Innoviva, Inc.

Previous wording

Important factors that we believe could cause actual results or events to differ materially from our forward‑looking statements include, but are not limited to, risks related to: lower than expected future royalty revenue from respiratory products partnered with GSK, the commercialization of RELVAR®/BREO® ELLIPTA®, ANORO® ELLIPTA®, GIAPREZA®, XERAVA®, XACDURO®, and ZEVTERA® in the jurisdictions in which these products have been approved; the strategies, plans and objectives of the Company (including the Company's growth strategy and corporate development initiatives); the timing, manner, and amount of potential capital returns to shareholders; the status and timing of clinical studies, data analysis and communication of results; the potential benefits and mechanisms of action of product candidates; expectations for product candidates through development and commercialization; the timing of regulatory approval of product candidates; and projections of revenue, expenses and other financial items; the impact of the novel coronavirus (“COVID-19”); the timing, manner and amount of capital deployment, including potential capital returns to stockholders; and risks related to the Company’s growth strategy and risks discussed in “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (“SEC”) on February 26, 2025, and as amended on March 24, 2025 (“2024 Form 10-K”), and Item 1A of Part II of our Quarterly Reports on Form 10-Q and below in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Item 2 of Part I. All forward-looking statements in this Quarterly Report on Form 10-Q are based on current expectations as of the date hereof and we do not assume any obligation to update any forward-looking statements on account of new information, future events or otherwise, except as required by law.

Current wording

Important factors that we believe could cause actual results or events to differ materially from our forward‑looking statements include, but are not limited to, risks related to: lower than expected future royalty revenue from respiratory products partnered with GSK, the commercialization of RELVAR®/BREO® ELLIPTA®, ANORO® ELLIPTA®, GIAPREZA®, XACDURO®, XERAVA®, ZEVTERA® and NUZOLVENCE®in the jurisdictions in which these products have been approved; the strategies, plans and objectives of the Company (including the Company’s growth strategy and corporate development initiatives); the timing, manner, and amount of potential capital returns to shareholders; the status and timing of clinical studies, data analysis and communication of results; the potential benefits and mechanisms of action of product candidates; expectations for product candidates through development and commercialization; the timing of regulatory approval of product candidates; and projections of revenue, expenses and other financial items; the timing, manner and amount of capital deployment, including potential capital returns to stockholders; and risks related to the Company’s growth strategy and risks discussed in “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (“SEC”) on February 25, 2026, and as amended on March 27, 2026 (“2025 Form 10-K”), and Item 1A of Part II of our Quarterly Reports on Form 10-Q and below in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Item 2 of Part I. All forward-looking statements in this Quarterly Report on Form 10-Q are based on current expectations as of the date hereof and we do not assume any obligation to update any forward-looking statements on account of new information, future events or otherwise, except as required by law.

Previous wording

Innoviva, Inc. (and where context requires, together with its subsidiaries referred to as “Innoviva”, the “Company”, or “we” and other similar pronouns) is a company with a 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.

Current wording

Innoviva, Inc. (and where context requires, together with its subsidiaries referred to as “Innoviva”, the “Company”, or “we” and other similar pronouns) is a diversified biopharmaceutical 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 healthcare assets.

Previous wording

Our commercial and marketed products also include GIAPREZA® (angiotensin II) approved to increase blood pressure in adults with septic or other distributive shock, XERAVA® (eravacycline) approved for the treatment of complicated intra-abdominal infections in adults, and XACDURO® (formerly known as sulbactam-durlobactam or SUL-DUR) approved for the treatment of hospital-acquired and ventilator-associated pneumonias caused by Acinetobacter in adults. In addition, ZEVTERA®(ceftobiprole), an advanced-generation cephalosporin antibiotic, is exclusively commercialized by us in the U.S. under a distribution and license agreement with Basilea Pharmaceutica Ltd., (“Basilea”), which we entered into in December 2024. We continue to advance our pipeline, zoliflodacin, a potentially first-in-class, single-dose oral treatment for uncomplicated gonorrhea. In June 2025, the U.S. Food and Drug Administration (“FDA”) accepted the new drug application (“NDA”) for zoliflodacin, which has received Qualified Infectious Disease Product designation (“QIDP”), granting it priority review and the potential for extended market exclusivity. We have established a wholly owned critical care and infectious disease operating platform, anchored by four differentiated commercial products and supported by a promising late-stage development asset.

Current wording

GIAPREZA® (angiotensin II) for increasing blood pressure in adults with septic or other distributive shock;

Previous wording

Additionally, we strategically deploy capital and maintain economic interests in various healthcare companies, including a significant equity stake in Armata Pharmaceuticals (“Armata”), a company focused on development of bacteriophages with potential use across a range of infectious and other serious diseases.

Current wording

In addition, we own other strategic healthcare assets, such as a significant stake in Armata Pharmaceuticals, Inc. (“Armata”), a leader in development of bacteriophages with potential use across a range of infectious and other serious diseases. We also have economic interests in other healthcare companies through our portfolio approach.

Previous wording

Third Quarter 2025 and Recent Highlights:

Current wording

First Quarter 2026 and Recent Highlights:

Previous wording

Royalty revenue: Third quarter 2025 gross royalty revenue from GSK was $63.4 million, compared to $60.5 million for the third quarter 2024.

Current wording

Royalty revenue: gross royalty revenue from GSK was $58.6 million, compared to $61.3 million for the first quarter 2025.

Previous wording

Equity and long-term investments: Third quarter 2025 net favorable changes in fair values of equity and long-term investments totaled $62.3 million, compared to unfavorable changes of $35.2 million in the third quarter 2024, were primarily due to share price appreciation of Armata and other equity investments.

Current wording

Equity and long-term investments: net favorable changes in fair value of equity and long-term investments totaled $191.2 million, primarily attributable to share price appreciation of Armata. Innoviva’s strategic healthcare investments were valued at $773.3 million as of March 31, 2026, and consisted of $603.4 million in Armata, $138.2 million in other strategic equity and convertible debt, and $31.7 million held by ISP Fund.

Previous wording

Cash and cash equivalents: Totaled $476.5 million. Royalty and net product sales receivables totaled $93.5 million as of September 30, 2025.

Current wording

Cash and cash equivalents: totaled $603.1 million. Royalty and net product sales receivables totaled $92.6 million as of March 31, 2026.

Previous wording

Zoliflodacin: an investigational, first-in-class, single oral dose, spiropyrimidinetrione antibiotic for the treatment of uncomplicated gonorrhea in adults and pediatric patients 12 years and older. It is being developed in partnership with The Global Antibiotic Research & Development Partnership (“GARDP”).

Current wording

NUZOLVENCE® (zoliflodacin): a first-in-class, single-dose oral medication for the treatment of uncomplicated urogenital gonorrhea due to Neisseria gonorrhoeae in adults and pediatric patients 12 years and older weighing at least 35kg, developed in partnership with The Global Antibiotic Research & Development Partnership ("GARDP").

Previous wording

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

Current wording

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

Previous wording

Total net royalty revenue increased to $59.9 million and $181.6 million for the three and nine months ended September 30, 2025, compared to $57.1 million and $179.2 million, respectively, for the same period a year ago. The increase of total net royalty revenue was primarily due to sales growth in RELVAR®/BREO®ELLIPTA®.

Current wording

Total net royalty revenue decreased to $55.2 million for the three months ended March 31, 2026, compared to $57.8 million for the same period a year ago. The decrease in total net royalty revenue was primarily due to lower net sales driven by pricing pressures in the United States.

Previous wording

Our net product sales increased during the periods presented, driven by higher sales volume resulting from our strategic commercialization efforts and dedication to delivering our critical care products to healthcare systems. The increase in XACDURO®ex-U.S. product sales is attributable mainly to product sales under the Amended Zai Agreement, which is billed at cost.

Current wording

Our net product sales increased during the periods presented, driven by higher sales volume resulting from our strategic commercialization efforts and dedication to delivering our critical care products to healthcare systems. The increase in XACDURO®ex-U.S. product sales is attributable mainly to product sales under an interim supply agreement with Zai Lab, which is billed at cost.

Previous wording

License revenue, as compared to the prior year period, was as follows:

Current wording

License and other revenue, as compared to the prior year period, was as follows:

Previous wording

Excluding the impact of the amortized fair value adjustments, our cost of products sold increased during the three and nine months ended September 30, 2025 compared to the same periods in 2024 as a result of higher sales volume, as well as cost of products sold under the Amended Zai Agreement. As of September 30, 2025, our total inventory included the remaining net fair value adjustments resulting from the acquisition of La Jolla of approximately $5.0 million, which will be recognized as cost of products sold when sales occur in future periods.

Current wording

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 $1.1 million and $0.2 million for the three months ended March 31, 2026 and 2025, respectively. Our cost of products sold increased during the three months ended March 31, 2026, driven by higher product sales volume. As of March 31, 2026, our total inventory included the remaining net fair value adjustments resulting from the acquisition of La Jolla of approximately $2.2 million, which will be recognized as cost of products sold when sales occur in future periods.

Previous wording

Research and development expenses for the three and nine months ended September 30, 2025 were $13.7 million and $26.0 million, respectively. The expenses for the current periods include the $9.4 million allocated cost of the acquired IPR&D as discussed in Note 13, “Asset Acquisition”, in the Condensed Consolidated Financial Statements. During the current year, we also incurred costs related to the continued advancement of our product candidate, zoliflodacin. Research and development expenses for the three and nine months ended September 30, 2024, which were mainly attributable to post-marketing commitments required by the FDA and ongoing product developments, were $3.6 million and $10.0 million, respectively.

Current wording

Research and development expenses for the three months ended March 31, 2026 were $5.2 million. The expenses for the current period include additional personnel and facilities costs in support of the acquired IPR&D as discussed in Note 13, “Asset Acquisition”, in the Condensed Consolidated Financial Statements. Research and development expenses for the three months ended March 31, 2025, which were mainly attributable to post-marketing commitments required by the FDA and ongoing product developments, were $4.4 million.

Previous wording

Our selling, general and administrative expenses are primarily incurred as a result of our ongoing efforts to promote our marketed critical care products and drive revenue, maintain regulatory compliance, and support essential administrative functions for general operations. Selling, general and administrative expenses decreased for the nine months ended September 30, 2025 compared to the corresponding period in 2024, during which incremental efforts and expenditures were associated with the commercial launch of XACDURO®in September 2023.

Current wording

Our selling, general and administrative expenses were $32.4 million and $27.5 million for the three months ended March 31, 2026 and 2025, respectively. The increase during the current period is a result of our ongoing efforts to promote our marketed critical care products and drive revenue, maintain regulatory compliance, and support essential administrative functions for general operations.

Previous wording

Interest and dividend income increased for the nine months ended September 30, 2025, compared to the same period in 2024, due to higher average balances of our cash equivalents, money market funds and other interest-bearing investments.

Current wording

Interest and dividend income increased for the three months ended March 31, 2026, compared to the same period in 2025, due to higher average balances of our cash equivalents, money market funds and other interest-bearing investments.

Previous wording

Our interest expense for the three and nine months ended September 30, 2025 and 2024 comprised mainly of the contractual interest expense and the amortization of debt issuance costs for our 2025 Notes and 2028 Notes, as well as effective interest expense on our deferred royalty obligation related to GIAPREZA®. The decrease for the three and nine months ended September 30, 2025, compared to the same period in 2024, was mainly due to lower interest expense on our deferred royalty obligation as a result of higher sales performance of GIAPREZA®, as well as the settlement of our 2025 Notes in August 2025.

Current wording

Our interest expense for the three months ended March 31, 2026 and 2025 comprised mainly of the contractual interest expense and the amortization of debt issuance costs for our 2028 Notes, as well as effective interest expense on our deferred royalty obligation related to GIAPREZA®. The increase for the three months ended March 31, 2026, compared to the same period in 2025, was mainly due to higher interest expense on our deferred royalty obligation as a result of higher sales performance of GIAPREZA®.

Previous wording

The changes in fair values of equity method investments for the three and nine months ended September 30, 2025 were driven by fluctuations in Armata's stock price between the reporting periods. We recorded $30.8 million and $30.3 million in unrealized gain for the three and nine months ended September 30, 2025, respectively, compared to $18.2 million and $43.0 million in unrealized loss for the three and nine months ended September 30, 2024, respectively.

Current wording

The changes in fair values of equity method investments for the three months ended March 31, 2026 were favorable mainly due to the appreciation in Armata’s stock price. We recorded $157.7 million in unrealized gain for the three months ended March 31, 2026, compared to $13.5 million in unrealized loss for the three months ended March 31, 2025.

Previous wording

The changes in fair values of other equity and long-term investments primarily reflected the realized gains and losses and net unrealized gains and losses in our strategic investments in Armata, InCarda, Gate, ImaginAb, Lyndra and those investments managed by ISP Fund LP. We recorded $11.7 million in net positive changes and $69.2 million in net negative changes in fair values of equity and long-term investments related to the investments managed by ISP Fund LP for the three and nine months ended September 30, 2025, respectively. We also recorded $16.3 million and $22.0 million net positive changes in fair values of equity and long-term investments for the three and nine months ended September 30, 2025, respectively, related to other long-term investments we made in Armata, and net positive changes in fair value of our investments in Syndeio of $5.7 million and $26.8 million for the three and nine months ended September 30, 2025, respectively.

Current wording

The changes in fair values of other equity and long-term investments primarily reflected the realized gains and losses and net unrealized gains and losses in our strategic investments in Armata, InCarda, Syndeio, Lyndra and those investments managed by ISP Fund LP. We recorded $47.8 million net positive changes in fair values of equity and long-term investments for the three months ended March 31, 2026 related to other long-term investments we made in Armata, and net negative changes in fair value of our investments in Syndeio of $13.8 million for the three months ended March 31, 2026. We recorded $83.7 million of net negative changes in fair values of equity and long-term investments related to the investments managed by ISP Fund LP for the three months ended March 31, 2025. We also recorded $3.3 million net negative changes in fair values of equity and long-term investments for the three months ended March 31, 2025 related to other long-term investments we made in Armata. These net negative changes in fair values were partially offset by a favorable net change in fair value of our investments in Syndeio of $19.3 million.

Previous wording

We recorded income tax expense of $7.9 million and $24.8 million for the three and nine months ended September 30, 2025, respectively, compared to income tax expense of $5.6 million and $9.6 million for the three and nine months ended September 30, 2024, respectively. The effective income tax rate for the nine months ended September 30, 2025 and 2024 was 18.8% and 40.5%, respectively.

Current wording

We recorded income tax expense of $48.0 million for the three months ended March 31, 2026, compared to income tax expense of $8.0 million for the three months ended March 31, 2025. The effective income tax rate for the three months ended March 31, 2026 and 2025 was 20.5% and (20.7)%, respectively.

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 collaboration arrangement. For the nine months ended September 30, 2025, we generated gross royalty revenues from GSK of $192.0 million, net product sales of $113.1 million and license revenue of $2.1 million. Net cash and cash equivalents totaled $476.5 million, royalties receivable from GSK totaled $63.4 million and accounts receivable associated with our product sales and license revenue totaled $30.2 million as of September 30, 2025.

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 three months ended March 31, 2026, we generated gross royalty revenues from GSK of $58.6 million, net product sales of $41.4 million and license and other revenue of $1.5 million. Cash and cash equivalents totaled $603.1 million, royalties receivable from GSK totaled $58.6 million and accounts receivable associated with our product sales and license and other revenue totaled $34.0 million as of March 31, 2026.

Previous wording

Net cash provided by operating activities for the nine months ended September 30, 2024 was $129.5 million, consisting primarily of our net income of $3.1 million, adjusted for net non-cash items, which included $103.8 million in changes in fair value of our investments, $19.4 million of amortization of acquired intangible assets, $12.1 million of amortization of inventory fair value step-up adjustment, $10.5 million of amortization of capitalized fees and depreciation of property and equipment, and $4.7 million of stock-based compensation, partially offset by $15.4 million of deferred income taxes and $9.9 million in net changes in operating assets and liabilities.

Current wording

Net cash provided by operating activities for the three months ended March 31, 2026 was $35.3 million, consisting primarily of our net income of $186.6 million, adjusted for net non-cash items, which included $41.0 million of deferred income taxes, $6.6 million of amortization of acquired intangible assets, $3.5 million of amortization of capitalized fees and depreciation of property and equipment, $2.6 million of stock-based compensation and $1.1 million of inventory fair value step-up adjustments, offset by $191.2 million in net changes in fair value of our investments and $16.3 million in net changes in operating assets and liabilities.

Previous wording

Net cash provided by operating activities for the nine months ended September 30, 2025 was $142.4 million, consisting primarily of our net income of $107.0 million, adjusted for net non-cash items, which included $19.6 million of amortization of acquired intangible assets, $10.5 million of amortization of capitalized fees and depreciation of property and equipment, $9.4 million of acquired IPR&D, $6.9 million of stock-based compensation, $4.1 million of inventory fair value step-up adjustments and $1.5 million in amortization of debt discount and issuance costs, partially offset by $7.8 million in net changes in fair value of our investments and $13.4 million in net changes in operating assets and liabilities.

Current wording

Net cash provided by operating activities for the three months ended March 31, 2025 was $48.6 million, consisting primarily of our net loss of $46.6 million, adjusted for net non-cash items, which included $78.8 million in changes in fair value of our investments, $6.5 million of amortization of acquired intangible assets, $3.5 million of amortization of capitalized fees, $2.1 million of stock-based compensation, $0.2 million of inventory fair value step-up adjustments and $2.9 million in net changes in operating assets and liabilities.

Previous wording

Net cash provided by investing activities for the nine months ended September 30, 2025 of $16.9 million primarily consisted of $71.9 million in sales of equity investments and net purchases and sales of other investments managed by ISP Fund LP and $5.1 million in proceeds from trading securities, partially offset by $49.7 million in purchases of trading securities, $9.4 million in cash paid for acquired IPR&D and $1.1 million purchases of property and equipment.

Current wording

Net cash provided by investing activities for the three months ended March 31, 2026 of $37.0 million primarily consisted of $43.3 million in sales of equity investments managed by ISP Fund LP and $6.7 million in net purchases and sales of other investments managed by ISP Fund LP, partially offset by $10.0 million in purchases of trading securities and $2.5 million in purchases of equity investments managed by ISP Fund LP.

Previous wording

Net cash used in investing activities for the nine months ended September 30, 2024 of $48.3 million primarily consisted of $48.1 million in purchases of trading securities, $32.3 million in purchases of equity and long-term investments managed by ISP Fund LP and $20.6 million in net purchases of other investments managed by ISP Fund LP. The use of cash for investing activities was partially offset by proceeds of $52.8 million from the sales of equity investments managed by ISP Fund LP.

Current wording

Net cash used in investing activities for the three months ended March 31, 2025 of $34.7 million primarily consisted of $34.7 million in purchases of trading securities and $19.9 million in net purchases of other investments managed by ISP Fund LP. The use of cash for investing activities was partially offset by proceeds of $19.9 million from the sales of equity investments managed by ISP Fund LP.

Previous wording

Net cash used in financing activities for the nine months ended September 30, 2024 of $14.0 million was primarily due to $14.8 million for the repurchase of common stock under our stock repurchase program which concluded in April 2024.

Current wording

Net cash used in financing activities for the three months ended March 31, 2026 of $20.1 million was primarily due to $20.2 million in repurchases of our common stock under the ongoing stock repurchase program.

Previous wording

Net cash provided by financing activities for the nine months ended September 30, 2025 of $12.3 million was primarily due to proceeds from exercise of warrants of $10.7 million and net proceeds from issuances of common stock of $1.7 million.

Current wording

Net cash provided by financing activities for the three months ended March 31, 2025 of $0.2 million was primarily due to net proceeds from issuances of common stock, partially offset by the repurchase of shares to satisfy tax withholding.

Previous wording

As of September 30, 2025, our notes payable obligation comprised of $261.0 million related to our 2028 Notes, which is due in 2028. Under the terms of the 2028 Notes, we make interest payments of 2.125% of outstanding principal. Refer to Note 11, “Debt” to the Condensed Consolidated Financial Statements for more information.

Current wording

As of March 31, 2026, our notes payable obligation comprised of $261.0 million related to our 2028 Notes, which are due in 2028. Under the terms of the 2028 Notes, we make interest payments of 2.125% of outstanding principal. Refer to Note 11, “Debt” to the Condensed Consolidated Financial Statements for more information.

Previous wording

Our short-term and long-term obligations also include contractual payments related to our operating leases amounting to $1.7 million, with approximately $0.4 million payable through December 31, 2025, and approximately $1.3 million payable through 2029. Refer to Note 12, “Commitments and Contingencies” to the Condensed 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 $14.8 million, with approximately $0.9 million payable through December 31, 2026, amounts ranging between $1.2 million and $1.5 million payable in each of the years 2027 to 2030, and $8.5 million payable thereafter. Refer to Note 12, “Commitments and Contingencies” to the Condensed Consolidated Financial Statements for more information.

Previous wording

Additionally, we have certain contingent payment obligations under various in-license agreements which we are required to make royalty payments or milestone payments upon successful completion and achievement of certain milestones. Refer to Note 4, “License and Collaboration Arrangements” to the Condensed Consolidated Financial Statements for more information.

Current wording

Additionally, we have certain contingent payment obligations under various in-license agreements which we are required to make royalty payments or milestone payments upon successful completion and achievement of certain milestones. Refer to Note 4, “License, Collaboration and Other Arrangements” to the Condensed Consolidated Financial Statements for more information.

Previous wording

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 purchase commitments through December 31, 2027. As of September 30, 2025, we have approximately $14.6 million in outstanding purchase commitments under the agreement.

Current wording

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 March 31, 2026, we have approximately $13.0 million U.S. dollar equivalent in outstanding purchase commitments under the agreement.