10-Q 1 inva-20240331.htm 10-Q 10-Q
0001080014Q1false--12-312023-03-31http://fasb.org/us-gaap/2023#OtherLiabilitiesCurrenthttp://fasb.org/us-gaap/2023#OtherLiabilitiesCurrenthttp://fasb.org/us-gaap/2023#OtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2023#OtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2023#LiabilitiesAndStockholdersEquity0001080014inva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ConvertibleDebtMember2023-12-310001080014us-gaap:FairValueInputsLevel2Memberinva:IspFundLpMemberus-gaap:FairValueMeasurementsRecurringMemberinva:EquityInvestmentsAndMoneyMarketFundsMember2023-12-310001080014us-gaap:SellingGeneralAndAdministrativeExpensesMember2024-01-012024-03-310001080014us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:DebtMember2024-03-310001080014inva:SeriesD1WarrantMemberinva:IncardaMember2022-06-152022-06-150001080014us-gaap:TreasuryStockCommonMember2023-12-310001080014us-gaap:SeriesCPreferredStockMemberinva:IncardaMember2022-06-152022-06-150001080014inva:LongActingBeta2AgonistAnoroMemberinva:GSKMember2024-01-012024-03-310001080014inva:TermLoanInvestmentMemberinva:ArmataMarchTwoThousandTwentyFourTermLoanMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001080014inva:ConsolidatedInvesteesMemberinva:IncardaMember2023-12-310001080014inva:ArmataPharmaceuticalsIncMemberinva:WarrantsPurchasedIn2022Member2024-01-010001080014inva:LaJollaPharmaceuticalCompanyMember2023-12-310001080014us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2023-12-310001080014us-gaap:WarrantMemberinva:ArmataPharmaceuticalsIncMemberinva:InnovivaStrategicOpportunitiesLimitedLiabilityCorporationMember2022-02-090001080014us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310001080014inva:GSKMember2024-01-012024-03-310001080014us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel3Member2023-12-310001080014inva:IspFundLpMember2023-01-012023-12-310001080014us-gaap:MoneyMarketFundsMember2023-12-310001080014us-gaap:CollaborativeArrangementMemberus-gaap:InProcessResearchAndDevelopmentMember2023-05-012023-05-310001080014us-gaap:FairValueInputsLevel1Memberinva:IspFundLpMemberus-gaap:FairValueMeasurementsRecurringMemberinva:EquityInvestmentsAndMoneyMarketFundsMember2023-12-310001080014us-gaap:EquitySecuritiesMemberinva:IspFundLpMember2024-03-310001080014us-gaap:CommonStockMember2023-12-310001080014us-gaap:CommonStockMemberinva:ArmataPharmaceuticalsIncMember2023-12-310001080014inva:GateNeuroscienceMember2023-12-310001080014inva:ArmataPharmaceuticalsIncMemberinva:SecuredConvertibleCreditAgreementMember2023-01-100001080014inva:HealthCareRoyaltyPartnersMember2024-01-012024-03-310001080014us-gaap:FairValueInputsLevel2Memberinva:IspFundLpMemberus-gaap:FairValueMeasurementsRecurringMemberinva:EquityInvestmentsAndMoneyMarketFundsMember2024-03-3100010800142023-03-310001080014us-gaap:CommonStockMemberus-gaap:EquitySecuritiesMemberinva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001080014inva:XeravaMember2024-01-012024-03-310001080014inva:ImaginabMember2024-03-310001080014inva:TermLoanInvestmentMemberus-gaap:FairValueInputsLevel1Memberinva:ArmataJulyTwoThousandTwentyThreeTermLoanMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001080014us-gaap:SeriesCPreferredStockMemberinva:NanoliveMember2022-02-180001080014inva:ArmataPharmaceuticalsIncMemberinva:JulyTwoThousandTwentyThreeCreditAndSecurityAgreementMember2023-07-102023-07-100001080014inva:SeniorUnsecuredConvertibleNotesMemberinva:TwoThousandTwentyFiveNotesMember2023-12-310001080014us-gaap:CollaborativeArrangementMember2024-01-012024-03-310001080014inva:ArmataPharmaceuticalsIncMemberinva:ArmataMarchTwoThousandTwentyFourTermLoanMember2024-01-012024-03-310001080014us-gaap:MoneyMarketFundsMember2024-03-310001080014us-gaap:CommonStockMemberinva:ArmataPharmaceuticalsIncMember2024-03-310001080014us-gaap:FairValueMeasurementsNonrecurringMember2023-12-310001080014inva:ArmataPharmaceuticalsIncMember2022-02-092022-02-090001080014us-gaap:SeriesCPreferredStockMemberinva:IncardaMember2022-06-150001080014us-gaap:WarrantMemberus-gaap:EquitySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberinva:IncardaMember2024-03-310001080014inva:MarchTwoThousandTwentyFourCreditAndSecurityAgreementMemberinva:ArmataPharmaceuticalsIncMember2024-03-042024-03-040001080014us-gaap:CommonStockMemberus-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel1Memberinva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001080014inva:EntasisTherapeuticsHoldingsIncMember2024-03-310001080014inva:SeriesD1AndD2PreferredStockAndCommonStockMemberinva:IncardaMember2024-03-310001080014inva:TwoThousandTwentyEightNotesMemberinva:SeniorUnsecuredConvertibleNotesMemberus-gaap:PrivatePlacementMember2022-03-310001080014srt:MaximumMember2023-12-310001080014srt:MinimumMember2024-03-310001080014us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberinva:GateNeuroscienceMemberus-gaap:ConvertibleDebtMember2023-12-310001080014inva:GSKMember2023-01-012023-03-310001080014us-gaap:CustomerConcentrationRiskMemberinva:CustomerThreeMemberus-gaap:SalesRevenueNetMemberinva:LaJollaMember2024-01-012024-03-310001080014inva:IspFundLpMember2023-12-310001080014inva:TwoThousandTwentyEightNotesMemberinva:SeniorUnsecuredConvertibleNotesMember2022-03-310001080014inva:HarvardUniversityMember2024-01-012024-03-310001080014inva:ArmataPharmaceuticalsIncMemberinva:CommonStockAndWarrantsMemberinva:InnovivaStrategicOpportunitiesLimitedLiabilityCorporationMember2022-02-092022-02-090001080014us-gaap:SeriesCPreferredStockMemberinva:ImaginabMember2021-03-182021-03-180001080014us-gaap:RetainedEarningsMember2023-12-310001080014inva:ImaginabMember2021-03-182021-03-180001080014us-gaap:CommonStockMemberinva:ArmataPharmaceuticalsIncMember2020-01-012020-03-310001080014inva:NanoliveMember2023-12-310001080014us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ConvertibleDebtMemberinva:IncardaMember2024-03-310001080014inva:LongActingBeta2AgonistAnoroMemberinva:GSKMember2023-01-012023-03-310001080014inva:TwoThousandTwentyEightNotesMemberinva:SeniorUnsecuredConvertibleNotesMemberus-gaap:OverAllotmentOptionMember2022-03-310001080014inva:ArmataPharmaceuticalsIncMemberinva:TwoDirectorsMember2022-02-092022-02-090001080014us-gaap:FairValueInputsLevel3Memberinva:IspFundLpMemberus-gaap:FairValueMeasurementsRecurringMemberinva:EquityInvestmentsAndMoneyMarketFundsMember2023-12-310001080014us-gaap:WarrantMemberus-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel1Memberinva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001080014inva:SeriesCPreferredStockAndWarrantsMemberinva:IncardaMember2020-07-012020-09-300001080014us-gaap:WarrantMemberus-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberinva:IncardaMember2024-03-310001080014inva:SeriesD1PreferredStockMemberinva:IncardaMember2022-06-152022-06-150001080014us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel2Member2023-12-310001080014inva:ImaginabConvertibleNoteMemberinva:ImaginabMember2024-01-012024-03-310001080014us-gaap:AdditionalPaidInCapitalMember2023-12-310001080014us-gaap:ProductMember2024-01-012024-03-310001080014us-gaap:SeriesCPreferredStockMemberinva:NanoliveMember2022-02-182022-02-180001080014inva:TwoThousandTwentyFiveNotesMemberus-gaap:CommonStockMember2017-08-010001080014inva:TwoThousandTwentyEightNotesMemberinva:SeniorUnsecuredConvertibleNotesMember2024-03-310001080014us-gaap:LicenseMember2024-01-012024-03-310001080014us-gaap:SellingGeneralAndAdministrativeExpensesMember2023-01-012023-03-310001080014inva:WarrantsPurchasedIn2021Memberinva:ArmataPharmaceuticalsIncMember2024-01-010001080014us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001080014inva:IncardaMember2024-03-310001080014inva:EntasisTherapeuticsHoldingsIncMember2022-07-110001080014us-gaap:RoyaltyMember2023-01-012023-03-310001080014inva:TwoThousandTwentyFiveNotesMemberinva:SeniorUnsecuredConvertibleNotesMemberus-gaap:CommonStockMember2017-08-072017-08-070001080014inva:SecuredConvertibleCreditAgreementMemberinva:ArmataPharmaceuticalsIncMember2023-01-102023-01-100001080014srt:MaximumMemberinva:LabaCollaborationMemberinva:LongActingBeta2AgonistAnoroMemberinva:GSKMember2024-01-012024-03-310001080014us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2024-03-310001080014inva:LaJollaPharmaceuticalCompanyMember2022-08-220001080014us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001080014us-gaap:AdditionalPaidInCapitalMember2023-03-310001080014us-gaap:RetainedEarningsMember2023-01-012023-03-3100010800142022-12-310001080014inva:ArmataPharmaceuticalsIncMemberinva:ArmataJulyTwoThousandTwentyThreeTermLoanMember2024-03-310001080014us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2023-12-310001080014us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel3Member2024-03-310001080014inva:IspFundLpMemberus-gaap:FairValueMeasurementsRecurringMemberinva:EquityInvestmentsAndMoneyMarketFundsMember2023-12-310001080014us-gaap:CommonStockMemberinva:ImaginabMemberinva:OneOfImaginabsCommonStockholderMember2021-03-182021-03-180001080014inva:NoteAmendmentAgreementMemberinva:GateNeuroscienceMember2023-02-020001080014us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2024-03-310001080014inva:GateNeuroscienceMember2021-11-242021-11-240001080014inva:ArmataPharmaceuticalsIncMemberinva:ConsolidatedInvesteesMember2024-03-310001080014inva:IspFundLpMemberinva:PrivatePlacementPositionsAndConvertibleNotesMember2024-03-310001080014inva:IspFundLpMember2022-03-302022-03-300001080014us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsNonrecurringMember2024-03-310001080014inva:InCardaConvertibleNoteMemberinva:IncardaMember2024-01-170001080014us-gaap:FairValueMeasurementsRecurringMemberinva:GateNeuroscienceMemberus-gaap:ConvertibleDebtMember2023-12-310001080014us-gaap:EmployeeStockOptionMemberinva:InnovivaMembersrt:MinimumMember2024-01-012024-03-310001080014inva:EverestMedicinesLimitedMember2024-01-012024-03-310001080014inva:ArmataPharmaceuticalsIncMemberinva:WarrantsPurchasedIn2020Member2024-01-010001080014us-gaap:WarrantMemberus-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberinva:IncardaMember2024-03-310001080014inva:ConvertiblePromissoryNotePurchaseAgreementMemberinva:GateNeuroscienceMember2021-11-240001080014us-gaap:WarrantMemberinva:ArmataPharmaceuticalsIncMemberinva:InnovivaStrategicOpportunitiesLimitedLiabilityCorporationMember2021-03-310001080014inva:ArmataPharmaceuticalsIncMemberinva:ArmataConvertibleNoteMember2023-01-012023-03-310001080014inva:SeriesD2PreferredStockMemberinva:IncardaMember2022-06-152022-06-150001080014inva:ImaginabMemberinva:SeriesC2PreferredStockMember2023-03-142023-03-140001080014inva:CostReimbursementMemberinva:PaionAgMember2024-01-012024-03-310001080014country:USus-gaap:GeographicConcentrationRiskMemberus-gaap:SalesRevenueNetMember2023-01-012023-03-310001080014inva:ImaginabMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ConvertibleDebtMember2024-03-310001080014us-gaap:ConvertibleSubordinatedDebtMemberinva:TwoThousandTwentyThreeNotesMember2013-01-310001080014inva:ConsolidatedInvesteesMemberinva:NanoliveMember2024-03-3100010800142023-01-012023-03-310001080014us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2023-12-310001080014inva:ImaginabConvertibleNoteMemberinva:ImaginabMember2024-02-230001080014inva:SarissaCapitalManagementLpMember2024-03-310001080014us-gaap:ConvertibleSubordinatedDebtMemberinva:TwoThousandTwentyThreeNotesMember2022-03-310001080014inva:InnovivaMemberus-gaap:EmployeeStockOptionMembersrt:MinimumMember2023-01-012023-03-310001080014inva:TwoThousandTwentyFiveNotesMember2023-01-012023-03-310001080014us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2023-12-310001080014us-gaap:SeriesDPreferredStockMemberinva:IncardaMember2022-06-152022-06-150001080014inva:LaJollaPharmaceuticalCompanyMember2024-01-012024-03-310001080014inva:LabaCollaborationMemberinva:LongActingBeta2AgonistAnoroMembersrt:MinimumMemberinva:GSKMember2024-01-012024-03-310001080014us-gaap:CommonStockMember2024-03-310001080014srt:MaximumMember2024-03-310001080014inva:InnovivaMemberus-gaap:EmployeeStockOptionMembersrt:WeightedAverageMember2023-01-012023-03-310001080014inva:ConsolidatedInvesteesMemberinva:IncardaMember2024-03-310001080014inva:ArmataPharmaceuticalsIncMemberinva:JulyTwoThousandTwentyThreeCreditAndSecurityAgreementMember2023-07-100001080014inva:LaJollaPharmaceuticalCompanyMember2023-01-012023-03-310001080014inva:TwoThousandTwentyFiveNotesMemberinva:SeniorUnsecuredConvertibleNotesMemberus-gaap:PrivatePlacementMember2017-08-070001080014inva:IspFundLpMember2023-12-3100010800142023-12-310001080014us-gaap:CommonStockMemberinva:IncardaMember2022-06-152022-06-150001080014inva:LongActingBeta2AgonistRelvarBreoMemberinva:GSKMember2023-01-012023-03-310001080014us-gaap:CommonStockMember2022-12-310001080014inva:IspFundLpMember2024-03-310001080014inva:HealthCareRoyaltyPartnersMemberinva:RoyaltyFinancingAgreementMemberus-gaap:LoansPayableMember2024-01-012024-03-310001080014us-gaap:ConvertibleSubordinatedDebtMemberinva:TwoThousandTwentyThreeNotesMember2022-01-012022-03-310001080014us-gaap:TreasuryStockCommonMember2022-12-310001080014us-gaap:CustomerConcentrationRiskMemberus-gaap:TradeAccountsReceivableMemberinva:CustomerTwoMemberinva:LaJollaMember2024-01-012024-03-310001080014inva:ArmataPharmaceuticalsIncMember2024-03-310001080014inva:TwoThousandTwentyEightNotesMemberinva:SeniorUnsecuredConvertibleNotesMember2023-12-310001080014us-gaap:CollaborativeArrangementMember2023-01-012023-03-310001080014inva:SeniorUnsecuredConvertibleNotesMemberinva:TwoThousandTwentyFiveNotesMember2024-01-012024-03-310001080014us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberinva:ImaginabMemberus-gaap:ConvertibleDebtMember2024-03-310001080014us-gaap:RetainedEarningsMember2022-12-310001080014inva:IspFundLpMember2023-01-012023-03-310001080014us-gaap:SeriesCPreferredStockMemberinva:ImaginabMember2021-03-180001080014inva:CostReimbursementMemberinva:PaionAgMember2023-01-012023-03-310001080014inva:HealthCareRoyaltyPartnersMemberinva:RoyaltyFinancingAgreementMemberus-gaap:LoansPayableMember2023-12-310001080014inva:ConvertiblePromissoryNotePurchaseAgreementMemberinva:GateNeuroscienceMember2023-02-020001080014inva:IspFundLpMemberus-gaap:FairValueMeasurementsRecurringMemberinva:EquityInvestmentsAndMoneyMarketFundsMember2024-03-310001080014inva:PaionAgMember2024-03-310001080014inva:ArmataPharmaceuticalsIncMemberinva:CommonStockAndWarrantsMember2020-01-012020-03-310001080014us-gaap:CollaborativeArrangementMemberinva:EntasisTherapeuticsHoldingsIncMember2024-03-310001080014us-gaap:WarrantMemberus-gaap:EquitySecuritiesMemberinva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001080014inva:LicenseRevenueMember2024-01-012024-03-310001080014inva:ThirdNoteAmendmentAgreementMemberinva:GateNeuroscienceMember2024-02-130001080014inva:LabaCollaborationMemberinva:LongActingBeta2AgonistRelvarBreoMemberinva:GSKMember2024-01-012024-03-310001080014inva:ArmataPharmaceuticalsIncMember2022-10-012022-12-310001080014inva:ArmataPharmaceuticalsIncMemberinva:ArmataJulyTwoThousandTwentyThreeTermLoanMember2023-12-310001080014us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:DebtMember2023-12-310001080014us-gaap:AdditionalPaidInCapitalMember2022-12-310001080014inva:HealthCareRoyaltyPartnersMemberinva:RoyaltyFinancingAgreementMemberus-gaap:LoansPayableMember2024-03-310001080014inva:GateNeuroscienceMember2023-10-062023-10-060001080014us-gaap:CommonStockMemberinva:ArmataPharmaceuticalsIncMemberinva:InnovivaStrategicOpportunitiesLimitedLiabilityCorporationMember2021-03-310001080014us-gaap:CommonStockMemberus-gaap:EquitySecuritiesMemberinva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001080014inva:TermLoanInvestmentMemberus-gaap:FairValueInputsLevel2Memberinva:ArmataJulyTwoThousandTwentyThreeTermLoanMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001080014us-gaap:WarrantMemberus-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberinva:IncardaMember2024-03-310001080014inva:EntasisTherapeuticsHoldingsIncMemberus-gaap:InProcessResearchAndDevelopmentMember2024-03-310001080014inva:TwoThousandTwentyThreeNotesMember2023-01-012023-03-310001080014us-gaap:WarrantMemberus-gaap:EquitySecuritiesMemberinva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001080014us-gaap:CommonStockMemberus-gaap:EquitySecuritiesMemberinva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001080014us-gaap:CommonStockMemberus-gaap:EquitySecuritiesMemberinva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001080014us-gaap:WarrantMemberinva:IncardaMember2023-01-012023-03-3100010800142023-01-012023-12-310001080014inva:TermLoanInvestmentMemberinva:ArmataMarchTwoThousandTwentyFourTermLoanMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001080014us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ConvertibleDebtMemberinva:IncardaMember2024-03-310001080014inva:ArmataPharmaceuticalsIncMemberinva:ArmataConvertibleNoteMember2024-03-310001080014inva:OutstandingStockWarrantMember2023-01-012023-03-310001080014us-gaap:FairValueMeasurementsRecurringMemberinva:GateNeuroscienceMemberus-gaap:ConvertibleDebtMember2024-03-310001080014inva:TwoThousandTwentyEightNotesMemberinva:SeniorUnsecuredConvertibleNotesMember2023-01-012023-03-310001080014us-gaap:CommonStockMember2023-03-310001080014inva:PrivatelyNegotiatedCappedCallOptionMemberinva:TwoThousandTwentyEightNotesMemberinva:SeniorUnsecuredConvertibleNotesMember2022-03-310001080014inva:TwoThousandTwentyFiveNotesMemberinva:SeniorUnsecuredConvertibleNotesMember2023-01-012023-03-310001080014inva:CommercialSupplyAgreementMemberinva:EverestMedicinesLimitedMember2024-01-012024-03-310001080014inva:TermLoanInvestmentMemberus-gaap:FairValueInputsLevel1Memberinva:ArmataJulyTwoThousandTwentyThreeTermLoanMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001080014us-gaap:RoyaltyMemberinva:GSKMember2024-01-012024-03-310001080014us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2024-03-310001080014us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberinva:GateNeuroscienceMemberus-gaap:ConvertibleDebtMember2023-12-310001080014us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001080014inva:TwoThousandTwentyFiveNotesMemberinva:SeniorUnsecuredConvertibleNotesMemberus-gaap:CommonStockMember2017-08-070001080014us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001080014us-gaap:SeriesCPreferredStockMemberinva:IncardaMember2020-07-012020-09-300001080014inva:IspFundLpMember2024-01-012024-03-310001080014us-gaap:EmployeeStockOptionMemberinva:InnovivaMembersrt:WeightedAverageMember2024-01-012024-03-310001080014us-gaap:CommonStockMemberinva:ArmataPharmaceuticalsIncMemberinva:InnovivaStrategicOpportunitiesLimitedLiabilityCorporationMember2021-10-012021-12-310001080014inva:EverestMedicinesLimitedMember2024-03-310001080014us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001080014us-gaap:FairValueInputsLevel1Memberinva:IspFundLpMemberus-gaap:FairValueMeasurementsRecurringMemberinva:EquityInvestmentsAndMoneyMarketFundsMember2024-03-310001080014inva:TermLoanInvestmentMemberus-gaap:FairValueInputsLevel1Memberinva:ArmataMarchTwoThousandTwentyFourTermLoanMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001080014inva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ConvertibleDebtMember2024-03-310001080014srt:MaximumMemberinva:ArmataPharmaceuticalsIncMemberinva:OneDirectorMember2022-02-092022-02-090001080014us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMemberinva:CustomerOneMemberinva:LaJollaMember2024-01-012024-03-310001080014us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:DebtMember2023-12-310001080014us-gaap:TreasuryStockCommonMember2023-03-310001080014inva:GiaprezaMember2023-01-012023-03-310001080014us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2024-03-310001080014inva:TermLoanInvestmentMemberus-gaap:FairValueInputsLevel3Memberinva:ArmataJulyTwoThousandTwentyThreeTermLoanMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001080014us-gaap:TreasuryStockCommonMember2024-01-012024-03-310001080014inva:TwoThousandTwentyEightNotesMemberinva:SeniorUnsecuredConvertibleNotesMemberus-gaap:CommonStockMember2022-01-012022-03-3100010800142024-01-012024-03-310001080014us-gaap:FairValueInputsLevel1Memberinva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ConvertibleDebtMember2024-03-310001080014us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberinva:GateNeuroscienceMemberus-gaap:ConvertibleDebtMember2024-03-310001080014us-gaap:CommonStockMemberus-gaap:EquitySecuritiesMemberinva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001080014inva:SeniorUnsecuredConvertibleNotesMemberinva:TwoThousandTwentyFiveNotesMemberus-gaap:OverAllotmentOptionMember2017-08-070001080014us-gaap:RetainedEarningsMember2024-03-310001080014inva:SeriesD1WarrantMemberinva:IncardaMember2022-06-150001080014us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel2Member2024-03-310001080014inva:ConvertiblePromissoryNotePurchaseAgreementMemberinva:GateNeuroscienceMember2021-11-242021-11-240001080014us-gaap:CommonStockMemberinva:ArmataPharmaceuticalsIncMemberinva:InnovivaStrategicOpportunitiesLimitedLiabilityCorporationMember2022-02-090001080014us-gaap:WarrantMemberinva:ArmataPharmaceuticalsIncMember2024-03-310001080014inva:LaJollaPharmaceuticalCompanyMember2024-03-310001080014us-gaap:RetainedEarningsMember2023-03-310001080014inva:ConvertibleNoteAndWarrantsMemberinva:IncardaMember2022-03-092022-03-090001080014srt:MinimumMember2023-12-310001080014inva:GateNeuroscienceMember2024-02-132024-02-130001080014inva:NanoliveMember2022-02-182022-02-180001080014us-gaap:TreasuryStockCommonMember2024-03-310001080014inva:SeriesCAndC2PreferredStockAndCommonStockMemberinva:ImaginabMember2024-03-310001080014inva:TermLoanInvestmentMemberus-gaap:FairValueInputsLevel2Memberinva:ArmataJulyTwoThousandTwentyThreeTermLoanMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001080014inva:GiaprezaMember2024-01-012024-03-310001080014us-gaap:WarrantMemberus-gaap:EquitySecuritiesMemberinva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001080014inva:SeriesDWarrantsMemberinva:IncardaMember2024-03-310001080014us-gaap:CommonStockMember2023-01-012023-03-310001080014inva:TwoThousandTwentyFiveNotesMemberinva:SeniorUnsecuredConvertibleNotesMember2024-03-310001080014inva:XeravaMember2023-01-012023-03-310001080014inva:TwoThousandTwentyEightNotesMember2023-01-012023-03-310001080014inva:ConsolidatedInvesteesMemberinva:NanoliveMember2023-12-310001080014inva:GateNeuroscienceMember2024-03-310001080014inva:ArmataPharmaceuticalsIncMemberinva:OneDirectorMembersrt:MinimumMember2022-02-092022-02-090001080014us-gaap:FairValueMeasurementsNonrecurringMember2024-03-310001080014inva:InCardaConvertibleNoteMemberinva:IncardaMember2024-03-310001080014us-gaap:FairValueInputsLevel3Memberinva:IncardaMemberinva:OptionPricingModelBacksolveValuationMember2022-04-012022-06-300001080014us-gaap:InProcessResearchAndDevelopmentMember2023-05-310001080014us-gaap:ResearchAndDevelopmentExpenseMember2023-01-012023-03-310001080014inva:IncardaMember2023-01-012023-03-310001080014us-gaap:AdditionalPaidInCapitalMember2024-03-310001080014inva:ImaginabMemberinva:SeriesC2PreferredStockMember2023-09-142023-09-140001080014inva:LicenseRevenueMember2023-01-012023-03-310001080014us-gaap:WarrantMemberus-gaap:EquitySecuritiesMemberinva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001080014inva:ZaiLabMemberus-gaap:SubsequentEventMember2024-04-242024-04-240001080014inva:SeriesCAndC2PreferredStockAndCommonStockMemberinva:ImaginabMember2023-12-310001080014us-gaap:FairValueInputsLevel3Memberinva:ImaginabMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ConvertibleDebtMember2024-03-310001080014us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberinva:GateNeuroscienceMemberus-gaap:ConvertibleDebtMember2024-03-310001080014us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ConvertibleDebtMemberinva:IncardaMember2024-03-310001080014inva:IspFundLpMemberinva:PrivatePlacementPositionsAndConvertibleNotesMember2023-12-310001080014inva:TermLoanInvestmentMemberinva:ArmataJulyTwoThousandTwentyThreeTermLoanMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-3100010800142024-03-310001080014srt:MaximumMemberinva:InnovivaMemberus-gaap:EmployeeStockOptionMember2023-01-012023-03-310001080014us-gaap:WarrantMemberinva:IncardaMember2020-09-300001080014us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:DebtMember2023-12-310001080014inva:IspFundLpMemberus-gaap:MoneyMarketFundsMember2024-03-310001080014inva:OutstandingStockWarrantMember2024-01-012024-03-310001080014inva:TwoThousandTwentyEightNotesMemberinva:SeniorUnsecuredConvertibleNotesMember2022-01-012022-03-310001080014us-gaap:LicenseMember2023-01-012023-03-310001080014inva:ArmataPharmaceuticalsIncMemberinva:CommonStockAndWarrantsMember2024-01-012024-03-310001080014inva:ConsolidatedInvesteesMemberinva:ImaginabMember2023-12-310001080014inva:ConsolidatedInvesteesMemberinva:ArmataPharmaceuticalsIncMember2023-12-310001080014inva:ArmataPharmaceuticalsIncMemberinva:CommonStockAndWarrantsMemberinva:InnovivaStrategicOpportunitiesLimitedLiabilityCorporationMember2021-01-012021-03-310001080014inva:AstrazenecaMember2024-01-012024-03-310001080014us-gaap:SeriesCPreferredStockMemberinva:IncardaMember2023-04-012023-06-300001080014us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001080014inva:ArmataPharmaceuticalsIncMemberinva:CommonStockAndWarrantsMember2023-01-012023-03-310001080014inva:TwoThousandTwentyEightNotesMember2024-01-012024-03-310001080014inva:MarchTwoThousandTwentyFourCreditAndSecurityAgreementMemberinva:ArmataPharmaceuticalsIncMember2024-03-040001080014inva:XacduroMember2024-01-012024-03-310001080014us-gaap:RoyaltyMemberinva:GSKMember2023-01-012023-03-310001080014inva:ImaginabMemberinva:SeriesC2PreferredStockMember2023-09-140001080014us-gaap:WarrantMemberinva:ArmataPharmaceuticalsIncMember2023-12-310001080014inva:TwoThousandTwentyFiveNotesMember2024-01-012024-03-3100010800142024-04-300001080014inva:EverestMedicinesLimitedMember2023-01-012023-03-310001080014us-gaap:FairValueMeasurementsRecurringMember2024-03-310001080014inva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ConvertibleDebtMember2023-12-310001080014us-gaap:SeriesCPreferredStockMemberinva:IncardaMember2022-04-012022-06-300001080014inva:ArmataPharmaceuticalsIncMemberinva:ArmataConvertibleNoteMember2023-12-310001080014inva:IspFundLpMember2022-03-300001080014inva:TermLoanInvestmentMemberus-gaap:FairValueInputsLevel3Memberinva:ArmataJulyTwoThousandTwentyThreeTermLoanMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001080014inva:TermLoanInvestmentMemberus-gaap:FairValueInputsLevel3Memberinva:ArmataMarchTwoThousandTwentyFourTermLoanMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001080014us-gaap:FairValueInputsLevel3Memberinva:IspFundLpMemberus-gaap:FairValueMeasurementsRecurringMemberinva:EquityInvestmentsAndMoneyMarketFundsMember2024-03-310001080014inva:GateNeuroscienceMember2023-02-022023-02-020001080014inva:GeorgeWashingtonUniversityMember2024-01-012024-03-310001080014inva:EquityIncentivePlansAndESPPMember2023-01-012023-03-310001080014us-gaap:WarrantMemberus-gaap:EquitySecuritiesMemberinva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001080014inva:LaJollaMember2023-01-012023-03-310001080014inva:SeriesA1PreferredStockMemberinva:IncardaMember2022-06-152022-06-150001080014us-gaap:CommonStockMemberus-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel1Memberinva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001080014inva:ImaginabMemberinva:SeriesC2PreferredStockMember2023-03-140001080014inva:IspFundLpMember2020-12-310001080014inva:TermLoanInvestmentMemberinva:ArmataJulyTwoThousandTwentyThreeTermLoanMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001080014us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:DebtMember2024-03-310001080014inva:NanoliveMember2024-03-310001080014inva:ZaiLabMemberinva:ResearchAndDevelopmentSupportMember2024-03-310001080014inva:ImaginabConvertibleNoteMemberinva:ImaginabMember2024-03-310001080014inva:IspFundLpMember2024-03-310001080014inva:LaJollaMember2024-01-012024-03-310001080014us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberinva:GateNeuroscienceMemberus-gaap:ConvertibleDebtMember2024-03-310001080014inva:CommercialSupplyAgreementMemberinva:CordenPharmaChenoveSasMember2024-04-110001080014inva:TwoThousandTwentyThreeNotesMember2024-03-310001080014us-gaap:RetainedEarningsMember2024-01-012024-03-310001080014us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:DebtMember2023-12-310001080014us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ConvertibleDebtMemberinva:IncardaMember2024-03-310001080014us-gaap:ProductMember2023-01-012023-03-310001080014inva:IspFundLpMember2021-05-310001080014inva:IspFundLpMember2024-01-012024-03-310001080014us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:DebtMember2024-03-310001080014inva:HarvardUniversityMember2023-01-012023-03-310001080014inva:GateNeuroscienceMember2024-01-012024-03-310001080014us-gaap:FairValueMeasurementsRecurringMember2023-12-310001080014us-gaap:EquitySecuritiesMemberinva:IspFundLpMember2023-12-310001080014us-gaap:CommonStockMember2022-10-310001080014us-gaap:CommonStockMemberus-gaap:EquitySecuritiesMemberinva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001080014inva:ArmataPharmaceuticalsIncMember2024-01-012024-03-310001080014inva:ParatekPharmaceuticalsIncMember2024-01-012024-03-310001080014inva:ArmataPharmaceuticalsIncMemberinva:ArmataJulyTwoThousandTwentyThreeTermLoanMember2024-01-012024-03-310001080014inva:TwoThousandTwentyEightNotesMemberinva:SeniorUnsecuredConvertibleNotesMemberus-gaap:CommonStockMember2022-03-310001080014us-gaap:CommonStockMember2024-01-012024-03-310001080014inva:ArmataPharmaceuticalsIncMember2023-10-012023-12-310001080014inva:ConsolidatedInvesteesMemberinva:ImaginabMember2024-03-310001080014us-gaap:CollaborativeArrangementMemberus-gaap:InProcessResearchAndDevelopmentMember2024-01-012024-03-310001080014inva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ConvertibleDebtMember2024-03-310001080014country:USus-gaap:GeographicConcentrationRiskMemberus-gaap:SalesRevenueNetMember2024-01-012024-03-310001080014us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001080014inva:SeriesDWarrantsMemberinva:IncardaMember2023-12-310001080014us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberinva:ImaginabMemberus-gaap:ConvertibleDebtMember2024-03-310001080014inva:TwoThousandTwentyThreeNotesMember2024-01-012024-03-310001080014inva:HealthCareRoyaltyPartnersMemberinva:RoyaltyFinancingAgreementMemberus-gaap:LoansPayableMember2023-01-012023-03-310001080014inva:LaJollaPharmaceuticalCompanyMember2024-03-310001080014inva:GateNeuroscienceMember2023-01-012023-03-310001080014us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsNonrecurringMember2023-12-310001080014us-gaap:WarrantMemberus-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel1Memberinva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001080014us-gaap:WarrantMemberus-gaap:EquitySecuritiesMemberinva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001080014inva:ArmataPharmaceuticalsIncMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ConvertibleDebtMember2024-03-310001080014us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberinva:GateNeuroscienceMemberus-gaap:ConvertibleDebtMember2023-12-310001080014inva:IspFundLpMemberus-gaap:MoneyMarketFundsMember2023-12-310001080014inva:ArmataPharmaceuticalsIncMemberinva:WarrantsPurchasedIn2020Member2020-01-012020-03-310001080014inva:LongActingBeta2AgonistRelvarBreoMemberinva:GSKMember2024-01-012024-03-310001080014inva:EquityIncentivePlansAndESPPMember2024-01-012024-03-310001080014us-gaap:SubsequentEventMemberus-gaap:CommonStockMember2024-04-012024-04-250001080014us-gaap:SeriesCPreferredStockMemberinva:IncardaMember2023-12-310001080014inva:SecondNoteAmendmentAgreementMemberinva:GateNeuroscienceMember2023-10-060001080014inva:TwoThousandTwentyEightNotesMemberinva:SeniorUnsecuredConvertibleNotesMember2024-01-012024-03-310001080014inva:SeriesD1AndD2PreferredStockAndCommonStockMemberinva:IncardaMember2023-12-310001080014inva:PrivatelyNegotiatedCappedCallOptionMemberinva:TwoThousandTwentyEightNotesMemberinva:SeniorUnsecuredConvertibleNotesMember2022-01-012022-03-310001080014us-gaap:RoyaltyMember2024-01-012024-03-310001080014inva:ArmataPharmaceuticalsIncMemberinva:ArmataConvertibleNoteMember2024-01-012024-03-310001080014us-gaap:CustomerConcentrationRiskMemberus-gaap:TradeAccountsReceivableMemberinva:CustomerThreeMemberinva:LaJollaMember2024-01-012024-03-310001080014us-gaap:FairValueInputsLevel3Memberinva:OptionPricingModelBacksolveValuationMemberinva:IncardaMember2024-01-012024-03-310001080014inva:ArmataPharmaceuticalsIncMemberinva:ArmataMarchTwoThousandTwentyFourTermLoanMember2024-03-310001080014inva:ConvertiblePromissoryNotePurchaseAgreementMemberinva:GateNeuroscienceMember2023-10-060001080014us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:DebtMember2024-03-310001080014us-gaap:CommonStockMemberinva:ImaginabMemberinva:OneOfImaginabsCommonStockholderMember2021-03-180001080014us-gaap:CustomerConcentrationRiskMemberus-gaap:TradeAccountsReceivableMemberinva:CustomerOneMemberinva:LaJollaMember2024-01-012024-03-310001080014us-gaap:SeriesCPreferredStockMemberinva:IncardaMember2024-03-310001080014srt:MaximumMemberinva:InnovivaMemberus-gaap:EmployeeStockOptionMember2024-01-012024-03-310001080014us-gaap:CustomerConcentrationRiskMemberinva:CustomerTwoMemberus-gaap:SalesRevenueNetMemberinva:LaJollaMember2024-01-012024-03-310001080014us-gaap:ResearchAndDevelopmentExpenseMember2024-01-012024-03-310001080014us-gaap:TreasuryStockCommonMember2023-01-012023-03-31inva:Directoriso4217:USDinva:Itemxbrli:purexbrli:sharesinva:Customeriso4217:USDxbrli:sharesiso4217:CHFinva:Trancheiso4217:USD

 

 

 

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, 2024

 

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 Other Jurisdiction of
Incorporation or Organization)

 

(I.R.S. Employer
Identification No.)

 

1350 Old Bayshore Highway Suite 400

Burlingame, CA 94010

(Address of Principal Executive Offices)

 

(650) 238-9600

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

INVA

 

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Act.

 

Large accelerated filer ☒

 

Accelerated filer ☐

 

 

 

Non-accelerated filer ☐

 

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No

 

The number of shares of registrant’s common stock outstanding on April 30, 2024 was 62,444,778.

 

 

 

 


 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements (Unaudited)

3

 

 

Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

3

Condensed Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2024 and 2023

4

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023

5

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023

7

Notes to Condensed Consolidated Financial Statements

9

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

35

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

42

 

 

Item 4. Controls and Procedures

42

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

43

 

 

Item 1A. Risk Factors

44

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

44

 

 

Item 3. Defaults Upon Senior Securities

44

 

 

Item 4. Mine Safety Disclosure

44

 

 

Item 5. Other Information

44

 

 

Item 6. Exhibits

45

 

 

Signatures

46

 

 

 

 

 

 

 

 

 

2


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

INNOVIVA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

 

(unaudited)

 

 

*

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

178,357

 

 

$

193,513

 

Accounts receivable

 

 

14,139

 

 

 

14,454

 

Receivables from collaboration arrangement

 

 

61,871

 

 

 

69,621

 

Inventory

 

 

37,437

 

 

 

40,737

 

Prepaid expenses

 

 

16,551

 

 

 

21,630

 

Other current assets

 

 

2,987

 

 

 

4,264

 

Total current assets

 

 

311,342

 

 

 

344,219

 

Property and equipment, net

 

 

324

 

 

 

483

 

Equity method investments

 

 

151,888

 

 

 

116,546

 

Equity and long-term investments

 

 

476,549

 

 

 

444,432

 

Capitalized fees paid, net

 

 

80,328

 

 

 

83,784

 

Right-of-use assets

 

 

2,269

 

 

 

2,536

 

Goodwill

 

 

17,905

 

 

 

17,905

 

Intangible assets

 

 

223,895

 

 

 

230,335

 

Other assets

 

 

3,112

 

 

 

3,267

 

Total assets

 

$

1,267,612

 

 

$

1,243,507

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

890

 

 

$

6,717

 

Accrued personnel-related expenses

 

 

3,422

 

 

 

7,020

 

Accrued interest payable

 

 

833

 

 

 

3,422

 

Deferred revenue

 

 

987

 

 

 

1,277

 

Other accrued liabilities

 

 

23,747

 

 

 

19,698

 

Total current liabilities

 

 

29,879

 

 

 

38,134

 

Long-term debt, net of discount and issuance costs

 

 

446,759

 

 

 

446,234

 

Other long-term liabilities

 

 

71,686

 

 

 

71,870

 

Deferred tax liabilities, net

 

 

3,807

 

 

 

563

 

Income tax payable, long-term

 

 

11,800

 

 

 

11,751

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock: $0.01 par value, 230 shares authorized,
   
no shares issued and outstanding

 

 

 

 

 

 

Common stock: $0.01 par value, 200,000 shares authorized,
   
62,797 and 63,307 issued and outstanding as of
   March 31, 2024 and December 31, 2023, respectively

 

 

628

 

 

 

633

 

Treasury stock: at cost, 32,005 shares as of March 31, 2024
   and December 31, 2023

 

 

(393,829

)

 

 

(393,829

)

Additional paid-in capital

 

 

1,085,539

 

 

 

1,093,340

 

Retained earnings (accumulated deficit)

 

 

11,343

 

 

 

(25,189

)

Total stockholders’ equity

 

 

703,681

 

 

 

674,955

 

Total liabilities and stockholders’ equity

 

$

1,267,612

 

 

$

1,243,507

 


 

 

*Condensed consolidated balance sheet has been derived from audited consolidated financial statements as of December 31, 2023.

 

See accompanying notes to condensed consolidated financial statements.

3


 

INNOVIVA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Revenue:

 

 

 

 

 

 

Royalty revenue, net of amortization of capitalized fees
   paid of $
3,456 in the three months ended
   March 31, 2024 and 2023

 

$

58,415

 

 

$

56,858

 

Net product sales

 

 

19,084

 

 

 

11,514

 

License revenue

 

 

 

 

 

8,000

 

Total revenue

 

 

77,499

 

 

 

76,372

 

Expenses:

 

 

 

 

 

 

Cost of products sold (inclusive of
   amortization of inventory fair value
   adjustments, excluding amortization
   of intangible assets)

 

 

10,971

 

 

 

8,749

 

Cost of license revenue

 

 

 

 

 

1,600

 

Selling, general and administrative

 

 

30,405

 

 

 

19,735

 

Research and development

 

 

3,878

 

 

 

12,588

 

Amortization of acquired intangible assets

 

 

6,440

 

 

 

3,805

 

Changes in fair values of equity method
   investments, net

 

 

(35,342

)

 

 

(15,817

)

Changes in fair values of equity and
   long-term investments, net

 

 

13,335

 

 

 

2,164

 

Interest and dividend income

 

 

(4,399

)

 

 

(3,365

)

Interest expense

 

 

5,851

 

 

 

4,427

 

Other expense, net

 

 

1,236

 

 

 

1,346

 

Total expenses, net

 

 

32,375

 

 

 

35,232

 

Income before income taxes

 

 

45,124

 

 

 

41,140

 

Income tax expense, net

 

 

8,592

 

 

 

6,275

 

Net income and comprehensive income

 

$

36,532

 

 

$

34,865

 

Net income per share:

 

 

 

 

 

 

Basic

 

$

0.58

 

 

$

0.51

 

Diluted

 

$

0.46

 

 

$

0.42

 

Shares used to compute net income per share:

 

 

 

 

 

 

Basic

 

 

63,185

 

 

 

67,786

 

Diluted

 

 

84,531

 

 

 

89,788

 

See accompanying notes to condensed consolidated financial statements.

4


 

INNOVIVA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

Retained

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Earnings

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

(Accumulated

 

 

Treasury Stock

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit)

 

 

Shares

 

 

Amount

 

 

Equity

 

Balance as of January 1, 2024

 

 

63,307

 

 

$

633

 

 

$

1,093,340

 

 

$

(25,189

)

 

 

32,005

 

 

$

(393,829

)

 

$

674,955

 

Exercise of stock options and
   issuance of common stock units
   and stock awards, net of
   repurchase of shares to satisfy
   tax withholding

 

 

124

 

 

 

1

 

 

 

403

 

 

 

 

 

 

 

 

 

 

 

 

404

 

Repurchase of common stock

 

 

(634

)

 

 

(6

)

 

 

(9,659

)

 

 

 

 

 

 

 

 

 

 

 

(9,665

)

Stock-based compensation

 

 

 

 

 

 

 

 

1,455

 

 

 

 

 

 

 

 

 

 

 

 

1,455

 

Net income

 

 

 

 

 

 

 

 

 

 

 

36,532

 

 

 

 

 

 

 

 

 

36,532

 

Balance as of March 31, 2024

 

 

62,797

 

 

$

628

 

 

$

1,085,539

 

 

$

11,343

 

 

 

32,005

 

 

$

(393,829

)

 

$

703,681

 

 

5


 

 

 

 

Three Months Ended March 31, 2023

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Treasury Stock

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Shares

 

 

Amount

 

 

Equity

 

Balance as of January 1, 2023

 

 

69,188

 

 

$

692

 

 

$

1,163,836

 

 

$

(204,911

)

 

 

32,005

 

 

$

(393,829

)

 

$

565,788

 

Issuance of common stock units
   and stock awards, net of repurchase
   of shares to satisfy tax withholding

 

 

55

 

 

 

1

 

 

 

(24

)

 

 

 

 

 

 

 

 

 

 

 

(23

)

Repurchase of common stock

 

 

(3,419

)

 

 

(34

)

 

 

(40,701

)

 

 

 

 

 

 

 

 

 

 

 

(40,735

)

Stock-based compensation

 

 

 

 

 

 

 

 

1,598

 

 

 

 

 

 

 

 

 

 

 

 

1,598

 

Net income

 

 

 

 

 

 

 

 

 

 

 

34,865

 

 

 

 

 

 

 

 

 

34,865

 

Balance as of March 31, 2023

 

 

65,824

 

 

$

659

 

 

$

1,124,709

 

 

$

(170,046

)

 

 

32,005

 

 

$

(393,829

)

 

$

561,493

 

See accompanying notes to condensed consolidated financial statements.

6


 

INNOVIVA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities

 

 

 

 

 

 

Net income

 

$

36,532

 

 

$

34,865

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Deferred income taxes

 

 

3,244

 

 

 

(812

)

Amortization of capitalized fees and depreciation of property and equipment

 

 

3,510

 

 

 

3,479

 

Amortization of acquired intangible assets

 

 

6,440

 

 

 

3,805

 

Inventory fair value step-up adjustment included in cost of products sold

 

 

6,843

 

 

 

6,842

 

Stock-based compensation

 

 

1,455

 

 

 

1,598

 

Amortization of debt discount and issuance costs

 

 

525

 

 

 

523

 

Changes in fair values of equity method investments, net

 

 

(35,342

)

 

 

(15,817

)

Changes in fair values of equity and long-term investments, net

 

 

13,335

 

 

 

2,164

 

Accrued interest income added to long-term investments

 

 

 

 

 

(1,482

)

Other non-cash items

 

 

(1,513

)

 

 

(2,062

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

315

 

 

 

(6,089

)

Receivables from collaboration arrangement

 

 

7,750

 

 

 

(5,642

)

Inventory

 

 

(3,543

)

 

 

(598

)

Prepaid expenses

 

 

5,079

 

 

 

5,440

 

Other assets

 

 

633

 

 

 

518

 

Accounts payable

 

 

(5,827

)

 

 

2,994

 

Accrued personnel-related expenses and other accrued liabilities

 

 

441

 

 

 

(565

)

Accrued interest payable

 

 

(2,589

)

 

 

(3,526

)

Income tax payable

 

 

49

 

 

 

49

 

Deferred revenue

 

 

(290

)

 

 

 

Net cash provided by operating activities

 

 

37,047

 

 

 

25,684

 

Cash flows from investing activities

 

 

 

 

 

 

Purchases of trading securities

 

 

(43,136

)

 

 

 

Purchases of equity and long-term investments

 

 

 

 

 

(35,689

)

Purchases of equity investments managed by ISP Fund LP

 

 

(8,756

)

 

 

(3,891

)

Sales of equity investments managed by ISP Fund LP

 

 

5,342

 

 

 

1,289

 

Purchases and sales of other investments managed by ISP Fund LP, net

 

 

3,414

 

 

 

2,602

 

Purchases of property and equipment

 

 

 

 

 

(33

)

Sale of property and equipment

 

 

98

 

 

 

 

Net cash used in investing activities

 

 

(43,038

)

 

 

(35,722

)

Cash flows from financing activities

 

 

 

 

 

 

Repurchase of common stock

 

 

(9,569

)

 

 

(40,735

)

Repurchase of shares to satisfy tax withholding

 

 

(84

)

 

 

(23

)

Proceeds from issuances of common stock, net

 

 

488

 

 

 

 

Payment for repurchase of convertible subordinated notes due 2023

 

 

 

 

 

(96,204

)

Net cash used in financing activities

 

 

(9,165

)

 

 

(136,962

)

Net decrease in cash and cash equivalents

 

 

(15,156

)

 

 

(147,000

)

Cash and cash equivalents at beginning of period

 

 

193,513

 

 

 

291,049

 

Cash and cash equivalents at end of period

 

$

178,357

 

 

$

144,049

 

 

 

7


 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

Cash paid for interest

 

$

5,179

 

 

$

6,202

 

Supplemental Disclosure of Non-cash Investing and Financing Activities:

 

 

 

 

 

 

Accrued interest income converted to long-term investments

 

$

799

 

 

$

 

See accompanying notes to condensed consolidated financial statements.

8


 

INNOVIVA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of Operations and Summary of Significant Accounting Policies

Description of Operations

Innoviva, Inc. (and where context requires, together with its subsidiaries referred to as “Innoviva”, the “Company”, or “we” and other similar pronouns) is a company with a portfolio of royalties and innovative healthcare assets. Our royalty portfolio contains respiratory assets partnered with Glaxo Group Limited (“GSK”), including RELVAR®/BREO® ELLIPTA® (fluticasone furoate/vilanterol, “FF/VI”) and ANORO® ELLIPTA® (umeclidinium bromide/ vilanterol, “UMEC/VI”). Under the Long-Acting Beta2 Agonist (“LABA”) Collaboration Agreement, Innoviva is entitled to receive royalties from GSK on sales of RELVAR®/BREO® ELLIPTA® as follows: 15% on the first $3.0 billion of annual global net sales and 5% for all annual global net sales above $3.0 billion; and royalties from the sales of ANORO® ELLIPTA®, which tier upward at a range from 6.5% to 10%.

We expanded our portfolio through the acquisition of Entasis Therapeutics Holdings Inc. (“Entasis”) on July 11, 2022 and the acquisition of La Jolla Pharmaceutical Company (“La Jolla”) on August 22, 2022. Our commercial and marketed products include GIAPREZA® (angiotensin II), approved to increase blood pressure in adults with septic or other distributive shock, and XERAVA® (eravacycline) approved for the treatment of complicated intra-abdominal infections in adults. Our third product, XACDURO® (formerly known as sulbactam-durlobactam or SUL-DUR), was approved by the United States Food and Drug Administration (“FDA”) for the treatment of hospital-acquired and ventilator-associated pneumonias caused by Acinetobacter in adults on May 23, 2023. We commenced commercial sales of XACDURO® in the third quarter of 2023. Our development pipeline includes zoliflodacin, an investigational treatment for uncomplicated gonorrhea that reported positive data in a pivotal Phase 3 clinical trial on November 1, 2023. As such, we have a wholly owned robust critical care and infectious disease operating platform with a hospital focus anchored by three differentiated products with growth potential and a late-stage drug candidate.

In addition, we own other strategic healthcare assets, such as a large equity stake in Armata Pharmaceuticals, a leader in development of bacteriophages with potential use across a range of infectious and other serious diseases. We also have economic interests in other healthcare companies.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The unaudited condensed consolidated financial statements have been prepared on the same basis as audited consolidated financial statements and, in our opinion, include all adjustments, consisting of all normal recurring adjustments, necessary for the fair presentation of our financial position, results of operations, comprehensive income and cash flows. The interim results are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2024, or any other periods.

The accompanying unaudited condensed consolidated financial statements include the accounts of Innoviva, our wholly-owned subsidiaries, and certain variable interest entities (“VIEs”) for which we are the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (“SEC”) on February 29, 2024, and as amended on March 5, 2024 and March 22, 2024.

Use of Management’s Estimates

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

9


 

Concentrations of Credit Risk and of Significant Suppliers and Partner

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

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

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

We also generate revenue from product sales of GIAPREZA® and XERAVA®. Additionally, we generate revenue from product sales of XACDURO®, which was commercially launched in September 2023. In the U.S., hospitals and other healthcare organizations generally acquire our products through a network of specialty distributors, which are regarded as our customers for accounting purposes. We do not believe that the loss of one of these distributors would significantly impact our ability to distribute our products, as we expect that sales volume would be absorbed by either new or remaining distributors. Three of our customers each account for 36%, 26% and 24%, respectively, of our net product sales for the three months ended March 31, 2024. These same customers account for 37%, 21% and 12%, respectively, of our receivables from net product sales, which are included in “Accounts receivables” in our unaudited condensed consolidated balance sheet as of March 31, 2024.

Refer to Item 1A. “Risk Factors” disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

Segment Reporting

We operate in a single segment, focusing on providing capital return to stockholders by maximizing the potential value of our portfolio of royalties and innovative healthcare assets. Our Chief Executive Officer serves as our Chief Operating Decision Maker (“CODM”). The CODM allocates resources and evaluates Innoviva’s performance at the consolidated level using information about our revenues, operating results and other key financial data as needed.

Variable Interest Entities

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

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

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

10


 

Cash and Cash Equivalents

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

Accounts Receivable

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

Inventory

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

Goodwill and Intangible Assets

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

Operating Leases

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

Equity and Long-Term Investments

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

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

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

11


 

We also invest in ISP Fund LP, which investments consist of money market funds, trading and equity securities in the healthcare, pharmaceutical and biotechnology industries. Pursuant to the Partnership Agreement entered in December 2020, we became a limited partner of this partnership, and our contributions are subject to a 36-month lock-up period which restriction prevents us from having control and access to the contributions and related investments. The lock-up period for a certain portion of our contributions expired in December 2023. We did not elect to make a withdrawal in 2023, thereby extending the lock-up period and withdrawal elections into subsequent years. These investments are classified as long-term investments in the unaudited condensed consolidated balance sheets.

Revenue Recognition

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

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

Royalty Revenue

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

Revenue from Product Sales

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

Chargebacks: Chargebacks are discounts we provide to distributors in the event that the sales prices to end users are below the distributors’ acquisition price. This may occur due to a direct contract with a health system, a group purchasing organization (“GPO”) agreement or a sale to a government facility. Chargebacks are estimated based on known chargeback rates and recorded as a reduction of revenue on delivery to our customers.
Discounts: We offer customers various forms of incentives and consideration, including prompt-pay and other discounts. We estimate discounts primarily based on contractual terms. These discounts are recorded as a reduction of revenue on delivery to our customers.
Returns: We offer customers a limited right of return, generally for damaged or expired product. We estimate returns based on an internal analysis, which includes actual experience. The estimates for returns are recorded as a reduction of revenue on delivery to our customers.

12


 

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

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

License Revenue

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

 

Research and Development Expenses

 

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

Interest Expense on Deferred Royalty Obligation

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

Related Party

Sarissa Capital owned 11.6% of our outstanding common stock as of March 31, 2024. Transactions with Sarissa Capital are described in Note 5, “Consolidated Entity”. Sarissa Capital is considered to be a related party because two of its principals are members of our board of directors.

Recently Issued Accounting Pronouncements Not Yet Adopted

In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The amendment modifies the disclosure or presentation requirements for a variety of topics. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective. The Company does not expect the adoption of the amendments to have a significant impact on its financial statements.

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). This ASU update requires enhanced segment disclosures, primarily related to significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. The Company does not expect the adoption of the amendments to have a significant impact on its financial statements.

13


 

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires the disclosure of income taxes paid disaggregated by jurisdiction and enhanced disclosures for the entity’s effective tax rate reconciliation as well as other income tax related disclosures. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. The Company does not expect the adoption of the amendments to have a significant impact on its financial statements.

2. Net Income Per Share

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

The following table shows the computation of basic and diluted net income per share for the three months ended March 31, 2024 and 2023:

 

 

 

Three Months Ended March 31,

 

(In thousands except per share data)

 

2024

 

 

2023

 

Numerator:

 

 

 

 

 

 

Net income, basic

 

$

36,532

 

 

$

34,865

 

Add: interest expense on 2023 Notes, net of tax effect

 

 

 

 

 

81

 

Add: interest expense on 2025 Notes, net of tax effect

 

 

1,121

 

 

 

1,169

 

Add: interest expense on 2028 Notes, net of tax effect

 

 

1,401

 

 

 

1,459

 

Net income, diluted

 

$

39,054

 

 

$

37,574

 

Denominator:

 

 

 

 

 

 

Weighted-average shares used to compute basic net income
   per share

 

 

63,185

 

 

 

67,786

 

Dilutive effect of 2023 Notes

 

 

 

 

 

757

 

Dilutive effect of 2025 Notes

 

 

11,150

 

 

 

11,150

 

Dilutive effect of 2028 Notes

 

 

9,956

 

 

 

9,956

 

Dilutive effect of options and awards granted under equity
   incentive plan and employee stock purchase plan

 

 

240

 

 

 

139

 

Weighted-average shares used to compute diluted net income
   per share

 

 

84,531

 

 

 

89,788

 

Net income per share

 

 

 

 

 

 

Basic

 

$

0.58

 

 

$

0.51

 

Diluted

 

$

0.46

 

 

$

0.42

 

 

Anti-Dilutive Securities

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

 

 

 

Three Months Ended March 31,

 

(In thousands)

 

2024

 

 

2023

 

Outstanding options and awards granted under equity incentive
   plan and employee stock purchase plan

 

 

1,360

 

 

 

1,326

 

Outstanding stock warrant

 

 

591

 

 

 

591

 

Total

 

 

1,951

 

 

 

1,917

 

 

14


 

3. Revenue Recognition

Net Revenue from Collaboration Arrangement

Net revenue recognized under our GSK Agreements was as follows:

 

 

 

Three Months Ended March 31,

 

(In thousands)

 

2024

 

 

2023

 

Royalties
   - RELVAR/BREO

 

$

52,138

 

 

$

50,883

 

Royalties
   - ANORO

 

 

9,733

 

 

 

9,431

 

Total royalties

 

 

61,871

 

 

 

60,314

 

Less: amortization of capitalized fees paid

 

 

(3,456

)

 

 

(3,456

)

Total net royalty revenue

 

$

58,415

 

 

$

56,858

 

 

Net Product Sales

Our net product sales were $19.1 million, consisting of net sales of GIAPREZA®, XERAVA®, and XACDURO® for $12.1 million, $4.8 million and $2.2 million, respectively, for the three months ended March 31, 2024. We derived over 91% of our net product sales from customers located in the U.S for the period.

Our net product sales were $11.5 million, consisting of net sales of GIAPREZA® and XERAVA® for $9.0 million and $2.5 million, respectively, for the three months ended March 31, 2023. We derived over 99% of our net product sales from customers located in the U.S for the period.

License Revenue

 

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

4. License and Collaboration Arrangements

Out-License Agreements

Zai Lab

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

We are eligible to receive up to an aggregate of $91.0 million in research and development support payments and development, regulatory and sales milestone payments related to SUL-DUR, imipenem and other combinations with the licensed products. Zai Lab will pay us a tiered royalty equal to from a high-single digit to low-double digit percentage based on annual net sales of licensed products in the territory, subject to specified reductions for the market entry of competing products, loss of patent coverage of licensed products and for payments owed to third parties for additional rights necessary to commercialize licensed products in the territory. Payments received for research support and reimbursable clinical trial costs are recorded as a reduction to research and development expense during the period in which the qualifying expenses are incurred. Such amounts recorded for the three months ended March 31, 2024 and 2023 were not material.

15


 

On April 24, 2024, we entered into an amendment to the Zai Agreement, pursuant to which Zai Lab shall share certain costs estimated at approximately $8.1 million associated with supply chain activities for manufacturing XACDURO®.

GARDP

Entasis entered into a collaboration agreement with the Global Antibiotic Research and Development Partnership (“GARDP”) for the development, manufacture and commercialization of the product candidate zoliflodacin in certain countries (“the GARDP Collaboration Agreement”). Under the terms of the GARDP Collaboration Agreement, GARDP will use commercially reasonable endeavors to perform and fully fund the Phase 3 registrational trial, including the manufacture and supply of the product candidate containing zoliflodacin, in uncomplicated gonorrhea. We recorded reimbursements from GARDP under this agreement as reduction to research and development expense. Relevant amounts for the three months ended March 31, 2024 and 2023 were not material.

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

PAION Pharma GmbH

Pursuant to the PAION AG and PAION Deutschland GmbH (together and individually “PAION”) License, La Jolla granted PAION an exclusive license to commercialize GIAPREZA® and XERAVA® in the European Economic Area, the United Kingdom and Switzerland (collectively, the “PAION Territory”). We are entitled to receive potential commercial milestone payments of up to $109.5 million and double-digit tiered royalty payments. Royalties payable in a given jurisdiction under the PAION License will be subject to reduction on account of generic competition and after patent expiration in that jurisdiction. Pursuant to the PAION License, PAION will be solely responsible for the future development and commercialization of GIAPREZA® and XERAVA® in the PAION Territory. PAION is required to use commercially reasonable efforts to commercialize GIAPREZA® and XERAVA® in the PAION Territory. We have not recognized any revenue from PAION related to commercial milestones from the date of acquisition of La Jolla to March 31, 2024. Royalty revenue recognized under this agreement for the three months ended March 31, 2024 and 2023 was not material.

La Jolla also entered into the PAION commercial supply agreement (the “PAION Supply Agreement”) whereby La Jolla will supply PAION a minimum quantity of GIAPREZA® and XERAVA® through July 13, 2024. The PAION supply agreement will automatically renew until the earlier of July 13, 2027, or until a new supply agreement is executed. During the initial term of the supply agreement, we will be reimbursed for direct and certain indirect manufacturing costs at cost. We did not recognize any cost reimbursements under this agreement for the three months ended March 31, 2024 and 2023.

PAION filed for insolvency in Germany on October 27, 2023 and the insolvency proceedings commenced on January 1, 2024. PAION announced on December 22, 2023 that it concluded negotiations with Humanwell Healthcare Group and entered into an agreement on the sale of the essential business operations of PAION with the approval of the insolvency administrator in both procedures. In early 2024, the sale of business operations of PAION was completed and starting February 2024, PAION has continued its business as a subsidiary of the Humanwell Healthcare Group as an independent company under the name PAION Pharma GmbH.

16


 

Everest Medicines Limited

Pursuant to the Everest Medicines Limited (“Everest”) License, La Jolla granted Everest an exclusive license to develop and commercialize XERAVA® for the treatment of complicated intra-abdominal infections (“cIAI”) and other indications in mainland China, Taiwan, Hong Kong, Macau, South Korea, Singapore, the Malaysian Federation, the Kingdom of Thailand, the Republic of Indonesia, the Socialist Republic of Vietnam and the Republic of the Philippines (collectively, the “Everest Territory”). Under the Everest License, we recognized $8.0 million in license revenue for the three months ended March 31, 2023 as a result of our achievement of a regulatory milestone during the period. We are eligible to receive additional sales milestone payments of up to an aggregate of $20.0 million.

We are also entitled to receive tiered royalties from Everest at percentages in the low double digits on sales, if any, in the Everest Territory of products containing eravacycline. Royalties are payable with respect to each jurisdiction in the Everest Territory until the latest to occur of: (i) the last-to-expire of specified patent rights in such jurisdiction in the Everest Territory; (ii) expiration of marketing or regulatory exclusivity in such jurisdiction in the Everest Territory; or (iii) 10 years after the first commercial sale of a product in such jurisdiction in the Everest Territory. Royalty revenue recognized for the three months ended March 31, 2024 and 2023 was not material.

La Jolla also entered into the Everest commercial supply agreement (the “Everest Supply Agreement”) whereby La Jolla will supply Everest a minimum quantity of XERAVA® and will transfer to Everest certain XERAVA®-related manufacturing know-how. Under the Everest Supply Agreement, we are reimbursed for direct and certain indirect manufacturing costs at 110% of cost. Revenue recognized under this agreement for the three months ended March 31, 2024 and 2023 was not material.

In-License Agreements

George Washington University

Pursuant to the George Washington University (“GW”) License, GW exclusively licensed to La Jolla certain intellectual property rights relating to GIAPREZA®, including the exclusive rights to certain issued patents and patent applications covering GIAPREZA®. Under the GW License, we are obligated to use commercially reasonable efforts to develop, commercialize, market and sell GIAPREZA®. We are obligated to pay a 6% royalty on net sales of GIAPREZA® and 15% on payments received from sublicensees. The obligation to pay royalties under this agreement extends through the last-to-expire patent covering GIAPREZA®. Amounts recognized under this agreement for the three months ended March 31, 2024 and 2023 were not material.

Harvard University

Pursuant to the Harvard University (“Harvard”) License, Harvard exclusively licensed to La Jolla certain intellectual property rights relating to tetracycline-based products, including XERAVA®, including the exclusive rights to certain issued patents and patent applications covering such products. Under the Harvard License, we are obligated to use commercially reasonable efforts to develop, commercialize, market and sell tetracycline-based products, including XERAVA®. For each product covered by the Harvard License, we are obligated to make certain payments for the following: (i) up to approximately $15.1 million upon the achievement of certain clinical development and regulatory milestones; (ii) a 5% royalty on direct U.S. net sales of XERAVA®; (iii) a single-digit tiered royalty on direct ex-U.S. net sales of XERAVA®, starting at a minimum royalty rate of 4.5%, with step-ups to a maximum royalty of 7.5% based on the achievement of annual net product sales thresholds; and (iv) 20% on payments received from sublicensees. The obligation to pay royalties under this agreement extends through the last-to-expire patent covering tetracycline-based products, including XERAVA®. Amounts recognized under this agreement for the three months ended March 31, 2024 were not material. For the three months ended March 31, 2023, we recognized $1.6 million in cost of license revenue under this agreement as a result of the license revenue we earned under the out-licensing agreement with Everest for the same period.

Paratek Pharmaceuticals, Inc.

Pursuant to the Paratek Pharmaceuticals, Inc. (“Paratek”) License, Paratek non-exclusively licensed to La Jolla certain intellectual property rights relating to XERAVA®, including non-exclusive rights to certain issued patents and patent applications covering XERAVA®. We are obligated to pay Paratek a 2.25% royalty based on direct U.S. net sales of XERAVA®. Our obligation to pay royalties with respect to the licensed product was retroactive to the date of the first commercial sale of XERAVA® and continued until there were no longer any valid claims of the Paratek patents, which expired in October 2023. Amounts recognized under this agreement for the three months ended March 31, 2023 were not material.

17


 

Business Transfer and Subscription Agreement with AstraZeneca

Entasis entered into a Business Transfer and Subscription Agreement with AstraZeneca, AstraZeneca UK Limited and AstraZeneca Pharmaceuticals LP (collectively, “AstraZeneca”) (the “AstraZeneca Agreement”) in 2015, which was amended and restated through 2018, pursuant to which Entasis obtained, among other things, worldwide rights to durlobactam and zoliflodacin. Under the AstraZeneca Agreement, we are obligated to pay AstraZeneca a one-time milestone payment of $5.0 million within three months of achieving a specified cumulative net sales milestone for durlobactam. We are also obligated to pay AstraZeneca a one-time milestone payment of $10.0 million within two years of achieving the first commercial sale of zoliflodacin. Additionally, we are obligated to pay AstraZeneca tiered, single-digit royalties on the annual worldwide net sales of durlobactam and, the lesser of tiered, single-digit royalties on the worldwide annual net sales of zoliflodacin and a specified share of the royalties we receive from sublicensees of zoliflodacin. Royalties on sales of zoliflodacin do not include sales by GARDP in low-income and specified middle-income countries as discussed above. Our obligation to make these royalty payments expires with respect to each product on a country-by-country basis upon the later of (i) the 10-year anniversary of the first commercial sale of a product in each such country or (ii) when the last patent right covering a product expires in each such country.

The royalty expense in respect of durlobactam arising from our net sales of XACDURO® for the three months ended March 31, 2024 was not material.

5. Consolidated Entity

ISP Fund LP

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

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

The Partnership Agreement includes a lock-up period of thirty-six months after which Strategic Partners is entitled to make withdrawals from the Partnership as of such lock-up expiration date and each anniversary thereafter, subject to certain limitations. The lock-up period for the initial contribution of $190.0 million, which excludes the $110.0 million amount discussed below, expired in December 2023. Strategic Partners did not elect to make a withdrawal in 2023, thereby extending the lock-up period and withdrawal elections into subsequent years.

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

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

ISP Fund LP is determined to be an investment company under ASC 946, Financial Services – Investment Companies, as it meets all fundamental characteristics of an investment company, and its activities are consistent with those of an investment company. Since ISP Fund LP is subject to investment company industry specific guidance, we have retained the industry-specific guidance applied by the Partnership. In addition, as our investment in the Partnership is a passive investment for the Company and is not part of our main operations, the investments are presented as part of “Equity and long-term investments” in our condensed consolidated balance sheets. We report in our condensed consolidated statements of income and comprehensive income any investment gains and losses by the Partnership as part of “Changes in fair value of equity and long-term investments, net”, any interest and dividend income as part of “Interest and dividend income” and any investment expenses as part of “Other expense, net”.

18


 

As of March 31, 2024, we continued to hold approximately 100% of the economic interest of the Partnership. As of March 31, 2024 and December 31, 2023, total assets of the Partnership were $287.2 million and $311.8 million, respectively, of which the majority was attributable to equity and long-term investments. As of March 31, 2024 and December 31, 2023, total liabilities were $1.8 million and $0.1 million, respectively. The partnership’s assets can only be used to settle its own obligations. During the three months ended March 31, 2024, we recorded $0.2 million of net investment-related expense incurred by the Partnership and $26.2 million of net negative changes in fair values of equity and long-term investments in the unaudited condensed consolidated statements of income and comprehensive income. During the three months ended March 31, 2023, we recorded $0.5 million of net investment-related expenses incurred by the Partnership and $4.1 million of net negative changes in fair values of equity and long-term investments in the unaudited condensed consolidated statements of income and comprehensive income.

6. Equity and Other Investments and Fair Value Measurements

Equity Investment in Armata

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

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

On February 9, 2022, ISO entered into a securities purchase agreement with Armata to acquire 9,000,000 shares of Armata common stock and warrants to purchase 4,500,000 additional shares of common stock with an exercise price of $5.00 per share for $45.0 million. The investment closed in two tranches on February 9, 2022 and March 31, 2022. The investment is intended to aid Armata in advancing its clinical pipeline and strengthening its bacteriophage platform. On February 9, 2022, Armata also entered a second amended and restated voting agreement with the Company and ISO, pursuant to which the Company and ISO agreed not to vote or take any action by written consent with respect to any common shares held by the Company and ISO that represent, in the aggregate, more than 49.5% of the total number of shares of Armata’s common stock for voting on the matters related to election or removal of Armata’s board members or amend the bylaws of Armata to reduce the maximum number of directors or set the number of directors who may serve on the board of Armata. The voting agreement will expire the earlier of the second anniversary of the agreement effective date and approval by the FDA of any of Armata’s product candidates for marketing and commercial distribution. In addition, as of February 9, 2022, Armata entered into an amended and restated investor rights agreement with the Company and ISO, pursuant to which for as long as the Company and ISO hold at least 12.5% of the outstanding shares of Armata’s common stock on a fully-diluted, the Company and ISO shall have the right to designate two directors to Armata’s board of directors, and for so long as the Company and ISO hold at least 8%, but less than 12.5%, of the outstanding shares of Armata’s common stock on a fully-diluted basis, the Company and ISO shall have the right to designate one director to Armata’s board of directors, subject to certain conditions and qualifications set forth in the amended and restated investor rights agreement. On July 10, 2023, Armata entered into an amendment to the amended and restated investor rights agreement with the Company and ISO, pursuant to which the Company and ISO agreed that the voting agreement will expire on the earlier of the fifth anniversary of the original agreement's effective date, January 26, 2021, or the approval by the FDA of any of Armata’s product candidates for marketing and commercial distribution. As of March 31, 2024, three of the seven members of Armata’s board of directors are also members of the board of directors of Innoviva. As of March 31, 2024 and December 31, 2023, the Company and ISO owned approximately 69.4%, of Armata’s common stock.

19


 

On January 10, 2023, we entered into a Secured Convertible Credit Agreement (the “Credit Agreement”) with Armata, under which we extended a one-year