Innoviva, Inc. - Quarter Report: 2021 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐ 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 Global Select Market

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 October 18, 2021 was 69,492,201.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020	3
Unaudited Consolidated Statements of Income for the Three and Nine Months ended September 30, 2021 and 2020	4
Unaudited Consolidated Statements of Comprehensive Income for the Three and Nine Months ended September 30, 2021 and 2020	5
Unaudited Consolidated Statements of Stockholders’ Equity for the Three and Nine Months ended September 30, 2021 and 2020	6
Unaudited Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2021 and 2020	8
Notes to Unaudited Consolidated Financial Statements	9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3. Quantitative and Qualitative Disclosures About Market Risk	27

Item 4. Controls and Procedures	27

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	27

Item 1A. Risk Factors	28

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 3. Defaults Upon Senior Securities	28

Item 4. Mine Safety Disclosure	28

Item 5. Other Information	28

Item 6. Exhibits	29

Signatures	30

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

INNOVIVA, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)


	September 30,			December 31,
	2021			2020
	(unaudited)			*
Assets
Current assets:
Cash and cash equivalents	$	135,115		$	246,487
Related party receivables from collaborative arrangements		101,271			93,931
Prepaid expenses and other current assets		542			1,640
Total current assets		236,928			342,058
Property and equipment, net		15			28
Equity and long-term investments		507,116			438,258
Capitalized fees paid to a related party, net		114,885			125,253
Deferred tax assets, net		28,159			93,759
Other assets		136			214
Total assets	$	887,239		$	999,570

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	89		$	66
Accrued personnel-related expenses		488			490
Accrued interest payable		1,668			4,152
Other accrued liabilities		880			1,402
Total current liabilities		3,125			6,110
Long-term debt, net of discount and issuance costs		392,295			385,517
Other long-term liabilities		14			106
Commitments and contingencies (Note 8)
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, 69,492 and 101,392 issued and outstanding as of September 30, 2021 and December 31, 2020 respectively		695			1,014
Treasury stock: at cost, 32,005 and no shares at September 30, 2021 and December 31, 2020, respectively		(393,829	)		—
Additional paid-in capital		1,262,438			1,260,900
Accumulated deficit		(466,493	)		(722,002	)
Total Innoviva stockholders’ equity		402,811			539,912
Noncontrolling interest		88,994			67,925
Total stockholders’ equity		491,805			607,837
Total liabilities and stockholders’ equity	$	887,239		$	999,570

Consolidated balance sheet as of December 31, 2020 has been derived from audited consolidated financial statements.

See accompanying notes to consolidated financial statements.

INNOVIVA, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Royalty revenue from a related party, net of amortization of capitalized fees paid to a related party of $3,456 in the three months ended September 30, 2021 and 2020, and $10,368 in the nine months ended September 30, 2021 and 2020	$	97,862		$	88,694		$	284,186		$	236,318
Revenue from collaborative arrangements with a related party		—			—			—			10,000
Total net revenue		97,862			88,694			284,186			246,318

Operating expenses:
Research and development		449			1,010			536			1,569
General and administrative		2,860			3,254			13,074			8,413
Total operating expenses		3,309			4,264			13,610			9,982
Income from operations		94,553			84,430			270,576			236,336

Other income (expense), net		(652	)		(13	)		(2,036	)		85
Interest income		453			41			503			1,501
Interest expense		(4,790	)		(4,603	)		(14,229	)		(13,680	)
Changes in fair values of equity and long-term investments, net		33,613			(29,368	)		133,973			39,245
Income before income taxes		123,177			50,487			388,787			263,487
Income tax expense, net		20,531			8,866			65,600			44,689
Net income		102,646			41,621			323,187			218,798
Net income attributable to noncontrolling interest		30,208			13,403			67,678			48,299
Net income attributable to Innoviva stockholders	$	72,438		$	28,218		$	255,509		$	170,499

Basic net income per share attributable to Innoviva stockholders	$	1.04		$	0.28		$	2.96		$	1.68
Diluted net income per share attributable to Innoviva stockholders	$	0.90		$	0.26		$	2.63		$	1.53

Shares used to compute Innoviva basic and diluted net income per share:
Shares used to compute basic net income per share		69,458			101,358			86,298			101,306
Shares used to compute diluted net income per share		81,699			113,572			98,536			113,543

See accompanying notes to consolidated financial statements.

INNOVIVA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income	$	102,646	$	41,621	$	323,187	$	218,798
Unrealized loss on marketable securities, net		—		2		—		(27	)
Comprehensive income		102,646		41,623		323,187		218,771
Comprehensive income attributable to noncontrolling interest		30,208		13,403		67,678		48,299
Comprehensive income attributable to Innoviva stockholders	$	72,438	$	28,220	$	255,509	$	170,472

See accompanying notes to consolidated financial statements.

INNOVIVA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Nine Months Ended September 30, 2021
							Additional			Accumulated Other													Total
	Common Stock						Paid-In			Comprehensive		Accumulated			Treasury Stock					Noncontrolling			Stockholders’
	Shares			Amount			Capital			Income (Loss)		Deficit			Shares		Amount			Interest			Equity
Balance as of December 31, 2020		101,392		$	1,014		$	1,260,900		$	—	$	(722,002	)		—	$	—		$	67,925		$	607,837
Distributions to noncontrolling interest		—			—			—			—		—			—		—			(21,285	)		(21,285	)
Equity activity of noncontrolling interest from a consolidated variable interest entity		—			—			—			—		—			—		—			8			8
Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding		16			—			(25	)		—		—			—		—			—			(25	)
Stock-based compensation		—			—			451			—		—			—		—			—			451
Net income		—			—			—			—		94,123			—		—			15,572			109,695
Balance as of March 31, 2021		101,408		$	1,014		$	1,261,326		$	—	$	(627,879	)		—	$	—		$	62,220		$	696,681
Distributions to noncontrolling interest		—			—			—			—		—			—		—			(20,161	)		(20,161	)
Equity activity of noncontrolling interest from a consolidated variable interest entity		—			—			—			—		—			—		—			8			8
Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding		92			1			49			—		—			—		—			—			50
Repurchase of common stock		(32,005	)		(320	)		—			—		—			32,005		(393,829	)		—			(394,149	)
Stock-based compensation		—			—			470			—		—			—		—			—			470
Net income		—			—			—			—		88,948			—		—			21,898			110,846
Balance as of June 30, 2021		69,495		$	695		$	1,261,845		$	—	$	(538,931	)		32,005	$	(393,829	)	$	63,965		$	393,745
Distributions to noncontrolling interest		—			—			—			—		—			—		—			(4,912	)		(4,912	)
Equity activity of noncontrolling interest from a consolidated variable interest entity		—			—			—			—		—			—		—			(267	)		(267	)
Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding		(3	)		—			51			—		—			—		—			—			51
Stock-based compensation		—			—			542			—		—			—		—			—			542
Net income		—			—			—			—		72,438			—		—			30,208			102,646
Balance as of September 30, 2021		69,492		$	695		$	1,262,438		$	—	$	(466,493	)		32,005	$	(393,829	)	$	88,994		$	491,805


	Nine Months Ended September 30, 2020
							Additional			Accumulated Other									Total
	Common Stock						Paid-In			Comprehensive			Accumulated			Noncontrolling			Stockholders’
	Shares			Amount			Capital			Income (Loss)			Deficit			Interest			Equity
Balance as of December 31, 2019		101,288		$	1,013		$	1,258,859		$	27		$	(946,404	)	$	28,621		$	342,116
Distributions to noncontrolling interest		—			—			—			—			—			(15,810	)		(15,810	)
Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding		32			—			170			—			—			—			170
Stock-based compensation		—			—			435			—			—			—			435
Net income		—			—			—			—			65,437			13,515			78,952
Other comprehensive income		—			—			—			6			—			—			6
Balance as of March 31, 2020		101,320		$	1,013		$	1,259,464		$	33		$	(880,967	)	$	26,326		$	405,869
Equity activity of noncontrolling interest from a consolidated variable interest entity		—			—			—			—			—			350			350
Distributions to noncontrolling interest		—			—			—			—			—			(12,152	)		(12,152	)
Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding		72			2			178			—			—			—			180
Stock-based compensation		—			—			375			—			—			—			375
Net income		—			—			—			—			76,844			21,381			98,225
Other comprehensive income		—			—			—			(35	)		—			—			(35	)
Balance as of June 30, 2020		101,392		$	1,015		$	1,260,017		$	(2	)	$	(804,123	)	$	35,905		$	492,812
Equity activity of noncontrolling interest from a consolidated variable interest entity		—			—			—			—			—			8			8
Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding		(1	)		(1	)		(11	)		—			—			—			(12	)
Stock-based compensation		—			—			441			—			—			—			441
Net income		—			—			—			—			28,218			13,403			41,621
Other comprehensive income		—			—			—			2			—			—			2
Balance as of September 30, 2020		101,391		$	1,014		$	1,260,447		$	—		$	(775,905	)	$	49,316		$	534,872

See accompanying notes to consolidated financial statements.

INNOVIVA, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2021			2020
Cash flows from operating activities
Net income	$	323,187		$	218,798
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes		65,600			44,689
Depreciation and amortization		10,376			10,382
Stock-based compensation		1,463			1,251
Amortization of debt discount and issuance costs		6,778			6,230
Amortization of discount on short-term investments		—			(343	)
Amortization of lease guarantee		—			135
Changes in fair values of equity and long-term investments, net		(132,485	)		(39,245	)
Other non-cash items		(251	)		14
Changes in operating assets and liabilities:
Receivables from collaborative arrangements		(7,340	)		(12,723	)
Prepaid expenses and other current assets		1,098			264
Accounts payable		23			613
Accrued personnel-related expenses and other accrued liabilities		(533	)		252
Accrued interest payable		(2,484	)		(2,484	)
Net cash provided by operating activities		265,432			227,833
Cash flows from investing activities
Maturities of marketable securities		—			86,000
Purchases of marketable securities		—			(12,943	)
Purchases of equity and long-term investments		(46,373	)		(72,500	)
Distributions of equity and long-term investments		110,000			—
Purchases of property and equipment		—			(13	)
Net cash provided by investing activities		63,627			544
Cash flows from financing activities
Repurchase of common stock		(394,149	)		—
Distributions to noncontrolling interest		(46,358	)		(27,962	)
Repurchase of shares to satisfy tax withholding		(47	)		(83	)
Proceeds from issuances of common stock, net		123			421
Net proceeds from the issuance of variable interest entity’s equity		—			344
Net cash used in financing activities		(440,431	)		(27,280	)
Net increase (decrease) in cash and cash equivalents		(111,372	)		201,097
Cash and cash equivalents at beginning of period		246,487			278,096
Cash and cash equivalents at end of period	$	135,115		$	479,193
Supplemental disclosure of cash flow information
Cash paid for interest	$	9,933		$	9,933

See accompanying notes to consolidated financial statements.

INNOVIVA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of Operations and Summary of Significant Accounting Policies

Description of Operations

Innoviva Inc. (referred to as “Innoviva”, the “Company”, or “we” and other similar pronouns) is a company with a portfolio of royalties and other healthcare assets. Our royalty portfolio contains respiratory assets partnered with Glaxo Group Limited (“GSK”), including RELVAR®/BREO® ELLIPTA® (fluticasone furoate/ vilanterol, “FF/VI”), ANORO® ELLIPTA® (umeclidinium bromide/ vilanterol, “UMEC/VI”) and TRELEGY® ELLIPTA® (the combination FF/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%. Innoviva is also entitled to 15% of royalty payments made by GSK under its agreements originally entered into with us, and since assigned to Theravance Respiratory Company, LLC (“TRC”), including TRELEGY® ELLIPTA® and any other product or combination of products that may be discovered or developed in the future under the LABA Collaboration Agreement and the Strategic Alliance Agreement with GSK (referred to herein as the “GSK Agreements”), which have been assigned to TRC other than RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA®.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements. In our opinion, the unaudited consolidated financial statements have been prepared on the same basis as audited consolidated financial statements and include all adjustments, consisting of only 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, 2021 or any other period.

The accompanying unaudited consolidated financial statements include the accounts of Innoviva, our wholly-owned subsidiaries and certain variable interest entities for which we are the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. For consolidated entities where we own or are exposed to less than 100% of the economics, we record net income (loss) attributable to noncontrolling interest in our unaudited consolidated statements of income equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties. The accompanying unaudited 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, 2020 filed with the Securities and Exchange Commission (“SEC”) on February 25, 2021 (“2020 Form 10-K”).

Variable Interest Entities

We evaluate our ownership, contractual and other interest in entities to determine if they are variable interest entities (“VIE”). We evaluate whether we have a variable interest in those entities and the nature and extent of those interests. Based on our evaluation, if we determine we are the primary beneficiary of a VIE, we consolidate the entity in our financial statements.

Equity Investments

We invest from time to time in equity securities of private or public companies. If we determine that we have control over these companies under either voting or VIE models, we include them in our 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 equity 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 and long-term investments, net on the consolidated statements of income.

If we conclude that we do not have an ability to exercise significant influence over an investee, we may elect to account for an equity security without a readily determinable fair value using the measurement alternative described in ASC Topic 825. This measurement alternative 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.

Revenue Recognition

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.

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 have the ability to 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.

Accounting Pronouncement Adopted by the Company

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”, which is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. We adopted ASU 2019-12 effective January 1, 2021. The adoption did not have a material impact on our consolidated financial statements.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements. This ASU improves the codification by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements is codified in the disclosure section of the codification. The ASU also clarifies various topics in the codification so that entities can apply guidance more consistently. The ASU is effective for fiscal years beginning after December 15, 2020. We adopted ASU 2020-10 effective January 1, 2021. The adoption did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Standards or Updates Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which is intended to simplify the accounting for convertible instruments by removing certain separation models in Subtopic 470-20 for convertible instruments. The ASU is effective for fiscal years beginning after December 15, 2021, and for interim periods within those fiscal years with early adoption permitted. We are currently in the process of evaluating the effects of the provisions of ASU 2020-06 on our consolidated financial statements.

2. Net Income Per Share

Basic net income per share attributable to Innoviva stockholders is computed by dividing net income attributable to Innoviva stockholders by the weighted-average number of shares of common stock outstanding. Diluted net income per share attributable to Innoviva stockholders is computed by dividing net income attributable to Innoviva stockholders by the weighted-average number of

shares of common stock and dilutive potential common stock equivalents then outstanding. Dilutive potential common stock equivalents include the assumed exercise, vesting and issuance of employee stock awards using the treasury stock method, as well as common stock issuable upon assumed conversion of our convertible subordinated notes due 2023 (the “2023 Notes”) using the if converted method.

Our convertible senior notes due 2025 (the “2025 Notes”) are convertible, based on the applicable conversion rate, into cash, shares of our common stock or a combination thereof, at our election. Our current intent is to settle the principal amount of the 2025 Notes in cash upon conversion. The impact of the assumed conversion premium to diluted net income per share is computed using the treasury stock method. As the average market price per share of our common stock as reported on The Nasdaq Global Select Market was lower than the initial conversion price of $17.26 per share, there was no dilutive effect of the assumed conversion premium for the three and nine months ended September 30, 2021 and 2020, respectively.

The following table shows the computation of basic and diluted net income per share for the three and nine months ended September 30, 2021 and 2020:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands except per share data)	2021		2020		2021		2020
Numerator:
Net income attributable to Innoviva stockholders, basic	$	72,438	$	28,218	$	255,509	$	170,499
Add: interest expense on 2023 Notes		1,186		1,171		3,553		3,535
Net income attributable to Innoviva stockholders, diluted	$	73,624	$	29,389	$	259,062	$	174,034
Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders		69,458		101,358		86,298		101,306
Dilutive effect of 2023 Notes		12,189		12,189		12,189		12,189
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan		52		25		49		48
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders		81,699		113,572		98,536		113,543
Net income per share attributable to Innoviva stockholders
Basic	$	1.04	$	0.28	$	2.96	$	1.68
Diluted	$	0.90	$	0.26	$	2.63	$	1.53

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:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2021		2020		2021		2020
Outstanding options and awards granted under equity incentive plan and employee stock purchase plan		891		1,268		1,048		1,172

3. Revenue Recognition and Collaborative Arrangements

We recognize 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. Royalties, which may include adjustments of estimates of net sales in prior periods, are recognized net of amortization of capitalized fees associated with any approval and launch milestone payments made to GSK.

Net Revenue from Collaborative Arrangements

Net revenue recognized under our GSK Agreements was as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2021			2020			2021			2020
Royalties from a related party - RELVAR/BREO	$	54,092		$	63,893		$	176,398		$	165,612
Royalties from a related party - ANORO		11,641			11,882			34,101			32,931
Royalties from a related party - TRELEGY		35,585			16,375			84,055			48,143
Total royalties from a related party		101,318			92,150			294,554			246,686
Less: amortization of capitalized fees paid to a related party		(3,456	)		(3,456	)		(10,368	)		(10,368	)
Royalty revenue		97,862			88,694			284,186			236,318
Strategic alliance - MABA program		—			—			—			10,000
Total net revenue from GSK	$	97,862		$	88,694		$	284,186		$	246,318

4. Consolidated Entities

We consolidate the financial results of TRC and Pulmoquine Therapeutics, Inc. (“Pulmoquine”), which we have determined to be VIEs. As we have the power to direct the economically significant activities of these entities and the obligation to absorb losses of, or the right to receive benefits from them, we are the primary beneficiary of the entities. We also consolidate the financial results of ISP Fund LP (the “Partnership”), which is our partnership with Sarissa Capital Management LP (“Sarissa Capital”), as we have determined that the Partnership is a VIE and we are its primary beneficiary.

Theravance Respiratory Company, LLC

The primary source of revenue for TRC is the royalties generated from the net sales of TRELEGY® ELLIPTA® by GSK. As of September 30, 2021, TRC held equity investments in InCarda Therapeutics, Inc. (“InCarda”) and ImaginAb, Inc. (“ImaginAb”). Refer to Note 5, “Financial Instruments and Fair Value Measurements,” for more information.

The summarized financial information for TRC is presented as follows:

Balance sheets


	September 30,		December 31,
(In thousands)	2021		2020
Assets
Cash and cash equivalents	$	46,505	$	38,081
Receivables from collaborative arrangements		35,535		24,946
Prepaid expenses and other current assets		1		—
Equity and long-term investments		22,743		16,959
Total assets	$	104,784	$	79,986

Liabilities and LLC Members’ Equity
Current liabilities	$	189	$	508
LLC members’ equity		104,595		79,478
Total liabilities and LLC members’ equity	$	104,784	$	79,986

Income statements


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2021		2020		2021			2020
Royalty revenue from a related party	$	35,585	$	16,375	$	84,055		$	48,143
Strategic alliance - MABA program		—		—		—			10,000
Total net revenue		35,585		16,375		84,055			58,143
Operating expenses		194		607		3,811			1,358
Income from operations		35,391		15,768		80,244			56,785
Other income, net		—		—		—			37
Changes in fair values of equity and long-term investments		148		—		(589	)		—
Net income	$	35,539	$	15,768	$	79,655		$	56,822

Pulmoquine Therapeutics, Inc.

In April 2020, we purchased 5,808,550 shares of Series A preferred stock of Pulmoquine for $5.0 million in cash. These shares represent a majority voting interest in Pulmoquine. Pulmoquine is a biotechnology company focused on the research and development of an aerosolized formulation of hydroxychloroquine to treat respiratory infections. In August 2021, the directors and stockholders of Pulmoquine voted to cease and terminate all operations and activities of Pulmoquine as soon as practicable. In September 2021, we received a net distribution of $2.3 million in cash related to the voluntary dissolution of Pulmoquine. The dissolution will be finalized in the fourth quarter of 2021.

As of September 30, 2021 and December 31, 2020, Pulmoquine’s total assets, mainly attributable to cash and cash equivalents, were $0.2 million and $3.5 million, respectively. Pulmoquine does not generate revenue. Total operating expense was $0.5 million and $0.7 million for the three and nine months ended September 30, 2021 respectively. Total operating expense was $1.1 million and $1.7 million for the three and nine months ended September 30, 2020.

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.

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. Pursuant to the letter agreement entered into between Strategic Partners, the Partnership and Sarissa Capital Fund GP LP on May 20, 2021, Strategic Partners is obligated to make additional capital contributions to the Partnership in an aggregate amount equal to the amount of the distribution ($110.0 million) prior to March 31, 2022. The capital contributions will then be subject to a 36-month lock up period from the contribution date.

As of September 30, 2021, we continued to hold 100% of the economic interest of the Partnership. As of September 30, 2021 and December 31, 2020, total assets of the Partnership were $228.9 million and $299.3 million, respectively, of which all were attributable to equity and long-term investments. During the three and nine months ended September 30, 2021, the Partnership incurred $0.2 million and $1.5 million, respectively, of investment-related expenses, net of investment-related income. During the three and nine months ended September 30, 2021, the Partnership recorded net unrealized gains of $10.1 million and $30.6 million, respectively, and net realized gains of $10.5 million during the nine months ended September 30, 2021 as changes in fair values of equity and long-term investments, net on the consolidated statements of income.

5. Financial Instruments and Fair Value Measurements

Equity Investment in Armata

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

On January 26, 2021, Innoviva Strategic Opportunities LLC (“ISO”), our wholly owned subsidiary, 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. The investment was closed in two tranches on January 26, 2021 and March 17, 2021. The investments support Armata’s ongoing advancement of its bacteriophage development programs. The additional investment in the first quarter of 2021 increased Innoviva and ISO’s combined ownership to 59.6% as of March 31, 2021. Armata 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 issued and outstanding as of the record date for voting on the matters related to election or removal of Armata’s board members. As of September 30, 2021, three of the eight members of Armata’s board of directors are also members of the board of directors of Innoviva. As of September 30, 2021 and December 31, 2020, we owned approximately 59.5% and 46.6%, respectively, of Armata’s common stock.

The investment in Armata provides Innoviva and ISO the ability to have significant influence, but not control over Armata’s operations. Based on our evaluation, we determined that Armata is a VIE, but Innoviva and ISO are not the primary beneficiary of the VIE. We continue to elect the fair value option to account for both Armata’s common stock and warrants. The fair value of Armata’s common stock is measured based on its closing market price. The warrants purchased in 2020 and 2021 have an exercise price of $2.87 and $3.25 per share, respectively. All warrants are exercisable immediately within five years from the issuance date of the warrants and include a cashless exercise option. We use the Black-Scholes-Merton pricing model to estimate the fair value of these warrants with the following input assumptions: Armata’s closing market price on the valuation date, the risk-free interest rate computed based on the U.S. Treasury yield, the remaining contractual term as the expected term, and the expected stock price volatility calculated based on the historical volatility of the common stock of Armata and its peer companies.

As of September 30, 2021, the fair values of Armata’s common stock and warrants were estimated at $53.8 million and $35.5 million, respectively. As of December 31, 2020, the fair values of Armata’s common stock and warrants were estimated at $26.0 million and $18.0 million, respectively. The total fair value of both financial instruments in the amount of $89.3 million and $44.0 million was recorded as equity and long-term investments on the consolidated balance sheets as of September 30, 2021 and December 31, 2020, respectively. During the three and nine months ended September 30, 2021, we recorded $11.6 million unrealized loss and $25.3 million unrealized gains, respectively, as changes in fair values of equity and long-term investments, net on the consolidated statements of income. During the three and nine months ended September 30, 2020, we recorded $12.4 million unrealized loss and $23.0 million unrealized gains, respectively, as changes in fair values of equity and long-term investments, net on the consolidated statements of income.

Equity Investment in Entasis

During the second quarter of 2020, we purchased 14,000,000 shares of common stock as well as warrants to purchase 14,000,000 additional shares of common stock of Entasis Therapeutics, Inc. (“Entasis”) for approximately $35.0 million in cash. Entasis is a clinical-stage biotechnology company focused on the discovery and development of novel antibacterial products.

During the third quarter of 2020, we purchased 4,672,897 shares of Entasis common stock as well as warrants to purchase 4,672,897 additional shares of its common stock for approximately $12.5 million in cash. Innoviva has a right to designate two members to Entasis’ board. As of September 30, 2021, no Innoviva designees are serving on Entasis’ six-member board.

On May 3, 2021, ISO entered into a securities purchase agreement with Entasis to acquire 10,000,000 shares of Entasis common stock and warrants to purchase 10,000,000 additional shares of Entasis common stock for approximately $20.0 million. The investment was closed in two tranches on May 3, 2021 and June 11, 2021. This investment supports the continued development of Entasis’ novel pipeline of pathogen-targeted antibacterial product candidates. As of September 30, 2021, we owned approximately 60.6% of Entasis’ common stock. As of December 31, 2020, we owned approximately 51.0% of Entasis’ common stock.

The investment in Entasis provides Innoviva the ability to have significant influence, but not control over Entasis’ operations. Based on our evaluation, we determined that Entasis is a VIE, but Innoviva is not the primary beneficiary of the VIE. We elected the fair value option to account for both Entasis’s common stock and warrants at fair value. The fair value of Entasis’ common stock is measured based on its closing market price at each balance sheet date. The warrants have an exercise price of $2.50 per share and $2.675 per share for those warrants acquired in the second and third quarter of 2020, respectively. The warrants acquired in the second quarter of 2021 have an exercise price of $2.00 per share. All of the warrants are exercisable immediately within five years from the issuance date of the warrants and include a cashless exercise option. We use the Black-Scholes-Merton pricing model to estimate the fair value of these warrants.

As of September 30, 2021, the fair values of Entasis’s common stock and warrants were estimated at $95.8 million and $70.4 million, respectively. As of December 31, 2020, the fair values of Entasis’s common stock and warrants were estimated at $46.1 million and $31.9 million, respectively. The total fair value of both financial instruments in the amount of $166.2 million and $78.0 million was recorded as equity and long-term investments on the consolidated balance sheets as of September 30, 2021 and December 31, 2020, respectively. During the three and nine months ended September 30, 2021, we recorded $34.9 million and $68.1 million unrealized gains as changes in fair values of equity and long-term investments, net on the consolidated statements of income. During the three and nine months ended September 30, 2020, we recorded $17.0 million unrealized loss and $16.3 million unrealized gain, respectively, as changes in fair values of equity and long-term investments, net on the consolidated statements of income.

Equity Investment in InCarda

During the third quarter of 2020, TRC purchased 20,469,432 shares of Series C preferred stock and warrants to purchase 5,117,358 additional shares of Series C preferred stock of InCarda Therapeutics, Inc. (“InCarda”) for $15.0 million. $0.8 million was incurred for investment due diligence costs and recorded as part of the equity investment on the consolidated balance sheets. InCarda is a privately held biopharmaceutical company focused on developing inhaled therapies for cardiovascular diseases. As of September 30, 2021, one of InCarda’s eight board members is designated by TRC. As of September 30, 2021 and December 31, 2020, TRC held 13.0% and 13.4%, respectively, of InCarda’s outstanding equity.

The investment in InCarda does not provide TRC the ability to control or have significant influence over InCarda’s operations. Based on our evaluation, we determined that InCarda is a VIE, but TRC is not the primary beneficiary of the VIE. We account for our investment in the Series C preferred shares in InCarda using the measurement alternative. Under the measurement alternative, the equity investment is initially recorded at its allocated cost, but the carrying value may be adjusted through earnings upon an impairment or when there is an observable price change involving the same or a similar investment with the same issuer. As of September 30, 2021 and December 31, 2020, we recorded $15.8 million from our investment in InCarda’s Series C preferred stock as equity and long-term investments on the consolidated balance sheets. There was no impairment or other change to the value of InCarda’s Series C preferred stock as of September 30, 2021 and December 31, 2020.

The warrants are recorded at fair value and subject to remeasurement at each balance sheet date. The warrants are exercisable immediately with an exercise price of $0.7328 per share. In September 2021, TRC and InCarda entered into an amendment to extend the expiration date of the warrants from October 6, 2021 to March 31, 2022. We use the Black-Scholes-Merton pricing model to estimate the fair value of the warrants with the following input assumptions: the exercise price of the warrants, the risk-free interest rate computed based on the U.S. Treasury yield, the remaining contractual term as the expected term, and the expected stock price volatility calculated based on the historical volatility of the common stock of its peer companies. As of September 30, 2021 and December 31, 2020, the fair value of InCarda’s warrants was estimated at $0.6 million and $1.1 million, respectively, and recorded as equity and long-term investments on the consolidated balance sheets. During the three and nine months ended September 30, 2021, we recorded $0.1 million unrealized gain and $0.6 million unrealized loss, respectively, as changes in fair values of equity and long-term investments, net on the consolidated statements of income.

Equity Investment in ImaginAb

On March 18, 2021, TRC entered into a securities purchase agreement with ImaginAb, Inc. to purchase 4,051,724 shares of ImaginAb Series C preferred stock for $4.7 million. On the same day, TRC also entered into a securities purchase agreement with one of ImaginAb’s common stockholders to purchase 4,097,157 shares of ImaginAb common stock for $1.3 million. ImaginAb is a privately held biotechnology company focused on clinically managing cancer and autoimmune diseases via molecular imaging. $0.4 million was incurred for investment due diligence costs and execution and recorded as part of the equity investment on the consolidated balance sheets. As of September 30, 2021, one of ImaginAb’s five board members is designated by TRC. As of September 30, 2021, TRC held 12.5% of ImaginAb equity ownership.

The investment in ImaginAb does not provide TRC the ability to control or have significant influence over ImaginAb’s operations. Based on our evaluation, we determined that ImaginAb is a VIE, but TRC is not the primary beneficiary of the VIE. Because ImaginAb’s equity securities are not publicly traded and do not have a readily determinable fair value, we have accounted for our investment in ImaginAb’s Series C preferred stock and common stock using the measurement alternative. Under the measurement alternative, the equity investment is initially recorded at its allocated cost, but the carrying value may be adjusted through earnings upon an impairment or when there is an observable price change involving the same or a similar investment with the same issuer. As of September 30, 2021, $6.4 million was recorded as equity and long-term investments on the consolidated balance sheets. There was no change to the value of our investment in ImaginAB’s equity securities as of September 30, 2021.

Available-for-Sale Securities

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


	September 30, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
(In thousands)	Cost		Gains		Losses		Fair Value
Money market funds(1)	$	78,025	$	—	$	—	$	78,025
Total	$	78,025	$	—	$	—	$	78,025

(1)

Money market funds are included in cash and cash equivalents on the consolidated balance sheets.


	December 31, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
(In thousands)	Cost		Gains		Losses		Fair Value
Money market funds (1)	$	204,808	$	—	$	—	$	204,808
Total	$	204,808	$	—	$	—	$	204,808

(1)

Money market funds are included in cash and cash equivalents on the consolidated balance sheets.

There was no credit loss to our available-for-sale securities as of September 30, 2021 and December 31, 2020.

Fair Value Measurements

Our available-for-sale securities and equity investments are measured at fair value on a recurring basis and our debt is carried at amortized cost basis. The estimated fair values were as follows:


	Estimated Fair Value Measurements as of September 30, 2021 Using:
	Quoted Price in Active Markets for		Significant Other		Significant
	Identical		Observable		Unobservable
Types of Instruments	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	78,025	$	—	$	—	$	78,025
Investments held by ISP Fund LP (1)		226,848		—		2,098		228,946
Equity investment - Armata Common Stock		53,810		—		—		53,810
Equity investment - Armata Warrants		—		35,470		—		35,470
Equity investment - Entasis Common Stock		95,767		—		—		95,767
Equity investment - Entasis Warrants		—		70,380		—		70,380
Equity investment - InCarda Warrants		—		—		558		558
Total assets measured at estimated fair value	$	454,450	$	105,850	$	2,656	$	562,956
Debt
2023 Notes	$	—	$	259,142	$	—	$	259,142
2025 Notes		—		231,418		—		231,418
Total fair value of debt	$	—	$	490,560	$	—	$	490,560

(1)

The investments held by ISP Fund LP consisted of equity investments and money market funds, which are subject to a 36-month lock-up period from our initial contribution date, December 11, 2020.


	Estimated Fair Value Measurements as of December 31, 2020 Using:
	Quoted Price
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
Types of Instruments	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	204,808	$	—	$	—	$	204,808
Investments held by ISP Fund LP (1)		299,288		—		—		299,288
Equity investment - Armata Common Stock		25,958		—		—		25,958
Equity investment - Armata Warrants		—		18,049		—		18,049
Equity investment - Entasis Common Stock		46,122		—		—		46,122
Equity investment - Entasis Warrants		—		31,882		—		31,882
Equity investment - InCarda Warrants		—		—		1,147		1,147
Total assets measured at estimated fair value	$	576,176	$	49,931	$	1,147	$	627,254
Debt
2023 Notes	$	—	$	239,779	$	—	$	239,779
2025 Notes		—		206,135		—		206,135
Total fair value of debt	$	—	$	445,914	$	—	$	445,914

(1)

The investments held by ISP Fund LP consisted of equity investments and money market funds, which are subject to a 36-month lock-up period from our initial contribution date, December 11, 2020.

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

InCarda’s warrants and private placement positions held by the ISP Fund LP and are classified as Level 3 financial instruments as these securities are not publicly traded and the assumptions used in the valuation model for valuing these securities are based on significant unobservable and observable inputs including those of publicly traded peer companies.

The fair values of our 2023 Notes and our 2025 Notes are based on recent trading prices of the respective instruments.

6. Stock-Based Compensation

Stock- Based Compensation Expense

Stock-based compensation expense was included in the consolidated statements of income as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2021		2020		2021		2020
General and administrative	$	542	$	441	$	1,463	$	1,251

Valuation Assumptions

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


	Nine Months Ended
	September 30, 2021
Risk-free interest rate	1.07%-1.13%
Expected term (in years)		6
Volatility		45	%
Dividend yield		—	%
Weighted-average estimated fair value of stock options granted	$	5.61

There were no grants of stock options during the three months ended September 30, 2021 and the three and nine months ended September 30, 2020.

7. Debt

Our debt consists of:


	September 30,			December 31,
(In thousands)	2021			2020
2023 Notes	$	240,984		$	240,984
2025 Notes		192,500			192,500
Total debt		433,484			433,484
Unamortized debt discount and issuance costs		(41,189	)		(47,967	)
Net long-term debt	$	392,295		$	385,517

Convertible Senior Notes Due 2025

In accordance with accounting guidance for debt with conversion and other options, we separately account for the liability and equity components of the 2025 Notes by allocating the proceeds between the liability component and the embedded conversion option (“equity component”) due to our ability to settle the conversion obligation of the 2025 Notes in cash, common stock or a combination of cash and common stock, at our option. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature using the income approach. The allocation was performed in a manner that reflected our non-convertible debt borrowing rate for similar debt. The equity component of the 2025 Notes was recognized as a debt discount and represents the difference between the proceeds from the issuance of the 2025 Notes and the fair value of the liability of the 2025 Notes on the date of issuance. The excess of the principal amount of the liability component over its carrying amount (“debt discount”) is amortized to interest expense using the effective interest method over the term of the 2025 Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

Our outstanding 2025 Notes balances consisted of the following:


	September 30,			December 31,
(In thousands)	2021			2020
Liability component
Principal	$	192,500		$	192,500
Debt discount and issuance costs, net		(40,420	)		(46,766	)
Net carrying amount	$	152,080		$	145,734
Equity component, net	$	65,361		$	65,361

The following table sets forth total interest expense recognized related to the 2025 Notes for the three and nine months ended September 30, 2021 and 2020:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2021		2020		2021		2020
Contractual interest expense	$	1,203	$	1,203	$	3,609	$	3,609
Amortization of debt issuance costs		166		152		487		446
Amortization of debt discount		1,997		1,828		5,859		5,363
Total interest and amortization expense	$	3,366	$	3,183	$	9,955	$	9,418

Debt Maturities

The aggregate scheduled maturities of our long-term debt as of September 30, 2021 were as follows:


(In thousands)
Years ending December 31:
Remainder of 2021	$	—
2022		—
2023		240,984
2024		—
2025		192,500
Total	$	433,484

8. Commitments and Contingencies

Operating Lease

Future minimum operating lease payments on our corporate headquarters as of September 30, 2021 were as follows:


(In thousands)
Years ending December 31:
Remainder of 2021	$	31
2022		109
Thereafter		—
Total	$	140

Legal Proceedings

From time to time, the Company is involved in legal proceedings in the ordinary course of its business. Currently, we believe that no litigation or arbitration, either individually or in the aggregate, to which we are presently a party is likely to have a material adverse effect on our operating results or financial position.

9. Shareholders’ Equity

On May 20, 2021, the Company entered into a share repurchase agreement with GSK to buy back 32,005,260 shares of its common stock at $12.25 per share from GSK, representing all of the shares of common stock or other capital interests of Innoviva owned by GSK or its affiliates. The total consideration including related transaction fees was $394.1 million. The share repurchase closed on May 25, 2021, and the shares were transferred to the Company. These shares are recorded as treasury stock on the consolidated balance sheets.

10. Income Taxes

Provisional income tax expense for the three and nine months ended September 30, 2021 was $20.5 million and $65.6 million, respectively, compared to $8.9 million and $44.7 million for the same periods in 2020 respectively. The Company’s effective income tax rate for the nine months ended September 30, 2021 was 16.9%, compared to 17.0% for the same period in 2020. The income tax expense for the nine months ended September 30, 2021 and 2020 was determined based upon estimates of the Company’s effective income tax rates in various jurisdictions. Our effective income tax rate for the nine months ended September 30, 2021 was lower than the U.S. federal statutory income tax rate due primarily to non-deductible expenses, noncontrolling interest and state income taxes.

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

Forward-Looking Statements

The information in this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve substantial risks, uncertainties, and assumptions. All statements contained herein that are not of historical fact, including, without limitation, statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, intentions, expectations, goals and objectives, may be forward-looking statements. The words “anticipates,” “believes,” “could,” “designed,” “estimates,” “expects,” “goal,” “intends,” “may,” “objective,” “plans,” “projects,” “pursue,” “will,” “would” and similar expressions (including the negatives thereof) are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, expectations or objectives disclosed in our forward-looking statements and the assumptions underlying our forward-looking statements may prove incorrect. Therefore, you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions, expectations and objectives disclosed in the forward-looking statements that we make. All written and verbal forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Important factors that we believe could cause actual results or events to differ materially from our forward-looking statements include, but are not limited to, risks related to: lower than expected future royalty revenue from respiratory products partnered with GSK; the commercialization of RELVAR®/BREO® ELLIPTA®, ANORO® ELLIPTA® and TRELEGY® ELLIPTA® in the jurisdictions in which these products have been approved; substantial competition from products discovered, developed, launched and commercialized both by GSK and by other pharmaceutical companies; the strategies, plans and objectives of the Company (related to the Company’s growth strategy and corporate development initiatives beyond the Company’s existing portfolio); the timing, manner and amount of capital deployment, including potential capital returns to stockholders; risks related to the Company’s growth strategy; projections of revenue, expenses and other financial items and risks discussed in “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on February 25, 2021, (“2020 Form 10-K”), and Item 1A of Part II of our Quarterly Reports on Form 10-Q and below in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Item 2 of Part I. All forward-looking statements in this Quarterly Report on Form 10-Q are based on current expectations as of the date hereof and we do not assume any obligation to update any forward-looking statements on account of new information, future events or otherwise, except as required by law.

We encourage you to read our consolidated financial statements contained in this Quarterly Report on Form 10-Q. We also encourage you to read Item 1A of Part I of our 2020 Form 10-K and Item 1A of Part II of our Quarterly Reports on Form 10-Q entitled “Risk Factors,” which contain a more complete discussion of the risks and uncertainties associated with our business. In addition to the risks described above and in Item 1A of Part I of our 2020 Form 10-K and Item 1A of Part II of this report, other unknown or unpredictable factors also could affect our results. Therefore, the information in this report should be read together with other reports and documents that we file with the SEC from time to time, including on Form 10-K, Form 10-Q and Form 8-K, which may supplement, modify, supersede or update those risk factors. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all.

OVERVIEW

Executive Summary

Innoviva, Inc. (“Innoviva”, the “Company”, the “Registrant” or “we” and other similar pronouns) is a company with a portfolio of royalties and other healthcare assets. Our royalty portfolio contains respiratory assets partnered with Glaxo Group Limited (“GSK”), including RELVAR®/BREO® ELLIPTA® (fluticasone furoate/ vilanterol, “FF/VI”), ANORO® ELLIPTA® (umeclidinium bromide/ vilanterol, “UMEC/VI”) and TRELEGY® ELLIPTA® (the combination FF/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%. Innoviva is also entitled to 15% of royalty payments made by GSK under its agreements originally entered into with us, and since assigned to Theravance Respiratory Company, LLC (“TRC”), including TRELEGY® ELLIPTA® and any other product or combination of products that may be discovered or developed in the future under the LABA Collaboration Agreement and the Strategic Alliance Agreement with GSK (referred to herein as the “GSK Agreements”), which have been assigned to TRC other than RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA®.

Our company structure and organization are tailored to our focused activities of managing our respiratory assets partnered with GSK, optimizing our operations and augmenting capital allocation. Our revenues consist of royalties from our respiratory partnership agreements with GSK.

Recent Highlights



GSK Net Sales:



Third quarter 2021 net sales of RELVAR®/BREO® ELLIPTA® by GSK were $360.6 million, down 15% from $426.0 million in the same quarter of 2020, with $146.0 million in net sales from the U.S. market and $214.6 million from non-U.S. markets.



Third quarter 2021 net sales of ANORO® ELLIPTA® by GSK were $179.1 million, down 2% from $182.8 million in the same quarter of 2020, with $102.0 million net sales from the U.S. market and $77.1 million from non-U.S. markets.



Third quarter 2021 net sales of TRELEGY® ELLIPTA® by GSK were $445.6 million, up 77% from $251.9 million in the same quarter of 2020, with $314.8 million in net sales from the U.S. market and $130.8 million in net sales from non-U.S. markets.

Collaborative Arrangements with GSK

LABA Collaboration

In November 2002, we entered into the LABA collaboration with GSK to develop and commercialize once-daily LABA products for the treatment of chronic obstructive pulmonary disorder (“COPD”) and asthma (the “LABA Collaboration Agreement”). For the treatment of COPD, the collaboration has developed three combination products:



RELVAR®/BREO® ELLIPTA® (“FF/VI”) (BREO® ELLIPTA® is the proprietary name in the U.S. and Canada and RELVAR® ELLIPTA® is the proprietary name outside the U.S. and Canada), a once-daily combination medicine consisting of a LABA, vilanterol (VI), and an inhaled corticosteroid (“ICS”), fluticasone furoate (“FF”),



ANORO® ELLIPTA® (“UMEC/VI”), a once-daily medicine combining a long-acting muscarinic antagonist (“LAMA”), umeclidinium bromide (“UMEC”), with a LABA, vilanterol (VI), and



TRELEGY® ELLIPTA® (the combination FF/UMEC/VI), a once-daily combination medicine consisting of an ICS, LAMA and LABA.

As a result of the launch and approval of RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA® in the U.S., Japan and Europe, in accordance with the LABA Collaboration Agreement, we paid milestone fees to GSK totaling $220.0 million during the year ended December 31, 2014. The milestone fees paid to GSK were recognized as capitalized fees paid to a related party, which are being amortized over their estimated useful lives commencing upon the commercial launch of the products.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

As part of our capital allocation strategies, we invest from time to time in equity securities of private or public companies. We also enter into strategic partnerships in order to accelerate the execution of our strategy and enhance returns on our capital. If we determine that we have control over these companies or partnerships, we consolidate the financial statements of these companies or partnerships. If we determine that we do not have control over these companies or partnerships 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.

If we conclude that we do not have an ability to exercise significant influence over an investee, we may elect to account for an equity security without a readily determinable fair value using the measurement alternative as prescribed by ASC Topic 825. This measurement alternative 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.

There were no significant changes to our critical accounting policies and estimates. Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 25, 2021 provides a more complete discussion of our critical accounting policies and estimates.

Results of Operations

Net Revenue

Total net revenue, as compared to the prior year periods, was as follows:


	Three Months Ended September 30,						Change						Nine Months Ended September 30,						Change
(In thousands)	2021			2020			$			%			2021			2020			$			%
Royalties from a related party - RELVAR/BREO	$	54,092		$	63,893		$	(9,801	)		(15	)%	$	176,398		$	165,612		$	10,786			7	%
Royalties from a related party - ANORO		11,641			11,882			(241	)		(2	)%		34,101			32,931			1,170			4	%
Royalties from a related party - TRELEGY		35,585			16,375			19,210			117	%		84,055			48,143			35,912			75	%
Total royalties from a related party		101,318			92,150			9,168			10	%		294,554			246,686			47,868			19	%
Less: amortization of capitalized fees paid to a related party		(3,456	)		(3,456	)		—			0	%		(10,368	)		(10,368	)		—		*
Royalty revenue		97,862			88,694			9,168			10	%		284,186			236,318			47,868			20	%
Strategic alliance - MABA program		—			—			—		*				—			10,000			(10,000	)	*
Total net revenue from GSK	$	97,862		$	88,694		$	9,168			10	%	$	284,186		$	246,318		$	37,868			15	%

*Not Meaningful

Total net revenue increased to $97.9 million and $284.2 million for the three and nine months ended September 30, 2021, compared to $88.7 million and $246.3 million, respectively, for the same periods a year ago, primarily due to favorable adjustments and the growth in prescriptions for our respiratory products.

Research & Development

Research and development (“R&D”) expenses attributable to Pulmoquine’s product development efforts were $0.4 million and $0.5 million for the three and nine months ended September 30, 2021. Research and development expenses of $1.0 million and $1.6 million for the three and nine months ended September 30, 2020 were attributable to Pulmoquine’s product development efforts.

General & Administrative

General and administrative expenses, as compared to the prior year periods, were as follows:


	Three Months Ended September 30,				Change						Nine Months Ended September 30,				Change
(In thousands)	2021		2020		$			%			2021		2020		$		%
General and administrative	$	2,860	$	3,254	$	(394	)		(12	)%	$	13,074	$	8,413	$	4,661		55	%

General and administrative expenses for the three months ended September 30, 2021 decreased compared to the same periods in 2020. General and administrative expenses for the nine months ended September 30, 2021 increased compared to the same periods in 2020 mainly due to business development related advisory service fees and legal expenses incurred for the arbitration initiated by Theravance Biopharma against the Company and TRC. The arbitration related legal fees were recognized in TRC’s statement of income.

Other Income, net and Interest Income

Other income, net and interest income, as compared to the prior year periods, were as follows:


	Three Months Ended September 30,						Change				Nine Months Ended September 30,					Change
(In thousands)	2021			2020			$			%	2021			2020		$			%
Other income (expense), net	$	(652	)	$	(13	)	$	(639	)	*	$	(2,036	)	$	85	$	(2,121	)	*
Interest income		453			41			412		*		503			1,501		(998	)		(66	)%

*Not Meaningful

The increase in other expense, net, for the three and nine months ended September 30, 2021 compared to the same periods a year ago was primarily due to the expenses incurred by ISP Fund LP. Interest income increased for the three and nine months ended September 30, 2021 compared to the same periods a year ago mainly due to favorable returns on investments managed by the ISP Fund LP.

Interest Expense

Interest expense, as compared to the prior year periods, was as follows:


	Three Months Ended September 30,				Change					Nine Months Ended September 30,				Change
(In thousands)	2021		2020		$		%			2021		2020		$		%
Interest expense	$	4,790	$	4,603	$	187		4	%	$	14,229	$	13,680	$	549		4	%

Interest expense includes the amortization of debt discount and issuance costs for our convertible notes. The increase in interest expense was mainly due to more debt discount and issuance costs being recognized through amortization.

Changes in Fair Values of Equity and Long-Term Investments

Changes in fair values of equity and long-term investments, as compared to the prior year periods, were as follows:


	Three Months Ended September 30,					Change			Nine Months Ended September 30,				Change
(In thousands)	2021		2020			$		%	2021		2020		$		%
Changes in fair values of equity and long-term investments, net	$	33,613	$	(29,368	)	$	62,981	*	$	133,973	$	39,245	$	94,728	*

*Not Meaningful

The changes in fair values of equity and long-term investments reflect the net changes in the fair values of our equity investments in Armata, Entasis, InCarda and those equity investments managed by ISP Fund LP.

Provision for Income Taxes

The provisional income tax expense for the three and nine months ended September 30, 2021 was $20.5 million and $65.6 million with an effective income tax rate of 16.9%, respectively, compared to $8.9 million and $44.7 million, respectively, with an effective income tax rate of 17.0% in the same period a year ago.

Net Income Attributable to Noncontrolling Interest

Net income attributable to noncontrolling interest, as compared to the prior periods, was as follows:


	Three Months Ended September 30,				Change			Nine Months Ended September 30,				Change
(In thousands)	2021		2020		$		%	2021		2020		$		%
Net income attributable to noncontrolling interest	$	30,208	$	13,403	$	16,805	*	$	67,678	$	48,299	$	19,379		40	%

*Not Meaningful

This represents the 85% share of net income in Theravance Respiratory Company, LLC for Theravance Biopharma for the three and nine months ended September 30, 2021 and 2020. The increase was primarily due to the increase in the growth in prescriptions and market share for TRELEGY® ELLIPTA®.

Liquidity and Capital Resources

Liquidity

Since our inception, we have financed our operations primarily through private placements and public offerings of equity and debt securities and payments received under collaborative arrangements. For the nine months ended September 30, 2021, we

generated gross royalty revenues from GSK of $294.6 million. Net cash and cash equivalents totaled $135.1 million and receivables from GSK totaled $101.3 million as of September 30, 2021.

Adequacy of Cash Resources to Meet Future Needs

We believe that cash from projected future royalty revenues and our cash, cash equivalents and marketable securities will be sufficient to meet our anticipated debt service and operating needs for at least the next 12 months based upon current operating plans and financial forecasts. If our current operating plans and financial forecasts change, we may require additional funding sooner in the form of public or private equity offerings or debt financings. Furthermore, if in our view favorable financing opportunities arise, we may seek additional funding at any time. However, future financing may not be available in amounts or on terms acceptable to us, if at all. This could leave us without adequate financial resources to fund our operations as currently planned. In addition, from time to time we may restructure or reduce our debt, including through tender offers, redemptions, amendments, repurchases or otherwise, all allowable with the terms of our debt agreements.

Cash Flows

Cash flows, as compared to the prior year period, were as follows:


	Nine Months Ended September 30,
(In thousands)	2021			2020			Change
Net cash provided by operating activities	$	265,432		$	227,833		$	37,599
Net cash provided by investing activities		63,627			544			63,083
Net cash used in financing activities		(440,431	)		(27,280	)		(413,151	)

Cash Flows from Operating Activities

Net cash provided by operating activities for the nine months ended September 30, 2021 was $265.4 million, consisting primarily of our net income of $323.2 million, adjusted for net non-cash items such as $65.6 million of deferred income taxes, $10.4 million of depreciation and amortization, and $6.8 million of amortization of debt discount and issuance costs, partially offset by an increase of $132.5 million in the fair value of our equity and long-term investments, net and an increase in receivables from collaborative arrangements of $7.3 million.

Net cash provided by operating activities for the nine months ended September 30, 2020 was $227.8 million, consisting primarily of our net income of $218.8 million, adjusted for net non-cash items such as $44.7 million of deferred income taxes, $10.4 million of depreciation and amortization, partially offset by an increase of $39.2 million in the fair value of our equity investments and an increase of $12.7 million in receivables from collaborative arrangements.

Cash Flows from Investing Activities

Net cash provided by investing activities for the nine months ended September 30, 2021 of $63.6 million was primarily due to $110.0 million in distribution of equity and long-term investments from the ISP Fund LP, partially offset by $46.4 million investments in Armata, ImaginAb and Entasis.

Net cash provided by investing activities for the nine months ended September 30, 2020 of $0.5 million was primarily due to $86.0 million received from maturities of marketable securities, partially offset by $12.9 million in purchases of marketable securities and $72.5 million for our investments in Armata and Entasis.

Cash Flows from Financing Activities

Net cash used in financing activities for the nine months ended September 30, 2021 of $440.4 million was primarily due to $394.1 million used for our common stock repurchase from GSK and $46.4 million distributions to noncontrolling interest.

Net cash used in financing activities for the nine months ended September 30, 2020 of $27.3 million was primarily due to $28.0 million distributions to noncontrolling interest.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

There have been no significant changes in our market risk or how our market risk is managed compared to those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

We conducted an evaluation as of September 30, 2021, under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures, which are defined under SEC rules as controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized and reported within required time periods. Based upon that evaluation, our Chief Executive Officer and Chief Accounting Officer, concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance levels.

Limitations on the Effectiveness of Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all frauds. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Innoviva have been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting

There have been no material changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In May 2019, Theravance Biopharma, which is the owner of 85% of the economic interests in TRC, initiated arbitration against the Company and TRC, relating to a dispute as to the determination by Innoviva (as manager of TRC) to cause TRC to explore potential reinvestment opportunities for the royalty proceeds received by GSK into initiatives that Innoviva believes will increase the value of TRC and TRELEGY® ELLIPTA®. Theravance Biopharma alleged that, in causing TRC to not distribute substantially all royalty proceeds received from GSK, Innoviva breached the limited liability company operating agreement governing TRC (the “Operating Agreement”), as well as the fiduciary duties applicable to Innoviva as manager of TRC. The hearing in respect of the arbitration was conducted from July 23, 2019 through July 25, 2019. Post-arbitration oral argument was heard on August 14, 2019. On September 26, 2019, the arbitrator issued a final decision. The arbitrator ruled that Innoviva did not breach the Operating Agreement or its fiduciary duties by withholding royalties or pursuing reinvestment opportunities. Accordingly, the Company is permitted to continue to pursue development and commercialization initiatives. The arbitrator did conclude that Innoviva breached a provision of the Operating Agreement requiring Innoviva to deliver quarterly financial plans to Theravance Biopharma. However, the arbitrator concluded that this technical breach did not cause any damages to Theravance Biopharma and the arbitrator awarded limited injunctive relief to expand and clarify the disclosure obligations under the Operating Agreement related to the delivery of financial plans and the pursuit of investment opportunities (if those opportunities related to TRELEGY® ELLIPTA®). Finally, the arbitrator ruled that the Company is entitled to indemnification from TRC for 95% of its fees and expenses incurred in connection with the arbitration.

On September 30, 2019, the Company and TRC filed a Verified Complaint in the Court of Chancery of the State of Delaware (“Court of Chancery”) to confirm the arbitration award. The award was confirmed by the Court of Chancery on May 4, 2020.

On July 16, 2020, Innoviva and TRC initiated a lawsuit in the Court of Chancery against Theravance Biopharma, seeking a permanent injunction preventing Theravance Biopharma from interfering with Innoviva’s ability to cause TRC to reserve cash to pursue non-Trelegy related investments opportunities and a declaration that the arbitration award conclusively established that Innoviva, as manager of TRC, has such authority. The Court of Chancery directed the parties to obtain the arbitrator’s opinion as to whether the arbitration award addressed non-Trelegy related investment opportunities. On July 31, 2020, the arbitrator, while reiterating that Innoviva has broad authority as manager of TRC, found that this award did not specifically address this situation. Accordingly, on August 5, 2020, the parties stipulated to the dismissal of the Court of Chancery action.

On October 6, 2020, Theravance Biopharma initiated a new arbitration against the Company and TRC, challenging Innoviva’s authority as manager of TRC to cause TRC to pursue non-Trelegy related investment opportunities and again alleging that Innoviva is required to cause TRC to distribute substantially all royalty proceeds from GSK. The hearing in respect of the arbitration was conducted from February 16, 2021 through February 19, 2021. Post-arbitration oral argument was heard on March 8, 2021. On March 30, 2021, the arbitrator issued a final decision. The arbitrator ruled that Innoviva did not breach the Operating Agreement or its fiduciary duties by withholding royalties to pursue non-Trelegy-related investment opportunities. Additionally, the arbitrator ruled that the Company is entitled to indemnification from TRC for 100% of its fees and expenses reasonably incurred in connection with the arbitration.

On April 15, 2021, the Company filed a Verified Complaint in the Court of Chancery to confirm the arbitration award. On May 19, 2021, Theravance Biopharma submitted an answer to the Verified Complaint and filed a Motion to Modify the Arbitral Award, alleging that it contained a mathematical error. The parties filed a proposed stipulation to remand the motion to Chancellor Chandler for his consideration, which the Court of Chancery granted. On June 25, 2021, Innoviva submitted a brief to Chancellor Chandler in opposition to the motion and on July 15, 2021, Theravance Biopharma submitted a reply brief. On August 6, 2021, Chancellor Chandler issued a modified final award, which did not affect any of his ultimate conclusions. The modified award was confirmed by the Court of Chancery on September 16, 2021.

Item 1A. Risk Factors

Our business is subject to a number of risks, including those identified in Item 1A of Part I of our 2020 Form 10-K. There have been no material changes to the risk factors described in our 2020 Form 10-K.

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

None.

Item 3: Defaults Upon Senior Securities

None.

Item 4: Mine Safety Disclosures

None.

Item 5: Other Information

None.

Item 6. Exhibits

(a)

Index to Exhibits



Exhibit Number	Description	Form	Exhibit	Incorporated by Reference Filing Date/Period End Date

31.1	Certification of Principal Executive Officer pursuant to Rules 13a‑14 pursuant to the Securities Exchange Act of 1934

31.2	Certification of Principal Financial Officer pursuant to Rules 13a‑14 pursuant to the Securities Exchange Act of 1934

32	Certifications Pursuant to 18 U.S.C. Section 1350

101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

101.SCH	Inline XBRL Taxonomy Extension Schema Document

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Innoviva, Inc.

Date: October 27, 2021	/s/ Pavel Raifeld
	Pavel Raifeld
	Chief Executive Officer
	(Principal Executive Officer)

Date: October 27, 2021	/s/ Marianne Zhen
	Marianne Zhen
	Chief Accounting Officer
	(Principal Financial Officer)