Net Product Sales
Total net product sales were as follows:
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|
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|
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|
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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(In thousands) |
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2026 |
|
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2025 |
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|
2026 |
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|
2025 |
|
GIAPREZA® |
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$ |
22,299 |
|
|
$ |
17,329 |
|
|
$ |
42,530 |
|
|
$ |
35,602 |
|
XACDURO® |
|
|
22,382 |
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|
|
10,731 |
|
|
|
40,456 |
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|
|
18,514 |
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XERAVA® |
|
|
6,739 |
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|
|
7,094 |
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|
|
9,367 |
|
|
|
11,317 |
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ZEVTERA® |
|
|
351 |
|
|
|
339 |
|
|
|
789 |
|
|
|
339 |
|
Total net product sales |
|
$ |
51,771 |
|
|
$ |
35,493 |
|
|
$ |
93,142 |
|
|
$ |
65,772 |
|
We derived our net product sales from customers located in the U.S. and the rest of world as follows:
•approximately 71% and 29%, respectively, for the three months ended June 30, 2026, and 76% and 24%, respectively, for the six months ended June 30, 2026; and
•approximately 82% and 18%, respectively, for the three months ended June 30, 2025, and 84% and 16%, respectively, for the six months ended June 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 six months ended June 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 three and six months ended June 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 $0.9 million and $2.0 million for the three and six months ended June 30, 2026, respectively, and $0.6 million and $1.1 million for the three and six months ended June 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, we recognized $0.6 million in license revenue for the six months ended June 30, 2025. License revenue for three and six months ended June 30, 2026 and the three months ended June 30, 2025 were not material. As of June 30, 2026 and December 31, 2025, outstanding amounts under this amendment of $1.8 million 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 their commercial use. We recognized $9.5 million and $14.9 million in net product sales for the cost of the Supplied Inventory for the three and six months ended June 30, 2026, respectively, and $1.7 million and $2.5 million for the three and six months ended June 30, 2025, respectively. Amounts outstanding under this agreement of $13.1 million and $6.7 million were included in “Accounts receivable” in our unaudited condensed consolidated balance sheets as of June 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 six months ended June 30, 2026 was not material. We recognized license revenue under this agreement of $0.9 million for the three and six months ended June 30, 2025.
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 three and six months ended June 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 six months ended June 30, 2026 and 2025 were not 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 their respective territories. 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 three and six months ended June 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 was $0.8 million and $1.4 million for the three and six months ended June 30, 2026, respectively, and was not material for the same periods in 2025.
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 were $1.8 million for the three and six months ended June 30, 2026, and $0.8 million and $1.4 million for the three and six months ended June 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 and six months ended June 30, 2026 was $0.9 million. Royalty revenue recognized for the three and six months ended June 30, 2025 was $2.0 million.
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 was $1.3 million for the three and six months ended June 30, 2026, and $0.8 million and $1.8 million for the three and six months ended June 30, 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 was not material during the three and six months ended June 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 six months ended June 30, 2026 were $1.4 million and $2.7 million, respectively, and $1.1 million and $2.2 million for the three and six months ended June 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 six months ended June 30, 2026 was not material. Royalty expense incurred for the three and six months ended June 30, 2025 was $0.6 million and $0.7 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 pay AstraZeneca a one-time milestone payment of $10.0 million within two years of achieving the first commercial sale of zoliflodacin. 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® was not material during the periods presented.
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 June 30, 2026, we continued to hold approximately 100% of the economic interest of the ISP Fund LP (“Partnership”). As of June 30, 2026 and December 31, 2025, total assets of the Partnership were $34.5 million and $79.7 million, respectively, with the majority attributable to either current portion of ISP Fund investment or to equity and long-term investments. As of June 30, 2026 and December 31, 2025, total liabilities were $0.1 million. During the six months ended June 30, 2026, $47.5 million in cash was distributed to us by the Partnership. The remaining equity investments managed by the Partnership are expected to be distributed in 2026.
During the three and six months ended June 30, 2026, we recorded $0.1 million and $0.5 million, respectively, in investment-related expense incurred by the Partnership, generated $0.1 million and $0.2 million, respectively, in interest income and recorded $3.1 million and $2.7 million, respectively, in net realized and unrealized gains 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 six months ended June 30, 2026, we recorded $14.9 million in net realized losses and $17.6 million in net unrealized gains 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 three and six months ended June 30, 2025, we recorded $0.7 million and $1.5 million, respectively, in investment-related expense incurred by the Partnership, generated $1.2 million and $2.4 million, respectively, in interest income, and recorded $0.4 million in net realized and unrealized gains and $80.9 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:
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|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
(In thousands) |
|
2026 |
|
|
2025 |
|
Common stock - Publicly traded healthcare companies |
|
|
|
|
|
|
United States |
|
$ |
13,029 |
|
|
$ |
52,392 |
|
United Kingdom |
|
|
10,136 |
|
|
|
8,874 |
|
Total common stock |
|
|
23,165 |
|
|
|
61,266 |
|
Preferred stock - Privately held healthcare companies |
|
|
|
|
|
|
United States |
|
|
2,686 |
|
|
|
2,748 |
|
Money market fund and cash |
|
|
8,668 |
|
|
|
15,727 |
|
Total investments held by ISP Fund LP |
|
$ |
34,519 |
|
|
$ |
79,741 |
|
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 June 30, 2026, our ownership in Armata was 67.5%.
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 June 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 $162.5 million, $57.0 million, $105.0 million, and $133.1 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 $131.8 million in unrealized loss and $25.8 million in unrealized gains as changes in fair values of equity method investments, net, in the unaudited condensed consolidated statements of income and comprehensive income for the three and six months ended June 30, 2026, respectively, and $13.1 million in unrealized gain and $0.4 million in unrealized loss for the three and six months ended June 30, 2025, respectively.
For the Armata convertible note, we recorded $43.3 million in unrealized loss and $3.7 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 the three and six months ended June 30, 2026, respectively, and $6.2 million and $1.9 million in unrealized gain for the three and six months ended June 30, 2025, respectively.
For the Armata term loans, we recorded $4.5 million and $5.3 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 the three and six months ended June 30, 2026, respectively, and $2.9 million and $3.9 million in unrealized gain for the three and six months ended June 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
Six Months Ended March 31, |
|
(In thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
Revenue |
|
$ |
789 |
|
|
$ |
491 |
|
|
$ |
1,874 |
|
|
$ |
1,726 |
|
Loss from operations |
|
$ |
(8,785 |
) |
|
$ |
(8,191 |
) |
|
$ |
(22,608 |
) |
|
$ |
(18,730 |
) |
Net loss |
|
$ |
(115,346 |
) |
|
$ |
(6,531 |
) |
|
$ |
(239,644 |
) |
|
$ |
(3,931 |
) |
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 June 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 June 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 notes as equity and long-term investments in the unaudited condensed consolidated balance sheets.
During the three and six months ended June 30, 2026 and 2025, the change to the carrying amount of our investments in InCarda was not 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 June 30, 2026, and December 31, 2025, we held an 11.8% of equity ownership in ImaginAb.
As of June 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 was no change in 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 June 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 June 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 June 30, 2026, and December 31, 2025, the fair value of the Syndeio 2021 Convertible Note was estimated at $70.3 million and $62.9 million, respectively, and recorded as equity and long-term investments in the unaudited condensed consolidated balance sheets. We recorded $3.7 million in unrealized gain and $8.5 million in unrealized loss for the three and six months ended June 30, 2026, respectively, and $1.4 million and $20.5 million in unrealized gain for the three and six months ended June 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 three and six months ended June 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 for the three and six months ended June 30, 2026, $2.9 million and $1.3 million in unrealized gain for the three and six months ended June 30, 2026, respectively, and $0.4 million and $0.6 million in unrealized gain for the three and six months ended June 30, 2025, respectively, 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 June 30, 2026, no Innoviva designee is serving on Nanolive’s six-member board. As of June 30, 2026 and December 31, 2025, we held 13.0% of Nanolive equity ownership.
As of June 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 June 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. As of June 30, 2026 and December 31, 2025, we held 5.4% and 5.6%, respectively, of equity ownership in Beacon.
As of June 30, 2026 and December 31, 2025, our $17.5 million investment in Beacon 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.
Intangible assets with definite lives are amortized over their estimated useful lives. The carrying basis and accumulated amortization of recognized intangible assets as of June 30, 2026 and December 31, 2025 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2026 |
|
|
|
Useful Life |
|
Gross |
|
|
Accumulated |
|
|
Net Carrying |
|
(In thousands) |
|
(Years) |
|
Amount |
|
|
Amortization |
|
|
Amount |
|
Marketed products |
|
8-10 |
|
$ |
226,300 |
|
|
$ |
(81,725 |
) |
|
$ |
144,575 |
|
Collaboration agreement |
|
10 |
|
|
35,400 |
|
|
|
(10,999 |
) |
|
|
24,401 |
|
Total |
|
|
|
$ |
261,700 |
|
|
$ |
(92,724 |
) |
|
$ |
168,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2025 |
|
|
|
Useful Life |
|
Gross |
|
|
Accumulated |
|
|
Net Carrying |
|
(In thousands) |
|
(Years) |
|
Amount |
|
|
Amortization |
|
|
Amount |
|
Marketed products |
|
8-10 |
|
$ |
226,300 |
|
|
$ |
(70,299 |
) |
|
$ |
156,001 |
|
Collaboration agreement |
|
10 |
|
|
35,400 |
|
|
|
(9,245 |
) |
|
|
26,155 |
|
Total |
|
|
|
$ |
261,700 |
|
|
$ |
(79,544 |
) |
|
$ |
182,156 |
|
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 $6.6 million and $13.2 million for the three and six months ended June 30, 2026, respectively, and $6.5 million and $13.0 million for the three and six months ended June 30, 2025, respectively. Future amortization expense is expected to be $13.4 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:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
(In thousands) |
|
2026 |
|
|
2025 |
|
Raw materials |
|
$ |
18,724 |
|
|
$ |
16,330 |
|
Work-in-process |
|
|
15,123 |
|
|
|
17,871 |
|
Finished goods |
|
|
5,121 |
|
|
|
4,971 |
|
Total inventory |
|
$ |
38,968 |
|
|
$ |
39,172 |
|
As of June 30, 2026 and December 31, 2025, total inventory included net fair value adjustments resulting from the acquisition of La Jolla of approximately $1.4 million and $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 $0.9 million and $2.0 million for the three and six months ended June 30, 2026, respectively, and $0.4 million and $0.6 million for the three and six months ended June 30, 2025, respectively.
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 the three and six months ended June 30, 2025:
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Three Months Ended June 30, 2025 |
|
|
Six Months Ended
June 30, 2025 |
|
Contractual interest expense |
|
$ |
1,199 |
|
|
$ |
2,402 |
|
Amortization of debt issuance costs |
|
|
188 |
|
|
|
375 |
|
Total interest and amortization expense |
|
$ |
1,387 |
|
|
$ |
2,777 |
|
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:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
(In thousands) |
|
2026 |
|
|
2025 |
|
Principal |
|
$ |
261,000 |
|
|
$ |
261,000 |
|
Debt discount and issuance costs, net |
|
|
(2,546 |
) |
|
|
(3,269 |
) |
Net carrying amount |
|
$ |
258,454 |
|
|
$ |
257,731 |
|
The following table sets forth total interest expense recognized related to the 2028 Notes for the three and six months ended June 30, 2026 and 2025:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(In thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
Contractual interest expense |
|
$ |
1,386 |
|
|
$ |
1,387 |
|
|
$ |
2,773 |
|
|
$ |
2,773 |
|
Amortization of debt discount and issuance costs |
|
|
360 |
|
|
|
349 |
|
|
|
723 |
|
|
|
703 |
|
Total interest and amortization expense |
|
$ |
1,746 |
|
|
$ |
1,736 |
|
|
$ |
3,496 |
|
|
$ |
3,476 |
|
Debt Maturities
The aggregate scheduled maturities of our convertible debt as of June 30, 2026 were as follows:
|
|
|
|
|
(In thousands) |
|
Amount |
|
Years ending December 31: |
|
|
|
Remainder of 2026 |
|
$ |
— |
|
2027 |
|
|
— |
|
2028 |
|
|
261,000 |
|
Total |
|
$ |
261,000 |
|
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 $7.4 million for the three and six months ended June 30, 2026, respectively, and $1.5 million and $3.1 million for the three and six months ended June 30, 2025, respectively. The carrying value of the deferred royalty obligation as of June 30, 2026 and December 31, 2025 was $61.6 million and $62.2 million, respectively (refer to Note 8, “Balance Sheet Components”). During the six months ended June 30, 2026 and 2025, we made royalty payments to HCR of $7.6 million and $6.1 million, respectively. The deferred royalty obligation was valued using Level 3 inputs, and its carrying value as of June 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 June 30, 2026, the annual effective interest rate of the deferred royalty obligation for the current period is 26.38%.
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 June 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 of thirty-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 the option to terminate this lease, for an early termination fee, before May 2029.
The components of lease cost were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(In thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
Straight line operating lease costs |
|
$ |
423 |
|
|
$ |
302 |
|
|
$ |
849 |
|
|
$ |
604 |
|
Variable lease costs |
|
|
131 |
|
|
|
3 |
|
|
|
259 |
|
|
|
5 |
|
Total lease costs |
|
$ |
554 |
|
|
$ |
305 |
|
|
$ |
1,108 |
|
|
$ |
609 |
|
Supplemental cash flow information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
(In thousands) |
|
2026 |
|
|
2025 |
|
Cash paid for amounts included in the measurement of operating lease liabilities |
|
$ |
357 |
|
|
$ |
849 |
|
As of June 30, 2026, our operating leases have a weighted-average remaining term of approximately 9.2 years and the weighted average discount rate on our operating lease liabilities was 5.3%.
Future minimum payments on our operating leases as of June 30, 2026 were as follows:
|
|
|
|
|
(In thousands) |
|
Amount |
|
Years ending December 31: |
|
|
|
Remainder of 2026 |
|
$ |
624 |
|
2027 |
|
|
1,327 |
|
2028 |
|
|
1,224 |
|
2029 |
|
|
1,335 |
|
2030 |
|
|
1,454 |
|
Thereafter |
|
|
8,516 |
|
Total undiscounted lease payments |
|
|
14,480 |
|
Less: imputed interest |
|
|
(3,277 |
) |
Total operating lease liabilities |
|
$ |
11,203 |
|
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 June 30, 2026, we have approximately $4.4 million and $5.9 million U.S. dollar equivalent in purchase commitments under the agreement for the remainder of 2026 and for the year 2027, respectively.
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 June 30, 2026, we have not 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. The fixed assets have not been placed in service and, therefore, no depreciation has been recognized as of June 30, 2026.
14. Income Taxes
We recorded income tax benefit of $24.6 million and income tax expense of $23.4 million for the three and six months ended June 30, 2026, respectively, and income tax expense of $8.9 million and $16.9 million for the three and six months ended June 30, 2025, respectively. The Company’s effective income tax rate for the six months ended June 30, 2026 was 18.5% compared to 49.7% for the same period in 2025. The income tax expense for the six months ended June 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 six months ended June 30, 2026 was lower than the U.S. federal statutory income tax rate primarily related to foreign-derived intangible income tax deduction and research and development credits, partially offset by discrete tax expenses related to unrealized gains on investment.
15. Segment Reporting
We operate as a single 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 the chief operating decision-maker (“CODM”), evaluates the Company’s financial performance and operational efficiency using consolidated net income. 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 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.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
The information in this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve substantial risks, uncertainties, and assumptions. All statements contained herein, other than statements of historical fact, including, without limitation, statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, intentions, expectations, goals and objectives may be forward‑looking statements. The words “anticipates,” “believes,” “could,” “designed,” “estimates,” “expects,” “goal,” “intends,” “may,” “objective,” “plans,” “projects,” “pursuing,” “will,” “would” and similar expressions (including the negatives thereof) are intended to identify forward‑looking statements, although not all forward‑looking statements contain these identifying words. We may not actually achieve the plans, intentions, expectations or objectives disclosed in our forward‑looking statements and the assumptions underlying our forward‑looking statements may prove incorrect. Therefore, you should not place undue reliance on our forward‑looking statements. Actual results or events could differ materially from the plans, intentions, expectations and objectives disclosed in the forward‑looking statements that we make. All written and verbal forward‑looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.
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.
We encourage you to read our unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q. We also encourage you to read Item 1A of Part I of our 2025 Form 10-K and Item 1A of Part II of our Quarterly Reports on Form 10-Q entitled “Risk Factors,” which contain a more complete discussion of the risks and uncertainties associated with our business. In addition to the risks described above and in Item 1A of Part I of our 2025 Form 10-K and Item 1A of Part II of this report, other unknown or unpredictable factors also could affect our results. Therefore, the information in this report should be read together with other reports and documents that we file with the SEC from time to time, including on Form 10-K, Form 10-Q and Form 8-K, which may supplement, modify, supersede or update those risk factors. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all.
OVERVIEW
Executive Summary
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.
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 in the second half of 2026:
•GIAPREZA® (angiotensin II) for increasing blood pressure in adults with septic or other distributive shock;
•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;
•XERAVA® (eravacycline) for the treatment of complicated intra-abdominal infections in adults;
•ZEVTERA® (ceftobiprole), an advanced-generation cephalosporin antibiotic for the treatment of staphylococcus 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 commercially launched in the third quarter of 2025; and
•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 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.
Our disciplined focus on deploying capital in areas of significant unmet medical need with high value creation potential has driven a meaningful transformation of our company over the years from a pure-play royalty business to a diversified biopharmaceutical company with a strong, fast-growing, differentiated operating platform and multiple other assets with significant promise. We believe we are well-positioned to deliver significant long-term shareholder value.
Our company structure and organization are tailored to our focused activities of managing our respiratory assets partnered with GSK, commercializing our marketed products, developing our product candidates, optimizing capital allocation, and providing for certain essential reporting and management functions of a public company.
Second Quarter 2026 and Recent Highlights:
Financial Highlights
•Total revenue: $119.6 million, representing 19% year-on-year growth compared to $100.3 million for the second quarter 2025.
•Royalty revenue: gross royalty revenue from GSK remains stable at $59.8 million in the second quarter of 2026, a 2% increase compared to $58.6 million in the first quarter of 2026.
•Net product sales: $51.8 million ($36.6 million U.S. and $15.2 million ex-US), representing 46% growth compared to $35.5 million in the second quarter of 2025. U.S. net product sales primarily consisted of $21.0 million from GIAPREZA®, $12.0 million from XACDURO®, and $3.3 million from XERAVA®.
•Income from operations: $50.9 million, compared to $48.8 million for the second quarter 2025, reflecting higher net product sales and continued operating discipline.
•Equity and long-term investments: net unfavorable changes in fair value of equity and long-term investments totaled $161.0 million, primarily attributable to a lower share price of Armata . Innoviva’s strategic healthcare investments were valued at $669.5 million as of June 30, 2026, and consisted of $457.7 million in Armata, $177.3 million in other strategic equity and convertible debt, and $34.5 million held by ISP Fund.
•Net income: net loss of $83.4 million, or $1.14 basic loss per share, driven primarily by decrease in fair value of equity and long-term investments.
•Cash and cash equivalents: Totaled $570.4 million. Royalty and net product sales receivables totaled $110.6 million as of June 30, 2026, a 25% year-on-year increase compared to $88.3 million for the second quarter of 2025.
Key Business and R&D Highlights
•XACDURO® (sulbactam for injection; durlobactam for injection), co-packaged for intravenous use: a targeted antibacterial treatment for patients with hospital-acquired bacterial pneumonia and ventilator-associated bacterial pneumonia (HABP/VABP) caused by susceptible isolates of Acinetobacter baumannii-calcoaceticus complex.
oDuring the second quarter, IST entered into an exclusive distribution and licensing agreement with Dr. Reddy’s Laboratories Ltd., a global pharmaceutical company, for the development and commercialization of XACDURO® in South and Central America, the Caribbean, Russia and Commonwealth of Independent States countries.
•Strategic Healthcare Assets
oDuring the second quarter, Innoviva launched Nortiva Bio (a wholly owned subsidiary), to advance the proprietary LYNX™ long-acting oral drug delivery platform. The LYNX platform is designed to transform daily oral medicines into less frequent dosing regimens, including once-weekly or once-monthly therapies. The platform is designed to improve patient adherence, stabilize drug exposure, and enhance clinical and commercial value by enabling less frequent oral dosing.
oNortiva is advancing a lead once-monthly oral drug therapy development program (via support from the Gates Foundation) and building an external partnering pipeline to enable the development of long-acting oral versions of branded and generic therapies.
oDuring the second quarter of 2026, Innoviva repurchased 1,403,247 shares for $31.4 million under its $125 million share repurchase program. Since inception, and through the end of the second quarter, the Company has repurchased 2,602,168 shares for $56.4 million, reflecting the Company’s continued confidence in its intrinsic value and long-term outlook.
oDuring the second quarter of 2026, Innoviva continued to support companies in its strategic healthcare asset portfolio with $55.0 million aggregate capital commitment.
LABA Collaboration
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:
•RELVAR®/BREO® ELLIPTA® (“FF/VI”) (BREO® ELLIPTA® is the proprietary name in the U.S. and Canada and RELVAR® ELLIPTA® is the proprietary name outside the U.S. and Canada), a once-daily combination medicine consisting of a LABA, vilanterol (VI), and an inhaled corticosteroid (“ICS”), fluticasone furoate (“FF”), and
•ANORO® ELLIPTA® (“UMEC/VI”), a once-daily medicine combining a long-acting muscarinic antagonist (“LAMA”), umeclidinium bromide (“UMEC”), with a LABA, vilanterol (VI).
As a result of the launch and approval of RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA® in the U.S., Japan and Europe, in accordance with the LABA Collaboration Agreement, we paid milestone fees to GSK totaling $220.0 million during the year ended December 31, 2014. Although we have no further milestone payment obligations to GSK pursuant to the LABA Collaboration Agreement, we continue to have ongoing commercialization activities under the LABA Collaboration Agreement, including participation in the joint steering committee that are expected to continue over the life of the agreement. The milestone fees paid to GSK were recognized as capitalized fees, which are being amortized over their estimated useful lives commencing upon the commercial launch of the products.
We are 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. On sales of ANORO® ELLIPTA®, royalties are upward tiering and range from 6.5% to 10%.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe there have been no significant changes in our critical accounting policies as described in the Form 10-K for the year ended December 31, 2025 filed with the SEC on February 25, 2026, and as amended on March 27, 2026.
Results of Operations
Net Revenue
Royalty Revenue
Total royalty revenue, net, as compared to the prior year period, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
|
Change |
|
|
Six Months Ended
June 30, |
|
|
Change |
|
(In thousands) |
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
Royalties
- RELVAR®/BREO® |
|
$ |
47,655 |
|
|
$ |
54,737 |
|
|
$ |
(7,082 |
) |
|
|
(13 |
)% |
|
$ |
94,931 |
|
|
$ |
105,627 |
|
|
$ |
(10,696 |
) |
|
|
(10 |
)% |
Royalties
- ANORO® |
|
|
12,135 |
|
|
|
12,599 |
|
|
|
(464 |
) |
|
|
(4 |
)% |
|
|
23,482 |
|
|
|
22,972 |
|
|
|
510 |
|
|
|
2 |
% |
Total royalties |
|
|
59,790 |
|
|
|
67,336 |
|
|
|
(7,546 |
) |
|
|
(11 |
)% |
|
|
118,413 |
|
|
|
128,599 |
|
|
|
(10,186 |
) |
|
|
(8 |
)% |
Less: amortization of capitalized fees paid |
|
|
(3,456 |
) |
|
|
(3,456 |
) |
|
|
— |
|
|
* |
|
|
|
(6,912 |
) |
|
|
(6,912 |
) |
|
|
— |
|
|
* |
|
Total royalty revenue, net |
|
$ |
56,334 |
|
|
$ |
63,880 |
|
|
$ |
(7,546 |
) |
|
|
(12 |
)% |
|
$ |
111,501 |
|
|
$ |
121,687 |
|
|
$ |
(10,186 |
) |
|
|
(8 |
)% |
* Not Meaningful
Total net royalty revenue decreased to $56.3 million and $111.5 million for the three and six months ended June 30, 2026, compared to $63.9 million and $121.7 million for the same periods 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.
Net Product Sales
Total product sales, net, as compared to prior year period, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
|
Change |
|
|
Six Months Ended
June 30, |
|
|
Change |
|
(In thousands) |
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
U.S. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GIAPREZA® |
|
$ |
21,004 |
|
|
$ |
16,988 |
|
|
$ |
4,016 |
|
|
|
24 |
% |
|
$ |
40,735 |
|
|
$ |
34,367 |
|
|
$ |
6,368 |
|
|
|
19 |
% |
XACDURO® |
|
|
11,964 |
|
|
|
8,507 |
|
|
|
3,457 |
|
|
|
41 |
% |
|
|
23,534 |
|
|
|
14,322 |
|
|
|
9,212 |
|
|
|
64 |
% |
XERAVA® |
|
|
3,265 |
|
|
|
3,129 |
|
|
|
136 |
|
|
|
4 |
% |
|
|
5,720 |
|
|
|
6,363 |
|
|
|
(643 |
) |
|
|
(10 |
)% |
ZEVTERA® |
|
|
351 |
|
|
|
339 |
|
|
|
12 |
|
|
* |
|
|
|
789 |
|
|
|
339 |
|
|
|
450 |
|
|
|
133 |
% |
Total U.S. |
|
|
36,584 |
|
|
|
28,963 |
|
|
|
7,621 |
|
|
|
26 |
% |
|
|
70,778 |
|
|
|
55,391 |
|
|
|
15,387 |
|
|
|
28 |
% |
Rest of the world |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GIAPREZA® |
|
|
1,295 |
|
|
|
341 |
|
|
|
954 |
|
|
|
280 |
% |
|
|
1,795 |
|
|
|
1,235 |
|
|
|
560 |
|
|
|
45 |
% |
XACDURO® |
|
|
10,418 |
|
|
|
2,224 |
|
|
|
8,194 |
|
|
|
368 |
% |
|
|
16,922 |
|
|
|
4,192 |
|
|
|
12,730 |
|
|
|
304 |
% |
XERAVA® |
|
|
3,474 |
|
|
|
3,965 |
|
|
|
(491 |
) |
|
|
(12 |
)% |
|
|
3,647 |
|
|
|
4,954 |
|
|
|
(1,307 |
) |
|
|
(26 |
)% |
Total rest of the world |
|
|
15,187 |
|
|
|
6,530 |
|
|
|
8,657 |
|
|
|
133 |
% |
|
|
22,364 |
|
|
|
10,381 |
|
|
|
11,983 |
|
|
|
115 |
% |
Total net product sales |
|
$ |
51,771 |
|
|
$ |
35,493 |
|
|
$ |
16,278 |
|
|
|
46 |
% |
|
$ |
93,142 |
|
|
$ |
65,772 |
|
|
$ |
27,370 |
|
|
|
42 |
% |
* Not Meaningful
Our net product sales increased overall 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.
License and Other Revenue
License and other revenue, as compared to the prior year period, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
|
Change |
|
Six Months Ended
June 30, |
|
|
Change |
(In thousands) |
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
License and other revenue |
|
$ |
11,486 |
|
|
$ |
910 |
|
|
$ |
10,576 |
|
|
* |
|
$ |
12,942 |
|
|
$ |
1,456 |
|
|
$ |
11,486 |
|
|
* |
* Not Meaningful
License and other revenue for the three and six months ended June 30, 2026 was derived primarily from our ongoing arrangements with Zai Lab and new agreements with GARDP and DRL as discussed in Note 4, “License, Collaboration and Other Arrangements”, to the Condensed Consolidated Financial Statements.
Cost of Products Sold
Cost of products sold, as compared to the prior year period, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
|
Change |
|
|
Six Months Ended
June 30, |
|
|
Change |
|
(In thousands) |
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
Cost of products sold |
|
$ |
22,349 |
|
|
$ |
10,590 |
|
|
$ |
11,759 |
|
|
|
111 |
% |
|
$ |
37,956 |
|
|
$ |
19,432 |
|
|
$ |
18,524 |
|
|
|
95 |
% |
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 $0.9 million and $2.0 million for the three and six months ended June 30, 2026, respectively, and $0.4 million and $0.6 million for the three and six months ended June 30, 2025, respectively. Our cost of products sold increased during the three and six months ended June 30, 2026, driven by higher product sales volume. As of June 30, 2026, our total inventory included the remaining net fair value adjustments resulting from the acquisition of La Jolla of approximately $1.4 million, which will be recognized as cost of products sold when sales occur in future periods.
Research and Development
Research and development expenses, as compared to the prior year period, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
|
Change |
|
|
Six Months Ended
June 30, |
|
|
Change |
|
(In thousands) |
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
Compensation and related personnel costs |
|
$ |
2,072 |
|
|
$ |
1,179 |
|
|
$ |
893 |
|
|
|
76 |
% |
|
$ |
4,147 |
|
|
$ |
2,483 |
|
|
$ |
1,664 |
|
|
|
67 |
% |
External services |
|
|
2,463 |
|
|
|
6,782 |
|
|
|
(4,319 |
) |
|
|
(64 |
)% |
|
|
5,069 |
|
|
|
9,833 |
|
|
|
(4,764 |
) |
|
|
(48 |
)% |
Facilities related |
|
|
596 |
|
|
|
(28 |
) |
|
|
624 |
|
|
* |
|
|
|
1,102 |
|
|
|
(20 |
) |
|
|
1,122 |
|
|
* |
|
Other |
|
|
59 |
|
|
|
50 |
|
|
|
9 |
|
|
|
18 |
% |
|
|
113 |
|
|
|
83 |
|
|
|
30 |
|
|
|
36 |
% |
Total research and development expense |
|
$ |
5,190 |
|
|
$ |
7,983 |
|
|
$ |
(2,793 |
) |
|
|
(35 |
)% |
|
$ |
10,431 |
|
|
$ |
12,379 |
|
|
$ |
(1,948 |
) |
|
|
(16 |
)% |
* Not Meaningful
Research and development expenses for the three and six months ended June 30, 2026 were $5.2 million and $10.4 million, respectively. 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 and six months ended June 30, 2025, which consisted primarily of the continued advancement of zoliflodacin, approved by the FDA in December 2025, were $8.0 million and $12.4 million, respectively.
Selling, General & Administrative
Selling, general and administrative expenses, as compared to the prior year period, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
|
Change |
|
|
Six Months Ended
June 30, |
|
|
Change |
|
(In thousands) |
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
Selling, general and administrative |
|
$ |
34,571 |
|
|
$ |
26,412 |
|
|
$ |
8,159 |
|
|
|
31 |
% |
|
$ |
67,009 |
|
|
$ |
53,903 |
|
|
$ |
13,106 |
|
|
|
24 |
% |
Our selling, general and administrative expenses increased for the three and six months ended June 30, 2026, compared to the corresponding periods in 2025. The increase during the current period was primarily attributable to our ongoing efforts to expand our sales force to meet demand in new regions, promote our marketed critical care products and drive revenue, maintain regulatory compliance, and support essential administrative functions for general operations.
Interest and Dividend Income and Other Expense, Net
Interest and dividend income and other expense, net, as compared to the prior year period, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
|
Change |
|
|
Six Months Ended
June 30, |
|
|
Change |
|
(In thousands) |
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
Interest and dividend income |
|
$ |
7,599 |
|
|
$ |
4,925 |
|
|
$ |
2,674 |
|
|
|
54 |
% |
|
$ |
18,586 |
|
|
$ |
9,463 |
|
|
$ |
9,123 |
|
|
|
96 |
% |
Other expense, net |
|
$ |
(15 |
) |
|
$ |
(777 |
) |
|
$ |
762 |
|
|
|
(98 |
)% |
|
$ |
(381 |
) |
|
$ |
(1,773 |
) |
|
$ |
1,392 |
|
|
|
(79 |
)% |
Interest and dividend income increased for the three and six months ended June 30, 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.
Other expense, net, was primarily expenses incurred by ISP Fund LP.
Interest Expense
Interest expense, as compared to the prior year period, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
|
Change |
|
|
Six Months Ended
June 30, |
|
|
Change |
|
(In thousands) |
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
Interest expense |
|
$ |
(5,472 |
) |
|
$ |
(4,663 |
) |
|
$ |
(809 |
) |
|
|
17 |
% |
|
$ |
(10,909 |
) |
|
$ |
(9,374 |
) |
|
$ |
(1,535 |
) |
|
|
16 |
% |
Our interest expense for the three and six months ended June 30, 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 and six months ended June 30, 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®.
Changes in Fair Values of Equity Method Investments and Equity and Long-Term Investments
Changes in fair values of equity and long-term investments, as compared to the prior year periods, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
|
Change |
|
|
Six Months Ended
June 30, |
|
|
Change |
|
(In thousands) |
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
Changes in fair values of equity
method investments, net |
|
$ |
(131,834 |
) |
|
$ |
13,082 |
|
|
$ |
(144,916 |
) |
|
* |
|
|
$ |
25,816 |
|
|
$ |
(467 |
) |
|
$ |
26,283 |
|
|
* |
|
Changes in fair values of equity
and long-term investments, net |
|
$ |
(29,153 |
) |
|
$ |
11,280 |
|
|
$ |
(40,433 |
) |
|
|
(358 |
)% |
|
$ |
4,422 |
|
|
$ |
(54,019 |
) |
|
$ |
58,441 |
|
|
|
(108 |
)% |
* Not Meaningful
The changes in fair values of equity method investments for the three and six months ended June 30, 2026 were driven by fluctuations in Armata’s stock price during the reporting periods. We recorded $131.8 million in unrealized loss and $25.8 million in unrealized gain for the three and six months ended June 30, 2026, respectively, compared to $13.1 million in unrealized gain and $0.5 million in unrealized loss for the three and six months ended June 30, 2025, respectively.
The changes in fair values of other equity and long-term investments primarily reflected the net realized gains and losses and net unrealized gains and losses in our strategic investments in Armata, Syndeio, Lyndra and those investments managed by ISP Fund LP.
We recorded $38.8 million in net negative changes in fair values of equity and long-term investments for the three months ended June 30, 2026 and $8.9 million in net positive changes in fair values of equity and long-term investments for the six months ended June 30, 2026, respectively, related to other long-term investments we made in Armata.
We recorded net positive changes in fair value of our investments in Syndeio of $6.6 million and net negative changes of $7.2 million for the three and six months ended June 30, 2026, respectively.
We recorded $3.0 million and $2.7 million in net positive changes in fair values of equity and long-term investments related to the investments managed by ISP Fund LP for the three and six months ended June 30, 2026, respectively.
Provision for Income Taxes
We recorded income tax benefit of $24.6 million and income tax expense of $23.4 million for the three and six months ended June 30, 2026, respectively, compared to income tax expense of $8.9 million and $16.9 million for the three and six months ended June 30, 2025, respectively. The effective income tax rate for the six months ended June 30, 2026 and 2025 was 18.5% and 49.7%, respectively.
Liquidity and Capital Resources
Liquidity
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 six months ended June 30, 2026, we generated gross royalty revenues from GSK of $118.4 million, net product sales of $93.1 million and license and other revenue of $12.9 million. Cash and cash equivalents totaled $570.4 million, royalties receivable from GSK totaled $59.8 million and accounts receivable associated with our product sales and license and other revenue totaled $50.8 million as of June 30, 2026.
As of June 30, 2026, we had one outstanding convertible note, the 2028 Notes, in an aggregate principal amount of $261.0 million, which will become due in March 2028. Future interest payments associated with this note total $13.9 million.
On November 3, 2025, our Board of Directors authorized a share repurchase program under which we may repurchase up to $125.0 million of Innoviva’s outstanding shares of common stock. From program inception through June 30, 2026, we have repurchased Innoviva common stock in the open market for total price of approximately $56.4 million. This program has no termination date, may be suspended or discontinued at any time at our discretion and does not oblige us to acquire any amount of common stock.
In 2024, we elected to unwind our capital accounts in ISP Fund LP. During the current year, we received $47.5 million cash distributions and expect to receive the remaining investments in 2026.
Adequacy of Cash Resources to Meet Future Needs
We believe that our cash and cash equivalents will be sufficient to meet our anticipated debt service and operating needs, as well as our ongoing share repurchase program, for at least the next 12 months based upon current operating plans and financial forecasts. Our long-term capital requirements will depend on many factors including the amount of our royalty revenues, sales growth of our currently marketed products, timing of regulatory approval of our product candidates and outcome of our acquisitions and strategic investments. If our current operating plans and financial forecasts change, we may require additional funding sooner in the form of public or private equity offerings or debt financings. Furthermore, if in our view favorable financing opportunities arise, we may seek additional funding in the form of public or private equity offerings or debt financings at any time. However, future financing may not be available in amounts or on terms acceptable to us, if at all. This could leave us without adequate financial resources to fund our operations as currently planned. In addition, from time to time we may restructure or reduce our debt, including through privately negotiated repurchases, tender offers, redemptions, amendments, or otherwise, all allowable with the terms of our debt agreements.
Cash Flows
Cash flows, as compared to the prior year period, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
(In thousands) |
|
2026 |
|
|
2025 |
|
|
Change |
|
Net cash provided by operating activities |
|
$ |
87,254 |
|
|
$ |
92,690 |
|
|
$ |
(5,436 |
) |
Net cash used in investing activities |
|
$ |
(18,256 |
) |
|
$ |
(1,552 |
) |
|
$ |
(16,704 |
) |
Net cash provided by (used in) financing activities |
|
$ |
(49,551 |
) |
|
$ |
1,430 |
|
|
$ |
(50,981 |
) |
Cash Flows from Operating Activities
Net cash provided by operating activities for the six months ended June 30, 2026 was $87.3 million, consisting primarily of our net income of $103.2 million, adjusted for net non-cash items, which included $4.9 million of deferred income taxes, $13.2 million of amortization of acquired intangible assets, $7.0 million of amortization of capitalized fees and depreciation of property and equipment, $7.3 million of stock-based compensation and $2.0 million of inventory fair value step-up adjustments, offset by $30.2 million in net changes in fair value of our investments and $22.1 million in net changes in operating assets and liabilities.
Net cash provided by operating activities for the six months ended June 30, 2025 was $92.7 million, consisting primarily of our net income of $17.1 million, adjusted for net non-cash items, which included $54.5 million in changes in fair value of our investments, $13.0 million of amortization of acquired intangible assets, $7.0 million of amortization of
capitalized fees and depreciation of property and equipment, $4.6 million of stock-based compensation and $1.1 million in amortization of debt discount and issuance costs, partially offset by $4.7 million in net changes in operating assets and liabilities.
Cash Flows from Investing Activities
Net cash used in investing activities for the six months ended June 30, 2026 of $18.3 million primarily consisted of $65.0 million in purchases of trading securities and other equity investments, $3.3 million in purchases of equity investments managed by ISP Fund LP and $0.9 million in purchases of property and equipment, partially offset by $44.1 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.
Net cash used in investing activities for the six months ended June 30, 2025 of $1.6 million primarily consisted of $34.7 million in purchases of trading securities, partially offset by $28.0 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.
Cash Flows from Financing Activities
Net cash used in financing activities for the six months ended June 30, 2026 of $49.6 million was primarily due to $51.3 million in repurchases of our common stock under the ongoing stock repurchase program, partially offset by net proceeds of $2.0 million from issuances of common stock.
Net cash provided by financing activities for the six months ended June 30, 2025 of $1.4 million was primarily due to net proceeds from issuances of common stock, partially offset by the repurchase of shares to satisfy tax withholding.
Contractual Obligations
As of June 30, 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.
Our short-term and long-term obligations also include contractual payments related to our operating leases amounting to $14.5 million, with approximately $0.6 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.
As part of our acquisition of La Jolla, we recognized its deferred royalty obligation in connection with the La Jolla Royalty Agreement with HCR. Under the terms of the Agreement, HCR is entitled to receive quarterly royalties on worldwide net sales of GIAPREZA® until either January 1, 2031 or when the maximum aggregate royalty payments have been made, whichever occurs first. Quarterly payments to HCR under the Royalty Agreement start at a maximum royalty rate, with step-downs based on the achievement of annual net product sales thresholds. The maximum royalty rate is 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.
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.
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 June 30, 2026, we have approximately $10.3 million U.S. dollar equivalent in outstanding purchase commitments under the agreement.
We also enter into other agreements in the normal course of business with vendors for commercial, manufacturing, clinical trials and preclinical studies, and other services and products for operating purposes.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As of June 30, 2026, our debt bears a fixed interest rate and we had no outstanding debt with variable interest rate. Our cash flows on this debt obligation are not subject to variability as a result of changes in interest rates.
We are exposed to changes in the fair value of certain of our investments in equity and debt securities. Fluctuations in the underlying fair value of the investments could result in material gains or losses. Refer to Note 6, “Equity and Long-Term Investments and Fair Value Measurements”, to the Condensed Consolidated Financial Statements for more information.
Inflation has increased during the periods covered by this Quarterly Report on Form 10-Q and could continue to increase for the near future. Inflationary factors, such as increases in the cost of our raw materials, supplies, interest rates and overhead costs, as well as trade and other international disputes, may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience some effect in the near future if inflation rates continue to rise. Significant adverse changes in inflation and prices in the future could result in material losses.
We may face foreign exchange risk as a result of entering into transactions denominated in currencies other than U.S. dollars, including contracts with international vendors related to raw material purchases. Our royalty revenue from RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA® is also indirectly exposed to foreign exchange risk as GSK also markets and sells the products outside the U.S. The majority of our cash and cash equivalents, investments, and the majority of our vendor relationships are denominated in U.S. dollars. Therefore, we do not believe that the risk of a significant impact on our operating income from foreign currency fluctuations is substantial.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation as of June 30, 2026, under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures. These controls and procedures, as defined under SEC rules, are designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized and reported within the timeframes specified by the Commission’s rules and forms. Additionally, they ensure that information required to be disclosed by the issuer is accumulated and communicated to management, including its principal executive and principal financial officers, or persons performing similar functions, to enable timely decisions regarding required disclosure. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance levels.
Limitations on the Effectiveness of Controls
Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all frauds. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Innoviva have been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
There have been no material changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.