Innoviva, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures. We conducted an evaluation as of December 31, 2021, under the supervision and with the participation of our management, including our chief executive officer and chief accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures, which are defined under SEC rules as controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Securities Exchange Act of 1934 (Exchange Act) is recorded, processed, summarized and reported within required time periods. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance levels. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a‑15(f) of the Exchange Act. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Management’s assessment included evaluation of such elements as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2021. Our independent registered public accounting firm, Grant Thornton LLP, has audited our internal control over financial reporting as of December 31, 2021. Their attestation report on the audit of our internal control over financial reporting is included below. Limitations on the Effectiveness of Controls Our management, including our principal executive officer and principal financial officer, 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 Internal control measures have been designed and continually evaluated for our equity and long-term investments and the related capital allocation processes for the year ended December 31, 2021. There have been no material changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 of the Exchange Act for the year ended December 31, 2021 which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 71 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Innoviva, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Innoviva, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2021, and our report dated February 28, 2022 expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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. /s/ GRANT THORNTON LLP San Francisco, California February 28, 2022 72 Table of Contents ITEM 9B. OTHER INFORMATION None ITEM 9C. DISCL OSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this Item is incorporated by reference from our proxy statement for our 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2021. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated by reference from our proxy statement for our 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2021. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Other than with respect to the Securities Authorized for Issuance under Equity Compensation Plans below, the information required by this Item is incorporated by reference from our proxy statement for our 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2021. Securities Authorized for Issuance under Equity Compensation Plans The following table provides certain information with respect to all of our equity compensation plans in effect as of December 31, 2021: Plan Category Number of securities to be issued upon exercise of outstanding options and vesting of outstanding restricted stock units and restricted stock awards Weighted‑average exercise price of outstanding options Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (a) (b) (c) Equity compensation plans approved by security holders 881,228 (1) 20.79 (2) 5,150,348 (3) (1) Includes 765,588 shares issuable upon exercise of outstanding options and 115,640 shares issuable upon vesting of outstanding RSUs and RSAs. (2) Does not take into account outstanding restricted stock units as these awards have no exercise price. (3) Includes 171,827 shares of common stock available under our Employee Stock Purchase Plan. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item is incorporated by reference from our proxy statement for our 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2021. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by this Item is incorporated by reference from our proxy statement for our 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2021. 73 Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this Annual Report on Form 10‑K: 1. Financial Statements: The following financial statements and schedules of the Registrant are contained in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10‑K: Page Consolidated Balance Sheets as of December 31, 2021 and 2020 41 Consolidated Statements of Income for each of the three years in the period ended December 31, 2021 42 Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 2021 43 Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended December 31, 2021 44 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2021 45 Notes to Consolidated Financial Statements 46 Reports of Independent Registered Public Accounting Firm (PCAOB ID 248) 69 2. Financial Statement Schedules: All schedules have been omitted because of the absence of conditions under which they are required or because the required information, where material, is shown in the financial statements, financial notes or supplementary financial information. (b) Exhibits required by Item 601 of Regulation S‑K: The information required by this Item is set forth on the exhibit index that follows the signature page of this report. ITEM 16. FORM 10‑K SUMMARY None. 74 Table of Contents Exhibits Incorporated by Reference Exhibit Number Description Form Exhibit Filing Date/Period End Date 3.1 Amended and Restated Certificate of Incorporation S‑1 3.3 7/26/2004 3.2 Certificate of Amendment of Restated Certificate of Incorporation 10‑Q 3.4 3/31/2007 3.3 Certificate of Ownership and Merger Merging LABA Merger Sub, Inc. with and into Theravance, Inc., as filed with the Secretary of State of the State of Delaware, effective on January 7, 2016 8‑K 3.1 1/8/2016 3.4 Amended and Restated Bylaws, amended and restated as of February 8, 2017 8‑K 3.1 2/9/2017 4.1 Specimen certificate representing the common stock of the registrant 10‑K 4.1 12/31/2006 4.2 Indenture, dated as of January 24, 2013 by and between Theravance, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee 8‑K 4.1 1/25/2013 4.3 Form of 2.125% Convertible Subordinated Note Due 2023 (included in Exhibit 4.4 ) 4.4 Indenture (including form of Note) with respect to Innoviva’s 2.50% Convertible Senior Notes due 2025, dated as of August 7, 2017, between Innoviva and The Bank of New York Mellon Trust Company, N.A., as trustee 8‑K 4.1 8/7/2017 4.5 Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 10-K 4.9 2/19/2020 10.1 Employee Stock Purchase Plan, as amended April 27, 2010 10‑Q 10.4 6/30/2010 10.2 Collaboration Agreement between the registrant and Glaxo Group Limited, dated as of November 14, 2002 10‑Q 10.1 6/30/2014 10.3 Amended and Restated Investors’ Rights Agreement by and among the registrant and the parties listed therein, dated as of May 11, 2004 S‑1 10.13 6/10/2004 10.4* Strategic Alliance Agreement between the registrant and Glaxo Group Limited, dated as of March 30, 2004 10‑K 10.13 12/31/2013 10.5+ Description of Cash Bonus Program, as amended 10‑K 10.22 12/31/2009 10.6+ Amendment to Change in Control Severance Plan effective December 16, 2009 10‑K 10.47 12/31/2009 10.7+ 2009 Change in Control Severance Plan adopted December 16, 2009 10‑K 10.48 12/31/2009 10.8 Second Amendment to Amended and Restated Governance Agreement among the registrant, Glaxo Group Limited, GlaxoSmithKline plc and GlaxoSmithKline LLC, dated as of November 29, 2010 8‑K 10.2 11/29/2010 10.9 Amendment to Strategic Alliance Agreement, dated October 3, 2011 10‑K 10.34 12/31/2011 10.10+ 2012 Equity Incentive Plan, as approved by the board of directors February 8, 2012 and approved by stockholders May 16, 2012 and forms of equity award 10‑Q 10.38 6/30/2012 10.11 Base Capped Call Transaction, dated January 17, 2013 8‑K 10.1 1/23/2013 10.12 Additional Capped Call Transaction, dated January 18, 2013 8‑K 10.2 1/23/2013 10.13 Master Agreement by and among Theravance, Inc., Theravance Biopharma, Inc. and Glaxo Group Limited, dated March 3, 2014 8‑K/A 10.1 3/6/2014 10.14* Collaboration Agreement Amendment by and between Theravance, Inc. and Glaxo Group Limited, dated March 3, 2014 8‑K/A 10.2 3/6/2014 10.15* Strategic Alliance Agreement Amendment by and between Theravance, Inc. and Glaxo Group Limited, dated March 3, 2014 8‑K/A 10.3 3/6/2014 10.16 Transition Services Agreement between Theravance and Theravance Biopharma, dated June 2, 2014. 8‑K 10.2 6/5/2014 10.17 Tax Matters Agreement between Theravance and Theravance Biopharma, dated June 2, 2014. 8‑K 10.3 6/5/2014 10.18 Employee Matters Agreement between Theravance and Theravance Biopharma, dated June 1, 2014. 8‑K 10.4 6/5/2014 10.19 Theravance Respiratory Company, LLC Limited Liability Company Agreement between Theravance and Theravance Biopharma, dated May 31, 2014. 8‑K 10.5 6/5/2014 75 Table of Contents 10.20 Amendment/Clarification to Transition Services Agreement between Theravance and Theravance Biopharma, dated March 2, 2015 10‑Q 10.64 3/31/2015 10.21+ First Amendment to 2009 Change In Control Severance Plan (Renamed 2009 Severance Plan) 8‑K 10.2 7/29/2015 10.22 Form of Notice of Performance‑Based Restricted Stock Award and Restricted Stock Award Agreement under 2012 Equity Incentive Plan (director form) 10‑K 10.76 2/23/2018 10.23+ Second Amendment to 2009 Severance Plan 10‑Q 10.81 7/26/2018 10.24+ Offer Letter with Marianne Zhen, dated September 7, 2018 8‑K 10.1 9/11/2018 10.25+ Offer Letter between Innoviva, Inc. and Pavel Raifeld, dated May 20, 2020. 8‑K 10.1 5/26/2020 10.26 Strategic Advisory Agreement, dated as of December 11, 2020, by and between Sarissa Capital Management LP and Innoviva, Inc. 8‑K 10.1 12/14/2020 10.27 Amended and Restated Limited Partnership Agreement of ISP Fund LP, dated as of December 11, 2020, by and among ISP Fund LP, Sarissa Capital Fund GP LP, Innoviva Strategic Partners LLC and the other parties named therein. 8‑K 10.2 12/14/2020 10.28 Share Repurchase Agreement, dated as of May 2021, by and between Innoviva, Inc. and Glaxo Group Limited 8-K 10.1 5/20/2021 10.29 Letter Agreement, dated as of May 20, 2021, by and among Innoviva Strategic Partners LLC, ISP Fund LP and Sarissa Capital Fung GP LP 8-K 10.2 5/20/2021 21.1 List of Subsidiaries 23.1 Consent of Independent Registered Public Accounting Firm 23.2 Consent of Ernst & Young LLP Independent Registered Public Accounting Firm of Armata Pharmaceuticals, Inc.** 24.1 Power of Attorney (see signature page to this Annual Report on Form 10‑K) 31.1 Certification of Principal Executive Officer Pursuant to Rule 13a‑14 under the Securities Exchange Act of 1934 31.2 Certification of Principal Financial Officer Pursuant to Rule 13a‑14 under the Securities Exchange Act of 1934 32 Certifications Pursuant to 18 U.S.C. Section 1350 99.1 Audited Consolidated Financial Statements of Armata Pharmaceuticals, Inc. at December 31, 2021, for the year ended December 31, 2021** 101 The following materials from Registrant’s Annual Report on Form 10‑K for the year ended December 31, 2021, formatted in Extensible Business Reporting Language (XBRL) includes: (i) Consolidated Balance Sheets as of December 31, 2021 and 2020, (ii) Consolidated Statements of Income for the years ended December 31, 2021, 2020 and 2019, (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019, (iv) Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2021, 2020 and 2019, (v) Consolidated Statements of Cash Flows for years ended December 31, 2021, 2020 and 2019, and (vi) Notes to Consolidated Financial Statements. 104 Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101) + Management contract or compensatory plan or arrangement required to be filed pursuant to Item 15(b) of Form 10‑K. * Confidential treatment has been granted for certain portions which are omitted in the copy of the exhibit electronically filed with the Securities and Exchange Commission. The omitted information has been filed separately with the Securities and Exchange Commission pursuant to Innoviva, Inc.’s application for confidential treatment. ** To be filed by amendment to this Annual Report on Form 10-K. 76 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INNOVIVA, INC. Date: February 28, 2022 By: /s/ PAVEL RAIFELD Pavel Raifeld Chief Executive Officer 77 Table of Contents POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Pavel Raifeld, as their true and lawful attorney‑in‑fact and agent, with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to the Annual Report on Form 10‑K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney‑in‑fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she could do in person, hereby ratifying and confirming all that said attorney‑in‑fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ PAVEL RAIFELD Pavel Raifeld Chief Executive Officer (Principal Executive Officer) February 23, 2022 /s/ MARIANNE ZHEN Marianne Zhen Chief Accounting Officer (Principal Financial Officer) February 23, 2022 /s/ GEORGE BICKERSTAFF, III George Bickerstaff, III Chairman of the Board February 23, 2022 /s/ ODYSSEAS KOSTAS, M.D. Odysseas Kostas, M.D. Director February 23, 2022 /s/ MARK DIPAOLO, ESQ. Mark DiPaolo, Esq. Director February 23, 2022 /s/ JULES HAIMOVITZ Jules Haimovitz. Director February 23, 2022 /s/ SARAH SCHLESINGER, M.D. Sarah Schlesinger, M.D. Director February 23, 2022 /s/ DEBORAH L. BIRX, M.D. Deborah L. Birx, M.D. Director February 23, 2022 78