Innoviva, Inc 10-Q for FY2020 Q2

Innoviva, Inc. (INVA)

10-Q 2020-07-29 For: 2020-06-30

Added on April 12, 2026

About this 10-Q

Innoviva, Inc filed this 10-Q on July 29, 2020, covering the quarter ended June 30, 2020 (FY2020 Q2).

Headline figures

Quarter ended June 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $78.95M; up 23.1% from $64.11M a year earlier
Net income: $98.23M; up 113.2% from net income of $46.06M a year earlier
Diluted EPS: $0.69; up 102.9% from $0.34 a year earlier

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Delaware		94-3265960
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

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

Large accelerated filer ⌧		Accelerated filer ◻

Non-accelerated filer ◻		Smaller reporting company ☐

		Emerging growth company ☐

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets as of June 30, 2020 (Unaudited) and December 31, 2019	3
Unaudited Consolidated Statements of Income for the Three and Six Months Ended June 30, 2020 and 2019	4
Unaudited Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2020 and 2019	5
Unaudited Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2020 and 2019	6
Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019	7
Notes to Unaudited Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3. Quantitative and Qualitative Disclosures About Market Risk	22

Item 4. Controls and Procedures	22

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	22

Item 1A. Risk Factors	23

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	23

Item 3. Defaults Upon Senior Securities	23

Item 4. Mine Safety Disclosure	23

Item 5. Other Information	23

Item 6. Exhibits	24

Signatures	25

Exhibits


	June 30,		December 31,
	2020		2019
	(unaudited)		*
Assets
Current assets:
Cash and cash equivalents	$	413,147	$	278,096
Short-term marketable securities		3,999		72,749
Related party receivables from collaborative arrangements		82,402		79,427
Prepaid expenses and other current assets		645		962
Total current assets		500,193		431,234
Property and equipment, net		37		33
Equity investments		128,613		—
Capitalized fees paid to a related party, net		132,164		139,076
Deferred tax assets, net		118,348		154,171
Other assets		264		312
Total assets	$	879,619	$	724,826

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	195	$	10
Accrued personnel-related expenses		291		647
Accrued interest payable		4,152		4,152
Other accrued liabilities		776		562
Total current liabilities		5,414		5,371
Long-term debt, net of discount and issuance costs		381,230		377,120
Other long-term liabilities		163		219
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, 101,392 and 101,288 issued and outstanding as of June 30, 2020 and December 31, 2019, respectively		1,015		1,013
Additional paid-in capital		1,260,017		1,258,859
Accumulated other comprehensive income (loss)		(2)		27
Accumulated deficit		(804,123)		(946,404)
Total Innoviva stockholders’ equity		456,907		313,495
Noncontrolling interest		35,905		28,621
Total stockholders’ equity		492,812		342,116
Total liabilities and stockholders’ equity	$	879,619	$	724,826


	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019

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 June 30, 2020 and 2019, and $6,912 in the six months ended June 30, 2020 and 2019	$	68,946	$	64,107	$	147,624	$	119,290
Revenue from collaborative arrangements with a related party		10,000		—		10,000		—
Total net revenue		78,946		64,107		157,624		119,290

Operating expenses:
Research and development		559		—		559		—
General and administrative		2,596		4,347		5,159		7,362
Total operating expenses		3,155		4,347		5,718		7,362

Income from operations		75,791		59,760		151,906		111,928

Other income (expense), net		30		(8)		98		(7)
Interest income		158		1,403		1,460		2,378
Interest expense		(4,561)		(4,661)		(9,077)		(9,278)
Changes in fair values of equity investments		46,698		—		68,613		—
Income before income taxes		118,116		56,494		213,000		105,021
Income tax expense, net		19,891		10,433		35,823		18,941
Net income		98,225		46,061		177,177		86,080
Net income attributable to noncontrolling interest		21,381		8,321		34,896		14,550
Net income attributable to Innoviva stockholders	$	76,844	$	37,740	$	142,281	$	71,530

Basic net income per share attributable to Innoviva stockholders	$	0.76	$	0.37	$	1.40	$	0.71
Diluted net income per share attributable to Innoviva stockholders	$	0.69	$	0.34	$	1.27	$	0.65

Shares used to compute Innoviva basic and diluted net income per share:
Shares used to compute basic net income per share		101,324		101,151		101,280		101,105
Shares used to compute diluted net income per share		113,545		113,391		113,527		113,384


	Six months ended June 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


	Six months ended June 30, 2019
				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, 2018	101,098	$	1,011	$	1,256,267	$	(3)	$	(1,103,692)	$	5,469	$	159,052
Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding	85		1		253		—		—		—		254
Stock-based compensation	—		—		605		—		—		—		605
Net income	—		—		—		—		33,790		6,229		40,019
Other comprehensive income	—		—		—		13		—		—		13
Balance as of March 31, 2019	101,183	$	1,012	$	1,257,125	$	10	$	(1,069,902)	$	11,698	$	199,943
Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding	89		1		200		—		—		—		201
Stock-based compensation	—		—		474		—		—		—		474
Net income	—		—		—		—		37,740		8,321		46,061
Other comprehensive income	—		—		—		23		—		—		23
Balance as of June 30, 2019	101,272	$	1,013	$	1,257,799	$	33	$	(1,032,162)	$	20,019	$	246,702


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands except per share data)	2020		2019		2020		2019
Numerator:
Net income attributable to Innoviva stockholders, basic	$	76,844	$	37,740	$	142,281	$	71,530
Add: interest expense on 2023 Notes		1,184		1,158		2,364		2,325
Net income attributable to Innoviva stockholders, diluted	$	78,028	$	38,898	$	144,645	$	73,855

Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders		101,324		101,151		101,280		101,105
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		32		51		58		90
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders		113,545		113,391		113,527		113,384

Net income per share attributable to Innoviva stockholders
Basic	$	0.76	$	0.37	$	1.40	$	0.71
Diluted	$	0.69	$	0.34	$	1.27	$	0.65


	Three Months Ended June 30,		Six Months Ended June 30,
(In thousands)	2020	2019	2020	2019
Outstanding options and awards granted under equity incentive plan and employee stock purchase plan	1,154	1,188	1,124	1,120


	June 30, 2020
			Gross		Gross
			Unrealized		Unrealized		Estimated
(In thousands)	Amortized Cost		Gains		Losses		Fair Value
U.S. government securities	$	3,993	$	6	$	—	$	3,999
Money market funds		378,472		—		—		378,472
Total	$	382,465	$	6	$	—	$	382,471


	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


	Estimated Fair Value Measurements as of June 30, 2020 Using:
	Quoted Price in
	Active Markets		Significant 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	$	—	$	3,999	$	—	$	3,999
Money market funds		378,472		—		—		378,472
Equity investment - Armata Common Stock		34,146		—		—		34,146
Equity investment - Armata Warrants		—		26,181		—		26,181
Equity investment - Entasis Common Stock		41,440		—		—		41,440
Equity investment - Entasis Warrants		—		26,846		—		26,846
Total assets measured at estimated fair value	$	454,058	$	57,026	$	—	$	511,084
Debt
2023 Notes	$	—	$	246,303	$	—	$	246,303
2025 Notes		—		198,997		—		198,997
Total fair value of debt	$	—	$	445,300	$	—	$	445,300


(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:
Remainder of 2020	$	60
2021		123
2022		109
Thereafter		—
Total	$	292


	Six Months Ended June 30,
(In thousands)	2020		2019		Change
Net cash provided by operating activities	$	153,275	$	133,151	$	20,124
Net cash provided by (used in) investing activities		9,044		(54,060)		63,104
Net cash provided by (used in) financing activities		(27,268)		444		(27,712)


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

10.1	Offer Letter between Innoviva, Inc. and Pavel Raifeld, dated May 20, 2020	8-K	10.1	05/26/2020

10.2	Transition Agreement between Innoviva, Inc. and Geoffrey L. Hulme, dated June 11, 2020	8-K	10.1	06/12/2020

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

99.1	Form of Indemnification Agreement between Innoviva, Inc. and its executive officers	8-K	99.1	05/26/2020

101	Interactive Data File (Quarterly Report on Form 10-Q, for the quarterly period ended June 30, 2020) formatted in iXBRL (Inline eXtensible Business Reporting Language).

104	Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101).


	Innoviva, Inc.

Date: July 29, 2020	/s/ Pavel Raifeld
	Pavel Raifeld
	Chief Executive Officer
	(Principal Executive Officer)

Date: July 29, 2020	/s/ Marianne Zhen
	Marianne Zhen
	Chief Accounting Officer
	(Principal Financial Officer)