Innoviva, Inc. 10-Q

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 ® , XERAVA ® and XACDURO ® in the jurisdictions in which these products have been approved; the strategies, plans and objectives of the Company (including the Company's growth strategy and corporate development initiatives); the timing, manner, and amount of potential capital returns to shareholders; the status and timing of clinical studies, data analysis and communication of results; the potential benefits and mechanisms of action of product candidates; expectations for product candidates through development and commercialization; the timing of regulatory approval of product candidates; and projections of revenue, expenses and other financial items; the impact of the novel coronavirus (“COVID-19”); the timing, manner and amount of capital deployment, including potential capital returns to stockholders; and risks related to the Company’s growth strategy and risks discussed in “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (“SEC”) on February 29, 2024, and as amended on March 5, 2024 and March 22, 2024 (“2023 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 2023 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 2023 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 company with a portfolio of royalties and innovative 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 38 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%. We expanded our portfolio through the acquisition of Entasis Therapeutics Holdings Inc. (“Entasis”) on July 11, 2022 and the acquisition of La Jolla Pharmaceutical Company (“La Jolla”) on August 22, 2022. Our commercial and marketed products include GIAPREZA ® (angiotensin II), approved to increase blood pressure in adults with septic or other distributive shock, and XERAVA ® (eravacycline) approved for the treatment of complicated intra-abdominal infections in adults. Our third product, XACDURO ® (formerly known as sulbactam-durlobactam or SUL-DUR), was approved by the United States Food and Drug Administration (“FDA”) for the treatment of hospital-acquired and ventilator-associated pneumonias caused by Acinetobacter in adults on May 23, 2023. We commenced commercial sales of XACDURO ® in the third quarter of 2023. Our development pipeline includes zoliflodacin, an investigational treatment for uncomplicated gonorrhea that reported positive data in a pivotal Phase 3 clinical trial on November 1, 2023. As such, we have a wholly owned robust critical care and infectious disease operating platform with a hospital focus anchored by three differentiated products with significant growth potential and a promising drug candidate. In addition, we own other strategic healthcare assets, such as a large equity stake in Armata Pharmaceuticals (“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. Our corporate strategy is currently focused on increasing stockholder value by, among other things, maximizing the potential value of our respiratory assets partnered with GSK, optimizing our operations and augmenting capital allocation. We continue to diversify our royalty management business through actively pursuing opportunistic acquisitions of promising companies and assets in the healthcare industry and enhancing the returns on our capital. In particular, our recent acquisitions of Entasis and La Jolla created a robust hospital and infectious disease platform. Third Quarter 2024 and Recent Highlights: Financial Highlights • Third quarter 2024 gross royalty revenue from GSK was $60.5 million, compared to $57.0 million for the third quarter 2023. • Third quarter 2024 net product sales were $27.8 million, which included U.S. net product sales of $19.7 million and ex-U.S. product sales of $8.1 million. U.S. net product sales consisted of $13.1 million from GIAPREZA ® , $2.3 million from XERAVA ® , and $4.3 million from XACDURO ® , a 68% increase compared to $11.8 million for the third quarter 2023. 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. o XACDURO ® was recently nominated for the 2024 Prix Galien USA Award for Best Biotechnology Product, which recognizes excellence in scientific innovation that improves the state of human health. • Zoliflodacin : a potential first-in-class, single dose, oral antibiotic is currently being developed in partnership with The Global Antibiotic Research & Development Partnership (GARDP) for the treatment of patients with uncomplicated gonorrhea. o In September 2024, we presented additional findings on its investigational agent zoliflodacin at the 2024 Sexually Transmitted Infections Prevention Conference in Atlanta. The first oral presentation demonstrated that zoliflodacin had potent in vitro activity against 200 clinical isolates, consistent with previous US surveillance data. The second presentation demonstrated that microbiological cure rates for specific subgroups were comparable to the primary endpoint analysis. Safety in these subgroups was also comparable. o In October 2024, we had five clinical presentations at IDWeek 2024, which took place in Los Angeles. One oral presentation on zoliflodacin included a review of the unique public-private partnership that led the clinical development of zoliflodacin. The second presentation highlighted the activity of sulbactam-durlobactam and standard-of-care antibiotics against Acinetobacter baumannii-calcoaceticus complex for hospitalized patients in the 39 US. Three posters were presented including two on zoliflodacin: In vitro activity against baseline isolates in US participants from the phase 3 trial and a pharmacometrics analysis supporting dose selection. Surveillance data of eravacycline against clinical pathogens, collected worldwide from multiple infections sites during 2018-2022 was also presented. o We continue to advance zoliflodacin following its successful Phase 3 clinical trial results and expect to submit an NDA to the U.S. FDA in early 2025. Collaboration Arrangement with GSK LABA Collaboration In November 2002, we entered into the LABA collaboration with GSK to develop and commercialize once-daily LABA products for the treatment of chronic obstructive pulmonary disorder (“COPD”) and asthma (the “LABA Collaboration Agreement”). For the treatment of COPD, the collaboration has developed the following combination products: • 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. 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, 2023 filed with the SEC on February 29, 2024, and as amended on March 5 and 22, 2024. 40 Results of Operations Net Revenue Royalty Revenue Total royalty revenue, net, as compared to the prior year periods, was as follows: Three Months Ended September 30, Change Nine Months Ended September 30, Change (In thousands) 2024 2023 $ % 2024 2023 $ % Royalties - RELVAR/BREO $ 48,199 $ 45,585 $ 2,614 6 % $ 154,317 $ 150,922 $ 3,395 2 % Royalties - ANORO 12,313 11,429 884 8 % 35,264 32,127 3,137 10 % Total royalties 60,512 57,014 3,498 6 % 189,581 183,049 6,532 4 % Less: amortization of capitalized fees paid (3,456 ) (3,456 ) — * (10,368 ) (10,368 ) — * Total net royalty revenue $ 57,056 $ 53,558 $ 3,498 7 % $ 179,213 $ 172,681 $ 6,532 4 % *Not Meaningful Total net royalty revenue increased to $57.1 million and $179.2 million for the three and nine months ended September 30, 2024, compared to $53.6 million and $172.7 million, respectively, for the same period a year ago. The increase of total net royalty revenue was primarily due to sales growth in both RELVAR ® /BREO ® ELLIPTA ® and ANORO ® ELLIPTA ® . Net Product Sales Net product sales recognized for the three months ended September 30, 2024 was $27.8 million, consisting of net sales of GIAPREZA ® , XERAVA ® , and XACDURO ® for $13.8 million, $4.2 million and $9.8 million, respectively. Net product sales recognized for the nine months ended September 30, 2024 was $68.6 million, consisting of net sales of GIAPREZA ® , XERAVA ® , and XACDURO ® for $39.0 million, $15.2 million and $14.4 million, respectively. Net product sales recognized for the three months ended September 30, 2023 was $13.7 million, consisting of net sales of GIAPREZA ® , XERAVA ® , and XACDURO ® for $8.0 million, $5.1 million, and $0.6 million, respectively. Net product sales recognized for the nine months ended September 30, 2023 was $40.9 million, consisting of net sales of GIAPREZA ® , XERAVA ® , and XACDURO ® for $28.2 million, $12.1 million and $0.6 million, respectively. Our net product sales increased during the periods presented as a result of increased efforts in sales and marketing of our marketed products. License Revenue We recognized $8.0 million in license revenue for the second quarter of 2024 as a result of achievement of a regulatory milestone under our license agreement with Zai Lab. We also recognized $6.5 million in license revenue for the second quarter of 2024 under the Amended Zai Agreement with Zai Lab. During the third quarter of 2024, we recognized additional license revenue of approximately $4.6 million from Zai Lab arising from a manufacturing stage transfer agreement and the aforementioned Amended Zai Agreement. We recognized license revenue of $8.0 million for the first quarter of 2023 and $3.0 million for the second quarter of 2023 as a result of achievement of regulatory milestones under our license agreements with Everest and Zai Lab, respectively. 41 Cost of Products Sold Cost of products sold, as compared to the prior year periods, were as follows: Three Months Ended September 30, Change Nine Months Ended September 30, Change (In thousands) 2024 2023 $ % 2024 2023 $ % Cost of products sold $ 9,990 $ 10,182 $ (192 ) (2 )% $ 29,433 $ 27,910 $ 1,523 5 % Our inventory includes net fair value adjustments resulting from the acquisition of La Jolla, which are being amortized and recognized as cost of products sold when sales occur. The fair value adjustments recorded as part of cost of products sold amounted to $1.8 million and $12.1 million for the three and nine months ended September 30, 2024, respectively, and $5.4 million and $19.2 million for the three and nine months ended September 30, 2023, respectively. Excluding the impact of the amortized fair value adjustments, our cost of products sold increased during the periods presented in 2024 compared to the same periods in 2023 as a result of higher sales volume. Research and Development Research and development expenses, as compared to the prior year periods, were as follows: Three Months Ended September 30, Change Nine Months Ended September 30, Change (In thousands) 2024 2023 $ % 2024 2023 $ % Research and development $ 3,551 $ 3,989 $ (438 ) (11 )% $ 9,989 $ 31,566 $ (21,577 ) (68 )% Research and development expenses consist of the following: Three Months Ended September 30, Change Nine Months Ended September 30, Change (in thousands) 2024 2023 $ % 2024 2023 $ % Compensation and related personnel costs $ 978 $ 1,825 $ (847 ) (46 )% $ 4,071 $ 8,636 $ (4,565 ) (53 )% External services 2,420 1,359 1,061 78 % 4,700 20,085 (15,385 ) (77 )% Facilities related 40 482 (442 ) (92 )% 694 1,730 (1,036 ) (60 )% Other 113 323 (210 ) (65 )% 524 1,115 (591 ) (53 )% Total research and development expense $ 3,551 $ 3,989 $ (438 ) (11 )% $ 9,989 $ 31,566 $ (21,577 ) (68 )% Research and development expenses, which are mainly attributable to post-marketing commitments required by the FDA and ongoing product developments, were $3.6 million and $10.0 million for the three and nine months ended September 30, 2024. Research and development expenses for the three and nine months ended September 30, 2023, which were mainly attributable to the product development efforts for XACDURO ® , were $4.0 million and $31.6 million, respectively. The decrease was primarily a result of the FDA approval of XACDURO ® in May 2023 and personnel transfers from the research development function to general and administrative function after the FDA approval. Selling, General & Administrative Selling, general and administrative expenses, as compared to the prior year periods, were as follows: Three Months Ended September 30, Change Nine Months Ended September 30, Change (In thousands) 2024 2023 $ % 2024 2023 $ % Selling, general and administrative $ 26,219 $ 28,636 $ (2,417 ) (8 )% $ 84,364 $ 71,913 $ 12,451 17 % 42 Our selling, general and administrative expenses are primarily incurred as a result of our ongoing efforts to promote our marketed critical care products and drive revenue, maintain regulatory compliance, and support essential administrative functions for general operations. The expenses for the three months ended September 30, 2023 were higher compared to the same period this year primarily due to the commercial launch effort of XACDURO ® . For the nine months ended September 30, 2024, the expenses increased compared to the same period last year due to the ongoing efforts, which led to higher net product sales. Interest and dividend income and other expense, net Interest and dividend income and other expense, net, as compared to the prior year periods, were as follows: Three Months Ended September 30, Change Nine Months Ended September 30, Change (In thousands) 2024 2023 $ % 2024 2023 $ % Interest and dividend income $ (5,500 ) $ (4,114 ) $ (1,386 ) 34 % $ (13,373 ) $ (11,032 ) $ (2,341 ) 21 % Other expense, net $ 914 $ 1,047 $ (133 ) (13 )% $ 3,123 $ 4,289 $ (1,166 ) (27 )% Interest and dividend income increased for the three and nine months ended September 31, 2024, compared to the same period a year ago, due to higher interest rates and 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 periods, was as follows: Three Months Ended September 30, Change Nine Months Ended September 30, Change (In thousands) 2024 2023 $ % 2024 2023 $ % Interest expense $ 5,807 $ 4,396 $ 1,411 32 % $ 17,460 $ 13,205 $ 4,255 32 % Interest expense for the three and nine months ended September 30, 2024 comprised mainly of the contractual interest expense and the amortization of debt issuance costs for our 2025 Notes and 2028 Notes, as well as effective interest expense on our deferred royalty obligation. Interest expense for the nine months ended September 30, 2023 included the amount on the 2023 Notes until the notes were fully paid off on January 15, 2023. The increase for the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023, was mainly due to higher effective interest rate 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 September 30, Change Nine Months Ended September 30, Change (In thousands) 2024 2023 $ % 2024 2023 $ % Changes in fair values of equity method investments, net $ 18,231 $ (71,980 ) $ 90,211 (125 )% $ 42,997 $ (67,886 ) $ 110,883 (163 )% Changes in fair values of equity and long-term investments, net $ 16,936 $ 2,640 $ 14,296 * $ 60,827 $ 4,887 $ 55,940 * *Not Meaningful The changes in fair values of equity method investments for the three and nine months ended September 30, 2024 were unfavorable mainly due to the decrease in Armata's stock price during this period. We recorded $18.2 million and $43.0 million in unrealized loss for the three and nine months ended September 30, 2024, respectively, and $72.0 million and $67.9 million in unrealized gain for the three and nine months ended September 30, 2023, respectively, related to our equity method investments in Armata. 43 The changes in fair values of other equity and long-term investments primarily reflected the realized gains and losses and net unrealized gains and losses in our strategic investments in Armata, InCarda, Gate, ImaginAb and those investments managed by ISP Fund LP. We recorded $17.8 million and $59.8 million of net negative changes in fair values of equity and long-term investments related to the investments managed by ISP Fund LP, for the three and nine months ended September 30, 2024, respectively. We also recorded $1.2 million net positive and $0.8 million net negative changes in fair values of equity and long-term investments for the three and nine months ended September 30, 2024, respectively, related to other long-term investments we made in Armata. Provision for Income Taxes We recorded income tax expense of $5.6 million and $9.6 million for the three and nine months ended September 30, 2024, respectively, compared to income tax expense of $3.9 million and $14.7 million for the three and nine months ended September 30, 2023, respectively. The effective income tax rate for the nine months ended September 30, 2024 and 2023 was 40.5% and 10.6%, 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 collaboration arrangement. For the nine months ended September 30, 2024, we generated gross royalty revenues from GSK of $189.6 million, net product sales of $68.6 million and license revenue of $19.1 million. Net cash and cash equivalents totaled $260.6 million, royalties receivable from GSK totaled $60.5 million and accounts receivable associated with our product sales and license revenue totaled $30.5 million as of September 30, 2024. 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 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: Nine Months Ended September 30, (In thousands) 2024 2023 Change Net cash provided by operating activities $ 129,451 $ 107,808 $ 21,643 Net cash used in investing activities $ (48,308 ) $ (61,610 ) $ 13,302 Net cash used in financing activities $ (14,026 ) $ (157,250 ) $ 143,224 Cash Flows from Operating Activities Net cash provided by operating activities for the nine months ended September 30, 2024 was $129.5 million, consisting primarily of our net income of $3.1 million, adjusted for net non-cash items, which included $103.8 million in changes in fair value of our investments, $19.4 million of amortization of acquired intangible assets, $12.1 million of amortization of inventory fair value step-up adjustment, $10.5 million of amortization of capitalized fees and depreciation of property and equipment, and $4.7 million of stock-based compensation, partially offset by $15.4 million of deferred income taxes and $9.9 million in net changes in operating assets and liabilities. 44 Net cash provided by operating activities for the nine months ended September 30, 2023 was $107.8 million, consisting primarily of our net income of $118.2 million, adjusted for net non-cash items, which included $19.2 million of amortization of inventory fair value step-up adjustment, $10.4 million of amortization of capital fees and depreciation of property and equipment, $15.3 million of amortization of acquired intangible assets, partially offset by $63.0 million of net changes in fair value of our investments and $5.0 million net changes in operating assets and liabilities. Cash Flows from Investing Activities Net cash used in investing activities for the nine months ended September 30, 2024 of $48.3 million primarily consisted of $48.1 million in purchases of trading securities, $32.3 million in purchases of equity and long-term investments managed by ISP Fund LP and $20.6 million in net purchases of other investments managed by ISP Fund LP. The use of cash for investing activities was partially offset by proceeds of $52.8 million from the sales of equity investments managed by ISP Fund LP. Net cash used in investing activities for the nine months ended September 30, 2023 of $61.6 million primarily consisted of $60.1 million in purchases of trading securities, $1.2 million in purchases of equity and long-term investments, $24.9 million in purchases of equity investments managed by ISP Fund LP, and $14.7 million from purchase and sales of other investments managed by ISP Fund LP. The use of cash for investing activities was partially offset by net proceeds of $39.6 million from the sales of equity investments managed by ISP Fund LP. Cash Flows from Financing Activities Net cash used in financing activities for the nine months ended September 30, 2024 of $14.0 million was primarily due to $14.8 million for the repurchase of common stock under our stock repurchase program which concluded in April 2024. Net cash used in financing activities for the nine months ended September 30, 2023 of $157.3 million was primarily due to the payments of $96.2 million upon maturity of the 2023 Notes in January 2023 and $61.1 million for the repurchase of common stock under our current stock repurchase program. Contractual Obligations As of September 30, 2024, our notes payable obligation included $192.5 million related to our 2025 Notes and $261.0 million related to our 2028 Notes, which are due in 2025 and 2028, respectively. Under the terms of the 2025 Notes and 2028 Notes, we will make interest payments of 2.5% and 2.125%, respectively, 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 were $3.4 million, with approximately $0.4 million payable through December 31, 2024, and approximately $3.0 million payable through 2029. 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 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. Additionally, we have certain contingent payment obligations under various in-license agreements which we are required to make royalty payments or milestone payments upon successful completion and achievement of certain milestones. Refer to Note 4, “License and Collaboration Arrangements” to the Condensed Consolidated Financial Statements for more information. We also entered into a Commercial Supply Agreement with Corden Pharma CHENÔVE SAS (“Corden”), under which we engaged Corden to manufacture and supply certain products related to XACDURO ® and to perform certain services and studies. Under the agreement, we committed to minimum purchase commitments through December 31, 2027. As of September 30, 2024, we have approximately $9.1 million, $7.1 million, $7.9 million and $6.3 million in outstanding purchase commitments under the agreement for the remainder of 2024 and for the years 2025, 2026 and 2027, respectively. 45 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.