Innoviva Inc
For the period ended Dec 31, 2024. Filed Feb 26, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 26, 2025
INVA$19.10-0.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-29.
0000950170-24-023237
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-26.
0000950170-25-027864
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 151 previous paragraphs and 163 current paragraphs.
87 unchanged; 39 reworded; 36 added; 23 removed; 2 previous and 1 current paragraphs rearranged.
Tables are not compared: 10 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (36)
Current report
Net Product Sales: Fourth quarter 2024 net product sales were $28.9 million, which included U.S. net product sales of $24.9 million, compared to $19.7 million for the fourth quarter of 2023, and ex-U.S. net product sales of $4.0 million. U.S. net product sales consisted of $15.9 million from GIAPREZA®, $3.1 million from XERAVA®, and $5.9 million from XACDURO®. Full year 2024 net product sales were $97.5 million, which included U.S. net product sales of $80.9 million, compared to $55.1 million for full year 2023, and ex-U.S. net product sales of $16.6 million. U.S. net product sales consisted of $53.4 million from GIAPREZA®, $12.8 million from XERAVA®, and $14.7 million from XACDURO®.
Current report
License revenue: Fourth quarter 2024 license revenue of $0.4 million included product development cost-sharing reimbursements from our partner. Full year 2024 license revenue of $19.5 million consisted of an $8.0 million milestone payment and $11.5 million cost-sharing reimbursements, compared to $11.0 million milestone payments in full year 2023.
Current report
Key Business and R&D Highlights
Current report
ZEVTERA® (ceftobiprole): an advanced-generation cephalosporin antibiotic that is approved in the U.S. for three specific treatment indications. ZEVTERA® is the only FDA-approved methicillin-resistant Staphylococcus aureus (MRSA) cephalosporin antibiotic for treating adult patients with Staphylococcus aureus bloodstream infections (bacteremia) (“SAB”) and endocarditis. ZEVTERA® is indicated for the treatment of adult patients with SAB, including right-sided infective endocarditis, adult patients with acute bacterial skin and skin structure infections (ABSSSI) and for adult and pediatric patients (3 months to less than 18 years old) with community-acquired bacterial pneumonia (CABP).
Current report
In the fourth quarter of 2024, Innoviva licensed U.S. commercialization and distribution rights to ZEVTERA® from Basilea.
Current report
The Company anticipates launching ZEVTERA® in the U.S. in mid-2025.
Current report
Zoliflodacin: a potential first-in-class, single dose, oral antibiotic is currently being developed in partnership with The Global Antibiotic Research & Development Partnership (“GARDP”) for the treatment of patients with uncomplicated gonorrhea.
Current report
In 2024, the Company reported positive Phase 3 data for zoliflodacin, in which a single dose of oral zoliflodacin achieved a statistically non-inferior microbiological cure rate compared to the current global standard of care. Oral zoliflodacin was generally well tolerated and emergent adverse events were comparable between treatment arms. No deaths or other serious adverse events were reported.
Current report
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Current report
The Company remains on track to submit the zoliflodacin NDA to the FDA in early 2025.
Current report
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Current report
XACDURO® was approved in China by the National Medical Products Administration for use in Chinese patients 18 years of age and older in May 2024.
Current report
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Current report
In July, XACDURO® was named as the preferred agent for the treatment of Carbapenem-resistant Acinetobacter baumannii infections, in combination with a carbapenem, in the updated 2024 IDSA treatment guidance.
Current report
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Current report
In August, XACDURO® was nominated for the prestigious Prix Galien USA award for Best Biotechnology Product.
Current report
Equity and Other Investments
Current report
Total product sales, net, as compared to the prior years, was as follows:
Current report
We derived our net product sales:
Current report
approximately 83% from customers located in the U.S. and 17% from the rest of the world for the year ended December 31, 2024;
Current report
Our net product sales increased during the periods presented, driven by higher sales volume resulting from our strategic commercialization efforts and dedications to delivering our critical care products to healthcare systems.
Current report
License and Other Revenue
Current report
We recognized license and other revenue of $8.0 million and $3.0 million for the year ended December 31, 2023 as a result of achievement of regulatory milestones under our license agreements with Everest and Zai Lab, respectively.
Current report
Cost of Products Sold
Current report
Cost of products sold, as compared to the prior years, were as follows:
Current report
The cost of products sold also includes the inventory step-up value from the acquisition of La Jolla, which is recorded upon the sale of such inventory. The step-up value included above amounted to $13.8 million, $27.2 million, and $10.0 million for the years ended December 31, 2024, 2023 and 2022, respectively. Our cost of products sold increased during the periods presented, driven by higher product sales volume. As of December 31, 2024, our total inventory included the remaining net fair value adjustments resulting from the acquisition of La Jolla of approximately $9.2 million, which will be recognized as cost of products sold when sales occur in future periods.
Current report
Selling, general and administrative expenses increased by $17.5 million for the year ended December 31, 2024, compared to the year ended December 31, 2023. The increase was mainly due to the reallocation of resources from the research and development function, focusing on regulatory compliance since May 2023 after the FDA approval of XACDURO®, and enhanced commercial strategies resulting from our ongoing efforts to promote and deliver our marketed critical care products to healthcare systems and patients.
Current report
Selling, general and administrative expenses for the year ended December 31, 2022 were lower than those for the year ended December 31, 2023, because this amount included only partial-year expenses for Entasis, which we began consolidating on February 17, 2022, and for La Jolla, which we acquired on August 22, 2022.
Current report
Our total unrecognized tax benefits as of December 31, 2024, 2023 and 2022 were $61.3 million, $19.4 million and $16.3 million, respectively. The increase of $41.9 million in 2024 was primarily due to our strategic intercompany intellectual property alignment across different jurisdictions.
Current report
As of December 31, 2024, $154.8 million of Entasis’ federal net operating losses and $365.8 million of La Jolla’s federal operating losses from the acquisitions in 2022, both subject to annual limitations, were available for future utilization.
Current report
The Organization for Economic Co-operation and Development (“OECD”) Inclusive Framework on Base Erosion and Profit Shifting (“BEPS”) addresses the tax challenges arising from the digitalization of the global economy. It aims to restore confidence in the international tax system by ensuring that profits are taxed where economic activities take place and value is created. On April 25, 2024, the OECD published the Consolidated Commentary (“Commentary”) to the Pillar Two Global Anti-Base Erosion (“GloBE”) Model Rules, incorporating all agreed Administrative Guidance that has been released by the Inclusive Framework from March 2022 through December 2023. The Commentary aims to provide tax administrations and taxpayers with guidance on the interpretation and application of the GloBE Model Rules. The Company is not subject to Pillar Two this fiscal year; however, it will continue to monitor the tax implications of the legislative changes if and when its non-U.S. footprint expands in the future.
Current report
Net income attributable to noncontrolling interests for the year ended December 31, 2022 was $6.3 million, which consisted of share of noncontrolling interests in TRC and Entasis. There were no noncontrolling interests for the years ended December 31, 2024 and 2023.
Current report
Cash provided by operating activities for the year ended December 31, 2024 was $188.7 million, consisting primarily of our net income of $23.4 million adjusted for net noncash items of $172.2 million, partially offset by net changes in operating assets and liabilities of $6.9 million. Noncash items included a $123.4 million net decrease in fair values of equity method investments and equity and long-term investments, $25.9 million in amortization of acquired intangible assets, $14.0 million of amortization of capitalized fees and depreciation of property and equipment, $13.8 million in inventory fair value adjustments included in cost of products sold, $6.4 million in stock-based compensation expense, and $2.1 million in amortization of debt discount and issuance costs, partially offset by $12.6 million of deferred income taxes. The changes in operating assets and liabilities included increases in other assets of $38.2 million, inventory of $6.8 million, accounts receivable of $5.9 million, and a decrease in accounts payable of $4.6 million, partially offset by an increases in income tax payable of $41.5 million and accrued liabilities of $3.0 million and a decrease in receivables from collaboration arrangements of $3.6 million.
Current report
Net cash used in investing activities for the year ended December 31, 2024 of $63.8 million included $59.6 million for purchases of trading securities, $32.3 million for purchases of equity investments managed by ISP Fund LP and $43.5 million in net purchases and sales of other investments managed by ISP Fund LP. Net cash used in investing activities was partially offset by $75.8 million in sales of equity investments managed by ISP Fund LP
Current report
Net cash used in financing activities for the year ended December 31, 2024 of $13.5 million included $14.8 million for the repurchases of our common stock under the stock repurchase program, partially offset by $1.5 million in net proceeds from issuances of common stock.
Current report
We also entered into a Commercial Supply Agreement with Corden Pharma CHENÔVE SAS (“Corden”), under which we engaged Corden to manufacture and supply certain products related to XACDURO® and to perform certain services and studies. Under the agreement, we committed to minimum purchases through December 31, 2027. As of December 31, 2024, we have approximately $26.4 million U.S. dollar equivalent in outstanding purchase commitments under this agreement.
Removed paragraphs (23)
Previous report
Net Product Sales: Fourth quarter 2023 net product sales and license revenue were $19.7 million, which included $13.1 million from GIAPREZA®, $5.2 million from XERAVA®, and $1.4 million from XACDURO®, compared to $14.6 million for the fourth quarter of 2022. Full year 2023 net product sales and license revenue was $71.6 million, which included $41.3 million from GIAPREZA®, $17.3 million from XERAVA®, $2.0 million from XACDURO®, and $11.0 million in milestone payments from our partners.
Previous report
Share repurchase: During the fourth quarter 2023, Innoviva repurchased 1,121,835 shares of its outstanding common stock for $15.4 million. During the year 2023, Innoviva repurchased 6,173,565 shares of its outstanding common stock for $76.5 million. Approximately $15 million of the authorized program remains outstanding as of year-end.
Previous report
Key 2023 R&D Highlights
Previous report
Zoliflodacin: potential first-in-class oral antibiotic to treat uncomplicated gonorrhea
Previous report
In November 2023, in collaboration with The Global Antibiotic Research & Development Partnership (GARDP), Innoviva announced that zoliflodacin, a first-in-class antibiotic, met its primary endpoint in a global pivotal phase 3 clinical trial for the treatment of uncomplicated gonorrhea. The Company expects a New Drug Application to be submitted to the U.S. FDA in the next twelve months.
Previous report
Earlier in May, The Lancet Infectious Diseases published detailed results from the pivotal Phase 3 ATTACK trial of sulbactam-durlobactam.
Previous report
Equity and Long-Term Investments
Previous report
Adoption of Accounting Standards Update (“ASU”) 2020-06 effective January 1, 2022;
Previous report
Research and development expenses for the year ended December 31, 2021 were attributable to the product development efforts of Pulmoquine Therapeutics Inc., which was dissolved at the end of 2021.
Previous report
Selling, general and administrative expenses increased by $34.7 million for the year ended December 31, 2023, compared to the year ended December 31, 2022, mainly attributable to the resource reallocation from the research development function to general and administrative function after the FDA approval of XACDURO®. Selling, general and administrative expenses for the year ended December 31, 2023 also reflect certain full-year expenses of Entasis which we started consolidating on February 17, 2022 and of La Jolla, which we acquired in August 22, 2022.
Previous report
Selling, general and administrative expenses increased by $47.4 million for the year ended December 31, 2022, compared to the year ended December 31, 2021, mainly attributable to the consolidation of Entasis’ operating expenses and La Jolla’s operating expenses as previously mentioned.
Previous report
The change in interest expense for the year ended December 31, 2022, compared to the year ended December 31, 2021, was primarily due to the adoption of ASU 2020-06, which simplifies the accounting for convertible debt instruments. As a result of the adoption, the debt discount associated with the cash settlement feature of the 2025 Notes was adjusted to zero as of January 1, 2022. Interest expense for the year ended December 31, 2022 included the contractual interest expense and the amortization of debt issuance costs for our 2023 Notes, the 2025 Notes and 2028 Notes. Interest expense for the year ended December 31, 2021 included the amortization of debt discount in addition to the contractual interest expense and the amortization of debt issuance costs for our 2023 Notes and 2025 Notes. The decrease in interest expense as a result of the adoption of ASU 2020-06 was partially offset by a higher debt balance and interest expense incurred for the deferred royalty obligation from the acquisition of La Jolla.
Previous report
We had total unrecognized tax benefits of $19.4 million as of December 31, 2023. Our total unrecognized tax benefits as of December 31, 2022 and December 31, 2021 were $16.3 million and $14.9 million, respectively.
Previous report
As a result of the acquisition of Entasis, we conducted a study of Entasis’ ownership changes and estimated that we will be able to utilize $155.6 million of its federal net operating losses, which are subject to annual limitations.
Previous report
As a result of the acquisition of La Jolla, we also performed an analysis of its ownership changes and estimated that we will be able to utilize $309.5 million of its federal net operating losses, which are subject to annual limitations.
Previous report
In December 2021, the Organization for Economic Cooperation and Development (“OECD”) enacted model rules for a new global minimum tax framework (“BEPS Pillar Two”), and various governments around the world have enacted, or are in the process of enacting legislation. We are in the process of evaluating whether and when these new rules may come into effect and apply to us. We plan to treat the tax if any as a period cost. We do not believe that the Pillar Two rules apply to us yet. As such, the potential future quantitative impact of the enacted or substantively enacted legislation is not yet reasonably estimable.
Previous report
Net income attributable to noncontrolling interests, as compared to the prior years, was as follows:
Previous report
(1) The year ended December 31, 2022 represents the period from the initial date of consolidation of Entasis on February 17, 2022 to the date of the acquisition of Entasis on July 11, 2022, and the period from January 1, 2022 through the date of the sale of our ownership interest in TRC on July 20, 2022.
Previous report
Net income attributable to noncontrolling interests for the year ended December 31, 2022 was $6.3 million compared to $103.0 million for the year ended December 31, 2021, or a decrease of $96.6 million, which was mainly due to lower net income attributable to the sale of our ownership interest in TRC, offset with net loss attributable to Entasis’ noncontrolling interest.
Previous report
On October 31, 2022, our Board of Directors authorized a share repurchase program under which we may repurchase up to $100.0 million of Innoviva’s outstanding shares of common stock. As of December 31, 2023, we have repurchased Innoviva common stock in the open market for total price of approximately $84.2 million. This program has no termination date, may be suspended or discontinued at any time at our discretion and does not obligate us to acquire any amount of common stock.
Previous report
Cash provided by operating activities for the year ended December 31, 2021 was $363.8 million, consisting primarily of our net income of $368.8 million, adjusted for non-cash items such as $76.4 million of deferred income taxes, $13.8 million of depreciation and amortization, $9.1 million amortization of debt discount and issuance costs, $2.0 million of stock-based compensation expense, partially offset by a $89.3 million net increase in fair values of equity method investments and equity and long-term investments and an increase in receivables from collaborative arrangements of $16.8 million.
Previous report
Net cash provided by investing activities for the year ended December 31, 2021 of $43.7 million was primarily due to $110.0 million net cash inflow from $301.0 million sales and $191.0 million purchases of equity and other investments managed by ISP Fund LP, offset by $66.3 million in purchases of various investment instruments including, but not limited to, common stock, warrants, convertible debt investment, money market funds and other securities.
Previous report
Net cash used in financing activities for the year ended December 31, 2021 of $452.5 million was primarily due to a $394.1 million repurchase of our common stock from GSK and $59.5 million in distributions to noncontrolling interest.
Reworded paragraphs (39)
Previous wording
Innoviva, Inc. (and where context requires, together with its subsidiaries referred to as “Innoviva”, the “Company”, the “Registrant” or “we” and other similar pronouns) is a company with a portfolio of royalties and innovative healthcare assets. We currently have three primary sets of assets: a royalty portfolio, operating assets in critical care and infectious disease, and other strategic healthcare assets.
Current wording
Innoviva, Inc. (and where context requires, together with its subsidiaries referred to as “Innoviva”, the “Company”, the “Registrant” or “we” and other similar pronouns) is a company with a core royalties portfolio, a leading critical care and infectious disease platform known as Innoviva Specialty Therapeutics (“IST”), and a portfolio of strategic investments in other healthcare assets
Previous wording
We expanded our portfolio through the acquisition of Entasis Therapeutics Holdings Inc. (“Entasis”) on July 11, 2022 and the acquisition of La Jolla Pharmaceutical Company (“La Jolla”) on August 22, 2022. Following the acquisitions, our commercial and marketed products include GIAPREZA® (angiotensin II), approved to increase blood pressure in adults with septic or other distributive shock, and XERAVA® (eravacycline) approved for the treatment of complicated intra-abdominal infections in adults. Our new commercial and marketed product, XACDURO® (formerly known as sulbactam-durlobactam or SUL-DUR), was approved by the United States Food and Drug Administration (“FDA”) on May 23, 2023 for the treatment of hospital-acquired and ventilator-associated pneumonias caused by Acinetobacter in adults. We commenced commercial sales of XACDURO® in the third quarter of 2023. Our development pipeline includes zoliflodacin, an investigational treatment for uncomplicated gonorrhea that reported positive data in a pivotal Phase 3 clinical trial on November 1, 2023. As such, we have a wholly owned robust critical care and infectious disease operating platform with hospital focus.
Current wording
We expanded our portfolio through the acquisition of Entasis Therapeutics Holdings Inc. (“Entasis”) on July 11, 2022 and the acquisition of La Jolla Pharmaceutical Company (“La Jolla”) on August 22, 2022. Following the acquisitions, our commercial and marketed products include GIAPREZA®(angiotensin II), approved to increase blood pressure in adults with septic or other distributive shock, and XERAVA® (eravacycline) approved for the treatment of complicated intra-abdominal infections in adults. Our new commercial and marketed product, XACDURO® (formerly known as sulbactam-durlobactam or SUL-DUR), was approved by the United States Food and Drug Administration (“FDA”) on May 23, 2023 for the treatment of hospital-acquired and ventilator-associated pneumonias caused by Acinetobacterin adults. We commenced commercial sales of XACDURO® in the third quarter of 2023. On December 14, 2024, we entered into an exclusive distribution and license agreement with Basilea Pharmaceutica Ltd, Allschwil (SIX: BSLN) (“Basilea”) for the commercialization of ZEVTERA®(ceftobiprole), an advanced-generation cephalosporin antibiotic, in the U.S. We continue to further advance our pipeline and are on track to submit a New Drug Application (“NDA”) for zoliflodacin, potentially first in class, single dose oral drug for the treatment of uncomplicated gonorrhea, to the U.S. FDA in early 2025. As such, we have a wholly owned robust critical care and infectious disease operating platform with hospital focus anchored by four differentiated products with significant growth potential and a promising drug candidate.
Previous wording
Our focus on capital allocation and shareholder value maximization has led our company to a meaningful transformation, and 2023 was a significant transition year. In 2022 our financials contained royalty revenues from TRELEGY® ELLIPTA® which was divested mid-year in an economically accretive transaction. Additionally, our acquisition and integration of operating companies further changed the structure of our financials compared to prior years. Through these changes, we believe we are well-positioned to create significant long-term shareholder value.
Current wording
Our focus on capital allocation and shareholder value maximization has led our company to a meaningful transformation over the last two years. In 2022 our financials contained royalty revenues from TRELEGY® ELLIPTA® which was divested mid-year in an economically accretive transaction. Additionally, our acquisition and integration of operating companies and advancement of our therapeutics portfolio further changed the structure of our financials compared to prior years. Through these changes, we believe we are well-positioned to create significant long-term shareholder value.
Previous wording
Our company structure and organization are tailored to our focused activities of managing our respiratory assets partnered with GSK, commercializing our marketed products, developing of our product candidates, optimizing capital allocation, and providing for certain essential reporting and management functions of a public company. As of December 31, 2023, we had 112 employees.
Current wording
Our company structure and organization are tailored to our focused activities of managing our respiratory assets partnered with GSK, commercializing our marketed products, developing our product candidates, optimizing capital allocation, and providing for certain essential reporting and management functions of a public company. As of December 31, 2024, we had 127 employees.
Previous wording
Royalty revenue: Fourth quarter 2023 gross royalty revenue from GSK was $69.6 million and full year was $252.7 million, compared to $54.7 million for the fourth quarter of 2022 and $253.4 million for the full year 2022.
Current wording
Royalty revenue: Fourth quarter 2024 gross royalty revenue from GSK was $66.0 million and full year was $255.6 million, compared to $69.6 million for the fourth quarter of 2023 and $252.7 million for the full year 2023.
Previous wording
Equity and long-term investments: Fourth quarter and full year 2023 change in fair values of equity and long-term investments of $25.5 million and $88.5 million, respectively, was primarily attributable to Armata share price appreciation.
Current wording
Equity and long-term investments: Fourth quarter and full year 2024 changes in fair values of equity and long-term investments of $19.6 million and $123.4 million, respectively, were primarily attributable to share price depreciation of Armata and other equity investments.
Previous wording
Net income: Fourth quarter 2023 net income was $61.5 million, or $0.97 basic per share, compared to a net loss of $68.3 million, or $(0.98) basic per share, for the fourth quarter 2022, driven primarily by higher revenue and positive impact of change in fair values of equity. Full year 2023 net income was $179.7 million, or $2.75 basic per share, compared to net income of $213.9 million, or $3.07 basic per share, for the full year 2022.
Current wording
Net income: Fourth quarter 2024 net income of $20.3 million ($0.32 basic net income per share) and full year 2024 net income of $23.4 million ($0.37 basic net income per share) were driven primarily by higher revenue, offset by the negative impact of changes in the fair values of equity investments.
Previous wording
Cash and cash equivalents: Totaled $193.5 million. Royalty and net product sales receivables totaled $84.1 million as of December 31, 2023.
Current wording
Cash and cash equivalents: Totaled $305.0 million. Royalty and net product sales receivables totaled $86.4 million as of December 31, 2024.
Previous wording
XACDURO® (sulbactam for injection; durlobactam for injection), co-packaged for intravenous use: targeted antibacterial for HABP/VABP caused by Acinetobacter
Current wording
XACDURO® (sulbactam for injection; durlobactam for injection), co-packaged for intravenous use: a targeted antibacterial treatment for patients with hospital-acquired bacterial pneumonia and ventilator-associated bacterial pneumonia (HABP/VABP) caused by susceptible isolates of Acinetobacter baumannii-calcoaceticus complex.
Previous wording
Our portfolio of strategic assets under the Company’s various subsidiaries was valued at $561.0 million as of December 31, 2023. In fourth quarter 2023, Innoviva invested an additional $5.0 million in one of our assets, Gate Neurosciences, to support its strategy of developing next generation targeted CNS therapies.
Current wording
Our portfolio of strategic assets under the Company’s various subsidiaries was valued at $501.5 million as of December 31, 2024. In the fourth quarter 2024, we continued to support product developments and invested $10.9 million in Gate Neurosciences, Inc., a leader in developing precision medicines targeting synaptic health.
Previous wording
The lock-up period for our initial contribution of $190.0 million expired in December 2023. Strategic Partners did not elect to make a withdrawal in 2023, thereby extending the lock-up period and withdrawal elections into subsequent years.
Current wording
The lock-up period for our initial contribution of $190.0 million expired in December 2023. Strategic Partners did not elect to make a withdrawal in 2023, thereby extending the lock-up period and withdrawal elections into subsequent years. In October 2024, we made an election to unwind the capital accounts in the Partnership in accordance with the terms of the Partnership Agreement and we expect to receive distributions of our capital accounts through April 2026.
Previous wording
We started recognizing revenue from product sales as a result of our acquisition of La Jolla. We apply the guidance on principal versus agent considerations under ASC Topic 606, Revenue from Contracts with Customers, to determine the appropriate treatment for the transactions between us and third parties. The classification of transactions under our arrangements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants. Any consideration related to activities in which we are considered the principal, which includes being in control of the good or service before such good or service is transferred to the customer, are accounted for as product sales.
Current wording
We apply the guidance on principal versus agent considerations under ASC Topic 606, Revenue from Contracts with Customers, to determine the appropriate treatment for the transactions between us and third parties. The classification of transactions under our arrangements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants. Any consideration related to activities in which we are considered the principal, which includes being in control of the good or service before such good or service is transferred to the customer, are accounted for as product sales.
Previous wording
Our investments in Armata include a convertible note (the “Armata Convertible Note”) and a term loan (the “Armata Term Loan”), both of which are classified as Level 3 financial instruments. The Armata Convertible Note is measured at fair value using a Monte Carlo simulation model with the probability of certain qualified events and the assumptions of risk-free rate, volatility of stock price and timing of certain qualified events. We measure the Armata Term Loan at fair value using an income approach based on the discounted value of expected future cash flows.
Current wording
Our investments in Armata include a convertible note (the “Armata Convertible Note”) and term loans issued in July 2023 and March 2024 (the “July 2023 Armata Term Loan ” and the “March 2024 Armata Term Loan”, respectively), all of which are classified as Level 3 financial instruments. The Armata Convertible Note is measured at fair value using a Monte Carlo simulation model with the probability of certain qualified events and the assumptions of risk-free rate, volatility of stock price and timing of certain qualified events. We measure the July 2023 Armata Term Loan and the March 2024 Armata Term Loan at fair value using an income approach based on the discounted value of expected future cash flows.
Previous wording
Our Level 3 financial instruments include the Gate Neurosciences Inc. (“Gate”) convertible promissory note and private placement positions held by ISP Fund LP 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. We measure the Gate convertible promissory note at fair value using a Monte Carlo simulation model with the probability of certain qualified events and the assumptions of equity value of Gate, risk-free rate, expected stock price, volatility of its peer companies, and the time until a financing is raised. Valuations models applied for the private placement positions held by ISP Fund LP may include the Black-Scholes-Merton pricing model, the Monte Carlo simulation model and other applicable valuation models. Key assumptions involve inputs to the Black-Scholes-Merton pricing model, probability rates of certain events and scenarios applied in the Monte Carlo simulation model and discount rates, as appropriate. The Monte Carlo simulation model also incorporates assumptions made based on transaction details such as the security’s stock price, the expected term, maturity, risk-free interest rates and dividend yield, as well as volatility.
Current wording
Our Level 3 financial instruments include the Gate convertible promissory note and private placement positions held by ISP Fund LP 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. We measure the Gate convertible promissory note at fair value using a Monte Carlo simulation model with the probability of certain qualified events and the assumptions of equity value of Gate, risk-free rate, expected stock price, volatility of its peer companies, and the time until a financing is raised. Valuation models applied for the private placement positions held by ISP Fund LP may include the Black-Scholes-Merton pricing model, the Monte Carlo simulation model and other applicable valuation models. Key assumptions involve inputs to the Black-Scholes-Merton pricing model, probability rates of certain events and scenarios applied in the Monte Carlo simulation model and discount rates, as appropriate. The Monte Carlo simulation model also incorporates assumptions made based on transaction details such as the security’s stock price, the expected term, maturity, risk-free interest rates and dividend yield, as well as volatility.
Previous wording
Accounting consolidation of Entasis on February 17, 2022 and purchase of remaining minority interest in Entasis on July 11, 2022;
Current wording
Accounting consolidation of Entasis on February 17, 2022 and purchase of remaining noncontrolling interest in Entasis on July 11, 2022;
Previous wording
Refer to Note 12, “Debt”, to the Consolidated Financial Statements for more information related to the adoption of ASU 2020-06. Refer to Note 5, “Consolidated Entities and Acquisitions”, to the Consolidated Financial Statements for more information related to our acquisitions of Entasis and La Jolla and the sale of our ownership interest in TRC.
Current wording
Refer to Note 5, “Consolidated Entities and Acquisitions”, to the Consolidated Financial Statements for more information related to our acquisitions of Entasis and La Jolla and the sale of our ownership interest in TRC.
Previous wording
Total royalty revenue, net, decreased to $311.6 million for the year ended December 31, 2022, compared to the year ended December 31, 2021. The decrease in total net royalty revenue was primarily due to the sale of our ownership interest in TRC, which received royalties stemming from sales of TRELEGY® ELLIPTA®. Royalties for RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA®decreased due to pricing pressures in the U.S. market and foreign currency rate changes.
Current wording
Total royalty revenue, net, increased to $241.7 million for the year ended December 31, 2024, compared to $238.8 million for the year ended December 31, 2023. The increase in total net royalty revenue was primarily due to the sales growth in ANORO® ELLIPTA®.
Previous wording
Net product sales for the year ended December 31, 2023 was $60.6 million, consisting of net sales of GIAPREZA®, XERAVA® and XACDURO® for $41.3 million, $17.3 million, and $2.0 million, respectively. We derived approximately 91% of our net product sales for the same period from customers located in the U.S. and 9% from the rest of the world.
Current wording
approximately 91% from customers located in the U.S. and 9% from the rest of the world for the year ended December 31, 2023; and,
Previous wording
Net product sales we recognized from the date of acquisition of La Jolla, which occurred on August 22, 2022, to December 31, 2022 was $19.7 million, consisting of net sales of GIAPREZA® and XERAVA® for $14.2 million and $5.5 million, respectively. We derived approximately 96% of our net product sales for the same period from customers located in the U.S. and 4% from the rest of the world.
Current wording
approximately 96% from customers located in the U.S. and 4% from the rest of the world from the date of acquisition of La Jolla, which occurred on August 22, 2022, to December 31, 2022.
Previous wording
We recognized $8.0 million in license revenue for the year ended December 31, 2023 as a result of achievement of a regulatory milestone under our license agreement with Everest. We also recognized $3.0 million in license revenue as a result of achievement of a regulatory milestone under our license and collaboration agreement with Zai Lab.
Current wording
We recognized $8.0 million in license and other revenue for the year ended December 31, 2024 as a result of the achievement of a regulatory milestone under our license agreement with Zai Lab. We also recognized $8.1 million and $3.4 million in license and other revenue under the Amended Zai Agreement and a manufacturing stage technology transfer agreement with Zai Lab, respectively.
Previous wording
Research and development expenses, as compared to the prior year period, were as follows:
Current wording
Research and development expenses, as compared to the prior years, were as follows:
Previous wording
Research and development expenses for the year ended December 31, 2023 were mainly attributable to our product development efforts for XACDURO®. Research and development expenses for the year ended December 31, 2022 were mainly attributable to product development efforts of Entasis that we recognized from February 17, 2022. Research and development expenses for the year ended December 31, 2023 decreased compared to the same period in 2022 primarily due to the FDA approval of XACDURO® in May 2023 and resource reallocation from the research development function to general and administrative function after the FDA approval. External services costs consist primarily of fees paid to consultants, contractors and contract manufacturing organizations.
Current wording
Research and development expenses for the year ended December 31, 2024 were mainly attributable to post marketing commitments required by the FDA and ongoing product development. Research and development expenses for the year ended December 31, 2023 and 2022 were mainly attributable to our product development efforts for XACDURO®. Research and development expenses for the year ended December 31, 2024 decreased compared to the same period in 2023 primarily due to the FDA approval of XACDURO® in May 2023 and resource reallocation from the research development function to general and administrative function after the FDA approval. External services costs consist primarily of fees paid to consultants, contractors and contract manufacturing organizations.
Previous wording
Interest and dividend income increased for the year ended December 31, 2023, compared to the year ended December 31, 2022, due to higher interest rates and higher average balances of our cash equivalents, money market funds and other interest-bearing investments.
Current wording
Interest and dividend income increased for the years ended December 31, 2024 and 2023, due to higher interest rates and higher average balances of our cash equivalents, money market funds and other interest-bearing investments.
Previous wording
Interest and dividend income increased for the year ended December 31, 2022, compared to the year ended December 31, 2021, due to higher interest rates and higher average balances of our cash equivalents, money market funds and other interest-bearing investments. Other expense, net, primarily consisted of expenses incurred by ISP Fund LP.
Current wording
Other expense, net, primarily consisted of expenses incurred by ISP Fund LP.
Previous wording
The interest expense included the contractual interest expense and the amortization of debt issuance costs for our convertible subordinated notes due 2023 (the “2023 Notes”), our convertible senior notes due 2025 (the “2025 Notes”) and our convertible senior notes due 2028 (the “2028 Notes”), as well as effective interest expense on our deferred royalty obligation. The increase in 2023, compared to the year ended December 31, 2022, was mainly due to the interest expense on our deferred royalty obligation from the acquisition of La Jolla.
Current wording
The interest expense for the periods presented included the contractual interest expense and the amortization of debt issuance costs for our convertible senior notes due 2025 (the “2025 Notes”) and our convertible senior notes due 2028 (the “2028 Notes”), as well as effective interest expense on our deferred royalty obligation related to GIAPREZA®. The year-over-year increases from 2022 to 2024 were primarily due to a higher effective interest rate on our deferred royalty obligation, driven by stronger sales performance of GIAPREZA®.
Previous wording
The changes in fair values of equity method investments for the year ended December 31, 2023 were favorable mainly due to Armata’s higher stock prices during this period. We recorded $77.4 million in unrealized gains, $152.5 million in unrealized losses and $78.7 million in unrealized gains associated with our equity method investments in Armata for the years ended December 31, 2023, 2022 and 2021, respectively. The changes in fair values of equity method investments for the years ended December 31, 2022 and 2021 also include $9.2 million in unrealized losses and $5.7 million in unrealized gains, respectively, we recorded from our then equity method investments in Entasis. Refer to Note 6, “Equity and Long-Term Investments and Fair Value Measurements”, to the Consolidated Financial Statements for more information.
Current wording
The changes in fair values of equity method investments for the year ended December 31, 2024 were unfavorable mainly due to the decrease in Armata’s stock price. We recorded $64.3 million in unrealized losses, $77.4 million in unrealized gains and $152.5 million in unrealized losses associated with equity investments in Armata for the years ended December 31, 2024, 2023 and 2022, respectively. The changes in fair values of equity method investments for the year ended December 31, 2022 also included $9.2 million in unrealized losses from our then equity investments in Entasis before the acquisition in July 2022.
Previous wording
The changes in fair values of equity and long-term investments year over year reflect the realized gains and losses and net unrealized gains and losses in our strategic investments in Armata, InCarda, and Gate, and those investments managed by ISP Fund LP. We recorded $23.8 million in unrealized gain for the year ended December 31, 2023 related to other long-term investments we made in Armata in 2023.
Current wording
The changes in fair values of equity and long-term investments year over year reflect the realized gains and losses and net unrealized gains and losses in our strategic investments in Armata, InCarda, Gate and ImaginAb, and those investments managed by ISP Fund LP. We recorded $2.3 million in unrealized losses and $23.8 million in unrealized gains for the year ended December 31, 2024 and 2023 related to our other long-term investments in Armata.
Previous wording
As of December 31, 2023, 2022 and 2021, we had net operating loss carryforwards for federal income taxes of $543.5 million, $411.5 million and $92.9 million, respectively. As of December 31, 2023, 2022 and 2021, we also had state net operating loss carryforwards of approximately $1.0 billion, $955.3 million and $648.6 million, respectively, which will expire beginning 2029. As of December 31, 2021, we had federal research and development tax credit carryforwards of $42.1 million. We did not have such federal research and development tax credit carryforwards as of December 31, 2023 and 2022. As of December 31, 2023, we had state research and development tax credits of $33.3 million.
Current wording
As of December 31, 2024, 2023 and 2022, we had net operating loss carryforwards for federal income taxes of $520.6 million, $543.5 million and $411.5 million, respectively. As of December 31, 2024, 2023 and 2022, we also had state net operating loss carryforwards of approximately $1.0 billion which will expire beginning 2030. As of December 31, 2024, we had state research and development tax credits of $33.3 million.
Previous wording
For the year ended December 31, 2023, 2022 and 2021, we recognized $14.4 million, $66.7 million and $76.4 million of income tax expense, respectively, mainly based on the taxable income generated during those years.
Current wording
For the years ended December 31, 2024, 2023 and 2022, we recognized $14.0 million, $14.4 million and $66.7 million, respectively, of income tax expense, mainly based on the taxable income generated during those years.
Previous wording
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 year ended December 31, 2023, we generated gross royalty revenues of $252.7 million and net product sales revenues of $60.6 million. Cash and cash equivalents totaled $193.5 million, royalties receivable from GSK totaled $69.6 million and accounts receivable associated with our product sales totaled $14.5 million, as of December 31, 2023.
Current wording
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 year ended December 31, 2024, we generated gross royalty revenues of $255.6 million, net product sales revenues of $97.5 million and license and other revenue of $19.5 million. Cash and cash equivalents totaled $305.0 million, royalties receivable from GSK totaled $66.0 million and accounts receivable associated with our marketed products and related arrangements totaled $20.4 million, as of December 31, 2024.
Previous wording
As of December 31, 2023, we had two outstanding convertible notes, the 2025 Notes and the 2028 Notes, in an aggregate principal amount of $453.5 million, of which $192.5 million and $261.0 million will become due in August 2025 and March 2028, respectively. Future interest payments associated with these notes total $34.6 million.
Current wording
As of December 31, 2024, we had two outstanding convertible notes, the 2025 Notes and the 2028 Notes, in an aggregate principal amount of $453.5 million, of which $192.5 million and $261.0 million will become due in August 2025 and March 2028, respectively. Future interest payments associated with these notes total $24.2 million.
Previous wording
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 Innoviva common shares held by GSK. On March 30, 2022, Strategic Partners made an additional capital contribution of $110.0 million to the Partnership pursuant to the letter agreement entered into between Strategic Partners, the Partnership and Sarissa Capital Fund GP LP on May 20, 2021. The capital contribution is subject to a 36-month lock-up period from the contribution date.
Current wording
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 Innoviva common shares held by GSK. On March 30, 2022, Strategic Partners made an additional capital contribution of $110.0 million to the Partnership pursuant to the letter agreement entered into between Strategic Partners, the Partnership and Sarissa Capital Fund GP LP on May 20, 2021. The capital contribution is subject to a 36-month lock-up period from the contribution date. The lock-up period for our initial contribution of $190.0 million expired in December 2023. Strategic Partners did not elect to make a withdrawal in 2023, thereby extending the lock-up period and withdrawal elections into subsequent years. In October 2024, we made an election to unwind the capital accounts in the Partnership in accordance with the terms of the Partnership Agreement and we expect to receive distributions of our capital accounts through April 2026.
Previous wording
We believe that our cash and cash equivalents will be sufficient to meet our anticipated debt service and operating needs, as well our ongoing share repurchase program, for at least the next 12 months based upon current operating plans and financial forecasts. Our long-term capital requirements will depend on many factors including the amount of our royalty revenues, sales growth of our currently marketed products, timing of regulatory approval of our product candidates and outcome of our acquisitions and strategic investments. 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 in the form of public or private equity offerings or debt financings 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 privately negotiated repurchases, tender offers, redemptions, amendments, or otherwise, all allowable with the terms of our debt agreements.
Current wording
We believe that our cash and cash equivalents 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. Our long-term capital requirements will depend on many factors including the amount of our royalty revenues, sales growth of our currently marketed products, timing of regulatory approval of our product candidate and outcome of our acquisitions and strategic investments. 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 in the form of public or private equity offerings or debt financings 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 privately negotiated repurchases, tender offers, redemptions, amendments, or otherwise, all allowable with the terms of our debt agreements.
Previous wording
Cash provided by operating activities for the year ended December 31, 2023 was $141.1 million, consisting primarily of our net income of $179.7 million, partially offset by net non-cash items of $13.9 million and net changes in operating assets and liabilities of $24.8 million. Non-cash items included a $88.5 million net increase in fair values of equity method investments and equity and long-term investments, partially offset by $27.2 million in inventory fair value adjustments included in cost of products sold, $21.8 million in amortization of acquired intangible assets, $13.9 million of amortization of capitalized fees and depreciation of property and equipment, $5.8 million in stock-based compensation expense, $4.4 million of deferred income taxes and $2.1 million in amortization of debt discount and issuance costs. The changes in operating assets and liabilities included increases in receivables from collaboration arrangements of $14.9 million, inventories of $12.0 million, accounts receivable of $5.1 million, other assets of $3.0 million and a decrease in personnel-related, interest and other accrued expenses of $2.4 million, partially offset by a decrease in prepaid expenses of $7.9 million and increases in accounts payable of $3.8 million and income tax payable of $1.7 million.
Current wording
Cash provided by operating activities for the year ended December 31, 2023 was $141.1 million, consisting primarily of our net income of $179.7 million, partially offset by net non-cash items of $13.9 million and net changes in operating assets and liabilities of $24.8 million. Non-cash items included a $88.5 million net increase in fair values of equity method investments and equity and long-term investments, partially offset by $27.2 million in inventory fair value adjustments included in cost of products sold, $21.8 million in amortization of acquired intangible assets, $13.9 million of amortization of capitalized fees and depreciation of property and equipment, $5.8 million in stock-based compensation expense, $4.4 million of deferred income taxes and $2.1 million in amortization of debt discount and issuance costs. The changes in operating assets and liabilities included increases in receivables from collaboration arrangements of $14.9 million, inventory of $12.0 million, accounts receivable of $5.1 million, other assets of $3.0 million and a decrease in personnel-related, interest and other accrued expenses of $2.4 million, partially offset by a decrease in prepaid expenses of $7.9 million and increases in accounts payable of $3.8 million and income tax payable of $1.7 million.
Previous wording
Cash provided by operating activities for the year ended December 31, 2022 was $201.7 million, consisting primarily of our net income of $220.3 million and net changes in operating assets and liabilities of $6.9 million, partially offset by net non-cash items of $25.4 million. Non-cash items included a net gain of $266.7 million recognized on the sale of TRC, partially offset by net non-cash charges of $241.3 million. Non-cash charges included a $153.3 million net decrease in fair values of equity method investments and equity and long-term investments, $25.0 of deferred income taxes, $13.9 million of amortization of capitalized fees and depreciation of property and equipment and $5.6 million in amortization of acquired intangible assets, $20.7 million in loss on the extinguishment of debt, $7.3 million in stock-based compensation expense, $10.0 million in inventory fair value adjustments included in cost of products sold and $2.1 million in the amortization of debt discount and issuance costs. The changes in operating assets and liabilities included an increase in prepaid expenses of $21.4 million, a decrease in receivables from collaboration arrangements of $13.3 million and increases of $11.9 million and $10.0 million in accrued personnel-related expenses and other accrued liabilities and in income tax payable, respectively.
Current wording
Cash provided by operating activities for the year ended December 31, 2022 was $201.7 million, consisting primarily of our net income of $220.3 million and net changes in operating assets and liabilities of $6.9 million, partially offset by net non-cash items of $25.4 million. Non-cash items included a net gain of $266.7 million recognized on the sale of TRC, partially offset by net non-cash charges of $241.3 million. Non-cash charges included a $153.3 million net decrease in fair values of equity method investments and equity and long-term investments, $25.0 million of deferred income taxes, $13.9 million of amortization of capitalized fees and depreciation of property and equipment and $5.6 million in amortization of acquired intangible assets, $20.7 million in loss on the extinguishment of debt, $7.3 million in stock-based compensation expense, $10.0 million in inventory fair value adjustments included in cost of products sold and $2.1 million in the amortization of debt discount and issuance costs. The changes in operating assets and liabilities included an increase in prepaid expenses of $21.4 million, a decrease in receivables from collaboration arrangements of $13.3 million and increases of $11.9 million and $10.0 million in accrued personnel-related expenses and other accrued liabilities and in income tax payable, respectively.
Previous wording
Net cash used in financing activities for the year ended December 31, 2023 of $171.8 million consist mainly of the repayments of $96.2 million upon maturity of the 2023 Notes in January 2023 and $75.7 million for the repurchases of our common stock under the current stock repurchase program.
Current wording
Net cash used in financing activities for the year ended December 31, 2023 of $171.8 million consisted mainly of the repayments of $96.2 million upon maturity of the 2023 Notes in January 2023 and $75.7 million for the repurchases of our common stock under the stock repurchase program.
Previous wording
Our short-term and long-term obligations also include contractual payments related to our operating leases amounting to $3.1 million, with approximately $1.4 million payable through December 31, 2024 and 2025 and approximately $0.1 million payable in each of the years 2026 and 2027. Refer to Note 13, “Commitments and Contingencies” to the Consolidated Financial Statements for more information.
Current wording
Our short-term and long-term obligations also include contractual payments related to our operating leases amounting to $3.0 million, with approximately $1.7 million payable in 2025 and approximately $0.4 million payable in each of the years 2026 through 2028. Refer to Note 13, “Commitments and Contingencies” to the Consolidated Financial Statements for more information.
Previous wording
As part of our acquisition of La Jolla, we recognized its deferred royalty obligation in connection with La Jolla Royalty Agreement with HCR. Under the terms of the Agreement, HCR is entitled to receive quarterly royalties on worldwide net sales of GIAPREZA® until either January 1, 2031 or when the maximum aggregate royalty payments have been made, whichever occurs first. Quarterly payments to HCR under the Royalty Agreement start at a maximum royalty rate, with step-downs based on the achievement of annual net product sales thresholds. The current maximum royalty rate is 14%. Starting January 1, 2024, the maximum royalty rate was increased to 18% based on the terms of the Agreement. The La Jolla Royalty Agreement is subject to maximum aggregate royalty payments to HCR of $225.0 million.
Current wording
As part of our acquisition of La Jolla, we recognized its deferred royalty obligation in connection with La Jolla Royalty Agreement with HCR. Under the terms of the Agreement, HCR is entitled to receive quarterly royalties on worldwide net sales of GIAPREZA® until either January 1, 2031 or when the maximum aggregate royalty payments have been made, whichever occurs first. Quarterly payments to HCR under the Royalty Agreement start at a maximum royalty rate, with step-downs based on the achievement of annual net product sales thresholds. The maximum royalty rate through December 31, 2023 was 14%. Starting January 1, 2024, the maximum royalty rate was increased to 18% based on the terms of the Agreement. The La Jolla Royalty Agreement is subject to maximum aggregate royalty payments to HCR of $225.0 million.
Previous wording
We also enter into agreements in the normal course of business with vendors for manufacturing, clinical trials and preclinical studies, and other services and products for operating purposes.
Current wording
We also enter into agreements in the normal course of business with vendors for manufacturing, clinical trials and pre-clinical studies, and other services and products for operating purposes.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Refer to Note 6, “Equity and Long-Term Investments and Fair Value Measurements”, to the Consolidated Financial Statements for more information.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
In May 2023, the U.S. Food and Drug Administration (FDA) approved XACDURO® for use in patients 18 years of age and older for the treatment of hospital-acquired bacterial pneumonia and ventilator-associated bacterial pneumonia (HABP/VABP) caused by susceptible isolates of Acinetobacter baumannii-calcoaceticus complex.
Previous report — wording carried elsewhere
The lock-up period for our initial contribution of $190.0 million expired in December 2023. Strategic Partners did not elect to make a withdrawal in 2023, thereby extending the lock-up period and withdrawal elections into subsequent years.