019, mirroring the trend in net income, with minimal impact from unrealized gains/losses on marketable securities Unaudited Condensed Consolidated Statements of Comprehensive Income Data | Metric (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :------------------------------------------------ | :------------------------------ | :------------------------------ | :------------------------------ | :------------------------------ | | Net income | $47,051 | $50,167 | $133,131 | $137,113 | | Unrealized gain (loss) on marketable securities, net | $(8) | $7 | $28 | $15 | | Comprehensive income attributable to Innoviva stockholders | $39,801 | $47,096 | $111,367 | $131,311 | [Unaudited Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)) Innoviva's total stockholders' equity significantly increased from December 31, 2018, to September 30, 2019, primarily due to net income contributions and an increase in noncontrolling interest, despite distributions to noncontrolling interest Unaudited Condensed Consolidated Statements of Stockholders' Equity (Deficit) Data | Metric (in thousands) | As of Dec 31, 2018 | As of Sep 30, 2019 | | :-------------------------- | :----------------- | :----------------- | | Total Stockholders' Equity | $159,052 | $283,763 | | Noncontrolling interest | $5,469 | $16,708 | | Accumulated Deficit | $(1,103,692) | $(992,353) | - Net income attributable to Innoviva stockholders for the nine months ended September 30, 2019, was **$111.3 million**, contributing to the increase in equity[12](index=12&type=chunk) - Distributions to noncontrolling interest totaled **$(10.6 million)** for the nine months ended September 30, 2019[18](index=18&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Innoviva experienced a substantial net increase in cash and cash equivalents for the nine months ended September 30, 2019, primarily driven by strong operating cash flows and a significant shift from net cash used in investing activities in 2018 to net cash provided by investing activities in 2019, alongside reduced cash used in financing activities due to lower debt prepayments Unaudited Condensed Consolidated Statements of Cash Flow Data | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :----- | | Net cash provided by operating activities | $190,553 | $161,754 | $28,799 | | Net cash provided by (used in) investing activities | $(69,997) | $49,113 | $(119,110) | | Net cash used in financing activities | $(10,027) | $(235,588) | $225,561 | | Net increase (decrease) in cash and cash equivalents | $110,529 | $(24,721) | $135,250 | | Cash and cash equivalents at end of period | $172,946 | $48,615 | $124,331 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering Innoviva's operations, accounting policies, per-share calculations, revenue recognition, fair value measurements, stock-based compensation, debt, related party transactions, income taxes, and lease arrangements [Note 1. Description of Operations and Summary of Significant Accounting Policies](index=10&type=section&id=Note%201.%20Description%20of%20Operations%20and%20Summary%20of%20Significant%20Accounting%20Policies) Innoviva operates as a royalty management company, primarily deriving revenue from respiratory assets partnered with GSK, including RELVAR®/BREO® ELLIPTA®, ANORO® ELLIPTA®, and TRELEGY® ELLIPTA®. The company consolidates Theravance Respiratory Company, LLC (TRC) as a Variable Interest Entity (VIE) and adopted new lease accounting standards (ASC 842) in 2019, which had a non-material impact on financial statements - Innoviva's core business is royalty management, with a portfolio of respiratory assets partnered with Glaxo Group Limited (GSK), including RELVAR®/BREO® ELLIPTA®, ANORO® ELLIPTA®, and TRELEGY® ELLIPTA®[24](index=24&type=chunk) - Innoviva consolidates the financial results of Theravance Respiratory Company, LLC (TRC), which is determined to be a Variable Interest Entity (VIE)[27](index=27&type=chunk) TRC Revenue from TRELEGY® ELLIPTA® | TRC Revenue from TRELEGY® ELLIPTA® (in millions) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :------------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenue | $11.2 | $3.6 | $28.4 | $6.9 | - The company adopted ASU 2016-02, Leases (Topic 842), on January 1, 2019, recognizing a **$1.5 million** right-of-use asset and **$1.6 million** lease liabilities for its corporate headquarters, which were subsequently reversed upon lease termination on September 13, 2019[28](index=28&type=chunk)[30](index=30&type=chunk) [Note 2. Net Income Per Share](index=12&type=section&id=Note%202.%20Net%20Income%20Per%20Share) Innoviva calculates basic and diluted net income per share, with diluted EPS reflecting the impact of convertible notes and employee stock awards. The 2025 Notes had no dilutive effect as the market price was below the conversion price Net Income Per Share Attributable to Innoviva Stockholders | Net Income Per Share Attributable to Innoviva Stockholders | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :------------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Basic | $0.39 | $0.47 | $1.10 | $1.30 | | Diluted | $0.36 | $0.43 | $1.01 | $1.19 | - The convertible senior notes due 2025 (2025 Notes) had no dilutive effect on net income per share for the three and nine months ended September 30, 2019 and 2018, as the average market price of common stock was lower than the initial conversion price of **$17.26** per share[33](index=33&type=chunk) [Note 3. Revenue Recognition and Collaborative Arrangements](index=13&type=section&id=Note%203.%20Revenue%20Recognition%20and%20Collaborative%20Arrangements) Innoviva recognizes royalty revenue from GSK based on licensee net sales, net of amortization of capitalized fees. TRELEGY® ELLIPTA® showed significant royalty growth, while RELVAR®/BREO® ELLIPTA® royalties decreased Royalties from a Related Party | Royalties from a related party (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | RELVAR®/BREO® ELLIPTA® | $46,433 | $51,745 | $136,259 | $155,420 | | ANORO® ELLIPTA® | $11,548 | $9,769 | $30,753 | $29,149 | | TRELEGY® ELLIPTA® | $11,230 | $3,622 | $28,401 | $6,945 | | Total royalties from a related party | $69,211 | $65,136 | $195,413 | $191,514 | | Royalty revenue from GSK (net) | $65,755 | $61,680 | $185,045 | $181,146 | - Royalties from TRELEGY® ELLIPTA® showed significant growth, increasing from **$3.6 million** to **$11.2 million** for the three months ended September 30, 2019, and from **$6.9 million** to **$28.4 million** for the nine months ended September 30, 2019[38](index=38&type=chunk) - Royalties from RELVAR®/BREO® ELLIPTA® decreased by **$5.3 million (10%)** for the three months and **$19.2 million (12%)** for the nine months ended September 30, 2019, compared to the prior year[38](index=38&type=chunk) [Note 4. Available-for-Sale Securities and Fair Value Measurements](index=15&type=section&id=Note%204.%20Available-for-Sale%20Securities%20and%20Fair%20Value%20Measurements) Innoviva's available-for-sale securities, primarily U.S. government securities, commercial paper, and money market funds, significantly increased in fair value from December 2018 to September 2019. The company also provides fair value measurements for its debt, which is carried at amortized cost Available-for-Sale Securities | Available-for-Sale Securities (in thousands) | Estimated Fair Value as of Sep 30, 2019 | Estimated Fair Value as of Dec 31, 2018 | | :----------------------------------------- | :-------------------------------------- | :-------------------------------------- | | U.S. government securities | $91,465 | $29,733 | | U.S. commercial paper | $54,356 | $22,037 | | Money market funds | $101,636 | $49,358 | | Total | $247,457 | $108,974 | - As of September 30, 2019, all available-for-sale securities had contractual maturities within one year, with a weighted average maturity of approximately four months[40](index=40&type=chunk) Fair Value of Debt | Fair Value of Debt (in thousands) | Estimated Fair Value as of Sep 30, 2019 | Estimated Fair Value as of Dec 31, 2018 | | :-------------------------------- | :-------------------------------------- | :-------------------------------------- | | Term B Loan | $13,750 | $13,750 | | 2023 Notes | $226,139 | $258,918 | | 2025 Notes | $182,729 | $230,692 | | Total fair value of debt | $422,618 | $503,360 | [Note 5. Stock-Based Compensation](index=16&type=section&id=Note%205.%20Stock-Based%20Compensation) Innoviva's stock-based compensation expense decreased for the nine months ended September 30, 2019, compared to the prior year, largely due to reversals of previously recognized expenses related to forfeited market-based and service-based awards following senior management separations in 2018 Stock-Based Compensation Expense | Stock-Based Compensation Expense (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :---------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | General and administrative | $489 | $(874) | $1,568 | $2,747 | - For the three months ended September 30, 2018, **$1.9 million** of stock-based compensation was reversed due to forfeited market-based and service-based awards following the separation of senior management members[53](index=53&type=chunk) Unrecognized Compensation Cost | Unrecognized Compensation Cost (in thousands) | As of Sep 30, 2019 | | :------------------------------------------ | :----------------- | | RSUs | $733 | | RSAs | $1,067 | | Total unrecognized compensation cost | $1,800 | [Note 6. Debt](index=18&type=section&id=Note%206.%20Debt) Innoviva's total debt balance remained constant at **$447.2 million** from December 2018 to September 2019, with a net long-term debt of **$388.6 million** as of September 30, 2019. The company made significant prepayments on its Term B Loan in 2018, reducing its outstanding principal balance to **$13.8 million** Debt Balances | Debt (in thousands) | Sep 30, 2019 | Dec 31, 2018 | | :------------------ | :----------- | :----------- | | Term B Loan | $13,750 | $13,750 | | 2023 Notes | $240,984 | $240,984 | | 2025 Notes | $192,500 | $192,500 | | Total debt | $447,234 | $447,234 | | Net long-term debt | $388,644 | $382,855 | - The outstanding principal balance of the Term B Loan was **$13.8 million** as of September 30, 2019, following prepayments of **$120.0 million** and **$110.0 million** in February and August 2018, respectively[56](index=56&type=chunk) Debt Maturities | Debt Maturities (in thousands) | Total | | :----------------------------- | :---- | | Years ending December 31: | | | 2019 to 2021 | $0 | | 2022 | $13,750 | | 2023 | $240,984 | | Thereafter | $192,500 | | Total | $447,234 | [Note 7. Related Party Transaction](index=20&type=section&id=Note%207.%20Related%20Party%20Transaction) Innoviva entered into an agreement with Sarissa Capital Management LP in February 2018, which included the appointment of Sarissa designees to the Board and partial reimbursement of expenses, establishing Sarissa as a related party - On February 12, 2018, Innoviva entered into an agreement with Sarissa Capital Management LP, which included the appointment of three Sarissa designees to the Board of Directors and partial reimbursement of **$2.7 million** for expenses[61](index=61&type=chunk) - The Sarissa Group is considered a related party due to its representation on the Board of Directors[61](index=61&type=chunk) [Note 8. Income Taxes](index=22&type=section&id=Note%208.%20Income%20Taxes) Innoviva recognized significant provisional income tax expense for the three and nine months ended September 30, 2019, compared to minimal amounts in 2018, due to a full valuation allowance previously maintained on deferred taxes. The effective tax rate for the nine months was **18%** Income Tax Expense | Income Tax Expense (in millions) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Provisional income tax expense | $10.6 | Minimal | $29.5 | Minimal | - The effective income tax rate for the nine months ended September 30, 2019, was **18%**, primarily differing from the U.S. federal statutory rate of **21%** due to state income tax, non-deductible expenses, and noncontrolling interest[63](index=63&type=chunk) [Note 9. Lease](index=22&type=section&id=Note%209.%20Lease) Innoviva terminated its operating lease for its corporate headquarters in September 2019, incurring termination fees and reversing previously recognized right-of-use assets and lease liabilities. A new lease in Burlingame, California, is anticipated to commence in November - Innoviva terminated the operating lease for its corporate headquarters in Brisbane, California, in September 2019[64](index=64&type=chunk) - In connection with the termination, the company incurred **$0.6 million** in termination-related fees and reversed **$1.3 million** in right-of-use assets and **$1.4 million** in lease liabilities[65](index=65&type=chunk) - A new operating lease in Burlingame, California, is anticipated to commence in early November 2019[64](index=64&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&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, including an executive summary of its royalty management business, recent highlights from its GSK collaboration, and a detailed analysis of revenue, expenses, and liquidity. It also includes cautionary statements regarding forward-looking information [Forward-Looking Statements](index=23&type=section&id=Forward-Looking%20Statements) This section provides a cautionary statement regarding forward-looking statements in the report, highlighting inherent risks, uncertainties, and assumptions that could cause actual results to differ materially from projections. It advises against undue reliance on these statements and refers readers to "Risk Factors" for a more complete discussion - Forward-looking statements involve substantial risks, uncertainties, and assumptions, and actual results or events could differ materially from disclosed plans[67](index=67&type=chunk) - Readers should not place undue reliance on forward-looking statements and are encouraged to read "Risk Factors" in the 2018 Form 10-K and current 10-Q for a more complete discussion of business risks[67](index=67&type=chunk)[68](index=68&type=chunk) [OVERVIEW](index=24&type=section&id=OVERVIEW) This overview summarizes Innoviva's business as a royalty management company focused on respiratory assets partnered with GSK, details recent sales highlights for key products, and discusses critical accounting policies, including the adoption of new lease accounting standards [Executive Summary](index=24&type=section&id=Executive%20Summary) Innoviva is a royalty management company focused on respiratory assets partnered with GSK, including RELVAR®/BREO® ELLIPTA®, ANORO® ELLIPTA®, and TRELEGY® ELLIPTA®. The company's structure is streamlined for managing these assets, intellectual property, and public company functions, with six employees as of September 30, 2019 - Innoviva's business is focused on royalty management from respiratory assets partnered with GSK, specifically RELVAR®/BREO® ELLIPTA®, ANORO® ELLIPTA®, and TRELEGY® ELLIPTA®[69](index=69&type=chunk) - The company's structure is tailored for managing GSK agreements, intellectual property, licensing operations, business development, and essential public company functions[70](index=70&type=chunk) - As of September 30, 2019, Innoviva had **six employees**[70](index=70&type=chunk) [Recent Highlights](index=24&type=section&id=Recent%20Highlights) Recent highlights include the continued collaboration with GSK on LABA products for COPD and asthma, with specific sales figures for RELVAR®/BREO® ELLIPTA®, ANORO® ELLIPTA®, and TRELEGY® ELLIPTA® for Q3 2019. TRELEGY® ELLIPTA® showed significant sales growth, while RELVAR®/BREO® ELLIPTA® sales declined - Innoviva's collaboration with GSK focuses on developing and commercializing once-daily LABA products for COPD and asthma, including RELVAR®/BREO® ELLIPTA®, ANORO® ELLIPTA®, and TRELEGY® ELLIPTA®[72](index=72&type=chunk) GSK Net Sales | GSK Net Sales (in millions) | Q3 2019 | Q3 2018 | Change | % Change | | :-------------------------- | :------ | :------ | :----- | :------- | | RELVAR®/BREO® ELLIPTA® | $309.5 | $344.9 | $(35.4) | -10% | | ANORO® ELLIPTA® | $177.7 | $150.8 | $26.9 | 18% | | TRELEGY® ELLIPTA® | $172.8 | $55.7 | $117.1 | Significant | | *Note: 'Significant' indicates a large percentage change not explicitly quantified as a percentage in the source text.* | | | | | - GSK licensed Innoviva's Bifunctional Muscarinic Antagonist-Beta2 Agonist (MABA) program in 2005, which GSK fully funds, and is currently determining next steps for the program[74](index=74&type=chunk) [Critical Accounting Policies and Estimates](index=26&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The financial statements are prepared under US GAAP, requiring estimates and assumptions. The company adopted ASU 2016-02 (Leases) on January 1, 2019, recognizing right-of-use assets and lease liabilities for its corporate headquarters, which were later reversed due to lease termination. No other significant changes to critical accounting policies were noted - Financial statements are prepared in accordance with US GAAP, requiring management to make estimates and assumptions[75](index=75&type=chunk) - Innoviva adopted ASU 2016-02, Leases (Topic 842), on January 1, 2019, recognizing a **$1.5 million** right-of-use asset and **$1.6 million** lease liabilities for its corporate headquarters, which were subsequently reversed upon lease termination[76](index=76&type=chunk) - There were no other significant changes to critical accounting policies and estimates[77](index=77&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Innoviva's results of operations show an increase in net revenue driven by TRELEGY® ELLIPTA®'s growth, despite declines in RELVAR®/BREO® ELLIPTA®. General and administrative expenses decreased year-to-date, while interest expense also fell due to lower debt balances. The company recorded significant income tax expense in 2019, and net income attributable to noncontrolling interest increased [Net Revenue](index=27&type=section&id=Net%20Revenue) Total net revenue increased for both the three and nine months ended September 30, 2019, driven by significant growth in TRELEGY® ELLIPTA® royalties, which offset declines in RELVAR®/BREO® ELLIPTA® due to pricing pressure. ANORO® ELLIPTA® maintained steady volume growth Net Revenue from GSK | Net Revenue (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Change ($) | Change (%) | | :------------------------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | Royalty revenue from GSK | $65,755 | $61,680 | $4,075 | 7% | | Royalties from RELVAR/BREO | $46,433 | $51,745 | $(5,312) | (10)% | | Royalties from ANORO | $11,548 | $9,769 | $1,779 | 18% | | Royalties from TRELEGY | $11,230 | $3,622 | $7,608 | * | | *Not meaningful due to large percentage change. | | | | | - For the nine months ended September 30, 2019, total net revenue increased by **2%** to **$185.0 million** from **$181.1 million** in the prior year[79](index=79&type=chunk) - Royalties for RELVAR®/BREO® ELLIPTA® were lower primarily due to increasing pricing pressure in the U.S., partially offset by volume growth[79](index=79&type=chunk) [General & Administrative](index=27&type=section&id=General%20%26%20Administrative) General and administrative expenses for the three months ended September 30, 2019, were slightly higher due to legal fees related to an arbitration, while for the nine months, they decreased significantly due to lower personnel-related expenses and the absence of certain 2018 payments General and Administrative Expenses | General and Administrative Expenses (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Change ($) | Change (%) | | :----------------------------------------------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | General and administrative expenses | $4,962 | $4,019 | $943 | 23% | | General and administrative expenses - related party | $0 | $0 | $0 | 0% | - For the nine months ended September 30, 2019, general and administrative expenses decreased by **$5.1 million (29%)** to **$12.3 million**, primarily due to lower headcount and the absence of **$5.7 million** cash severance payments and **$2.7 million** payment to Sarissa in 2018[81](index=81&type=chunk) - The three months ended September 30, 2019, included **$2.8 million** in legal and related fees for an arbitration initiated by Theravance Biopharma[80](index=80&type=chunk) [Other Income (Expense), net and Interest Income](index=27&type=section&id=Other%20Income%20(Expense),%20net%20and%20Interest%20Income) Other expense, net, significantly decreased for both the three and nine months ended September 30, 2019, primarily due to the absence of debt extinguishment losses incurred in 2018. Interest income increased due to higher cash and investment balances Other Expense, Net and Interest Income | Other Expense, net (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Change ($) | | :-------------------------------- | :------------------------------ | :------------------------------ | :--------- | | Other expense, net | $(115) | $(2,626) | $2,511 | | Interest income | $1,624 | $370 | $1,254 | - Other expense, net, for the three and nine months ended September 30, 2018, mainly consisted of losses on the extinguishment of debt of **$2.6 million** and **$5.7 million**, respectively, related to Term B Loan prepayments[84](index=84&type=chunk) - Interest income increased for both periods in 2019 primarily due to higher cash and investment balances[84](index=84&type=chunk) [Interest Expense](index=29&type=section&id=Interest%20Expense) Interest expense decreased for both the three and nine months ended September 30, 2019, compared to the prior year, primarily due to a lower average outstanding debt balance following significant prepayments on the Term B Loan in 2018 Interest Expense | Interest Expense (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Change ($) | Change (%) | | :------------------------------ | :------------------------------ | :------------------------------ | :--------- | :--------- | | Interest expense | $4,693 | $5,238 | $(545) | (10)% | | Interest expense (9 months) | $13,971 | $19,373 | $(5,402) | (28)% | - The decrease in interest expense was primarily due to a lower average outstanding debt balance[85](index=85&type=chunk) [Provision for Income Taxes](index=29&type=section&id=Provision%20for%20Income%20Taxes) Innoviva recorded significant provisional income tax expense for the three and nine months ended September 30, 2019, at an effective rate of **18%** for the nine-month period, in contrast to minimal amounts in the prior year due to a previously maintained full valuation allowance on deferred taxes Provisional Income Tax Expense | Income Tax Expense (in millions) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Provisional income tax expense | $10.6 | Immaterial | $29.5 | Immaterial | - The effective income tax rate for the nine months ended September 30, 2019, was **18%**[86](index=86&type=chunk) [Net Income Attributable to Noncontrolling Interest](index=29&type=section&id=Net%20Income%20Attributable%20to%20Noncontrolling%20Interest) Net income attributable to noncontrolling interest significantly increased for both the three and nine months ended September 30, 2019, primarily driven by the growth in prescriptions and market share for TRELEGY® ELLIPTA® Net Income Attributable to Noncontrolling Interest | Net Income Attributable to Noncontrolling Interest (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Change ($) | | :--------------------------------------------------------------- | :------------------------------ | :------------------------------ | :--------- | | Net income attributable to noncontrolling interest | $7,242 | $3,078 | $4,164 | | Net income attributable to noncontrolling interest (9 months) | $21,792 | $5,817 | $15,975 | - The increase was primarily due to the growth in prescriptions and market share for TRELEGY® ELLIPTA®[87](index=87&type=chunk) - This represents the **85% share** of net income in Theravance Respiratory Company, LLC for Theravance Biopharma[87](index=87&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) Innoviva's liquidity position improved significantly, with substantial cash and marketable securities. The company's cash flows from operating activities increased, while financing activities saw reduced cash usage due to lower debt prepayments. Innoviva also details its off-balance sheet lease guarantee and contractual debt obligations [Liquidity](index=29&type=section&id=Liquidity) Innoviva's liquidity position improved significantly, with cash, cash equivalents, and marketable securities totaling **$297.2 million** as of September 30, 2019. The company has financed operations through equity, debt, and collaborative arrangements, and believes current resources are sufficient for the next **12 months** - As of September 30, 2019, net cash and cash equivalents, short-term investments, and marketable securities totaled **$297.2 million**[88](index=88&type=chunk) - Royalties receivable from GSK totaled **$69.2 million** as of September 30, 2019[88](index=88&type=chunk) - The outstanding principal balance of the Term B Loan was **$13.8 million** as of September 30, 2019, after significant prepayments in 2018[89](index=89&type=chunk) - Management believes that projected future royalty revenues and current cash/investments will be sufficient to meet anticipated debt service and operating needs for at least the next **12 months**[90](index=90&type=chunk) [Cash Flows](index=31&type=section&id=Cash%20Flows) Innoviva's cash flows from operating activities increased for the nine months ended September 30, 2019, while investing activities shifted to a net cash outflow due to increased purchases of marketable securities. Financing activities saw a substantial reduction in cash used, primarily due to lower debt prepayments compared to the prior year Cash Flow Activities | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :----- | | Net cash provided by operating activities | $190,553 | $161,754 | $28,799 | | Net cash provided by (used in) investing activities | $(69,997) | $49,113 | $(119,110) | | Net cash used in financing activities | $(10,027) | $(235,588) | $225,561 | - Cash provided by operating activities for the nine months ended September 30, 2019, was **$190.6 million**, primarily from net income and adjustments for non-cash items[92](index=92&type=chunk) - Net cash used in financing activities for the nine months ended September 30, 2019, decreased significantly due to lower debt prepayments compared to **$230.0 million** in Term B Loan prepayments in 2018[96](index=96&type=chunk)[97](index=97&type=chunk) [Off-Balance Sheet Arrangements](index=31&type=section&id=Off-Balance%20Sheet%20Arrangements) Innoviva has an off-balance sheet arrangement related to a lease guarantee for facilities assigned to Theravance Biopharma, Inc. in 2014. Innoviva would be liable for remaining lease payments totaling **$4.4 million** through May 2020 if Theravance Biopharma defaults - Innoviva has guaranteed lease payments for facilities in South San Francisco, California, which were assigned to Theravance Biopharma, Inc. in 2014[98](index=98&type=chunk) - If Theravance Biopharma defaults, Innoviva would be liable for the remaining lease payments, which total **$4.4 million** through May 2020[99](index=99&type=chunk) - The carrying value of this lease guarantee was **$0.2 million** as of September 30, 2019[99](index=99&type=chunk) [Contractual Obligations and Commercial Commitments](index=33&type=section&id=Contractual%20Obligations%20and%20Commercial%20Commitments) Innoviva's significant contractual obligations as of September 30, 2019, primarily consist of its 2023 Notes, 2025 Notes, and the Term B Loan, totaling **$494.0 million**, with varying maturities Contractual Obligations | Contractual Obligations (in thousands) | Total | Less Than 1 Year | 1 - 3 Years | 3 - 5 Years | More Than 5 Years | | :----------------------------------- | :---- | :--------------- | :---------- | :---------- | :---------------- | | 2023 Notes | $258,907 | $5,121 | $10,242 | $243,544 | $0 | | 2025 Notes | $221,375 | $4,813 | $9,625 | $9,625 | $197,312 | | Term B Loan* | $13,750 | $0 | $0 | $13,750 | $0 | | Total | $494,032 | $9,934 | $19,867 | $266,919 | $197,312 | | *The Term B Loan balances reflect principal repayment obligations and do not include interest payments as the loan bears a variable interest rate. | | | | | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There have been no significant changes in Innoviva'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, 2018 - No significant changes in market risk or its management have occurred compared to disclosures in the 2018 Annual Report on Form 10-K[102](index=102&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Innoviva's management concluded that its disclosure controls and procedures were effective at reasonable assurance levels as of September 30, 2019. The report acknowledges inherent limitations in control systems, which can only provide reasonable, not absolute, assurance. No material changes in internal control over financial reporting occurred during the quarter - Management concluded that disclosure controls and procedures were effective at reasonable assurance levels as of September 30, 2019[103](index=103&type=chunk) - Control systems provide only reasonable, not absolute, assurance that objectives are met, due to inherent limitations and resource constraints[104](index=104&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended September 30, 2019[105](index=105&type=chunk) **PART II. OTHER INFORMATION** [Item 1. Legal Proceedings](index=24&type=section&id=Item%201.%20Legal%20Proceedings) Theravance Biopharma initiated arbitration against Innoviva and TRC in May 2019 regarding the reinvestment of royalty proceeds. The arbitrator ruled that Innoviva did not breach the operating agreement or fiduciary duties by withholding royalties for reinvestment, but did breach a disclosure provision, awarding limited injunctive relief. Innoviva is entitled to indemnification for **95%** of arbitration fees - Theravance Biopharma initiated arbitration in May 2019 against Innoviva and TRC concerning Innoviva's decision to reinvest TRC royalty proceeds rather than distribute them[106](index=106&type=chunk) - The arbitrator ruled that Innoviva did not breach the operating agreement or its fiduciary duties by withholding royalties or pursuing reinvestment opportunities[106](index=106&type=chunk) - Innoviva was found to have technically breached a disclosure provision for quarterly financial plans, resulting in limited injunctive relief to clarify disclosure obligations[106](index=106&type=chunk) - Innoviva is entitled to indemnification from TRC for **95%** of its total fees and expenses incurred in connection with the arbitration[106](index=106&type=chunk) [Item 1A. Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously described in Innoviva's 2018 Form 10-K, except for the legal proceedings discussed in Item 1 - No material changes to the risk factors described in the 2018 Form 10-K, except for the legal proceedings detailed in Item 1[108](index=108&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=24&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported - None[109](index=109&type=chunk) [Item 3. Defaults Upon Senior Securities](index=24&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - None[110](index=110&type=chunk) [Item 4. Mine Safety Disclosure](index=24&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) No mine safety disclosures were reported - None[111](index=111&type=chunk) [Item 5. Other Information](index=24&type=section&id=Item%205.%20Other%20Information) No other information was reported - None[112](index=112&type=chunk) [Item 6. Exhibits](index=25&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Lease Termination Agreement, certifications from executive officers, and interactive data files in iXBRL format - Exhibits include the Lease Termination Agreement (10.84), Certifications of Principal Executive Officer and Principal Financial Officer (31.1, 31.2, 32), and Interactive Data Files in iXBRL format (101, 104)[114](index=114&type=chunk) **Signatures** [Signatures](index=26&type=section&id=Signatures) The report is signed by Geoffrey Hulme, Interim Principal Executive Officer, and Marianne Zhen, Chief Accounting Officer, on October 30, 2019 - The report was signed by Geoffrey Hulme, Interim Principal Executive Officer, and Marianne Zhen, Chief Accounting Officer, on October 30, 2019[118](index=118&type=chunk)

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, 2019 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 (I.R.S. Employ ...

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements for the quarter ended March 31, 2019, show an increase in total assets and stockholders' equity compared to year-end 2018, with net income rising to $40.0 million from $30.3 million in the prior-year period, driven by higher royalty revenue and significantly lower operating expenses, alongside strong cash flow from operations at $76.7 million and the adoption of the new lease standard (ASC 842) on January 1, 2019 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $65,151 | $62,417 | | Total current assets | $251,519 | $199,043 | | **Total assets** | **$590,114** | **$548,193** | | **Liabilities & Equity** | | | | Total current liabilities | $3,810 | $5,700 | | Long-term debt, net | $384,744 | $382,855 | | **Total stockholders' equity** | **$199,943** | **$159,052** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Royalty revenue from a related party, net | $55,183 | $52,380 | | Total operating expenses | $3,015 | $11,685 | | Income from operations | $52,168 | $40,695 | | **Net income** | **$40,019** | **$30,330** | | Net income attributable to Innoviva stockholders | $33,790 | $29,581 | | **Diluted net income per share** | **$0.31** | **$0.27** | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Condensed Consolidated Statements of Comprehensive Income (in thousands) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net income | $40,019 | $30,330 | | Comprehensive income | $40,032 | $30,326 | | Comprehensive income attributable to Innoviva stockholders | $33,803 | $29,577 | [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)) - Total stockholders' equity increased from **$159.1 million** at December 31, 2018, to **$199.9 million** at March 31, 2019, primarily driven by net income of **$40.0 million**[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $76,655 | $49,914 | | Net cash provided by (used in) investing activities | ($74,167) | $26,513 | | Net cash provided by (used in) financing activities | $246 | ($122,625) | | **Net increase (decrease) in cash** | **$2,734** | **($46,198)** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) - Innoviva's business is focused on royalty management, with a portfolio including respiratory assets partnered with GSK, such as RELVAR®/BREO® ELLIPTA®, ANORO® ELLIPTA®, and TRELEGY® ELLIPTA®[23](index=23&type=chunk) Net Revenue from GSK Agreements (in thousands) | Product Royalties | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | RELVAR/BREO | $42,740 | $46,160 | | ANORO | $8,570 | $8,724 | | TRELEGY | $7,329 | $952 | | **Total royalties from a related party** | **$58,639** | **$55,836** | - The company adopted the new lease accounting standard (ASU 2016-02, Leases (Topic 842)) on January 1, 2019, resulting in the recognition of a **$1.5 million** right-of-use asset and **$1.6 million** in lease liabilities[27](index=27&type=chunk)[28](index=28&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reports a 5% year-over-year increase in total net revenue to $55.2 million for Q1 2019, primarily driven by strong growth in TRELEGY® ELLIPTA® royalties, which offset declines in RELVAR®/BREO® and ANORO® royalties due to pricing pressures, while operating expenses decreased significantly by $8.7 million mainly from the absence of one-time severance and settlement costs incurred in Q1 2018, and the company maintains a strong liquidity position with $192.2 million in cash and marketable securities, believing it has sufficient resources for at least the next 12 months GSK Net Sales of Key Products - Q1 2019 vs Q1 2018 | Product | Q1 2019 Net Sales | Q1 2018 Net Sales | % Change | | :--- | :--- | :--- | :--- | | RELVAR®/BREO® ELLIPTA® | $284.9M | $307.7M | -7% | | ANORO® ELLIPTA® | $131.8M | $134.2M | -2% | | TRELEGY® ELLIPTA® | $112.7M | $14.6M | +672% | - General and administrative expenses decreased by **66%** to **$3.0 million** in Q1 2019 from **$9.0 million** in Q1 2018, with the prior year's quarter including **$3.2 million** in cash severance payments and a **$2.7 million** settlement reimbursement to Sarissa Group[74](index=74&type=chunk) - Interest expense decreased by **40%** to **$4.6 million** in Q1 2019, primarily due to a lower average outstanding debt balance following prepayments on the Term B Loan in 2018[77](index=77&type=chunk) - The company believes its cash from future royalties, along with existing cash, cash equivalents, and marketable securities, will be sufficient to meet debt service and operating needs for at least the next 12 months[82](index=82&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=23&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reported no significant changes to its market risk profile or its management of market risk since the disclosures made in its 2018 Annual Report on Form 10-K - There have been no significant changes in the company's market risk or how it is managed compared to what was disclosed in the Annual Report on Form 10-K for the year ended December 31, 2018[92](index=92&type=chunk) [Item 4. Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) Based on an evaluation as of March 31, 2019, the company's management, including the Interim Principal Executive Officer and Chief Accounting Officer, concluded that disclosure controls and procedures were effective, with no material changes in internal control over financial reporting during the quarter - Management concluded that as of March 31, 2019, the company's disclosure controls and procedures were effective at a reasonable assurance level[93](index=93&type=chunk) - No material changes occurred in the company's internal control over financial reporting during the quarter ended March 31, 2019[95](index=95&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=24&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that it is not currently a party to any material legal proceedings - The company is not a party to any material legal proceedings[97](index=97&type=chunk) [Item 1A. Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2018 - No material changes have occurred to the risk factors described in the 2018 Form 10-K[98](index=98&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=24&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[99](index=99&type=chunk) [Item 3. Defaults Upon Senior Securities](index=24&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[100](index=100&type=chunk) [Item 6. Exhibits](index=24&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the quarterly report, which include officer certifications as required by the Sarbanes-Oxley Act and the Interactive Data File (XBRL) - The exhibits filed with this report include Certifications of the Principal Executive Officer (31.1) and Principal Financial Officer (31.2), Certifications Pursuant to 18 U.S.C. Section 1350 (32), and the Interactive Data File (101)[103](index=103&type=chunk) Signatures [Signatures](index=25&type=section&id=Signatures_details) The report was duly signed and authorized on May 1, 2019, by Geoffrey Hulme, the Interim Principal Executive Officer, and Marianne Zhen, the Chief Accounting Officer - The report was signed on May 1, 2019, by Geoffrey Hulme (Interim Principal Executive Officer) and Marianne Zhen (Chief Accounting Officer)[107](index=107&type=chunk)

Financial Data and Key Metrics Changes - For Q4 2018, GIAPREZA net product sales were $4.2 million, up from $3.5 million in Q3 2018, $1.6 million in Q2 2018, and $0.8 million in Q1 2018 [16] - For the full year 2018, GIAPREZA net product sales totaled $10.1 million, with a net loss of $45.4 million for Q4 and $199.5 million for the full year [16] - Cash and cash equivalents increased to $172 million as of December 31, 2018, compared to $90.9 million a year earlier, primarily due to proceeds from stock offerings and royalty financing [17] Business Line Data and Key Metrics Changes - GIAPREZA was launched in March 2018 and has been ordered by approximately 380 hospitals, with a focus on securing formulary approvals to access about 70% of patients treated for distributive shock [13][14] - The company expects net product sales for GIAPREZA in 2019 to be between $24 million and $28 million [16] Market Data and Key Metrics Changes - In the U.S., there are approximately 800,000 cases of distributive shock annually, with 300,000 patients unable to achieve adequate blood pressure despite existing treatments [12] - In the European Union, the annual incidence of sepsis is estimated to exceed 500,000, with over 170,000 patients progressing to septic shock [14] Company Strategy and Development Direction - The company aims to file an NDA for LJPC-0118 for severe malaria in Q4 2019 and expects to report top-line results for LJPC-401 in mid-2020 [25] - The strategic focus includes expanding the commercialization of GIAPREZA and advancing clinical development programs for other product candidates [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the potential of GIAPREZA to change treatment for patients with septic or distributive shock and highlighted the importance of securing hospital access [10][25] - The company anticipates a significant reduction in operating expenses in 2019 compared to 2018, with a focus on maintaining efficiency in generating GIAPREZA sales [39] Other Important Information - The company has no debt as of December 31, 2018, and expects net cash used for operating activities in 2019 to be between $89 million and $94 million [17] - The company is preparing for potential partnerships in Europe following the expected decision on the MAA for GIAPREZA in June 2019 [49] Q&A Session Summary Question: What amount of iron induction in the heart would be needed for the drug to be commercially viable? - Management indicated that the effectiveness of current chelators varies, and achieving statistical significance in the trial would be clinically meaningful [28] Question: What is the current access percentage of GIAPREZA for patients with distributive shock? - Management stated that they are currently in the 35% to 40% range for access, aiming for 70% [35] Question: What are the plans for beta thalassemia in the U.S.? - Management confirmed that the FDA is aware of their protocol and they are confident in achieving a good chance of approval if statistical significance is reached [38] Question: What is the cash runway? - Management indicated that the current cash balance allows for operations into the second half of 2020 [33] Question: What data is being used for the NDA filing for LJPC-0118? - Management confirmed that they are finalizing a clinical study and have sufficient data showing a survival benefit for the active ingredient [52] Question: What is the expected marketing strategy for LJPC-0118? - Management believes that the existing infrastructure will support marketing efforts, given the limited number of severe malaria cases in the U.S. [55]

Use these links to rapidly review the document Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA PART IV UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 or o 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 INNOV ...

Corporate Presentation Developing Innovative Therapies for Patients Suffering from Life-threatening Diseases NASDAQ: LJPC January 2019 Forward-Looking Statements These slides contain forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements related to La Jolla's expectations regarding net sales and net cash used in operating activities for the full-year 2019, the expectation for future clinical and regulatory milesto ...