Innoviva, Inc.

1. Description of Operations and Summary of Significant Accounting Policies

Description of Operations

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 portfolio of royalties, a critical care and infectious disease platform, and a portfolio of strategic healthcare assets. Our royalty portfolio contains respiratory assets partnered with Glaxo Group Limited (“GSK”), including RELVAR®/BREO® ELLIPTA® (fluticasone furoate/vilanterol, “FF/VI”) and ANORO® ELLIPTA® (umeclidinium bromide/ vilanterol, “UMEC/VI”). Under the Long-Acting Beta2 Agonist (“LABA”) Collaboration Agreement, Innoviva is entitled to receive royalties from GSK on sales of RELVAR®/BREO® ELLIPTA®as follows:15% on the first $3.0 billion of annual global net sales and 5% for all annual global net sales above $3.0 billion; and royalties from the sales of ANORO® ELLIPTA®, which tier upward at a range from 6.5% to 10%.

Our wholly owned, critical care and infectious disease operating platform, with a hospital focus, is anchored by a portfolio of four commercial and marketed products, as well as an FDA-approved product which is expected to be available to patients before the end of 2026:

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

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XACDURO® (sulbactam for injection; durlobactam for injection), co-packaged for intravenous use for the treatment of hospital-acquired and ventilator-associated bacterial pneumonia caused by Acinetobacter;

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XERAVA®(eravacycline) for the treatment of complicated intra-abdominal infections in adults;

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ZEVTERA® (ceftobiprole), an advanced-generation cephalosporin antibiotic for the treatment ofstaphylococcus aureus bacteremia, including those with right-sided endocarditis, acute bacterial skin and skin structure infections, and community-acquired bacterial pneumonia, licensed from Basilea Pharmaceutica Ltd, Allschwil (SIX: BSLN) (“Basilea”) for U.S. commercialization and which commercially launched in the third quarter of 2025; and

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NUZOLVENCE® (formerly known as zoliflodacin), approved by the FDA on December 12, 2025, for the treatment of uncomplicated urogenital gonorrhea in adults and adolescents.

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

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The unaudited condensed consolidated financial statements have been prepared on the same basis as audited consolidated financial statements and, in our opinion, include all adjustments, consisting of all normal recurring adjustments, necessary for the fair presentation of our financial position, results of operations, comprehensive income and cash flows. The interim results are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2026, or any other periods.

The accompanying unaudited condensed consolidated financial statements include the accounts of Innoviva, our wholly-owned subsidiaries, and certain variable interest entities (“VIEs”) for which we are the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission (“SEC”) on February 25, 2026, and as amended on March 27, 2026. There have been no material changes to our summary of significant accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.

Use of Management’s Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. Management evaluates its significant accounting policies and estimates on an ongoing basis. We base our estimates on historical experience and other relevant assumptions that we believe to be reasonable under the circumstances. These estimates also form the basis for making judgments about the carrying values of assets and liabilities when these values are not readily apparent from other sources.

Concentrations of Credit Risk and of Significant Suppliers and Partner

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and equity and long-term investments. Although we deposit our cash with multiple financial institutions, our deposits, at times, may exceed federally insured limits.

We are dependent on third-party manufacturers to supply active pharmaceutical ingredients (“API”) and drug products for research and development and commercial programs. These programs could be adversely affected by significant interruption in the supply of API or drug products.

Currently, we derive the majority of our revenues from GSK. Our near-term success depends in large part upon the performance by GSK of its commercial obligations under the GSK Agreements and the commercial success of RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA®. If GSK does not devote sufficient resources to the commercialization of these products, is unsuccessful in its efforts, or chooses to reprioritize its commercial programs, our business would be materially harmed. GSK is responsible for all clinical and other product development, regulatory, manufacturing and commercialization activities for products developed under the GSK Agreements, including RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA®. Our quarterly royalty revenues may fluctuate due to a variety of factors, many of which are outside of our control. Our royalty revenues under the GSK Agreements may not meet our analysts’ or investors’ expectations due to a number of important factors.

Our revenues also include net product sales of GIAPREZA®, XERAVA®, XACDURO®, and ZEVTERA®, which we commercially launched in the third quarter of 2025. In the U.S., hospitals and other healthcare organizations generally acquire our products through a network of specialty distributors, which are regarded as our customers for accounting purposes. We do not believe that the loss of any one of these distributors would significantly impact our ability to distribute our products, as we expect that the sales volume would be absorbed by either new or remaining distributors.

Three of our customers accountedfor 30%,26% and 25%, respectively, of our net product sales for thethree months ended September 30, 2026, and 27%,24% and 23%, respectively, for thenine months ended September 30, 2026. Three of our customers accounted for 21%,20% and 19%, respectively, of our net product sales for the three months ended September 30, 2025, and 24%,24% and 22%, respectively, for the nine months ended September 30, 2025. Three of our customers accounted for 39%,20% and 15%, respectively, of our receivables from net product sales, which are included in “Accounts receivable” in our unaudited condensed consolidated balance sheet as of September 30, 2026. Three of our customers accounted for 29%,28% and 16%, respectively, of our receivables from net product sales, which are included in “Accounts receivable” in our consolidated balance sheet as of December 31, 2025.

We didnot have an allowance for expected credit losses on our receivable from collaboration arrangement and accounts receivable as of September 30, 2026 and December 31, 2025.

Refer to Item 1A. “Risk Factors” disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is made available for evaluation by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and assessing performance. Refer to Note 15, “Segment Reporting”, for more information.

Variable Interest Entities

The primary beneficiary of a VIE is required to consolidate the assets and liabilities of the VIE. When we obtain a variable interest in another entity, we assess at the inception of the relationship and upon occurrence of certain significant events whether the entity is a VIE and, if so, whether we are the primary beneficiary of the VIE based on our power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and our obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

To assess whether we have the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, we consider all the facts and circumstances, including our role in establishing the VIE and our ongoing rights and responsibilities. This assessment includes identifying the activities that most significantly impact the VIE’s economic performance and identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE (management and representation on the Board of Directors) and have the right to unilaterally remove those decision-makers are deemed to have the power to direct the activities of a VIE.

To assess whether we have the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, we consider all of our economic interests that are deemed to be variable interests in the VIE. This assessment requires us to apply judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE.

Goodwill and Intangible Assets

Goodwill is recognized as the excess of the purchase consideration of an acquired entity over the fair value assigned to assets acquired and liabilities assumed in a business combination. Goodwill and intangible assets with an indefinite useful life are not amortized and are tested for impairment at least annually on the first day of December of each year or more frequently if indicators for potential impairment exist or whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. Intangible assets with definite useful lives are amortized on a straight-line basis over their respective remaining useful lives and are tested for impairment only if indicators for potential impairment exist or whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. Significant judgment may be involved in determining if an indicator of impairment has occurred.

Asset Acquisitions

We measure and recognize asset acquisitions that are not deemed to be business combinations based on the cost to acquire the assets, which includes transaction costs. Goodwill is not recognized in asset acquisitions. In an asset acquisition, the cost of the acquisition is allocated to the assets acquired on the basis of their relative fair values. The cost allocated to acquire in-process research and development (“IPR&D”) with no alternative future use is charged to research and development expense at the acquisition date.

Equity and Long-Term Investments

We invest from time to time in equity and debt securities of private or public companies. If we determine that we have control over these companies under either voting or VIE models, we consolidate them in our consolidated financial statements. If we determine that we do not have control over these companies under either voting or VIE models, we then determine if we have an ability to exercise significant influence via voting interests, board representation or other business relationships.

We may account for the investments where we exercise significant influence using either an equity method of accounting or at fair value by electing the fair value option under Accounting Standards Codification (“ASC”) Topic 825, Financial Instruments. If the fair value option is applied to an investment that would otherwise be accounted for under the equity method, we apply it to all our financial interests in the same entity (equity and debt, including guarantees) that are eligible items. All gains and losses from fair value changes, unrealized and realized, are presented as changes in fair values of equity method investments, net, and changes in fair values of equity and long-term investments, net, within the consolidated statements of income and comprehensive income.

If we conclude that we do not have the ability to exercise significant influence over an investee, we may elect to account for equity securities without a readily determinable fair value using the measurement alternative method under ASC 321, Investments - Equity Securities. This method allows us to measure the investment at cost less impairment, if any, and adjusted for observable price changes in orderly transactions involving the same or a similar investment of the same issuer.

We also invested in ISP Fund LP, whose investments consist of money market funds, trading securities, and equity securities in the healthcare, pharmaceutical and biotechnology industries. Pursuant to the Partnership Agreement entered into in December 2020, we became a limited partner of the partnership. In October 2024, we elected to unwind our capital accounts in the partnership in accordance with the terms of the Partnership Agreement. Accordingly, the portion of the cash balance and money market funds expected to be distributed within 12 months from the balance sheet date has been classified as “Current portion of ISP Fund investments,” while the remaining equity investments have been classified as long-term investments in the condensed consolidated balance sheets as of September 30, 2026 and December 31, 2025.

Revenue Recognition

We apply the guidance on principal versus agent considerations under ASC Topic 606, Revenue from Contracts with Customers(“ASC 606”), 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, is accounted for as product sales.

Revenue is recognized when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. Revenue is recognized through a five-step process: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price for the contract; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue as a performance obligation is satisfied.

Royalty Revenue

We recognize royalty revenue on net sales of products with respect to which we have contractual royalty rights in the period in which the royalties are earned. The net sales reports provided by our partner are based on their own methodology and assumptions for estimating rebates and returns, which they monitor and adjust regularly in light of contractual and legal obligations, historical trends, past experience, and projected market conditions. Our partner may make significant adjustments to its reported sales based on actual results, which could cause fluctuation in our royalty revenue. We have rights to conduct periodic royalty audits to evaluate the accuracy of the information provided. Royalties from GSK are recognized as the net of amortization of capitalized fees related to approval and launch milestone payments made to GSK.

Revenue from Product Sales

Revenue from product sales is recognized when our customers obtain control of the product and is recorded at the transaction price, net of estimates for variable consideration consisting of chargebacks, discounts, returns and rebates. Variable consideration is estimated using the expected-value amount method, which is the sum of probability-weighted amounts in a range of possible consideration amounts. Actual amounts of consideration ultimately received may differ from our estimates. If actual results vary materially from our estimates, we will adjust these estimates, which will affect revenue from product sales and earnings in the period such estimates are adjusted. These items may include:

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Chargebacks: Chargebacks are discounts we provide to distributors in the event that the sales prices to end users are below the distributors’ acquisition price. This may occur due to a direct contract with a health system, a group purchasing organization (“GPO”) agreement or a sale to a government facility. Chargebacks are estimated based on known chargeback rates and recorded as a reduction of revenue on delivery to our customers.

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Discounts: We offer customers various forms of incentives and consideration, including prompt-pay and other discounts. We estimate discounts primarily based on contractual terms. These discounts are recorded as a reduction of revenue on delivery to our customers.

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Returns: We offer customers a limited right of return, generally for damaged or expired products. We estimate returns based on an internal analysis, which includes actual experience. The estimates for returns are recorded as a reduction of revenue on delivery to our customers.

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Rebates: We participate in Medicaid rebate programs, which provide assistance to certain low-income patients based on each state’s eligibility guidelines and services. Under these programs, we pay rebates to participating states, typically within three months after the quarter in which the product was sold. Additionally, we may offer customer incentives and other forms of consideration, such as volume-based or performance-based rebates. Estimated rebates are recorded as a reduction of revenue on delivery to our customers.

We continue to assess our estimates of variable consideration as we accumulate additional historical data and will adjust these estimates accordingly.

We may also enter into contracts that involve a series of manufacturing processes for products and related components. For any distinct performance obligation where the manufacturing process does not create an asset with alternative use and there is an enforceable right to payment for the performance completed to date, the related revenue is recognized over time. For performance obligations satisfied over time, we use an input method to measure progress. Specifically, we apply the cost-to-cost method, under which progress is calculated as the ratio of costs incurred to date relative to the total estimated costs of the contract. This method most accurately depicts the transfer of value to the customer because costs incurred are determined to be proportionate to our performance in satisfying the obligation. Estimated total contract costs are reassessed periodically. Changes in estimates are accounted for prospectively as changes in estimates.

License Revenue

At the inception of a licensing arrangement that includes development and regulatory milestone payments, we evaluate whether the milestones are considered probable of being achieved and estimate the amount to be included in the transaction price. We generally include these milestone payments in the transaction price when they are achieved because there is considerable uncertainty in the research and development processes that trigger receipt of these payments under our agreements. Similarly, we include approval milestone payments in the transaction price once the product is approved by the applicable regulatory agency. For delivery of other goods or services related to a licensing arrangement, we determine whether the performance obligation is satisfied over time or at a point in time. If the performance obligation is satisfied over time, we use judgment in determining the appropriate method of measuring progress for purposes of recognizing revenue. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and the related revenue recognition.

Grant Revenue

We recognize grant revenue from non-governmental entities in accordance with ASC 958-605, Revenue Recognition Not-for-Profit Entities, when qualifying costs are incurred and the conditions of the grant agreement have been met. If grant funds are received after costs have been incurred, we record the amount as grant revenue and a corresponding grant receivable. Cash received from grants in advance of incurring qualifying costs is recorded as deferred revenue and recognized as grant revenue when qualifying costs are incurred. Grant revenue is included in “License and other revenue” in our condensed consolidated statements of income and comprehensive income.

Research and Development Expenses

Research and development expenses are recognized in the period that services are rendered or goods are received. Research and development expenses consist of salaries and benefits, laboratory supplies, facilities and other overhead costs, research-related manufacturing costs, contract service and clinical-related service costs performed by third party research organizations, research institutions and other outside service providers. Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts are recognized as an expense as the related goods are delivered or the related services are performed. We also utilize significant judgment and estimates to record accruals for estimated ongoing research costs based on the progress of the studies and progress of research manufacturing activities.

Recently Adopted Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-04, Debt — Debt with Conversion and Other Options (Subtopic 470-20), which clarifies the assessment of whether a transaction should be accounted for as an induced conversion or extinguishment of convertible debt when changes are made to conversion features as part of an offer to settle the instrument. ASU 2024-04 is effective for annual reporting periods beginning after December 15, 2025 and interim reporting periods within those annual reporting periods. Effective January 1, 2026, we adopted ASU 2024-04 on a prospective basis. The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses for Current Accounts Receivable and Contract Assets, which provides a practical expedient for estimating expected credit losses by assuming current conditions remain unchanged over the life of the asset. The amendments in ASU 2025-05 are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Effective January 1, 2026, we adopted ASU 2025-05. The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncement Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40), which requires disclosures about specific types of expenses included in the expense captions presented on the face of the statement of income as well as disclosures about selling expenses. ASU 2024-03 is effective for the Company in annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. We are currently evaluating the potential impact that ASU 2024-03 may have on our consolidated financial statements and related disclosures.

2. Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding. Diluted net income per share is computed by dividing net income by the weighted-average number of shares of common stock and dilutive potential common stock equivalents then outstanding. Dilutive potential common stock equivalents include the assumed exercise, vesting and issuance of employee stock awards using the treasury stock method, as well as common stock issuable upon assumed conversion of our convertible senior notes due 2025 (the “2025 Notes”) up until its maturity date on August 15, 2025, and our convertible senior notes due 2028 (the “2028 Notes”) using the if-converted method. If the results are in a net loss position, diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period, without consideration for potential dilutive common stock equivalents.

The following table shows the computation of basic and diluted net income (loss) per share for thethree and nine months ended September 30, 2026 and 2025:

Anti-Dilutive Securities

The following common stock equivalents were not included in the computation of diluted net income (loss) per share because their effect was anti-dilutive for the periods presented:

3. Revenue Recognition

Net Revenue from Collaboration Arrangement

Net revenue recognized under our GSK Agreement was as follows:

Net Product Sales

Total net product sales were as follows:

We derived our net product sales from customers located in the U.S. and the rest of the world as follows:

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approximately 88% and 12%, respectively, for thethree months ended September 30, 2026, and 80% and 20%, respectively, for thenine months ended September 30, 2026; and

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approximately 63% and 37%, respectively, for the three months ended September 30, 2025, and 75% and 25%, respectively, for the nine months ended September 30, 2025.

License and Other Revenue

Refer to the out-license agreements in Note 4, “License, Collaboration and Other Arrangements”.

4. License, Collaboration and Other Arrangements

Out-License Agreements

Zai Lab

Entasis Therapeutics Holdings Inc. (“Entasis”), our wholly-owned subsidiary, entered into a license and collaboration agreement with Zai Lab (Shanghai) Co., Ltd. (“Zai Lab”) (Nasdaq: ZLAB), pursuant to which Zai Lab licensed exclusive rights to durlobactam and SUL-DUR, in the Asia-Pacific region (the “Zai Agreement”). Under the terms of the Zai Agreement, Zai Lab shall fund most of the registrational clinical trial costs in China for SUL-DUR, with the exception of Phase 3 patient drug supply of licensed products. Zai Lab shall conduct development activities and plan and obtain regulatory approval in a specified number of countries in the Asia-Pacific region beyond China after receipt of regulatory approval of a licensed product in China. Zai Lab is also solely responsible for commercializing licensed products in the Asia-Pacific region and shall commercialize licensed products for which it has obtained regulatory approval. We are obligated to supply Zai Lab with the licensed products for clinical development and for commercial use for a certain period unless Zai Lab notifies otherwise. Zai Lab may take over manufacturing responsibilities for its own commercialization activities within a specified time period following the effective date of the Zai Agreement.

We are eligible to receive up to an aggregate of $91.0 million in research and development support payments and development, regulatory and sales milestone payments related to SUL-DUR, imipenem and other combinations with the licensed products. Zai Lab shall pay us a tiered royalty ranging from a high-single digit to low-double digit percentage based on annual net sales of licensed products in the territory, subject to specified reductions for the market entry of competing products, loss of patent coverage of licensed products and for payments owed to third parties for additional rights necessary to commercialize licensed products in the territory. Payments received for research support and reimbursable clinical trial costs are recorded as a reduction to research and development expense during the period in which the qualifying expenses are incurred. Such amounts recorded for the nine months ended September 30, 2026 and 2025 were not material. SUL-DUR was approved by China’s National Medical Products Administration in May 2024 and was launched by Zai Lab in mainland China in January 2025. We recognized $4.0 million in license revenue for the nine months ended September 30, 2026 under this agreement as a result of the achievement of a regulatory milestone. Royalties under this arrangement based on the product sales were $1.1 million and $3.1 millionfor the three and nine months ended September 30, 2026, respectively, and $0.4 million and $1.5 million for the three and nine months ended September 30, 2025, respectively.

In April 2024, we entered into an amendment to the Zai Agreement (the “Amended Zai Agreement”), pursuant to which Zai Lab shall share costs associated with certain new manufacturing and technology transfer activities for XACDURO®(the “Services”), which were not contemplated under the Zai Agreement and are crucial for regulatory approval in the Asia-Pacific region. Under the Amended Zai Agreement, werecognized $0.4 million and $1.0 million in license revenue for thethree and nine months ended September 30, 2025, respectively. License revenue for the three and nine months ended September 30, 2026 wasnot material. As of September 30, 2026 and December 31, 2025, outstanding amounts under this amendment of $2.2 million and $1.8 million, respectively, were included in “Accounts receivable” in our unaudited condensed consolidated balance sheets.

We entered into an interim supply agreement with Zai Lab in June 2024, which was amended in February 2025 and August 2025, under which Zai Lab shall purchase XACDURO®inventory (the “Supplied Inventory”) at cost for its commercial use. We recognized $4.8 million and $19.7 million in net product sales for the cost of the Supplied Inventory for thethree and nine months ended September 30, 2026, respectively, and $14.9 million and $17.4 million for the three and nine months ended September 30, 2025, respectively. Amounts outstanding under this agreement of$6.2 million and $6.7 million were included in “Accounts receivable” in our unaudited condensed consolidated balance sheets as of September 30, 2026 and December 31, 2025, respectively.

We also entered into a manufacturing stage transfer agreement with Zai Lab in June 2024, which was amended in September 2024 (the “Zai Manufacturing Stage Transfer Agreement”). Pursuant to this agreement, Entasis shall provide assistance to Zai Lab for building out Zai Lab’s manufacturing site for XACDURO® and be compensated for Entasis' services and associated costs. License revenue recognized under this agreement for the three and nine months ended September 30, 2026 wasnot material. We recognized license revenue under this agreement of$0.1 million and $1.0 million for the three and nine months ended September 30, 2025, respectively.

Dr. Reddy’s Laboratories

In June 2026, Entasis entered into an exclusive distribution and license agreement with Dr. Reddy's Laboratories Ltd. (“DRL”) to commercialize XACDURO® in certain countries. A one-time, nonrefundable upfront payment of $3.4 million was recognized as license revenue for the nine months ended September 30, 2026. Entasis is also entitled to receive development, launch and commercial milestone payments, as well as tiered royalties based on DRL's annual net sales.

GARDP

Entasis entered into a collaboration agreement with the Global Antibiotic Research and Development Partnership (“GARDP”) for the development, manufacture and commercialization of the product candidate zoliflodacin in certain countries (the “GARDP Collaboration Agreement”). Under the terms of the GARDP Collaboration Agreement, GARDP shall use commercially reasonable endeavors to perform and fully fund the Phase 3 registrational trial, including the manufacture and supply of the product candidate containing zoliflodacin, in uncomplicated gonorrhea. Reimbursements from GARDP under this agreement are recorded as a reduction to research and development expense. Reimbursements recorded from GARDP during the three and nine months ended September 30, 2026 and 2025 werenot material.

In addition, under the GARDP Collaboration Agreement, GARDP was granted a worldwide, fully paid, exclusive and royalty-free license, with the right to sublicense, to use our zoliflodacin technology in connection with GARDP’s development, manufacture and commercialization of zoliflodacin in low-income and specified middle-income countries. We retained commercial rights in all other countries worldwide, including the major markets in North America, Europe and Asia-Pacific. We also retained the right to use and grant licenses to our zoliflodacin technology to perform our obligations under the GARDP Collaboration Agreement and for any purpose other than gonorrhea or community-acquired indications. Each party is responsible for using commercially reasonable efforts to obtain marketing authorizations for the product candidate in its respective territory. The FDA approved zoliflodacin, marketed as NUZOLVENCE®, on December 12, 2025.

In May 2026, Entasis entered into an amendment to the GARDP Collaboration Agreement under which Entasis granted GARDP a non-exclusive license to use Entasis’ technology in certain European countries and received a one-time, nonrefundable upfront payment of $2.0 million, which was recorded as license revenue for the nine months ended September 30, 2026. Furthermore, Entasis is entitled to receive future regulatory milestone payment and royalties on net sales of NUZOLVENCE®.

PAION Pharma GmbH

Pursuant to the PAION AG and PAION Deutschland GmbH (together and individually “PAION”) License, La Jolla Pharmaceutical Company (“La Jolla”), our wholly-owned subsidiary, granted PAION an exclusive license to commercialize GIAPREZA® and XERAVA® in the European Economic Area, the United Kingdom and Switzerland (collectively, the “PAION Territory”). PAION is currently a subsidiary of the Humanwell Healthcare Group. We are entitled to receive potential commercial milestone payments of up to $109.5 million and double-digit tiered royalty payments. Royalties payable in a given jurisdiction under the PAION License are subject to reduction on account of generic competition and after patent expiration in that jurisdiction. Pursuant to the PAION License, PAION will be solely responsible for the future development and commercialization of GIAPREZA® and XERAVA® in the PAION Territory. PAION is required to use commercially reasonable efforts to commercialize GIAPREZA® and XERAVA® in the PAION Territory. Royalty revenue recognized under this agreement, presented as part of net product sales in the unaudited condensed consolidated statement of income, was $0.1 million and $1.5 million for thethree and nine months ended September 30, 2026, respectively, and$0.7 million and $1.8 million for thethree and nine months ended September 30, 2025, respectively.

La Jolla also entered into the PAION commercial supply agreement (the “PAION Supply Agreement”) whereby La Jolla supplies PAION a minimum quantity of GIAPREZA® and XERAVA® until the earlier of July 13, 2027, or until a new supply agreement is executed. During the term of the supply agreement, we are reimbursed for direct and certain indirect manufacturing costs at cost. Cost reimbursements under the PAION Supply Agreement werenot material and $1.8 million for thethree and nine months ended September 30, 2026, and$1.3 million and $2.7 million for the three and nine months ended September 30, 2025, respectively.

Everest Medicines Limited

Pursuant to the Everest Medicines Limited (“Everest”) License, La Jolla granted Everest an exclusive license to develop and commercialize XERAVA® for the treatment of complicated intra-abdominal infections (“cIAI”) and other indications in mainland China, Taiwan, Hong Kong, Macau, South Korea, Singapore, the Malaysian Federation, the Kingdom of Thailand, the Republic of Indonesia, the Socialist Republic of Vietnam and the Republic of the Philippines (collectively, the “Everest Territory”). Under the Everest License, we are eligible to receive remaining sales milestone payments of up to an aggregate of $20.0 million.

We are also entitled to receive tiered royalties from Everest at percentages in the low double digits on sales, if any, in the Everest Territory of products containing eravacycline. Royalties are payable with respect to each jurisdiction in the Everest Territory until the latest to occur of: (i) the last-to-expire of specified patent rights in such jurisdiction in the Everest Territory; (ii) expiration of marketing or regulatory exclusivity in such jurisdiction in the Everest Territory; or (iii)10 years after the first commercial sale of a product in such jurisdiction in the Everest Territory. Royalty revenue from Everest recognized for the three months ended September 30, 2026 and 2025, presented as part of net product sales in the unaudited condensed consolidated statement of income, was not material. Royalty revenue from Everest recognized for the nine months ended September 30, 2026 and 2025 was $1.1 million and $2.0 million, respectively.

La Jolla also entered into the Everest commercial supply agreement (the “Everest Supply Agreement”) whereby La Jolla will supply Everest a minimum quantity of XERAVA® and will transfer to Everest certain XERAVA®-related manufacturing know-how. Under the Everest Supply Agreement, we are reimbursed for direct and certain indirect manufacturing costs at 110% of cost. Revenue recognized under the Everest Supply Agreement for the three months ended September 30, 2026 and 2025 wasnot material. Revenue recognized was $1.3 million and $1.8 million for the nine months ended September 30, 2026 and 2025, respectively.

In-License Agreements

Basilea

In December 2024, we entered into an exclusive distribution and license agreement with Basilea, under which we were granted exclusive marketing rights to ZEVTERA® in the U.S. The agreement will remain in effect through the expiration of ZEVTERA®’s market exclusivity in the U.S. in 2034 (the “initial term”) and is subject to automatic renewal unless terminated by either party with prior notice. We paid an upfront fee of $4.0 million, which was recognized as an intangible asset and is being amortized over the initial term of the agreement. Under the agreement, we are required to exclusively purchase ZEVTERA® (in pre-packaging and labeling form) from Basilea for the duration of the term. We are also obligated to pay Basilea tiered royalties ranging from the high-teens to mid-twenties, as well as tiered milestone payments based on annual net sales in the U.S. ZEVTERA® was commercially launched in the U.S. in July 2025. Royalty expense incurred on the sales wasnot material during thethree and nine months ended September 30, 2026 and 2025.

George Washington University

Pursuant to the George Washington University License (the “GW License”), GW exclusively licensed to La Jolla certain intellectual property rights relating to GIAPREZA®, including the exclusive rights to certain issued patents and patent applications covering GIAPREZA®. Under the GW License, we are obligated to use commercially reasonable efforts to develop, commercialize, market and sell GIAPREZA®. We are obligated to pay a 6% royalty on net sales of GIAPREZA® and 15% on payments received from sublicensees. The obligation to pay royalties under the GW License extends through the last-to-expire patent covering GIAPREZA®. Royalty expense incurred under the GW License for the three and nine months ended September 30, 2026 was$1.4 million and $4.1 million, respectively, and $1.1 million and $3.3 million for thethree and nine months ended September 30, 2025, respectively.

Harvard University

Pursuant to the Harvard University (“Harvard”) License, Harvard exclusively licensed to La Jolla certain intellectual property rights relating to tetracycline-based products, including XERAVA®, including the exclusive rights to certain issued patents and patent applications covering such products. Under the Harvard License, we are obligated to use commercially reasonable efforts to develop, commercialize, market and sell tetracycline-based products, including XERAVA®. For each product covered by the Harvard License, we are obligated to make certain payments for the following: (i) up to approximately $15.1 million upon the achievement of certain clinical development and regulatory milestones; (ii) a 5% royalty on direct U.S. net sales of XERAVA®; (iii) a single-digit tiered royalty on direct ex-U.S. net sales of XERAVA®, starting at a minimum royalty rate of 4.5%, with step-ups to a maximum royalty of 7.5% based on the achievement of annual net product sales thresholds; and (iv)20% on payments received from sublicensees. The obligation to pay royalties under this agreement extends through the last-to-expire patent covering tetracycline-based products, including XERAVA®. Royalty expense incurred under the Harvard License for the three and nine months ended September 30, 2026 wasnot material. Royalty expense incurred for the three and nine months ended September 30, 2025 was $0.3 million and $1.0 million, respectively.

Business Transfer and Subscription Agreement with AstraZeneca

Entasis entered into a Business Transfer and Subscription Agreement with AstraZeneca, AstraZeneca UK Limited and AstraZeneca Pharmaceuticals LP (collectively, “AstraZeneca”) (the “AstraZeneca Agreement”) in 2015, which was amended and restated through 2018, pursuant to which Entasis obtained, among other things, worldwide rights to durlobactam and zoliflodacin. Under the AstraZeneca Agreement, we are obligated to pay AstraZeneca a one-time milestone payment of $5.0 million within three months of achieving a specified cumulative net sales milestone for durlobactam. We are also obligated to make a one-time milestone payment of $10.0 million to AstraZeneca withintwo years following the first commercial sale of zoliflodacin. This milestone was achieved in October 2026, and the payment is due in October 2028. Additionally, we are obligated to pay AstraZeneca tiered, single-digit royalties on the annual worldwide net product sales of durlobactam and the lesser of tiered, single-digit royalties on the worldwide annual net sales of zoliflodacin and a specified share of the royalties we receive from sublicensees of zoliflodacin. Royalties on sales of zoliflodacin do not include sales by GARDP in low-income and specified middle-income countries as discussed above. Our obligation to make these royalty payments expires on a country-by-country basis for each product upon the later of (i) the 10-year anniversary of the first commercial sale of a product in that country or (ii) the expiration date of the last patent right covering the product in that country.

The royalty expense in respect of durlobactam arising from our net product sales of XACDURO® wasnot material for the three and nine months ended September 30, 2026 and 2025.

Massachusetts Institute of Technology

In connection with the asset acquisition described in Note 13, “Asset Acquisition”, in September 2025, we entered into a license agreement with Massachusetts Institute of Technology (“MIT”), under which MIT licensed to us certain patent rights relating to a drug delivery device. Under this agreement, we paid an upfront fee of $0.5 million and are obligated to pay a minimal annual maintenance fee. We are also obligated to pay MIT up to $17.5 million in development, regulatory and sales milestone payments, and pay royalties in a low single-digit percentage on future net sales related to the licensed product.

5. Consolidated Entity

ISP Fund LP

As of September 30, 2026, we continued to hold approxi mately 100% ofthe economic interest of the ISP Fund LP (“Partnership”). As of September 30, 2026 and December 31, 2025, total assets of the Partnership were$31.9 million and $79.7 million, respectively, with the majority attributable to either current portion of ISP Fund investments or to equity and long-term investments. As of September 30, 2026 and December 31, 2025, total liabilities were $0.1 million. During thenine months ended September 30, 2026, $47.5 million in cash was distributed to us by the Partnership.

During the three and nine months ended September 30, 2026, we recorded $0.1 million and $0.6 million, respectively, in investment-related expense incurred by the Partnership, and generated $0.1 million and $0.3 million, respectively, in interest income. During the three and nine months ended September 30, 2026, we recorded $2.7 million in net unrealized losses and $14.9 million in net unrealized gains, respectively, as changes in fair values of equity and long-term investments, net, in the unaudited condensed consolidated statements of income and comprehensive income. During the nine months ended September 30, 2026, we recorded $14.9 million in net realized losses as changes in fair values of equity and long-term investments, net, in the unaudited condensed consolidated statements of income and comprehensive income. During thethree and nine months ended September 30, 2025, we recorded $0.4 million and $1.9 million, respectively, in investment-related expense incurred by the Partnership, generated $0.8 million and $3.2 million, respectively, in interest income, and recorded $11.7 million in net realized and unrealized gains and $69.2 million in net realized and unrealized losses, respectively, as changes in fair values of equity and long-term investments, net, in the unaudited condensed consolidated statements of income and comprehensive income.

The following is a summary of individual investments held by ISP Fund at each balance sheet date:

6. Equity and Long-Term Investments and Fair Value Measurements

Equity and Other Investments in Armata

Since the first quarter of 2020, Innoviva and its wholly owned subsidiary, Innoviva Strategic Opportunities, LLC (“ISO”), have invested in the common stock, warrants, convertible note, and term loans of Armata Pharmaceuticals, Inc. (“Armata”), a clinical stage biotechnology company focused on development of precisely targeted bacteriophage therapeutics for antibiotic-resistant infections.

In January 2026, we entered into various amendments to existing agreements with Armata, extending the maturities of the convertible note and the term loans issued in July 2023, March 2024 and March 2025 to June 1, 2027. The expiration dates of all outstanding Armata warrants held by us were extended to January 26, 2031.

The maturity date of the term loan issued in August 2025 remained unchanged at January 11, 2029.

In addition, we entered into an amendment to the amended and restated investor rights agreement, pursuant to which the Company and ISO agreed that the voting agreement will expire at the earlier of January 26, 2031 or the approval by the FDA of any of Armata's product candidates for marketing and commercial distribution. As of September 30, 2026, our ownership in Armata was 67.4%.

In May 2026, ISO and Armata entered into a Credit and Security Agreement, under which ISO extended a term loan to Armata (the “Armata May 2026 Term Loan”) in the aggregate principal amount of $25.0 million. The loan bears interest at a rate of 14% per annum and matures on January 11, 2029. The Credit and Security Agreement is secured by substantially all assets of Armata and its domestic and foreign material subsidiaries.

As of September 30, 2026, the fair values of our holdings of 25,076,769 shares of Armata common stock,10,653,847 warrants, a$30.1 million convertible note and $110.1 million in term loans were estimated at $92.0 million, $29.9 million, $68.1 million, and $133.6 million, respectively. As of December 31, 2025, the fair values of these holdings were estimated at $157.5 million, $36.2 million, $101.4 million, and $102.8 million, respectively.

For the Armata common stock and warrants, we recorded $97.6 million and $71.8 million in unrealized loss as changes in fair values of equity method investments, net, in the unaudited condensed consolidated statements of income and comprehensive income for thethree and nine months ended September 30, 2026, respectively, and $30.8 million and $30.3 million in unrealized gain for thethree and nine months ended September 30, 2025, respectively.

For the Armata convertible note, we recorded $36.9 million and $33.3 million in unrealized loss as changes in fair values of equity and long-term investments, net, in the unaudited condensed consolidated statements of income and comprehensive income for thethree and nine months ended September 30, 2026, respectively, and$13.0 million and $14.9 million in unrealized gainfor the three and nine months ended September 30, 2025, respectively.

For the Armata term loans, we recorded $0.5 million and $5.8 million in unrealized gain as changes in fair values of equity and long-term investments, net, in the unaudited condensed consolidated statements of income and comprehensive income for thethree and nine months ended September 30, 2026, respectively, and $3.4 million and $7.2 million in unrealized gain for thethree and nine months ended September 30, 2025, respectively.

The summarized financial information, including the portion we do not own, is presented for Armata on a one quarter lag as follows:

Income Statement Information

Equity and Other Investments in InCarda

Since the third quarter of 2020, Innoviva TRC Holdings, LLC (“ITH”), a wholly owned subsidiary of Innoviva, has invested in the common stock, preferred stock, warrants and convertible notes of InCarda Therapeutics, Inc. (“InCarda”), a privately held biopharmaceutical company focused on developing intravenous and inhaled therapies for cardiovascular diseases.

As of September 30, 2026 and December 31, 2025, ITH owns 36,742,250 shares of InCarda’s common and preferred stock and 2,490,033 warrants, representing a 9.5% equity interest. Over the years, ITH has also invested $2.1 million in InCarda’s convertible notes.

As of September 30, 2026 and December 31, 2025, we recorded $7.5 million in carrying amount of InCarda’s preferred stock, approximately $0.1 million in fair value of warrants and $2.1 million in fair value of convertible notesas equity and long-term investments in the unaudited condensed consolidated balance sheets.

During the three and nine months ended September 30, 2026 and 2025, the change to the carrying amount of our investments in InCarda wasnot material.

Equity and Other Investments in ImaginAb

Since March of 2021, ITH has invested $7.6 million in 8,825,301 shares of common and preferred stock of ImaginAb, Inc. (“ImaginAb”), a privately held biotechnology company focused on clinically managing cancer and autoimmune diseases via molecular imaging. As of September 30, 2026, and December 31, 2025, we held an 11.8% ofequity ownership in ImaginAb.

As of September 30, 2026 and December 31, 2025, our investment of $7.6 million was recorded as equity and long-term investments in the unaudited condensed consolidated balance sheets. There wasno changein the carrying amount of our equity investments in ImaginAb during the periods presented.

Equity and Other Investments in Syndeio Biosciences

Syndeio Biosciences, Inc. (formerly known as Gate Neurosciences, Inc.) (“Syndeio”) is a privately held biopharmaceutical company focused on developing the next generation of targeted nervous system therapies, leveraging precision medicine approaches to develop breakthrough drugs for psychiatric and neurologic diseases. In May 2025, Gate Neurosciences, Inc. rebranded as Syndeio. From 2021 to 2024, ITH invested a total of $51.5 million including $0.9 million in transaction costs in Syndeio’s convertible notes (the “Syndeio 2021 Convertible Note”). In 2025, ITH invested a total of $25.8 million in Syndeio’s new convertible notes (the “Syndeio 2025 Convertible Note”).

On February 10, 2026, ITH entered into a Note Amendment Agreement with Syndeio to amend the Syndeio 2021 Convertible Note. Pursuant to the Note Amendment Agreement, the principal amount of the Syndeio 2021 Convertible Note was increased from $50.6 million to $60.8 million, which represents the principal and accrued interest as of the amendment date and an additional cash investment of $5.0 million. Certain thresholds associated with the definition of qualified financing were likewise amended. All other material terms of the Syndeio 2021 Convertible Note remained unchanged.

On March 25, 2026, ITH entered into another Note Amendment Agreement with Syndeio to amend the Syndeio 2021 Convertible Note. Under the Note Amendment Agreement, the principal amount of the Syndeio 2021 Convertible Note was increased from $60.8 million to $66.5 million, which represents the principal and accrued interest as of the amendment date and an additional cash investment of $5.0 million. All other material terms of the Syndeio 2021 Convertible Note remained unchanged.

On June 11, 2026, ITH and other existing Syndeio investors entered into a Series B Preferred Stock Purchase Agreement with Syndeio, pursuant to which ITH purchased 3.75 million shares of Series B Preferred Stock for $30.0 million. Concurrently, the Syndeio 2025 Convertible Note with an outstanding balance of $27.0 million, including principal and accrued interest, was converted into 4.2 million shares of Series B-2 Preferred Stock, and $1.1 million of the Syndeio 2021 Convertible Note was converted into 175,000 shares of Series B-2 Preferred Stock. As of September 30, 2026, we held 44.4% of equity ownership in Syndeio.

On the same date, ITH also entered into an amendment to the Syndeio 2021 Convertible Note to increase the principal amount to $66.5 million, representing the remaining principal after the aforementioned conversion and accrued interest. All other material terms remained unchanged.

Our investments in Syndeio do not provide us with the ability to control or have significant influence over Syndeio’s operations. Based on our evaluation, we determined that Syndeio is a VIE, but we are not the primary beneficiary of the VIE. We have not provided financial or other support that we were not previously contractually required to provide during the periods presented. Our maximum exposure to loss is equal to the amount we invested in the entity.

We account for our investment in Syndeio Series B and Series B-2 preferred stock using the measurement alternative because Syndeio’s equity securities are not publicly traded and do not have a readily determinable fair value. As of September 30, 2026, our equity investments of $58.2 million were recorded as equity and long-term investments in the unaudited condensed consolidated balance sheets.

We account for both the Syndeio 2021 Convertible Note and the Syndeio 2025 Convertible Note as trading securities, measured at fair value using a Monte Carlo simulation model with the probability of certain qualified events and the assumptions of equity value of Syndeio, risk-free rate, expected stock price, volatility of its peer companies, and the time until a financing is raised.

As of September 30, 2026, and December 31, 2025, the fair value of the Syndeio 2021 Convertible Note was estimated at $67.5 million and $62.9 million, respectively, and recorded as equity and long-term investments in the unaudited condensed consolidated balance sheets. We recorded $2.9 million and $11.4 million in unrealized loss for thethree and nine months ended September 30, 2026, respectively, and$6.3 million and $26.8 million in unrealized gain for thethree and nine months ended September 30, 2025, respectively, as changes in fair values of equity and long-term investments, net in the unaudited condensed consolidated statements of income and comprehensive income. We also recorded $1.2 million of accrued interest as interest income for the nine months ended September 30, 2026 in the unaudited condensed consolidated statements of income and comprehensive income.

As of December 31, 2025, the fair value of the Syndeio 2025 Convertible Note was estimated at $24.5 million and recorded as equity and long-term investments in the unaudited condensed consolidated balance sheet. We recorded $1.2 million in interest income and $1.3 million in unrealized gain for the nine months ended September 30, 2026. We recorded$0.6 million in unrealized loss for the three months ended September 30, 2025 and immaterial unrealized gains for the nine months ended September 30, 2025 as changes in fair values of equity and long-term investments, net in the unaudited condensed consolidated statement of income and comprehensive income.

Equity Investment in Nanolive

In 2022, ITH invested $9.8 million in 18,750,000 shares of preferred stock of Nanolive SA (“Nanolive”), a Swiss privately held life sciences company focused on developing breakthrough imaging solutions that accelerate research in growth industries such as drug discovery and cell therapy. ITH has the right to designate one member to Nanolive’s board. ITH also has the right to designate another member, who will be mutually acceptable to ITH and another stockholder, to Nanolive’s board. As of September 30, 2026, no Innoviva designee is serving on Nanolive’ssix-member board. As of September 30, 2026 and December 31, 2025, we held 13.0% of Nanolive equity ownership.

As of September 30, 2026 and December 31, 2025, $10.6 million was recorded as equity and long-term investments in the unaudited condensed consolidated balance sheets, and there was no change to the carrying amount of our investment.

Convertible Promissory Note in Lyndra

In 2025, we invested $9.2 million in the convertible promissory note of Lyndra Therapeutics, Inc. (“Lyndra”), which was then a clinical-stage company with a novel drug delivery platform that enables the administration of ultra-long-acting oral drugs. In 2025, we received a $3.3 million partial repayment on the note, reducing the outstanding principal to $5.9 million.

As of September 30, 2026 and December 31, 2025, the fair value of the note was estimated at$3.5 million and recorded as equity and long-term investments in the unaudited condensed consolidated balance sheets. There was no change in the carrying amount of the note during the periods presented.

Equity Investment in Beacon

Beacon Biosignals, Inc. (“Beacon”) is an AI-driven neurotechnology company developing treatments for neurological, psychiatric, and sleep disorders. On October 7, 2025, ITH entered into a Preferred Stock Purchase Agreement with Beacon, pursuant to which ITH acquired 1,448,303 shares of Beacon’s Series B Preferred Stock for $17.5 million. On September 18, 2026, ITH entered into a Series B-2 Preferred Stock Purchase Agreement with Beacon, under which ITH acquired 266,186 shares of Beacon’s Series B-2 Preferred Stock for $5.4 million. As of September 30, 2026 and December 31, 2025, we held 5.5% and 5.6%, respectively, of equity ownership in Beacon.

As of September 30, 2026 and December 31, 2025, our investments in Beacon of $23.0 million and $17.5 million, respectively, were recorded as equity and long-term investments in the unaudited condensed consolidated balance sheets, and there was no change to the carrying amount of our investment in the periods presented.

Reconciliation of Equity and Long-Term Investments Balances

The following table reconciles the change in balances in “Equity and Long-Term Investments” as of each balance sheet date:

Available-for-Sale Securities

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

(1) Money market funds are included in cash and cash equivalents in the condensed consolidated balance sheets.

(1)Money market funds are included in cash and cash equivalents in the condensed consolidated balance sheets.

As of September 30, 2026 and December 31, 2025, all available-for-sale investments were money market funds, and there wasno credit loss recognized.

Fair Value Measurements

Our available-for-sale securities and equity and long-term investments are measured at fair value on a recurring basis and our debt is carried at amortized cost basis.

There wereno transfers between Level 1, Level 2 or Level 3 during the periods presented.

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

The investments classified as Level 3 financial instruments are securities that are not publicly traded and the assumptions used in the valuation model of these securities are based on significant unobservable and observable inputs including those of publicly traded peer companies. There are uncertainties on the fair value measurement of the instruments classified under Level 3 due to the use of unobservable inputs and interrelationships between these unobservable inputs, which could result in higher or lower fair value measurements.

The fair value of our 2028 Notes is based on the recent trading price of the instrument.

7. Goodwill and Intangible Assets

Goodwill and intangible assets acquired are recognized at fair value as of the acquisition date. We recognized goodwill of $11.5 million and $6.4 million from our acquisitions of Entasis and La Jolla, respectively, in 2022. The carrying amount of goodwill as of September 30, 2026 and December 31, 2025 was $17.9 million. We havenot recognized any impairment losses related to goodwill during the periods presented.

Intangible assets with definite lives are amortized over their estimated useful lives. The carrying basis and accumulated amortization of recognized intangible assets as of September 30, 2026 and December 31, 2025 were as follows:

Intangible assets recognized as a result of the acquisition of Entasis amounted to $106.7 million, which consisted of Entasis’ in-process research and development related to its antibacterial therapeutic product candidates and a collaboration agreement amounting to $71.3 million and $35.4 million, respectively. Following the FDA approval of XACDURO® in May 2023, we started amortizing $68.7 million of the then in-process research and development as a marketed product, as well as the collaboration agreement, over their estimated useful lives. Following the FDA approval of NUZOLVENCE® (formerly zoliflodacin) in December 2025, we started amortizing $2.6 million of the then in-process research and development as a marketed product over its estimated useful life.

Intangible assets recognized as a result of the acquisition of La Jolla amounting to $151.0 million pertain to product rights and developed technologies on La Jolla’s currently marketed products. These are intangible assets with determinable lives and are amortized over their estimated useful lives.

As discussed in Note 4 “License, Collaboration and Other Arrangements”, we capitalized the upfront fee of $4.0 million that we paid to Basilea for the exclusive commercialization right of ZEVTERA® in the U.S. under our exclusive distribution and license agreement as an intangible asset. This amount is included in marketed products in the table above and is being amortized over the term of the agreement.

We recognized amortization expense of$6.7 million and $19.9 million for the three and nine months ended September 30, 2026, respectively, and$6.6 million and $19.6 million for thethree and nine months ended September 30, 2025, respectively. Future amortization expense is expected to be$6.7 million for the remainder of 2026, $26.6 million for each of the years from 2027 to 2030 and $49.2 million thereafter.

8. Balance Sheet Components

Inventory

Inventory consisted of the following:

As of September 30, 2026 and December 31, 2025, total inventory included net fair value adjustments resulting from the acquisition of La Jolla of approximately $1.1 millionand $3.4 million, respectively, which will be amortized and recognized as cost of products sold when sales occur in future periods. The fair value adjustments recorded as part of cost of products sold amounted to$0.2 million and $2.2 million for the three and nine months ended September 30, 2026, respectively, and$3.5 million and $4.1 million for thethree and nine months ended September 30, 2025, respectively.

Other Accrued Liabilities

Other accrued liabilities consisted of the following:

Other Long-term Liabilities

Other long-term liabilities consisted of the following:

9. Stock-Based Compensation

Equity Incentive Plan

In May 2026, our stockholders approved the 2026 Equity Incentive Plan (the “2026 Plan”). The 2026 Plan provides for the grant of incentive stock options, nonstatutory stock options, RSAs, RSUs, Stock Appreciation Rights and other stock-based awards to employees, non-employee directors and consultants. A total of 9,000,000 shares of our common stock are reserved for issuance under the 2026 Plan.

Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense:

10. Stockholders' Equity

On November 3, 2025, our board of directors authorized a new share repurchase program under which we may repurchase up to $125.0 million of our outstanding shares of common stock. For thethree months ended September 30, 2026, we repurchased 1,226,948 shares in the open market at an average price of $21.46 per share for a total amount of approximately $26.3 million. For thenine months ended September 30, 2026, we repurchased 3,601,261 shares in the open market at an average price of $21.70 per share for a total amount of approximately $78.2 million. From program inception through September 30, 2026, we have repurchased Innoviva common stock in the open market for a total price of approximately $82.7 million. Subsequent to September 30, 2026, and through October 31, 2026, we have repurchased 454,835 shares in the open market for a total of approximately $9.6 million. All repurchased shares were retired.

11. Debt

Convertible Senior Notes Due 2025

On August 7, 2017, we completed a private placement of $192.5 million aggregate principal amount of our 2025 Notes.

The 2025 Notes were convertible, based on the applicable conversion rate, into cash, shares of our common stock or a combination thereof, at our election.

In June 2025, we elected to settle the 2025 Notes in shares. Approximately $192.5 million of the principal amount was converted into 11,148,918 shares of our common stock. The remaining principal balance of $25,000 was fully paid in cash upon the maturity date on August 15, 2025.

The annual effective interest rate on the 2025 Notes in 2025 up to its settlement was 2.90%.

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

Convertible Senior Notes Due 2028

In March 2022, we completed a private placement of $261.0 million aggregate principal amount of our 2028 Notes, which will mature on March 15, 2028.

The 2028 Notes bear interest at an annual rate of 2.125% that is payable semi-annually in arrears in cash on March 15 and September 15 of each year, beginning on September 15, 2022.

The 2028 Notes are convertible, based on the applicable conversion rate, into cash, shares of our common stock or a combination thereof, at our election. The initial conversion rate was 38.1432 shares per $1,000 principal amount of the 2028 Notes, subject to customary anti-dilution adjustment in certain circumstances, which represented an initial conversion price of approximately $26.22 per share.

The annual effective interest rate on the 2028 Notes is 2.70%.

Our outstanding 2028 Notes balance consisted of the following:

The following table sets forth total interest expense recognized related to the 2028 Notes for thethree and nine months ended September 30, 2026 and 2025:

Debt Maturities

The aggregate scheduled maturities of our convertible debt as of September 30, 2026 were as follows:

Deferred Royalty Obligation

As part of our acquisition of La Jolla, we recorded the fair value of its deferred royalty obligation in connection with La Jolla’s royalty financing agreement (“La Jolla Royalty Agreement”) with HealthCare Royalty Partners (“HCR”). Under the terms of the La Jolla Royalty 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.

We recognized interest expense of $3.7 million and $11.1 million for thethree and nine months ended September 30, 2026, respectively, and$1.6 million and $4.7 million for thethree and nine months ended September 30, 2025, respectively. The carrying value of the deferred royalty obligation as of September 30, 2026 and December 31, 2025 was $61.2 million and $62.2 million, respectively (refer to Note 8, “Balance Sheet Components”). During thenine months ended September 30, 2026 and 2025, we made royalty payments to HCR of $11.6 million and $9.5 million, respectively. The deferred royalty obligation was valued using Level 3 inputs, and its carrying value as of September 30, 2026 approximates fair value. The fair value of the deferred royalty obligation was calculated as the discounted deferred royalty obligations based on risk-adjusted revenue projections for GIAPREZA®. As of September 30, 2026, the annual effective interest rate of the deferred royalty obligation for the current period is 26.10%.

Certain contract provisions within the La Jolla Royalty Agreement that could result in an acceleration of amounts due under the La Jolla Royalty Agreement are recognized as embedded derivatives that require bifurcation from the deferred royalty obligation and fair value recognition. We determined the fair value of each derivative by assessing the probability of each event occurring, as well as the potential repayment amounts and timing of such repayments that would result under various scenarios. As a result of this assessment, we determined that the fair value of the embedded derivatives is not material and, therefore, not recognized as of September 30, 2026 and December 31, 2025. We estimate the fair value of the embedded derivatives for each reporting period until either the features lapse or the La Jolla Royalty Agreement is terminated, whichever occurs first. Any material change in the fair value of the embedded derivatives will be recorded as either a gain or loss in the consolidated statements of income and comprehensive income.

12. Commitments and Contingencies

Operating Lease

We have operating leases for our corporate headquarters, office spaces and laboratory facilities.

In 2019, we entered into an operating lease for our headquarters in Burlingame, California for approximately 2,111 square feet. The lease commenced in November 2019 with an initial term ofthirty-six calendar months, which was subsequently amended to expire in December 2027. Our operating leases include a facility lease consisting of 15,500 square feet of office space in Waltham, Massachusetts, which expires in March 2029. In November 2025, we entered into an operating lease for approximately 22,881 square feet of office and laboratory space in Lexington, Massachusetts, which expires in April 2036. We have theoption to terminate this lease, for an early termination fee, before May 2029.

The components of lease cost were as follows:

Supplemental cash flow information related to leases was as follows:

As of September 30, 2026, our operating leases have a weighted-average remaining term of approximately 9.0 years and the weighted average discount rate on our operating lease liabilities was 5.3%.

Future minimum payments on our operating leases as of September 30, 2026 were as follows:

Purchase Commitments

In April 2024, we 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, 2026, we have satisfied our purchase commitments for the year 2026 and have approximately $5.9 million U.S. dollar equivalent in purchase commitments under the agreement for the year 2027.

Legal Proceedings

From time to time, the Company is involved in legal proceedings in the ordinary course of its business. We are not currently a party to any material legal proceedings.

Indemnification and Other Contingencies

In the ordinary course of business, we may provide indemnifications of varying scope and terms to vendors, directors, officers, and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by us, our negligence or willful misconduct, violations of law, or intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with directors and certain officers and employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. No material demands have been made upon us to provide indemnification under such agreements, and thus, there are no claims that we are aware of that could have a material effect on our consolidated financial statements. We also maintain director and officer insurance, which may cover certain liabilities arising from our obligation to indemnify our directors. To date, we have not incurred any material costs and, as of September 30, 2026, we havenot accrued any material liabilities in the unaudited condensed consolidated financial statements as a result of these provisions.

13. Asset Acquisition

In September 2025, we entered into an Asset Purchase Agreement with Lyndra to acquire the IPR&D and certain fixed assets related to its Lynx™ long-acting drug delivery platform. We made an upfront cash payment of $10.2 million and incurred $0.3 million in direct transaction costs. We are also obligated to pay up to $20.0 million upon the achievement of certain development, regulatory and sales milestone payments, as well as royalties in a low single-digit percentage on future net sales of the first approved therapeutic product.

Based on the qualitative and quantitative assessments performed under ASC 805, Business Combinations, we concluded that the set of assets acquired did not meet the definition of a business and, therefore, accounted for the transaction as an asset acquisition. The assets acquired in the transaction were recorded at their allocated costs based on their relative fair values. The allocated cost of the IPR&D acquired was $9.4 million, which was charged to research and development expense as it had no alternative future use at the time of the acquisition. The allocated cost of the fixed assets, which consist of laboratory equipment, was $1.1 million and was capitalized within property and equipment.

14. Income Taxes

We recorded income tax benefitof $23.7 million and $0.4 million for the three and nine months ended September 30, 2026, respectively, and income tax expense of$7.9 million and $24.8 million for thethree and nine months ended September 30, 2025, respectively. The Company’s effective income tax rate for the nine months ended September 30, 2026 was (1.2)% compared to 18.8% for the same period in 2025. The income tax expense for the nine months ended September 30, 2026 and 2025 was determined based upon estimates of the Company’s effective income tax rates in various jurisdictions. Our effective tax rate for the nine months ended September 30, 2026 was lower than the U.S. federal statutory income tax rate primarily related to foreign-derived intangible income tax deduction and discrete tax benefits related to unrealized loss on investment. For the three months ended September 30, 2026, we reversed a $38.9 million reserve for potential foreign tax liabilities upon expiration of the applicable statute of limitations. The reversal was reflected in“Other Assets” and “Long-Term Income Tax Payable” in the unaudited condensed consolidated balance sheet.

15. Segment Reporting

We operate as asingle operating and reportable segment, focused on creating value for our stockholders. We achieve this by maximizing the value of our respiratory royalty portfolio and growing our investments in innovative healthcare assets that address critical unmet medical needs.

Our Chief Executive Officer, as thechief operating decision-maker (“CODM”), evaluates the Company’s financial performance and operational efficiency using consolidated net income (loss). This helps guide decisions related to commercial operations, product development, and regulatory compliance, ensuring resources are allocated effectively to support growth initiatives. Consolidated net income (loss) also helps inform reinvestment strategies to strengthen our market position and drive innovation.

The accounting policies of the segment are the same as those described in Note 1, “Description of Operations and Summary of Significant Accounting Policies”.

Our revenues are generated primarily from our collaborative arrangements and royalty payments from GSK, located in Great Britain. We also generate revenue from net product sales of GIAPREZA®, XACDURO®, XERAVA® and ZEVTERA®, as well as license and other revenues. Refer to Note 3, “Revenue Recognition”, for more information on our revenues for the periods presented.

Our long-term assets are located within the United States. The CODM does not review assets at a different level or category than the amounts disclosed in the consolidated balance sheets.

The table below presents the financial information used by the CODM to assess performance, which reconciles to the consolidated net income (loss):