Innoviva(INVA) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, statements of stockholders' equity, and cash flow statements, along with detailed notes explaining the company's operations, accounting policies, and specific financial items Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 (Unaudited) (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :--------------------------------------- | :------------------------------- | | Cash and cash equivalents | $397,532 | $304,964 | | Total current assets | $651,778 | $554,306 | | Total assets | $1,333,572 | $1,301,060 | | Total current liabilities | $246,563 | $236,083 | | Total liabilities | $618,751 | $649,898 | | Total stockholders' equity | $714,821 | $691,159 | Condensed Consolidated Statements of Income and Comprehensive Income Condensed Consolidated Statements of Income and Comprehensive Income (in thousands, except per share data) | Metric (in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $100,283 | $99,898 | $188,915 | $177,397 | | Gross profit | $83,146 | $84,986 | $156,461 | $145,074 | | Income from operations | $48,751 | $54,686 | $90,179 | $80,491 | | Income (loss) before income taxes | $72,598 | $(39,279) | $34,009 | $5,845 | | Net income (loss) | $63,688 | $(34,685) | $17,104 | $1,847 | | Basic Net income (loss) per share | $1.01 | $(0.55) | $0.27 | $0.03 | | Diluted Net income (loss) per share | $0.77 | $(0.55) | $0.24 | $0.03 | Condensed Consolidated Statements of Stockholders' Equity Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric (in thousands) | Balance as of January 1, 2025 | Balance as of March 31, 2025 | Balance as of June 30, 2025 | | :-------------------- | :---------------------------- | :--------------------------- | :-------------------------- | | Common Stock (Shares) | 62,665 | 62,771 | 63,011 | | Common Stock (Amount) | $627 | $628 | $630 | | Additional Paid-In Capital | $692,329 | $694,658 | $698,884 | | Retained Earnings (Accumulated Deficit) | $(1,797) | $(48,381) | $15,307 | | Total Stockholders' Equity | $691,159 | $646,905 | $714,821 | - The company completed a $100.0 million share repurchase program in April 2024, repurchasing 986,928 shares for approximately $14.9 million, all of which were retired. In April 2024, the company also retired all shares held in treasury from a 2021 strategic buyback of GSK's common shares, recording $393.8 million in additional paid-in capital[137][138] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $92,690 | $80,765 | | Net cash used in investing activities | $(1,552) | $(43,038) | | Net cash provided by (used in) financing activities | $1,430 | $(14,237) | | Net increase in cash and cash equivalents | $92,568 | $23,490 | | Cash and cash equivalents at end of period | $397,532 | $217,003 | Notes to Condensed Consolidated Financial Statements Note 1. Description of Operations and Summary of Significant Accounting Policies Innoviva operates with a diversified portfolio including respiratory royalties from GSK, a critical care and infectious disease platform (Innoviva Specialty Therapeutics), and strategic investments in healthcare companies. The company's accounting policies are consistent with U.S. GAAP, with no material changes from the prior annual report - Innoviva's royalty portfolio includes respiratory assets partnered with GSK: RELVAR®/BREO® ELLIPTA® (15% on first $3.0B annual global net sales, 5% above $3.0B) and ANORO® ELLIPTA® (6.5% to 10% tiered royalties)[21] - Commercial and marketed products include GIAPREZA® (septic/distributive shock), XERAVA® (complicated intra-abdominal infections), XACDURO® (hospital-acquired/ventilator-associated pneumonias), and ZEVTERA® (advanced-generation cephalosporin antibiotic, launched in U.S. in July 2025)[22] - The company is advancing zoliflodacin, a potential first-in-class, single-dose oral treatment for uncomplicated gonorrhea, with its NDA accepted by the FDA in June 2025, granted Priority Review and a PDUFA target action date of December 15, 2025[22][191] - Innoviva maintains strategic economic interests in various healthcare companies, including a significant equity stake in Armata Pharmaceuticals, focused on bacteriophage development[23] Note 2. Net Income (Loss) Per Share This note details the computation of basic and diluted net income (loss) per share, including adjustments for convertible notes and stock awards, and identifies anti-dilutive securities not included in diluted EPS calculations Net Income (Loss) Per Share Calculation (in thousands except per share data) | Metric (in thousands except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss), basic | $63,688 | $(34,685) | $17,104 | $1,847 | | Net income (loss), diluted | $65,258 | $(34,685) | $20,248 | $1,847 | | Basic EPS | $1.01 | $(0.55) | $0.27 | $0.03 | | Diluted EPS | $0.77 | $(0.55) | $0.24 | $0.03 | Anti-Dilutive Securities (in thousands) | Anti-Dilutive Securities (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Outstanding options and awards | 1,630 | 1,897 | 1,389 | 1,542 | | Outstanding stock warrant | — | 591 | — | 591 | | Outstanding 2025 Notes | — | 11,150 | — | 11,150 | | Outstanding 2028 Notes | — | 9,955 | — | 9,955 | | Total | 1,630 | 23,593 | 1,389 | 23,238 | Note 3. Revenue Recognition This note provides a detailed breakdown of the company's revenue streams, including net royalty revenue from GSK, net product sales from its commercial portfolio, and license revenue from collaboration agreements Net Royalty Revenue (in thousands) | Revenue Type (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | RELVAR/BREO Royalties | $54,737 | $53,980 | $105,627 | $106,118 | | ANORO Royalties | $12,599 | $13,218 | $22,972 | $22,951 | | Total net royalty revenue | $63,880 | $63,742 | $121,687 | $122,157 | Net Product Sales (in thousands) | Product Sales (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | GIAPREZA® | $17,329 | $13,109 | $35,602 | $25,190 | | XACDURO® | $10,731 | $2,344 | $18,514 | $4,579 | | XERAVA® | $7,094 | $6,198 | $11,317 | $10,966 | | ZEVTERA® | $339 | — | $339 | — | | Total net product sales | $35,493 | $21,651 | $65,772 | $40,735 | - License and other revenue for the three months ended June 30, 2025, was $910 thousand, down from $14,505 thousand in the prior year, primarily due to a non-recurring regulatory milestone payment in 2024[13] Note 4. License and Collaboration Arrangements This note details various out-license agreements with partners like Zai Lab, GARDP, PAION Pharma GmbH, and Everest Medicines Limited, as well as in-license agreements with Basilea, George Washington University, and Harvard University, outlining the terms, milestones, and royalty structures for product development and commercialization - Under the Zai Agreement, SUL-DUR was approved by China's NMPA in May 2024 and launched in mainland China in January 2025, generating $0.6 million and $1.1 million in royalties for the three and six months ended June 30, 2025, respectively[60] - The GARDP Collaboration Agreement involves the development of zoliflodacin for uncomplicated gonorrhea, with GARDP funding the Phase 3 trial and Innoviva retaining commercial rights in major markets[65][66] - Innoviva entered an exclusive distribution and license agreement with Basilea in December 2024 for ZEVTERA® in the U.S., with commercial launch in July 2025[72] - Royalty revenue from Everest Medicines for XERAVA® was $2.0 million for the three and six months ended June 30, 2025, compared to $1.2 million and $1.8 million for the same periods in 2024[70] Note 5. Consolidated Entity - ISP Fund LP Innoviva consolidates ISP Fund LP under the VIE model, holding approximately 100% economic interest. The fund invests in healthcare, pharmaceutical, and biotechnology sectors, with an election made in October 2024 to unwind capital accounts through April 2026 - ISP Fund LP's total assets were $147.5 million as of June 30, 2025, down from $255.7 million as of December 31, 2024[79] - For the six months ended June 30, 2025, ISP Fund LP recorded $80.9 million in net realized and unrealized losses from equity and long-term investments, compared to $42.0 million in losses for the same period in 2024[80] ISP Fund LP Investments (in thousands) | Investment Type (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------- | :------------ | :---------------- | | Common stock - Publicly traded healthcare companies (U.S.) | $41,294 | $84,039 | | Common stock - Publicly traded healthcare companies (U.K.) | $3,325 | $1,989 | | Preferred stock - Privately held healthcare companies (U.S.) | $2,644 | $53,591 | | Warrants - Privately held healthcare companies | — | $8,507 | | Money market fund and cash | $100,200 | $107,532 | | Total investments held by ISP Fund LP | $147,463 | $255,658 | Note 6. Equity and Other Investments and Fair Value Measurements This note details Innoviva's equity and other investments in various biotechnology and pharmaceutical companies, including Armata, InCarda, ImaginAb, Syndeio, Nanolive, and Lyndra. It outlines the company's ownership stakes, the types of financial instruments held (common stock, warrants, convertible notes, term loans), and the methodologies used for fair value measurements, categorizing them into Level 1, Level 2, and Level 3 inputs - Innoviva holds a 69.3% equity interest in Armata Pharmaceuticals, along with warrants, convertible notes, and term loans totaling $147.2 million in fair value as of June 30, 2025[84][87] - For the three months ended June 30, 2025, Innoviva recorded a $13.1 million unrealized gain on Armata common stock and warrants, a significant improvement from a $60.1 million unrealized loss in the prior year period[88] - The fair value of Syndeio 2021 Convertible Note increased to $71.3 million as of June 30, 2025, from $50.9 million as of December 31, 2024, with a $20.5 million unrealized gain for the six months ended June 30, 2025[107] - Innoviva recorded the Lyndra Convertible Note at its original cost of $9.2 million as of June 30, 2025, believing its proprietary platform supports full recovery despite winding down operations[114][115] Note 7. Goodwill and Intangible Assets This note details the company's goodwill and intangible assets, including their carrying amounts, amortization schedules, and the impact of acquisitions. Goodwill remained stable, while definite-lived intangible assets are amortized over their estimated useful lives - Goodwill remained at $17.9 million as of June 30, 2025, with no impairment losses recognized[126] Intangible Assets (in thousands) | Intangible Asset Type (in thousands) | Useful Life (Years) | Net Carrying Amount (June 30, 2025) | Net Carrying Amount (December 31, 2024) | | :----------------------------------- | :------------------ | :---------------------------------- | :------------------------------------ | | Marketed products | 8-10 | $164,873 | $176,141 | | In-process research and development | - | $2,600 | $2,600 | | Collaboration agreement | 10 | $27,938 | $29,692 | | Total | | $195,411 | $