Innoviva, Inc 10-K for FY2019

Innoviva, Inc. (INVA)

10-K 2020-02-19 For: 2019-12-31

Added on April 12, 2026

About this 10-K

Innoviva, Inc filed this 10-K on February 19, 2020, covering the fiscal year ended December 31, 2019 (FY2019).

Headline figures

Fiscal year ended December 31, 2019, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $261.02M; unchanged from $261M a year earlier
Net income: $190.99M; down 53.0% from net income of $406.33M a year earlier
Diluted EPS: $1.43; down 59.5% from $3.53 a year earlier

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(Mark One)
☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019

or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Delaware (State or other jurisdiction of incorporation or organization)	94-3265960 (I.R.S. Employer Identification No.)

1350 Old Bayshore Highway, Suite 400 Burlingame, CA (Address of principal executive offices)	94010 (Zip Code)

Title of Each Class		Trading Symbol(s)		Name of Each Exchange On Which Registered
Common Stock $0.01 Par Value		INVA		The Nasdaq Stock Market LLC


Large accelerated filer ⌧	Accelerated filer ◻	Non-accelerated filer ◻	Smaller reporting company ☐
			Emerging growth company ☐

		Page
	PART I
Item 1.	Business	4
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	26
Item 2.	Properties	26
Item 3.	Legal Proceedings	26
Item 4.	Mine Safety Disclosures	27
	PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	27
Item 6.	Selected Financial Data	28
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 8.	Financial Statements and Supplementary Data	39
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	67
Item 9A.	Controls and Procedures	67
Item 9B.	Other Information	69
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	69
Item 11.	Executive Compensation	69
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	69
Item 13.	Certain Relationships and Related Transactions, and Director Independence	69
Item 14.	Principal Accountant Fees and Services	69
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	70
Item 16.	Form 10-K Summary	70
Exhibits		71
Signatures		74


Name	Age	Positions Held
Geoffrey Hulme	53	Interim Principal Executive Officer
Marianne Zhen	51	Chief Accounting Officer


	Year Ended December 31,
	2019		2018		2017		2016		2015
	(In thousands, except per share data)
CONSOLIDATED STATEMENTS OF INCOME DATA
Net revenue	$	261,016	$	261,004	$	217,217	$	133,569	$	53,949
Total operating expenses		14,656		22,753		33,613		24,581		22,369
Income from operations		246,360		238,251		183,604		108,988		31,580
Interest and other income (expense), net		5,195		(4,042)		(5,727)		3,059		1,443
Interest expense		(18,660)		(23,954)		(43,601)		(52,416)		(51,803)
Income (loss) before income taxes		232,895		210,255		134,276		59,631		(18,780)
Income tax benefit (expense), net⁽¹⁾		(41,902)		196,073		(4)		(95)		20
Net income (loss)		190,993		406,328		134,272		59,536		(18,760)
Net income attributable to noncontrolling interest		33,705		11,272		129		—		—
Net income (loss) attributable to Innoviva stockholders	$	157,288	$	395,056	$	134,143	$	59,536	$	(18,760)
Basic net income (loss) per share attributable to Innoviva stockholders	$	1.55	$	3.92	$	1.25	$	0.54	$	(0.16)
Diluted net income (loss) per share attributable to Innoviva stockholders:	$	1.43	$	3.53	$	1.17	$	0.53	$	(0.16)
Shares used to compute basic net income (loss) per share attributable to Innoviva stockholders		101,150		100,849		106,945		110,280		115,372
Shares used to compute diluted net income (loss) per share attributable to Innoviva stockholders		113,409		113,408		119,866		123,233		115,372
Cash dividends declared per common share	$	—	$	—	$	—	$	—	$	0.75


	As of December 31,
	2019		2018		2017		2016		2015
	(In thousands)
CONSOLIDATED BALANCE SHEETS DATA
Cash, cash equivalents and marketable securities	$	350,845	$	114,908	$	129,075	$	150,433	$	187,283
Working capital		425,863		193,343		165,627		177,997		200,834
Total assets		724,826		548,193		367,337		378,996		408,932
Long‑term liabilities		377,339		383,441		575,302		711,938		738,086
Accumulated deficit		(946,404)		(1,103,692)		(1,498,748)		(1,632,891)		(1,692,427)
Total Innoviva stockholders’ equity (deficit)		313,495		153,583		(242,859)		(352,991)		(342,645)


							Change
	Year Ended December 31,						2019					2018
(In thousands)	2019		2018		2017		$		%			$		%
Royalties from a related party — RELVAR/BREO	$	189,424	$	220,162	$	198,726	$	(30,738)		(14)	%	$	21,436	11	%
Royalties from a related party — ANORO		42,625		41,286		29,036		1,339		3			12,250	42
Royalties from a related party — TRELEGY		42,790		13,379		179		29,411		*			13,200	*
Total royalties from a related party		274,839		274,827		227,941		12		—			46,886	21
Less: amortization of capitalized fees paid to a related party		(13,823)		(13,823)		(13,823)		—		—			—	—
Royalty revenue		261,016		261,004		214,118		12		—			46,886	22
Strategic alliance — MABA program license		—		—		3,099		—		*			(3,099)	*
Total net revenue from GSK	$	261,016	$	261,004	$	217,217	$	12	$	—	%	$	43,787	20	%


			Payment Due by Period
			Less Than						More Than
(In thousands)	Total		1 Year		1 ‑ 3 Years		3 ‑ 5 Years		5 Years
2023 Notes	$	258,907	$	5,121	$	10,242	$	243,544	$	—
2025 Notes		221,376		4,813		9,625		9,625		197,313
Facility lease		348		116		232		—		—
Total	$	480,631	$	10,050	$	20,099	$	253,169	$	197,313


	Page
Consolidated Balance Sheets as of December 31, 2019 and December 31, 2018	40
Consolidated Statements of Income for each of the three years in the period ended December 31, 2019	41
Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 2019	42
Consolidated Statements of Stockholders’ Equity (Deficit) for each of the three years in the period ended December 31, 2019	43
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2019	44
Notes to Consolidated Financial Statements	45
Supplementary Financial Data (unaudited)	64
Reports of Independent Registered Public Accounting Firm	65


	December 31,
	2019		2018
Assets
Current assets:
Cash and cash equivalents	$	278,096	$	62,417
Short-term marketable securities		72,749		52,491
Related party receivables from collaborative arrangements		79,427		83,286
Prepaid expenses and other current assets		962		849
Total current assets		431,234		199,043
Property and equipment, net		33		160
Capitalized fees paid to a related party, net		139,076		152,899
Deferred tax assets, net		154,171		196,054
Other assets		312		37
Total assets	$	724,826	$	548,193

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	10	$	11
Accrued personnel-related expenses		647		470
Accrued interest payable		4,152		4,264
Other accrued liabilities		562		955
Total current liabilities		5,371		5,700
Long-term debt, net of discount and issuance costs		377,120		382,855
Other long-term liabilities		219		586
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, 101,288 and 101,098 issued and outstanding as of December 31, 2019 and 2018, respectively		1,013		1,011
Additional paid-in capital		1,258,859		1,256,267
Accumulated other comprehensive income (loss)		27		(3)
Accumulated deficit		(946,404)		(1,103,692)
Total Innoviva stockholders’ equity		313,495		153,583
Noncontrolling interest		28,621		5,469
Total stockholders’ equity		342,116		159,052
Total liabilities and stockholders’ equity	$	724,826	$	548,193


	Innoviva Stockholders' Equity (Deficit)
						Accumulated									Total
				Additional		Other									Stockholders’
	Common Stock			Paid-In		Comprehensive		Accumulated		Treasury Stock			Noncontrolling		Equity
	Shares	Amount		Capital		Income (loss)		Deficit		Shares	Amount		Interest		(Deficit)
Balance as of December 31, 2016	108,585	$	1,085	$	1,282,077	$	1	$	(1,632,891)	(150)	$	(3,263)	$	—	$	(352,991)
Contributions from noncontrolling interest	—		—		—		—		—	—		—		23		23
Exercise of stock options, and issuance of common stock units and stock awards	891		9		(1,702)		—		—	—		—		—		(1,693)
Stock-based compensation	—		—		9,833		—		—	—		—		—		9,833
Cash dividend forfeited	—		—		7		—		—	—		—		—		7
Repurchase of common stock	(7,430)		(75)		(97,425)		—		—	—		—		—		(97,500)
Equity component of Covertible Senior Notes due 2025, net of issuance costs	—		—		65,361		—		—	—		—		—		65,361
Net income	—		—		—		—		134,143	—		—		129		134,272
Other comprehensive loss	—		—		—		(19)		—	—		—		—		(19)
Balance as of December 31, 2017	102,046		1,019		1,258,151		(18)		(1,498,748)	(150)		(3,263)		152		(242,707)
Distributions to noncontrolling interest	—		—		—		—		—	—		—		(5,955)		(5,955)
Exercise of stock options, and issuance of common stock units and stock awards	(798)		(8)		(1,926)		—		—	—		—		—		(1,934)
Stock-based compensation	—		—		3,233		—		—	—		—		—		3,233
Cash dividend forfeited	—		—		72		—		—	—		—		—		72
Retirement of treasury stock	(150)		—		(3,263)		—		—	150		3,263		—		—
Net income	—		—		—		—		395,056	—		—		11,272		406,328
Other comprehensive income	—		—		—		15		—	—		—		—		15
Balance as of December 31, 2018	101,098		1,011		1,256,267		(3)		(1,103,692)	—		—		5,469		159,052
Distributions to noncontrolling interest	—		—		—		—		—	—		—		(10,553)		(10,553)
Exercise of stock options, and issuance of common stock units and stock awards	190		2		536		—		—	—		—		—		538
Stock-based compensation	—		—		2,056		—		—	—		—		—		2,056
Net income	—		—		—		—		157,288	—		—		33,705		190,993
Other comprehensive income	—		—		—		30		—	—		—		—		30
Balance as of December 31, 2019	101,288	$	1,013	$	1,258,859	$	27	$	(946,404)	—	$	—	$	28,621	$	342,116


Leasehold improvements		Shorter of remaining lease terms or useful life
Equipment, furniture and fixtures		5 - 7 years
Software and computer equipment		3 years


	Year Ended December 31,
(In thousands except per share data)	2019		2018			2017
Numerator:
Net income attributable to Innoviva stockholders, basic	$	157,288	$	395,056	$	134,143
Add: interest expense on 2023 Notes		4,648		5,661		5,647
Net income attributable to Innoviva stockholders, diluted	$	161,936	$	400,717	$	139,790
Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders		101,150		100,849		106,945
Dilutive effect of 2023 Notes		12,189		12,189		12,189
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan		70		370		732
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders		113,409		113,408		119,866
Net income per share attributable to Innoviva stockholders
Basic	$	1.55	$	3.92	$	1.25
Diluted	$	1.43	$	3.53	$	1.17


	December 31, 2019
			Gross		Gross
			Unrealized		Unrealized		Estimated
(In thousands)	Amortized Cost		Gains		Losses		Fair Value
U.S. government securities	$	53,799	$	35		—	$	53,834
U.S. commercial paper		18,915		—		—		18,915
Money market funds		233,992		—		—		233,992
Total	$	306,706	$	35	$	—	$	306,741


	December 31, 2018
			Gross		Gross
			Unrealized		Unrealized		Estimated
(In thousands)	Amortized Cost		Gains		Losses		Fair Value
U.S. government securities	$	29,736	$	—	$	(3)	$	29,733
U.S. government agencies		4,971		—		—		4,971
U.S. corporate notes		2,875		—		—		2,875
U.S. commercial paper		22,037		—		—		22,037
Money market funds		49,358		—		—		49,358
Total	$	108,977	$	—	$	(3)	$	108,974


	Estimated Fair Value Measurements as of December 31, 2019 Using:
	Quoted Price in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
Types of Instruments	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets
U.S. government securities	$	—	$	53,834	$	—	$	53,834
U.S. commercial paper		—		18,915		—		18,915
Money market funds		233,992		—		—		233,992
Total assets measured at estimated fair value	$	233,992	$	72,749	$	—	$	306,741
Debt
2023 Notes	$	—	$	243,394	$	—	$	243,394
2025 Notes		—		208,976		—		208,976
Total fair value of debt	$	—	$	452,370	$	—	$	452,370


		December 31,
(In thousands)	Amortization period	2019		2018
United States	2013-2030	$	120,000	$	120,000
Europe	2013-2029		60,000		60,000
Japan	2013-2029		40,000		40,000
Gross carrying value			220,000		220,000
Accumulated amortization			(80,924)		(67,101)
Net carrying value		$	139,076	$	152,899


	Unrecognized		Weighted-Average
	Compensation		Amortization
(In thousands)	Cost		Period (Years)
RSUs	$	376	0.3
RSAs		942	2.5
Total unrecognized compensation cost	$	1,318


		Weighted-
		Average			Weighted-			Weighted-
		Exercise			Average			Average
	Number of	Price of		Number of	Fair Value		Number of	Fair Value
	outstanding	Outstanding		outstanding	per Share		outstanding	per Share
(In thousands, except per share data)	options	Options		RSUs and PSUs	at Grant		RSAs and PSAs	at Grant
Balance as of December 31, 2018	1,237	$	24.00	105	$	15.54	77	$	15.37
Granted	—		—	81		13.72	53		15.08
Exercised	(45)		12.27	—		—	—		—
Released RSUs/RSAs	—		—	(92)		15.55	(52)		16.43
Forfeited	(105)		27.14	—		—	—		—
Balance as of December 31, 2019	1,087		24.18	94		13.94	78		14.46


(In thousands)
Years ending December 31:
2020 to 2022	$	—
2023		240,984
2024		—
Thereafter		192,500
Total	$	433,484


(In thousands)
Years ending December 31:
2020	$	116
2021		123
2022		109
Thereafter		—
Total	$	348


(In thousands)
Unrecognized tax benefits as of December 31, 2017 and 2016	$	15,488
Gross decrease in tax portions for 2018		(75)
Unrecognized tax benefits as of December 31, 2018	$	15,413
Gross decrease in tax portions for 2019		(71)
Unrecognized tax benefits as of December 31, 2019	$	15,342


	For the Quarters Ended
	March 31		June 30		September 30		December 31
2019
Net revenue	$	55,183	$	64,107	$	65,755	$	75,971
Total operating expenses		3,015		4,347		4,962		2,332
Income from operations		52,168		59,760		60,793		73,639
Income tax expense, net		(8,508)		(10,433)		(10,558)		(12,403)
Net income		40,019		46,061		47,051		57,862
Net income attributable to noncontrolling interest		6,229		8,321		7,242		11,913
Net income attributable to Innoviva stockholders	$	33,790	$	37,740	$	39,809	$	45,949
Basic net income per share	$	0.33	$	0.37	$	0.39	$	0.45
Diluted net income per share	$	0.31	$	0.34	$	0.36	$	0.42

	For the Quarters Ended
	March 31		June 30		September 30		December 31
2018
Net revenue	$	52,380	$	67,086	$	61,680	$	79,858
Total operating expenses		11,685		4,411		4,019		2,638
Income from operations		40,695		62,675		57,661		77,220
Income tax benefit, net		—		—		—		196,073
Net income		30,330		56,616		50,167		269,215
Net income attributable to noncontrolling interest		749		1,990		3,078		5,455
Net income attributable to Innoviva stockholders	$	29,581	$	54,626	$	47,089	$	263,760
Basic net income per share	$	0.29	$	0.54	$	0.47	$	2.61
Diluted net income per share	$	0.27	$	0.49	$	0.43	$	2.34


	Number of securities to
	be issued upon exercise					Number of securities
	of outstanding options					remaining available for
	and vesting of					future issuance under
	outstanding restricted		Weighted‑average			equity compensation plans
	stock units and		exercise price of			(excluding securities
Plan Category	restricted stock awards		outstanding options			reflected in column (a))
	(a)			(b)		(c)
Equity compensation plans approved by security holders	1,181,499	(1)	$	24.18	(2)	5,210,527	(3)


			Incorporated by Reference
Exhibit Number	Description	Form	Exhibit	Filing Date/Period End Date
3.1	Amended and Restated Certificate of Incorporation	S-1	3.3	7/26/2004
3.2	Certificate of Amendment of Restated Certificate of Incorporation	10-Q	3.4	3/31/2007
3.3	Certificate of Ownership and Merger Merging LABA Merger Sub, Inc. with and into Theravance, Inc., as filed with the Secretary of State of the State of Delaware, effective on January 7, 2016	8-K	3.1	1/8/2016
3.4	Amended and Restated Bylaws, amended and restated as of February 8, 2017	8-K	3.1	2/9/2017
4.1	Specimen certificate representing the common stock of the registrant	10-K	4.1	12/31/2006
4.4	Indenture, dated as of January 24, 2013 by and between Theravance, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee	8-K	4.1	1/25/2013
4.5	Form of 2.125% Convertible Subordinated Note Due 2023 (included in Exhibit 4.4)
4.6	Indenture, dated April 17, 2014	8-K	4.1	4/21/2014
4.8	Indenture (including form of Note) with respect to Innoviva’s 2.50% Convertible Senior Notes due 2025, dated as of August 7, 2017, between Innoviva and The Bank of New York Mellon Trust Company, N.A., as trustee	8-K	4.1	8/7/2017
4.9	Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934	10-K	4.9	2/19/2020
10.1+	1997 Stock Plan	S-1	10.1	6/10/2004
10.2+	Long-Term Stock Option Plan	S-1	10.2	6/10/2004
10.3+	2004 Equity Incentive Plan, as amended by the Board of Directors February 10, 2010 and approved by stockholders April 27, 2010 and forms of equity award	10-K	10.3	12/31/2011
10.4	Employee Stock Purchase Plan, as amended April 27, 2010	10-Q	10.4	6/30/2010
10.5+	Change in Control Severance Plan, as amended and restated on July 27, 2007	10-Q	10.5	6/30/2008
10.6	Amended and Restated Lease Agreement, 951 Gateway Boulevard, between the registrant and HMS Gateway Office L.P., dated January 1, 2001	S-1	10.8	6/10/2004
10.7	Lease Agreement, 901 Gateway Boulevard, between the registrant and HMS Gateway Office L.P., dated January 1, 2001	S-1	10.9	6/10/2004
10.8	Collaboration Agreement between the registrant and Glaxo Group Limited, dated as of November 14, 2002	10-Q	10.1	6/30/2014
10.9+	Form of Indemnification Agreement for directors and officers of the registrant	S-1	10.11	6/10/2004
10.11	Amended and Restated Investors’ Rights Agreement by and among the registrant and the parties listed therein, dated as of May 11, 2004	S-1	10.13	6/10/2004
10.13*	Strategic Alliance Agreement between the registrant and Glaxo Group Limited, dated as of March 30, 2004	10-K	10.13	12/31/2013
10.18+	Form of Notice of Grant and Stock Option Agreement under 2004 Equity Incentive Plan	10-K	10.30	12/31/2004
10.19+	Form of Notice of Restricted Stock Award and Restricted Stock Agreement under 2004 Equity Incentive Plan (form in effect through 2010)	10-Q	10.31	6/30/2007
10.20+	Description of Cash Bonus Program, as amended	10-K	10.22	12/31/2009
10.24+	Amended and Restated 2008 New Employee Equity Incentive Plan and forms of equity award	10-K	10.24	12/31/2011
10.27+	Amendment to Change in Control Severance Plan effective December 16, 2009	10-K	10.47	12/31/2009
10.28+	2009 Change in Control Severance Plan adopted December 16, 2009	10-K	10.48	12/31/2009


Signature	Title	Date

/s/ GEOFFREY HULME Geoffrey Hulme	Interim Principal Executive Officer (Principal Executive Officer)	February 19, 2020

/s/ MARIANNE ZHEN Marianne Zhen	Chief Accounting Officer (Principal Accounting Officer)	February 19, 2020

/s/ ODYSSEAS KOSTAS, M.D. Odysseas Kostas, M.D.	Chairman of the Board	February 19, 2020

/s/ GEORGE BICKERSTAFF, III George Bickerstaff, III	Director	February 19, 2020

/s/ MARK DIPAOLO, ESQ. Mark DiPaolo, Esq.	Director	February 19, 2020

/s/ JULES HAIMOVITZ Jules Haimovitz.	Director	February 19, 2020

/s/ SARAH SCHLESINGER, M.D. Sarah Schlesinger, M.D.	Director	February 19, 2020