What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-05-07 compared with 2024-11-06 · 315 added, 441 removed, 612 unchanged (55% of the section changed)

3 unchanged sentences

(In thousands, except per share data)

September 30,

Current assets:

3 unchanged sentences

Prepaid expenses

Current portion of ISP Fund investments (Note 5)

Other current assets

19 unchanged sentences

Other long-term liabilities

Deferred tax liabilities, net

Income tax payable, long-term

7 unchanged sentences

62,771 and 62,665 issued and outstanding as of

September 30, 2024 and December 31, 2023, respectively

Treasury stock:

at cost, nil and 32,005 shares as of

September 30, 2024 and December 31, 2023, respectively

March 31, 2025 and December 31, 2024, respectively

Additional paid-in capital

7 unchanged sentences

(In thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

Royalty revenue, net of amortization

of capitalized fees paid of $ 3,456 in the

three months ended September 30, 2024

and 2023, and $ 10,368 in the nine months

ended September 30, 2024 and 2023

Three Months Ended March 31,

Royalty revenue, net of amortization of

capitalized fees paid of $ 3,456 in the

three months ended March 31, 2025

Net product sales

License revenue

License and other revenue

Total revenue

1 unchanged sentence

amortization of inventory fair value

adjustments, excluding amortization

of intangible assets)

Cost of license revenue

Amortization of acquired intangible assets

Operating expenses:

Selling, general and administrative

Research and development

Amortization of acquired intangible assets

Total operating expenses

Income from operations

Changes in fair values of equity method

5 unchanged sentences

Other expense, net

Total expenses, net

Income before income taxes

Income (loss) before income taxes

Income tax expense, net

Net income and comprehensive income

Net income per share:

Shares used to compute net income per share:

Net income (loss) and comprehensive

income (loss)

Net income (loss) per share:

Shares used to compute net income (loss) per share:

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Nine Months Ended September 30, 2024

Treasury Stock

Three Months Ended March 31, 2025

Stockholders’

5 unchanged sentences

tax withholding

Repurchase of common stock

Stock-based compensation

Balance as of March 31, 2025

Exercise of stock options and

issuance of common stock units

and stock awards, net of

repurchase of shares to satisfy

tax withholding

Repurchase of common stock

Retirement of treasury stock

Stock-based compensation

Balance as of June 30, 2024

Exercise of stock options and

issuance of common stock units

and stock awards, net of

repurchase of shares to satisfy

tax withholding

Stock-based compensation

Balance as of September 30, 2024

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

Retained Earnings

Treasury Stock

2 unchanged sentences

Issuance of common stock units

and stock awards, net of repurchase

of shares to satisfy tax withholding

and stock awards, net of

repurchase of shares to

satisfy tax withholding

Repurchase of common stock

1 unchanged sentence

Balance as of March 31, 2024

Issuance of common stock units

and stock awards, net of repurchase

of shares to satisfy tax withholding

Repurchase of common stock

Stock-based compensation

Balance as of June 30, 2023

Issuance of common stock units

and stock awards, net of repurchase

of shares to satisfy tax withholding

Repurchase of common stock

Stock-based compensation

Balance as of September 30, 2023

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Deferred income taxes

6 unchanged sentences

Changes in fair values of equity and long-term investments, net

Accrued interest income added to long-term investments

Other non-cash items

11 unchanged sentences

Purchases of trading securities

Purchases of equity and long-term investments

Purchases of equity investments managed by ISP Fund LP

1 unchanged sentence

Purchases and sales of other investments managed by ISP Fund LP, net

Purchases of property and equipment

Sale of property and equipment

4 unchanged sentences

Proceeds from issuances of common stock, net

Payment for repurchase of convertible subordinated notes due 2023

Net cash used in financing activities

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

1 unchanged sentence

Cash and cash equivalents at end of period

Nine Months Ended September 30,

Three Months Ended March 31,

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest

Cash paid for income taxes

Supplemental Disclosure of Non-cash Investing and Financing Activities:

11 unchanged sentences

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 growth potential and a late-stage drug candidate.

In addition, we own other strategic healthcare assets, such as a large equity stake in Armata Pharmaceuticals, 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 commercial and marketed products also include GIAPREZA ® (angiotensin II), approved to increase blood pressure in adults with septic or other distributive shock;

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

and XACDURO ® (sulbactam for injection;

durlobactam for injection), approved for the treatment of hospital-acquired and ventilator-associated pneumonias caused by Acinetobacter in adults.

In addition, ZEVTERA ® (ceftobiprole), an advanced-generation cephalosporin antibiotic, will be exclusively commercialized by us in the U.S.

under a distribution and license agreement with Basilea Pharmaceutica Ltd., (“Basilea”), which we entered into in December 2024.

We continue to advance our pipeline, zoliflodacin, potentially a first in class, single-dose oral treatment for uncomplicated gonorrhea.

We have established a wholly owned, critical care and infectious disease operating platform, anchored by four differentiated commercial products and supported by a promising late-stage development asset.

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

Basis of Presentation

7 unchanged sentences

All intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (“SEC”) on February 29, 2024, and as amended on March 5, 2024 and March 22, 2024.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (“SEC”) on February 26, 2025, and as amended on March 24, 2025.

There have been no material changes to our summary of significant accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

Use of Management’s Estimates

16 unchanged sentences

Our royalty revenues under the GSK Agreements may not meet our analysts’ or investors’ expectations due to a number of important factors.

We also generate revenue from product sales of GIAPREZA ® and XERAVA ® .

Additionally, we generate revenue from product sales of XACDURO ® , which was commercially launched in September 2023.

Our revenues also include net product sales of GIAPREZA ® , XERAVA ® and XACDURO ® .

In the U.S., hospitals and other healthcare organizations generally acquire our products through a network of specialty distributors, which are regarded as our customers for accounting purposes.

We do not believe that the loss of one of these distributors would significantly impact our ability to distribute our products, as we expect that sales volume would be absorbed by either new or remaining distributors.

Three of our customers each account for 27 %, 21 % and 20 %, respectively, of our net product sales for the three months ended September 30, 2024 , and 31 %, 23 % and 23 %, respectively, for the nine months ended September 30, 2024 .

These same customers account for 32 %, 15 % and 12 %, respectively, of our receivables from net product sales, which are included in “Accounts receivable” in our unaudited condensed consolidated balance sheet as of September 30, 2024 .

Three of our customers each account for 27 %, 28 % and 26 %, respectively, of our net product sales for the three months ended September 30, 2023, and 32 %, 28 % and 27 %, respectively, for the nine months ended September 30, 2023.

We do not believe that the loss of one of these distributors would significantly impact our ability to distribute our products, as we expect that sales volume will be absorbed by either new or remaining distributors.

Three of our customers each account for 29 %, 27 % and 27 %, respecti vely, of our net product sales for the three months ended March 31, 2025 .

These same customers account for 33 %, 18 % and 20 %, respectively, of our receivables from net product sales, which are included in “Accounts receivable” in our unaudited condensed consolidated balance sheet as of March 31, 2025 .

Three of our customers each account for 36 %, 26 % and 24 %, respectively, of our net product sales for the three months ended March 31, 2024.

These same customers account for 31 %, 24 % and 24 %, respectively, of our receivables from net product sales, which are included in “Accounts receivable” in our condensed consolidated balance sheet as of December 31, 2024.

2 unchanged sentences

Segment Reporting

We operate in a single segment, focusing on providing capital return to stockholders by maximizing the potential value of our portfolio of royalties and innovative healthcare assets.

Our Chief Executive Officer serves as our Chief Operating Decision Maker (“CODM”).

The CODM allocates resources and evaluates Innoviva’s performance at the consolidated level using information about our revenues, operating results and other key financial data as needed.

Operating segments are defined as components of an enterprise for which discrete financial information is available and are evaluated regularly by the chief operating decision maker (“CODM”) in making decisions about resource allocation and assessing performance.

Refer to Note 14, “Segment Reporting”, for more information.

Variable Interest Entities

6 unchanged sentences

This assessment requires us to apply judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE.

Cash and Cash Equivalents

We consider all highly liquid investments purchased with a maturity of three months or less on the date of purchase to be cash equivalents.

Cash equivalents are carried at cost, which approximates fair value.

Accounts Receivable

Accounts receivable are recorded net of estimates for prompt-pay discounts, chargebacks, returns and rebates.

Allowances for prompt-pay discounts and chargebacks are based on contractual terms.

We estimate the allowance for credit losses based on existing contractual payment terms, actual payment patterns of customers and individual customer circumstances.

Inventory is stated at the lower of cost or estimated net realizable value on a first in, first out basis.

We periodically analyze inventory levels and write down inventory as cost of products sold when the following occurs:

inventory has become obsolete, inventory has a cost basis in excess of its estimated net realizable value, or inventory quantities are in excess of expected product sales .

Goodwill and Intangible Assets

3 unchanged sentences

Significant judgment may be involved in determining if an indicator of impairment has occurred.

Operating Leases

Right-of-use assets represent our right to use an underlying asset over the lease term and include any lease payments made prior to the lease commencement date and are reduced by lease incentives.

Lease liabilities represent the present value of the total lease payments over the lease term, calculated using an estimated incremental borrowing rate.

Lease expense is recognized on a straight-line basis over the expected lease term.

Equity and Long-Term Investments

5 unchanged sentences

All gains and losses from fair value changes, unrealized and realized, are presented as changes in fair values of equity method investments, net, and changes in fair values of equity and long-term investments, net, within the unaudited condensed consolidated statements of income and comprehensive income.

If we conclude that we do not have an ability to exercise significant influence over an investee, we may elect to account for the security without a readily determinable fair value using the measurement alternative method under ASC 321, Investments - Equity Securities .

This measurement alternative method allows us to measure the equity investment at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

We also invest in ISP Fund LP, which investments consist of money market funds, trading and equity securities in the healthcare, pharmaceutical and biotechnology industries.

Pursuant to the Partnership Agreement entered in December 2020, we became a limited partner of this partnership, and our contributions are subject to a 36-month lock-up period which restriction prevents us from having control and access to the contributions and related investments.

The lock-up period for a certain portion of our contributions expired in December 2023.

We did not elect to make a withdrawal in 2023, thereby extending the lock-up period and withdrawal elections into subsequent years.

These investments are classified as long-term investments in the unaudited condensed consolidated balance sheets.

In October 2024, Strategic Partners made an election to unwind its capital accounts in the Partnership in accordance with the terms of the Partnership Agreement.

If we conclude that we do not have the ability to exercise significant influence over an investee, we may elect to account for equity security without a readily determinable fair value using the measurement alternative method under ASC 321, Investments - Equity Securities .

This method allows us to measure the investment at cost less impairment, if any, and adjusted for observable price changes in orderly transactions involving the same or a similar investment of the same issuer.

We also invest in ISP Fund LP, which investments consist of money market funds, trading securities, and equity securities in the healthcare, pharmaceutical and biotechnology industries.

Pursuant to the Partnership Agreement entered into in December 2020, we became a limited partner of the partnership, and our contributions are subject to a 36-month lock-up period which restricts our ability to control or access the contributions and related investments.

In October 2024, we elected to unwind our capital accounts in the partnership in accordance with the terms of the Partnership Agreement and expect to receive distributions through April 2026.

Accordingly, the portion of the cash balance and money market funds expected to be distributed within 12 months from the balance sheet date has been classified as “Current portion of ISP Fund investments,” while the remaining equity investments have been classified as long-term investments in the condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024.

Revenue Recognition

10 unchanged sentences

Royalty Revenue

We recognize the royalty revenue on net sales of products with respect to which we have contractual royalty rights in the period in which the royalties are earned.

The net sales reports provided by our partner are based on its methodology and assumptions to estimate rebates and returns, which it monitors and adjusts regularly in light of contractual and legal obligations, historical trends, past experience and projected market conditions.

Our partner may make significant adjustments to its sales based on actual results recorded, which could cause our royalty revenue to fluctuate.

We conduct periodic royalty audits to evaluate the information provided by our partner.

Royalties are recognized net of amortization of capitalized fees associated with any approval and launch milestone payments made to GSK.

We recognize royalty revenue on net sales of products with respect to which we have contractual royalty rights in the period in which the royalties are earned.

The net sales reports provided by our partner are based on their own methodology and assumptions for estimating rebates and returns, which they monitor and adjust regularly in light of contractual and legal obligations, historical trends, past experience, and projected market conditions.

Our partner may make significant adjustments to its reported sales based on actual results, which could cause fluctuation in our royalty revenue.

We conduct periodic royalty audits to evaluate the accuracy of the information provided.

Royalties from GSK are recognized as the net of amortization of capitalized fees related to approval and launch milestone payments made to GSK.

Revenue from Product Sales

14 unchanged sentences

The estimates for returns are recorded as a reduction of revenue on delivery to our customers.

We participate in Medicaid rebate programs, which provide assistance to certain low-income patients based on each individual state’s guidelines regarding eligibility and services.

Under the Medicaid rebate programs, we pay a rebate to each participating state, generally within three months after the quarter in which the product was sold.

Additionally, we may offer customer incentives and consideration in the form of volume-based or other rebates.

The estimates for rebates are recorded as a reduction of revenue on delivery to our customers.

We participate in Medicaid rebate programs, which provide assistance to certain low-income patients based on each state’s eligibility guidelines and services.

Under these programs, we pay rebates to participating states, typically within three months after the quarter in which the product was sold.

Additionally, we may offer customer incentives and other forms of consideration, such as volume-based or performance-based rebates.

Estimated rebates are recorded as a reduction of revenue on delivery to our customers.

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

3 unchanged sentences

Similarly, we include approval milestone payments in the transaction price once the product is approved by the applicable regulatory agency.

For a licensing arrangement that includes services, we will recognize revenue over time using an input method, representing the transfer of goods or services as we perform activities over the term of the arrangement.

For a licensing arrangement that includes services, we recognize revenue over time using an input method, representing the transfer of goods or services as we perform activities over the term of the arrangement.

Research and Development Expenses

4 unchanged sentences

We also utilize significant judgment and estimates to record accruals for estimated ongoing research costs based on the progress of the studies and progress of research manufacturing activities.

Interest Expense on Deferred Royalty Obligation

Interest expense related to the deferred royalty obligation is recognized over the expected repayment term of the deferred royalty obligation using the effective interest method.

The assumptions used in determining the expected repayment term of the deferred royalty obligation require us to make estimates that could impact the effective interest rate.

Each reporting period, we estimate the expected repayment term of the deferred royalty obligation based on forecasted net sales of GIAPREZA ® .

Changes in interest expense resulting from changes in the effective interest rate, if any, are recorded on a prospective basis.

Refer to Note 11, “Debt” for more information.

Related Party

Sarissa Capital owned 11.6 % of our outstanding common stock as of September 30, 2024 .

Transactions with Sarissa Capital are described in Note 5, “Consolidated Entity”.

Sarissa Capital is considered to be a related party because two of its principals are members of our board of directors.

Recently Issued Accounting Pronouncements Not Yet Adopted

In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-06, Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative .

The amendment modifies the disclosure or presentation requirements for a variety of topics.

The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective.

The Company does not expect the adoption of the amendments to have a significant impact on its financial statements.

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures (Topic 280) .

This ASU update requires enhanced segment disclosures, primarily related to significant segment expenses.

The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024.

The Company is assessing the impact this adoption will have on its disclosures.

Recently Issued Accounting Pronouncement Adopted

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740) .

The ASU requires the disclosure of income taxes paid disaggregated by jurisdiction and enhanced disclosures for the entity’s effective tax rate reconciliation as well as other income tax related disclosures.

The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024.

The Company does not expect the adoption of the amendments to have a significant impact on its financial statements.

Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding.

This ASU became effective for us on January 1, 2025, at which time it was adopted.

We will include the required disclosures, to the extent applicable, within our annual financial statements as of and for the year ended December 31, 2025.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40) , which requires disclosures about specific types of expenses included in the expense captions presented on the face of the statement of income as well as disclosures about selling expenses.

ASU 2024-03 is effective for the Company in annual reporting periods beginning after December 15, 2027, and interim reporting periods beginning after December 15, 2027.

We are currently evaluating the potential impact that ASU 2024-03 may have on our financial statement disclosures.

In November 2024, the FASB issued ASU 2024-04, Debt — Debt with Conversion and Other Options (Subtopic 470-20) , which clarifies the assessment of whether a transaction should be accounted for as an induced conversion or extinguishment of convertible debt when changes are made to conversion features as part of an offer to settle the instrument.

ASU 2024-04 is effective for annual reporting periods beginning after December 15, 2025 and interim reporting periods within those annual reporting periods.

We are currently evaluating the potential impact that ASU 2024-04 may have on our financial statements and related disclosures.

Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding.

Diluted net income per share is computed by dividing net income by the weighted-average number of shares of common stock and dilutive potential common stock equivalents then outstanding.

Dilutive potential common stock equivalents include the assumed exercise, vesting and issuance of employee stock awards using the treasury stock method, as well as common stock issuable upon assumed conversion of our convertible subordinated notes due 2023 (the “2023 Notes”) up until its maturity date on January 15, 2023, our convertible senior notes due 2025 (the “2025 Notes”) and our convertible senior notes due 2028 (the “2028 Notes”) using the if-converted method.

Dilutive potential common stock equivalents include the assumed exercise, vesting and issuance of employee stock awards using the treasury stock method, as well as common stock issuable upon assumed conversion of our convertible senior notes due 2025 (the “2025 Notes”) and our convertible senior notes due 2028 (the “2028 Notes”) using the if-converted method.

If in a net loss position, diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period, without consideration for dilutive potential common stock equivalents.

The following table shows the computation of basic and diluted net income per share for the three and nine months ended September 30, 2024 and 2023:

Three Months Ended September 30,

Nine Months Ended September 30,

The following table shows the computation of basic and diluted net income (loss) per share for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

(In thousands except per share data)

Net income, basic

interest expense on 2023 Notes, net of tax effect

Net income (loss), basic

interest expense on 2025 Notes, net of tax effect

interest expense on 2028 Notes, net of tax effect

Net income, diluted

Weighted-average shares used to compute basic net income

Dilutive effect of 2023 Notes

Net income (loss), diluted

Weighted-average shares used to compute basic

net income (loss) per share

Dilutive effect of 2025 Notes

3 unchanged sentences

Dilutive effect of outstanding warrant

Weighted-average shares used to compute diluted net income

Net income per share

Weighted-average shares used to compute diluted

net income (loss) per share

Net income (loss) per share

Anti-Dilutive Securities

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

Three Months Ended September 30,

Nine Months Ended September 30,

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

Three Months Ended March 31,

(In thousands)

7 unchanged sentences

Net revenue recognized under our GSK Agreements was as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

4 unchanged sentences

Net Product Sales

Our net product sales were $ 27.8 million, consisting of net sales of GIAPREZA ® , XERAVA ® , and XACDURO ® for $ 13.8 million, $ 4.2 million and $ 9.8 million, respectively, for the three months ended September 30, 2024 .

Our net product sales were $ 68.6 million, consisting of net sales of GIAPREZA ® , XERAVA ® , and XACDURO ® for $ 39.0 million, $ 15.2 million and $ 14.4 million, respectively, for the nine months ended September 30, 2024 .

We derived approximately 71 % and 82 % of our net product sales from customers located in the U.S.

for the three and nine months ended September 30, 2024, respectively.

Our net product sales were $ 13.7 million, consisting of net sales of GIAPREZA ® , XERAVA ® , and XACDURO ® for $ 8.0 million, $ 5.1 million, and $ 0.6 million, respectively, for the three months ended September 30, 2023.

Our net product sales were $ 40.9 million, consisting of net sales of GIAPREZA ® , XERAVA ® , and XACDURO ® for $ 28.2 million, $ 12.1 million, and $ 0.6 million, respectively, for the nine months ended September 30, 2023.

We derived over 86 % and 93 % of our net product sales from customers located in the U.S.

for the three and nine months ended September 30, 2023, respectively.

Total net product sales was as follows:

Three Months Ended March 31,

(In thousands)

Total net product sales

We derived our net product sales:

• approximately 87 % from customers located in the U.S.

and 13 % from the rest of the world for the three months ended March 31, 2025;

• approximately 91 % from customers located in the U.S.

and 9 % from the rest of the world for the three months ended March 31, 2024.

License Revenue

Refer to the out-license agreements with Zai Lab and Everest in Note 4, “License and Collaboration Arrangements”.

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

License and Collaboration Arrangements

11 unchanged sentences

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 three and nine months ended September 30, 2024 and 2023 were not material.

SUL-DUR was approved by China’s National Medical Products Administration in May 2024, and we recognized $ 8.0 million in license revenue for the nine months ended September 30, 2024 under this agreement.

Following the approval of XACDURO ® by the FDA in May 2023, we recognized $ 3.0 million in license revenue for the nine months ended September 30, 2023.

Such amounts recorded for the three months ended March 31, 2025 and 2024 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.

Royalties under this arrangement, based on the product sales for the three months ended March 31, 2025, was $ 0.5 million.

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.

We determined that the Amended Zai Agreement falls within the scope of ASC 606 and Zai Lab is a customer in this arrangement as the Services are an output of our ordinary activities.

We have determined that the Services represent the only performance obligation and are distinct from the performance obligations under the original Zai Agreement.

We have determined th at the Services represent the only performance obligation and are distinct from the performance obligations under the original Zai Agreement.

In addition, the costs we incur in performing the Services most accurately depict the transfer of value to Zai Lab and maximize the use of observable inputs for measuring progress, therefore, we recognize revenue from this arrangement as the costs related to Services are incurred.

We recognized $ 0.8 million and $ 7.3 million in license revenue for the three and nine months ended September 30, 2024, respectively, under the Amended Zai Agreement.

This amount is included in “Accounts receivable” in our unaudited condensed consolidated balance sheet as of September 30, 2024.

In June 2024, we entered into an interim supply agreement with Zai Lab, under which Zai Lab shall purchase XACDURO ® inventory (the “Supplied Inventory”) for their commercial launch.

We recognized $ 0.5 million in license revenue for the three months ended March 31, 2025 under the Amended Zai Agreement.

Amounts outstanding under this agreement of $ 0.6 million and $ 1.6 million are included in “Accounts receivable” in our unaudited condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024, respectively.

In June 2024, we entered into an interim supply agreement with Zai Lab, under which Zai Lab shall purchase XACDURO ® inventory (the “Supplied Inventory”) for their commercial use.

We have determined that this agreement falls within the scope of ASC 606.

2 unchanged sentences

Furthermore, we evaluated that the performance obligation is satisfied over time and that a cost-to-cost measure of progress would be the measure of progress that most accurately depicts the transfer of value to Zai Lab and maximizes the use of observable inputs to measure progress.

We recognized $ 5.5 million in net product sales for the Supplied Inventory for the three and nine months ended September 30, 2024, respectively.

This amount is included in “Accounts receivable” in our unaudited condensed consolidated balance sheet as of September 30, 2024.

We recognized $ 0.8 million in net product sales for the Supplied Inventory for the three months ended March 31, 2025.

Amounts outstanding under this agreement of $ 0.6 million are included in “Accounts receivable” in our unaudited condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024.

We have also received advance payments of $ 8.6 million and $ 5.3 million as of March 31, 2025, and December 31, 2024, respectively, from Zai Lab for additional inventory purchases.

These amounts were recorded as other accrued liabilities and will be recognized as revenue when a supply agreement is finalized and performance obligation is satisfied.

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”).

3 unchanged sentences

Furthermore, we have evaluated that the performance obligation is satisfied over time and that the costs we incur in performing the transfer service most accurately depicts the transfer of value to Zai Lab and maximizes the use of observable inputs for measuring progress, therefore, we recognize revenue from this arrangement as the services are provided and the costs are incurred.

We recognized $ 3.4 million in license revenue for the three and nine months ended September 30, 2024, respectively, under the Zai Manufacturing Stage Transfer Agreement.

This amount is included in “Accounts receivable” in our unaudited condensed consolidated balance sheet as of September 30, 2024.

We did no t recognize license revenue for the three months ended March 31, 2025 under the Zai Manufacturing Stage Transfer Agreement.

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”).

8 unchanged sentences

Pursuant to the PAION AG and PAION Deutschland GmbH (together and individually “PAION”) License, La Jolla 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 will be subject to reduction on account of generic competition and after patent expiration in that jurisdiction.

Royalties payable in a given jurisdiction under the PAION License is 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.

We have not recognized any revenue from PAION related to commercial milestones from the date of acquisition of La Jolla to September 30, 2024.

Royalty revenue recognized under this agreement for the three and nine months ended September 30, 2024 was $ 1.2 million and $ 1.3 million, respectively.

Royalty revenue recognized under this agreement for the three and nine months ended September 30, 2023 was not material.

La Jolla also entered into the PAION commercial supply agreement (the “PAION Supply Agreement”) whereby La Jolla will supply PAION a minimum quantity of GIAPREZA ® and XERAVA ® through July 13, 2024.

The PAION supply agreement automatically renewed and will expire until the earlier of July 13, 2027, or until a new supply agreement is executed.

During the term of the supply agreement, we will be reimbursed for direct and certain indirect manufacturing costs at cost.

Cost reimbursements recognized under this agreement for the three and nine months ended September 30, 2024 were no t material.

We recognized $ 1.0 million in cost reimbursements under this agreement for the three and nine months ended September 30, 2023.

PAION filed for insolvency in Germany on October 27, 2023 and the insolvency proceedings commenced on January 1, 2024.

PAION announced on December 22, 2023 that it concluded negotiations with Humanwell Healthcare Group and entered into an agreement on the sale of the essential business operations of PAION with the approval of the insolvency administrator in both procedures.

In early 2024, the sale of business operations of PAION was completed and starting February 2024, PAION has continued its business as a subsidiary of the Humanwell Healthcare Group as an independent company under the name PAION Pharma GmbH.

Royalty revenue recognized under this agreement for the three months ended March 31, 2025 and 2024 was no t material.

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.

We recognized $ 0.6 million in cost reimbursements under this agreement for the three months ended March 31, 2025.

Cost reimbursements recognized under this agreement for the three months ended March 31, 2024 were no t material.

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 recognized $ 8.0 million in license revenue for the nine months ended September 30, 2023 as a result of our achievement of a regulatory milestone during the period.

We are eligible to receive additional sales milestone payments of up to an aggregate of $ 20.0 million.

We are eligible to receive sales milestone payments of up to an aggregate of $ 20.0 million under this agreement.

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.

3 unchanged sentences

or (iii) 10 years after the first commercial sale of a product in such jurisdiction in the Everest Territory.

Royalty revenue recognized for the three and nine months ended September 30, 2024 was $ 0.6 million and $ 2.3 million, respectively.

Royalty revenue recognized for the three and nine months ended September 30, 2023 was no t material.

Royalty revenue from Everest recognized for the three months ended March 31, 2025 and 2024 was no t material.

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.

R evenue recognized under this agreement for the three and nine months ended September 30, 2024 was $ 0.9 million and $ 2.6 million, respectively.

Revenue recognized under this agreement for the three and nine months ended September 30, 2023 was $ 0.9 million and $ 1.6 million, respectively .

R evenue recognized under the Everest Supply Agreement for the three months ended March 31, 2025 was $ 1.0 million.

Revenue recognized under the Everest Supply Agreement for the three months ended March 31, 2024 was no t material .

In-License Agreements

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.

We anticipate commercialization of ZEVTERA ® in mid-2025 and, as a result, did not incur any royalty or sales milestone payments under this agreement during three months ended March 31, 2025.

George Washington University

Pursuant to the George Washington University (“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 ® .

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 this agreement extends through the last-to-expire patent covering GIAPREZA ® .

Amounts recognized under this agreement for the three and nine months ended September 30, 2024 were $ 1.0 million and $ 2.5 million, respectively.

Amounts recognized under this agreement for the three and nine months ended September 30, 2023 were $ 0.5 million and $ 1.7 million, respectively.

The obligation to pay royalties under the GW License extends through the last-to-expire patent covering GIAPREZA ® .

Amounts recognized under the GW License for the three months ended March 31, 2025 were $ 1.1 million.

Amounts recognized under the GW License for the three months ended March 31, 2024 were no t material .

Harvard University

9 unchanged sentences

The obligation to pay royalties under this agreement extends through the last-to-expire patent covering tetracycline-based products, including XERAVA ® .

Amounts recognized under this agreement for the three and nine months ended September 30, 2024 were $ 0.3 million and $ 1.5 million, respectively.

For the nine months ended September 30, 2023 , we recognized $ 1.6 million in cost of license revenue under this agreement as a result of the license revenue we earned under the out-licensing agreement with Everest for the same period.

Paratek Pharmaceuticals, Inc.

Pursuant to the Paratek Pharmaceuticals, Inc.

(“Paratek”) License, Paratek non-exclusively licensed to La Jolla certain intellectual property rights relating to XERAVA ® , including non-exclusive rights to certain issued patents and patent applications covering XERAVA ® .

We were obligated to pay Paratek a 2.25 % royalty based on direct U.S.

net sales of XERAVA ® .

Our obligation to pay royalties with respect to the licensed product was retroactive to the date of the first commercial sale of XERAVA ® and continued until there were no longer any valid claims of the Paratek patents, which expired in October 2023 .

Amounts recognized under this agreement for the three and nine months ended September 30, 2023 were not material.

Amounts recognized under the Harvard License for the three months ended March 31, 2025 and 2024 were no t material.

Business Transfer and Subscription Agreement with AstraZeneca

5 unchanged sentences

Our obligation to make these royalty payments expires with respect to each product on a country-by-country basis upon the later of (i) the 10-year anniversary of the first commercial sale of a product in each such country or (ii) when the last patent right covering a product expires in each such country.

The royalty expense in respect of durlobactam arising from our net product sales of XACDURO ® for the three and nine months ended September 30, 2024 was no t material.

The royalty expense in respect of durlobactam arising from our net product sales of XACDURO ® for the three months ended March 31, 2025 and 2024 was no t material.

Consolidated Entity

In December 2020, Innoviva Strategic Partners LLC, our wholly owned subsidiary (“Strategic Partners”), contributed $ 300.0 million to ISP Fund LP (the “Partnership”) for investing in “long” positions in the healthcare, pharmaceutical and biotechnology sectors and became a limited partner.

In 2020 and 2021, Innoviva Strategic Partners LLC, our wholly owned subsidiary (“Strategic Partners”), contributed a total of $ 300.0 million to ISP Fund LP (the “Partnership”) for investing in “long” positions in the healthcare, pharmaceutical and biotechnology sectors, and became a limited partner.

The general partner of the Partnership (“General Partner”) is an affiliate of Sarissa Capital.

The Partnership Agreement provides for Sarissa Capital to receive management fees from the Partnership, payable quarterly in advance, measured based on the Net Asset Value of Strategic Partners’ capital account in the Partnership.

In addition, General Partner is entitled to an annual performance fee based on the Net Profits of the Partnership during the annual measurement period.

The Partnership Agreement includes a lock-up period of thirty-six months after which Strategic Partners is entitled to make withdrawals from the Partnership as of such lock-up expiration date and each anniversary thereafter, subject to certain limitations.

The lock-up period for the initial contribution of $ 190.0 million, which excludes the $ 110.0 million amount discussed below, expired in December 2023.

Strategic Partners did not elect to make a withdrawal in 2023, thereby extending the lock-up period and withdrawal elections into subsequent years.

In October 2024, Strategic Partners made an election to unwind its capital accounts in the Partnership in accordance with the terms of the Partnership Agreement.

In May 2021, Strategic Partners received a distribution of $ 110.0 million from the Partnership to provide funding to Innoviva for a strategic repurchase of shares held by GSK.

On March 30, 2022, Strategic Partners made an additional capital contribution of $ 110.0 million to the Partnership pursuant to the letter agreement entered into between Strategic Partners, the Partnership and Sarissa Capital Fund GP LP on May 20, 2021.

The capital contribution is subject to a 36-month lock up period from the contribution date, which will expire in March 2025.

The capital contribution was subject to a 36-month lock up period from the contribution date.

We consolidate ISP Fund LP under the VIE model as we have determined that ISP Fund LP is a VIE and we are the primary beneficiary of the entity via our related party relationships with Sarissa Capital entities.

3 unchanged sentences

In addition, as our investment in the Partnership is a passive investment for the Company and is not part of our main operations, the investments are presented as part of “Equity and long-term investments” in our condensed consolidated balance sheets.

In October 2024, Strategic Partners made an election to unwind its capital accounts in the Partnership in accordance with the terms of the Partnership Agreement and we expect to receive distributions of our capital accounts through April 2026.

Accordingly, a portion of our investments, which consist of cash and money market funds that we expect to be distributed within 12 months from the balance sheet date, were classified as “Current portion of ISP Fund investments” in the condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024, and the remaining equity investments managed by ISP Fund LP are expected to be distributed through April 2026.

The first distribution, in the amount of $ 28.0 million, was received in April 2025.

We report in our condensed consolidated statements of income and comprehensive income any investment gains and losses by the Partnership as part of “Changes in fair value of equity and long-term investments, net”, any interest and dividend income as part of “Interest and dividend income” and any investment expenses as part of “Other expense, net”.

As of September 30, 2024, we continued to hold approximately 100 % of the economic interest of the Partnership.

As of September 30, 2024 and December 31, 2023, total assets of the Part nership were $ 252.4 million and $ 311.8 million, respectively, of which the majority was attributable to equity and long-term investments.

As of September 30, 2024 and December 31, 2023 , total liabilities were $ 0.8 million and $ 0.1 million, respectively.

As of March 31, 2025, we continued to hold approximately 100 % of the economic interest of the Partnership.

As of March 31, 2025 and December 31, 2024, total assets of the Part nership were $ 174.8 million and $ 255.7 million, respectively, of which the majority was attributable to equity and long-term investments.

As of March 31, 2025 and December 31, 2024 , total liabilities were $ 0.2 million.

The partnership’s assets can only be used to settle its own obligations.

During the three and nine months ended September 30, 2024 , we recorded an immaterial amount and $ 0.3 million, respectively, of net investment-related expense incurred by the Partnership and $ 17.8 million and $ 59.8 million, respectively, of net negative changes in fair values of equity and long-term investments in the unaudited condensed consolidated statements of income and comprehensive income.

During the three and nine months ended September 30, 2023, we recorded $ 1.1 million and $ 1.2 million, respectively, of net investment-related income earned by the Partnership, and $ 22.4 million and $ 22.7 million of net negative changes, respectively, in fair values of equity and long-term investments in the unaudited condensed consolidated statements of income and comprehensive income.

During the three months ended March 31, 2025 , we recorded $ 0.8 million in investment-related expense incurred by the Partnership, generated $ 1.2 million interest income, recorded $ 2.5 million in net realized gains and $ 83.7 million in net unrealized losses as changes in fair values of equity and long-term investments, net, in the unaudited condensed consolidated statements of income and comprehensive income.

During the three months ended March 31, 2024, we recorded $ 0.2 million of net investment-related expense incurred by the Partnership and $ 26.2 million of net negative changes in fair values of equity and long-term investments 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:

September 30,

(In thousands)

Common stock - Publicly traded healthcare companies

9 unchanged sentences

Equity Investment in Armata

During the first quarter of 2020, Innoviva acquired 8,710,800 shares of common stock as well as warrants to purchase 8,710,800 additional shares of common stock of Armata Pharmaceuticals, Inc.

(“Armata”) for approximately $ 25.0 million in cash.

Armata is a clinical stage biotechnology company focused on precisely targeted bacteriophage therapeutics for antibiotic-resistant infections.

During the first quarter of 2021, ISO entered into a securities purchase agreement with Armata to acquire 6,153,847 shares of Armata common stock and warrants to purchase 6,153,847 additional shares of Armata common stock for approximately $ 20.0 million.

Armata also entered into a voting agreement with the Company and ISO, pursuant to which the Company and ISO agreed not to vote or take any action by written consent with respect to any common shares held by the Company and ISO that represent, in the aggregate, more than 49.5 % of the total number of shares of Armata’s common stock for voting on the matters related to election or removal of Armata’s board members.

The voting agreement will expire the earlier of the second anniversary of the agreement effective date and approval by the FDA of any of Armata’s product candidates for marketing and commercial distribution.

During the fourth quarter of 2021, ISO also purchased an additional 1,212,122 shares of Armata common stock for approximately $ 4.0 million.

On February 9, 2022, ISO entered into a securities purchase agreement with Armata to acquire 9,000,000 shares of Armata common stock and warrants to purchase 4,500,000 additional shares of common stock with an exercise price of $ 5.00 per share for $ 45.0 million.

The investment closed in two tranches on February 9, 2022 and March 31, 2022.

The investment is intended to aid Armata in advancing its clinical pipeline and strengthening its bacteriophage platform.

On February 9, 2022, Armata also entered a second amended and restated voting agreement with the Company and ISO, pursuant to which the Company and ISO agreed not to vote or take any action by written consent with respect to any common shares held by the Company and ISO that represent, in the aggregate, more than 49.5 % of the total number of shares of Armata’s common stock for voting on the matters related to election or removal of Armata’s board members or amend the bylaws of Armata to reduce the maximum number of directors or set the number of directors who may serve on the board of Armata.

The voting agreement will expire the earlier of the second anniversary of the agreement effective da te and approval by the FDA of any of Armata’ s product candidates for marketing and commercial distribution.

In addition, as of February 9, 2022, Armata entered into an amended and restated investor rights agreement with the Company and ISO, pursuant to which for as long as the Company and ISO hold at least 12.5 % of the outstanding shares of Armata ’s common stock on a fully-diluted, the Company and ISO shall have the right to designate two directors to Armata’ s board of directors, and for so long as the Company and ISO hold at least 8 %, but less than 12.5 %, of the outstanding shares of Armata ’s common stock on a fully-diluted basis, the Company and ISO shall have the right to designate one director to Armata’ s board of directors, subject to certain conditions and qualifications set forth in the amended and restated investor rights agreement.

On July 10, 2023, Armata entered into an amendment to the amended and restated investor rights agreement with the Company and ISO, pursuant to which the Company and ISO agreed that the voting agreement will expire on the earlier of the fifth anniversary of the original agreement's effective date, January 26, 2021, or the approval by the FDA of any of Armata’s product candidates for marketing and commercial distribution.

As of September 30, 2024 , three of the seven members of Armata’s board of directors are also members of the board of directors of Innoviva.

As of September 30, 2024 and December 31, 2023, the Company and ISO owned approximately 69.4 % of Armata’s common stock.

On January 10, 2023, we entered into a Secured Convertible Credit Agreement (the “Credit Agreement”) with Armata, under which we extended a one-year convertible note (the “Armata Convertible Note”) in an aggregate amount of $ 30.0 million at an interest rate of 8.0 % per annum.

Pursuant to the Credit Agreement, the balance on the Armata Convertible Note, including all accrued and unpaid interest thereon, will convert into shares of Armata's common stock upon the occurrence of a qualified financing, as defined in the Credit Agreement.

Any portion of the balance on the Armata Convertible Note, including all accrued and unpaid interest thereon, may also be converted into shares of Armata's common stock at our option once a registration statement covering the resale of such securities has been declared effective by the SEC.

The Armata Convertible Note is secured by substantially all of the assets of Armata and its domestic and foreign material subsidiaries.

On July 10, 2023, ISO and Armata executed an amendment to the Armata Convertible Note extending the maturity date from January 10, 2024 to January 10, 2025 .

On July 10, 2023, ISO and Armata entered into a Credit and Security Agreement (the “July 2023 Credit and Security Agreement”), under which we extended a term loan to Armata (the “Armata July 2023 Term Loan”) in an aggregate amount of $ 25.0 million.

The Armata July 2023 Term Loan is subject to an interest rate of 14 % per annum and is due to mature on January 10, 2025 .

The July 2023 Credit and Security Agreement is secured by substantially all of the assets of Armata and its domestic and foreign material subsidiaries.

On March 4, 2024, ISO and Armata entered into a Credit and Security Agreement (the “March 2024 Credit and Security Agreement”), under which we extended a term loan to Armata (the “Armata March 2024 Term Loan”) in an aggregate amount of $ 35.0 million.

The Armata March 2024 Term Loan is subject to an interest rate of 14 % per annum and is due to mature on June 4, 2025 .

The March 2024 Credit and Security Agreement is secured by substantially all of the assets of Armata and its domestic and foreign material subsidiaries.

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.

On March 12, 2025, ISO and Armata entered into a Credit and Security Agreement, under which ISO extended a term loan to Armata (the “Armata March 2025 Term Loan”) in the aggregate principal amount of $ 10.0 million.

The loan bears interest at a rate of 14 % per annum and matures on March 12, 2026 .

The Credit and Security Agreement is secured by substantially all assets of Armata and its domestic and foreign material subsidiaries.

Concurrently, ISO extended the maturity date of the convertible note and the term loans issued in July 2023 (the ‘Armata July 2023 Term Loan”) and in March 2024 the “Armata March 2024 Term Loan”) to March 12, 2026.

As of March 31, 2025, Innoviva collectively owns 25,076,769 shares of Armata’s common stock, representing a 69.3 % equity interest, and held 10,653,847 warrants with exercise price ranging from $ 3.25 to $ 5.00 per share.

Innoviva also held $ 30.1 million in principal amount of Armata’s convertible note and a total of $ 70.1 million in term loans.

The investments in Armata’s common stock and warrants provide Innoviva and ISO the ability to have significant influence, but not control over Armata’s operations.

5 unchanged sentences

The fair value of Armata’s common stock is measured based on its closing market price.

The warrants purchased in 2020, 2021 and 2022 have an exercise price of $ 2.87 , $ 3.25 and $ 5.00 per share, respectively.

All warrants are exercisable immediately within five years from the issuance date of the warrants and include a cashless exercise option.

The warrants purchased in 2020 expired during the first quarter of 2025 .

We use the Black-Scholes-Merton pricing model to estimate the fair value of these warrants with the following input assumptions:

1 unchanged sentence

Treasury yield, the remaining contractual term as the expected term, and the expected stock price volatility calculated based on the historical volatility of the common stock of Armata and its peer companies.

We account for the Armata Convertible Note as a trading security, measured at fair value using a Monte Carlo simulation model with the probability of certain qualified events and the assumptions of risk-free rate, volatility of stock price and timing of certain qualified events.

We account for the Armata July 2023 Term Loan and the Armata March 2024 Term Loan as trading securities, measured at fair value using income approach based on the discounted value of expected future cash flows.

As of September 30, 2024, the fair values of our holdings of Armata common stock, warrants, the Armata Convertible Note, the Armata July 2023 Term Loan and the Armata March 2024 Term Loan were estimated at $ 59.4 million, $ 14.1 million, $ 45.5 million, $ 29.4 million, and $ 38.3 million, respectively.

As of December 31, 2023, the fair values of our holdings of Armata common stock, warrants, the Armata Convertible Note and the Armata July 2023 Term Loan were estimated at $ 81.2 million, $ 35.3 million, $ 51.9 million and $ 27.0 million , respectively.

For the Armata common stock and warrants, 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, as changes in fair values of equity method investments, net, in the unaudited condensed consolidated statements of income and comprehensive income.

For the Armata Convertible Note, we recorded $ 2.2 million and $ 6.4 million in unrealized loss for the three and nine months ended September 30, 2024 , respectively, and $ 18.5 million and $ 19.6 million unrealized gain for the three and nine months ended September 30, 2023, respectively, 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 July 2023 Armata Term Loan, we recorded $ 1.4 million and $ 2.4 million in unrealized gain for three and nine months ended September 30, 2024, respectively, and $ 1.1 million unrealized gain for three and nine months ended September 30, 2023, 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 March 2024 Armata Term Loan, we recorded $ 2.0 million and $ 3.3 million for the three and nine months ended September 30, 2024, respectively, 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.

We account for the convertible note as a trading security, measured at fair value using a Monte Carlo simulation model with the probability of certain qualified events and the assumptions of risk-free rate, volatility of stock price and timing of certain qualified events.

We account for the term loans as trading securities, measured at fair value using income approach based on the discounted value of expected future cash flows.

As of March 31, 2025, the fair values of our holdings of Armata common stock, warrants, the convertible note, the term loan issued in 2023, the term loan issued in 2024 and the term loan issued in March 2025 were estimated at $ 36.6 million, $ 2.1 million, $ 37.8 million, $ 30.5 million, $ 39.9 million and $ 10.1 million, respectively.

As of December 31, 2024, the fair values of our holdings of Armata common stock, warrants, the convertible note, the term loan issued in 2023, and the term loan issued in 2024 were estimated at $ 46.4 million, $ 5.9 million, $ 42.1 million, $ 30.2 million and $ 39.3 million, respectively.

For the common stock and warrants, we recorded $ 13.5 million in unrealized loss and $ 35.3 million in unrealized gain for the three months ended March 31, 2025 and 2024, respectively, as changes in fair values of equity method investments, net, in the unaudited condensed consolidated statements of income and comprehensive income.

For the convertible note, we recorded $ 4.3 million in unrealized loss and $ 12.4 million in unrealized gain for the three months ended March 31, 2025 and 2024, respectively, 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 term loan issued in 2023, we recorded $ 0.3 million and $ 0.4 million in unrealized gains for three months ended March 31, 2025 and 2024, respectively, 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 term loan issued in 2024, we recorded $ 0.6 million and $ 0.5 million in unrealized gain for the three months ended March 31, 2025 and 2024, respectively, 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 term loan issued in March 2025, we recorded $ 0.1 million in unrealized gain for the three months ended March 31, 2025 as changes in fair values of equity and long-term investments, net, in the unaudited condensed consolidated statement of income and comprehensive income.

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 June 30,

Nine Months Ended June 30,

Three Months Ended December 31,

(In thousands)

2 unchanged sentences

Equity Investment in InCarda

During the third quarter of 2020, TRC purchased 20,469,432 shares of Series C preferred stock and a warrant to purchase 5,117,358 additional shares of Series C preferred stock of InCarda Therapeutics, Inc.

(“InCarda”) (the “InCarda 2020 Warrant”) for $ 15.8 million, which included $ 0.8 million of transaction costs.

InCarda is a privately held biopharmaceutical company focused on developing inhaled therapies for cardiovascular diseases.

The investment is intended to fund the ongoing clinical development of InRhythm TM (flecainide for inhalation), InCarda’s lead program, for the treatment of a recent-onset episode of paroxysmal atrial fibrillation.

On July 20, 2022, under the terms of the TRC Equity Purchase Agreement, TRC transferred to Innoviva’s wholly-owned subsidiary, Innoviva TRC Holdings, LLC (“ITH”) all of TRC’s ownership interests and investments in InCarda.

ITH has the right to designate one member to InCarda’s board of directors.

As of September 30, 2024 , none of InCarda’s six board members was designated by ITH.

We did not exercise the InCarda 2020 Warrant which expired in March 2023 and wrote off its carrying value of $ 0.1 million during the three months ended March 31, 2023.

On March 9, 2022, TRC entered into a Note and Warrant Purchase Agreement (the “InCarda Agreement”) with InCarda to acquire a convertible promissory note (the “InCarda 2022 Convertible Note”) and warrants (the “InCarda 2022 Warrant”) for $ 0.7 million.

The InCarda 2022 Warrant expires on March 9, 2027 and is measured at fair value.

On June 15, 2022, the principal amount and the accrued interest of the InCarda 2022 Convertible Note were converted into equity securities.

In addition, TRC participated in InCarda’s Series D preferred stock financing by investing $ 2.3 million.

In connection with the new round of financing, InCarda recapitalized its equity structure resulting in TRC owning 4,093,886 shares of InCarda’s common stock, 37,350 shares of its Series A-1 preferred stock, 20,469,432 shares of its Series C preferred stock, 8,771,780 shares of its Series D-1 preferred stock, 3,369,802 shares of its Series D-2 preferred stock, a warrant to purchase 5,117,358 shares of its Series C preferred stock at $ 0.73 per share and a warrant to purchase 2,490,033 shares of its Series D-1 preferred stock at $ 0.20 per share.

Due to certain changes in InCarda’s business operations during the second quarter of 2023, ITH reassessed the value of its investments in InCarda using the Option Pricing Model methodology.

Key assumptions used in the valuation model included an expected holding period of two years , a risk-free interest rate of 4.9 %, a dividend yield of 0.0 % and an estimated volatility of 114.2 %.

The estimated volatility was calculated based on the historical volatility of a selected peer group of public companies comparable to InCarda.

We recognized an impairment charge of $ 2.9 million during the second quarter of 2023.

On January 17, 2024, ITH purchased a secured convertible promissory note (the “InCarda Convertible Note”) from InCarda for a total purchase price of $ 0.4 million.

The InCarda Convertible Note bears an annual interest rate of 8 % and shall be due and payable upon the earlier to occur of certain events defined in the InCarda Convertible Note.

The InCarda Convertible Note will convert into equity securities or shadow equity securities of InCarda depending upon the occurrence of a qualified event or a qualified financing event as also defined in the InCarda Convertible Note.

The InCarda Convertible Note is secured by certain intellectual property rights of InCarda.

As of September 30, 2024 and December 31, 2023 , we held 9.1 % and 8.1 %, respectively, of InCarda equity ownership.

Since the third quarter of 2020, Innoviva TRC Holdings, LLC (“ITH”), a wholly owned subsidiary of Innvovia, 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 inhaled therapies for cardiovascular diseases.

As of March 31, 2025, ITH owns 36,742,250 shares of InCarda’s common and preferred stock and 2,490,033 warrants, representing a 9.1 % equity interest.

ITH also invested $ 0.4 million and $ 0.5 million in the principal amounts of InCarda’s convertible notes issued in Januar y 2024 (the “InCarda 2024 Convertible Note”) and February 2025 (the “InCarda 2025 Convertible Note”), respectively.

With the exception of the convertible notes and the warrants, we account for our investments in InCarda under the measurement alternative.

Under the measurement alternative, the equity investment is initially recorded at its allocated cost, but the carrying value may be adjusted through earnings upon an impairment or when there is an observable price change involving the same or a similar investment with the same issuer.

We account for the convertible note as trading securities, measured at fair value.

Our investment in InCarda does not provide us with the ability to control or have significant influence over InCarda’s operations.

2 unchanged sentences

Our maximum exposure to loss is equal to the amount we invested in the entity.

With the exception of the InCarda Convertible Note and the InCarda Series D Warrants, we account for our investments in InCarda under the measurement alternative.

We account for the InCarda Convertible Note as a trading security, measured at fair value.

As of September 30, 2024 and December 31, 2023 , we recorded as equity and long-term investments in the unaudited condensed consolidated balance sheets $ 4.8 million in carrying amount of InCarda’s Series C preferred stock and $ 0.1 million in fair value of the InCarda Series D Warrants.

As of September 30, 2024 and December 31, 2023 , we recognized as equity and long-term investments in the unaudited condensed consolidated balance sheets $ 2.7 million, for InCarda’s Series D-1 preferred stock, Series D-2 preferred stock, and common stock using the measurement alternative.

As of September 30, 2024 , we recorded $ 0.4 million in fair value of the InCarda Convertible Note as equity and long-term investments in the unaudited condensed consolidated balance sheet.

During the three and nine months ended September 30, 2024, there were immaterial changes in the carrying amount of our investments.

During the three months ended September 30, 2023, there was no change in the carrying amount of our investment.

During the nine months ended September 30, 2023, we recorded a $ 3.0 million net unrealized loss, as a change in fair values of equity and long-term investments, net, in the unaudited condensed consolidated statements of income and comprehensive income.

As of March 31, 2025 and December 31, 2024 , we recorded as equity and long-term investments in the unaudited condensed consolidated balance sheets $ 4.8 million in carrying amount of InCarda’s Series C preferred stock and $ 0.1 million in fair value of the InCarda warrants.

As of March 31, 2025 and December 31, 2024 , we recognized as equity and long-term investments in the unaudited condensed consolidated balance sheets $ 2.7 million, for InCarda’s Series D-1 preferred stock, Series D-2 preferred stock, and common stock using the measurement alternative.

As of March 31, 2025 , we recorded $ 0.9 million in fair value of the convertible notes, as equity and long-term investments in the unaudited condensed consolidated balance sheet.

As of December 31, 2024, we recorded $ 0.4 million in fair value of convertible note as equity and long-term investments in the unaudited condensed consolidated balance sheet.

During the three months ended March 31, 2025 and 2024, the change to the carrying amount of our investments in InCarda was not material.

Equity Investment in ImaginAb

On March 18, 2021, TRC entered into a securities purchase agreement with ImaginAb, to purchase 4,051,724 shares of ImaginAb Series C preferred stock for $ 4.7 million.

On the same day, TRC also entered into a securities purchase agreement with one of ImaginAb’s common stockholders to purchase 4,097,157 shares of ImaginAb common stock for $ 1.3 million.

ImaginAb is a privately held biotechnology company focused on clinically managing cancer and autoimmune diseases via molecular imaging.

$ 0.4 million was incurred for investment due diligence costs and execution and recorded as part of the equity investment in the condensed consolidated balance sheets.

On July 20, 2022, under the terms of the TRC Equity Purchase Agreement, TRC transferred to ITH all of TRC’s ownership interests and investments in ImaginAb.

On March 14, 2023, ITH entered into a securities purchase agreement with ImaginAb to purchase 270,568 shares of ImaginAb Series C-2 preferred stock for $ 0.6 million.

On September 14, 2023, ITH entered into a securities purchase agreement with ImaginAb to purchase another 405,852 shares of ImaginAb Series C-2 preferred stock for $ 0.6 million.

On February 23, 2024, ITH purchased a subordinated convertible promissory note (the “ImaginAb Convertible Note”) from ImaginAb for a total purchase price of $ 2.7 million.

The ImaginAb Convertible Note bears an annual interest rate of 10 % and shall be due and payable upon the earlier to occur of January 31, 2025 and certain events defined in the ImaginAb Convertible Note.

Under certain circumstances, the ImaginAb Convertible Note is convertible at the option of ITH into ImaginAb’s equity securities at defined conversion prices.

The ImaginAb Convertible Note is subordinate to certain existing indebtedness of ImaginAb as defined in the ImaginAb Convertible Note.

As of September 30, 2024 , one of ImaginAb’s six board members was designated by ITH.

As of September 30, 2024 and December 31, 2023, we held 11.8 % and 12.4 %, respectively, of ImaginAb equity ownership.

Since March of 2021, ITH has invested $ 7.6 million in 8,825,301 shares of common and preferred stock, and $ 4.8 million in a convertible note of ImaginAb, Inc.

(“ImaginAb”), a privately held biotechnology company focused on clinically managing cancer and autoimmune diseases via molecular imaging.

On January 13, 2025, ITH and ImaginAb executed an amendment to extend the maturity date of the convertible note from January 31, 2025 to May 30, 2025 .

As of March 31, 2025, and December 31, 2024, we held an 11.8 % equity interest in ImaginAb.

Our investment in ImaginAb does not provide us with the ability to control or have significant influence over ImaginAb’s operations.

2 unchanged sentences

Our maximum exposure to loss is equal to the amount we invested in the entity.

Because ImaginAb’s equity securities are not publicly traded and do not have a readily determinable fair value, we account for our investment in ImaginAb’s Series C preferred stock, Series C-2 preferred stock and common stock using the measurement alternative.

Because ImaginAb’s equity securities are not publicly traded and do not have a readily determinable fair value, we account for our investment in ImaginAb’s preferred stock and common stock using the measurement alternative.

As of March 31, 2025 and December 31, 2024, our investment in the preferred stock and common stock amounted to $ 7.6 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 our equity investments in ImaginAb during the three months ended March 31, 2025 and 2024.

We account for the ImaginAb convertible note as a trading security, measured at fair value using a Monte Carlo simulation model with the probability of certain qualified events and the assumptions of risk-free rate, volatility of stock price and timing of certain qualified events.

As of September 30, 2024 and December 31, 2023, our investment in ImaginAb’s Series C preferred stock, Series C-2 preferred stock and common stock amounted to $ 7.6 million and recorded as equity and long-term investments in the unaudited condensed consolidated balance sheets.

As of September 30, 2024 , we recorded $ 3.1 million in fair value of the ImaginAb Convertible Note as equity and long-term investments in the unaudited condensed consolidated balance sheet.

During the three and nine months ended September 30, 2024, we recorded $ 0.1 million and $ 0.4 million, respectively, in net unrealized gain on the ImaginAb Convertible Note as changes in fair values of equity and long-term investments, net in the unaudited condensed consolidated statements of income and comprehensive income.

There was no change in the carrying amount of our equity investments in ImaginAb.

As of March 31, 2025 and December 31, 2024 , we recorded $ 5.0 million in fair value of the ImaginAb convertible note as equity and long-term investments in the unaudited condensed consolidated balance sheet.

There was a minimal change in fair value of the ImaginAb convertible note for the three months ended March 31, 2025.

During the three months ended March 31, 2024, we recorded $ 0.2 million in net unrealized loss on the ImaginAb convertible note as changes in fair values of equity and long-term investments, net, in the unaudited condensed consolidated statements of income and comprehensive income.

Convertible Promissory Note in Gate Neurosciences

On November 24, 2021, TRC entered into a Convertible Promissory Note Purchase Agreement with Gate to acquire a convertible promissory note (the “Gate Convertible Note”) with a principal amount of $ 15.0 million.

From 2021 to 2024, ITH invested in Gate Neurosciences, Inc.

(“Gate”) a total of $ 51.5 million in convertible notes (the “Gate 2021 Convertible Note”).

Gate 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.

The investment is intended to fund Gate's ongoing development and research.

The Gate Convertible Note bears an annual interest rate of 8 % and will convert into shares of common stock of Gate upon a qualified event or into shares of shadow preferred stock of Gate (“Shadow Preferred”) upon a qualified financing.

A qualifying event can be a qualified initial price offering, a qualified merger, or a merger with a special-purpose acquisition company (“SPAC”).

On March 3, 2025, ITH entered into a Convertible Promissory Note Purchase Agreement with Gate to acquire a convertible promissory note (the “Gate 2025 Convertible Note”) with a principal amount of $ 15.0 million.

The Gate 2025 Convertible Note bears an annual interest rate of 8 % and will mature on November 24, 2026 .

The Gate 2025 Convertible Note will convert into shares of series seed preferred stock of Gate upon a qualified initial public offering (“IPO”), or into shares of shadow preferred stock of Gate (“Shadow Preferred”) upon a qualified financing.

Shadow Preferred means preferred stock having identical rights, preferences and restrictions as the preferred stock that would be issued in a qualified financing.

The number of common stock shares to be issued in a qualified event shall be equal to the amount due on the conversion date divided by the lesser of a capped conversion price (the “Capped Conversion Price”) and the qualified event price (the “Qualified Event Price”).

The Capped Conversion Price is calculated as $50.0 million divided by the number of shares of common stock outstanding at such time on a fully diluted basis.

The Qualified Event Price is the price per share determined by the qualified event.

A qualified financing is a sale or series of sales of preferred stock where (i) at least 50 percent of counterparties are not existing shareholders, (ii) net proceeds to Gate are at least $35.0 million, and (iii) the stated or implied equity valuation of Gate is at least $80.0 million.

On July 20, 2022, under the terms of the TRC Equity Purchase Agreement, TRC transferred to ITH all of TRC’s debt investments in Gate.

On February 2, 2023, ITH entered into a Note Amendment Agreement (the “Note Amendment Agreement”) with Gate to amend the Gate Convertible Note.

Pursuant to the Note Amendment Agreement, the principal amount of the Gate Convertible Note was increased from $ 15.0 million to $ 21.5 million, which represents the original principal and accrued interest as of the first amendment date and an additional cash investment of $ 5.0 million.

All other material terms of the Gate Convertible Note were unchanged.

On October 6, 2023, ITH entered into a Second Note Amendment Agreement with Gate to amend the Note Amendment Agreement.

Pursuant to the Second Note Amendment Agreement, the principal amount of the Gate Convertible Note was increased from $ 21.5 million to $ 27.7 million, which represents the principal and accrued interest as of the second amendment date and an additional cash investment of $ 5.0 million.

All other material terms of the Gate Convertible Note were unchanged.

On February 13, 2024, ITH entered into a Third Note Amendment Agreement with Gate to amend the Gate Convertible Note.

Pursuant to the Third Note Amendment Agreement, the principal amount of the Gate Convertible Note was increased from $ 27.7 million to $ 33.5 million, which represents the principal and accrued interest as of the third amendment date and an additional cash investment of $ 5.0 million.

All other material terms of the Gate Convertible Note were unchanged.

On August 5, 2024, ITH entered into a Fourth Note Amendment Agreement with Gate to amend the Gate Convertible Note.

Pursuant to the Fourth Note Amendment Agreement, the principal amount of the Gate Convertible Note was increased from $ 33.5 million to $ 39.8 million, which represents the principal and accrued interest as of the fourth amendment date and an additional cash investment of $ 5.0 million.

All other material terms of the Gate Convertible Note were unchanged.

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

As of September 30, 2024 and December 31, 2023, the fair value of the Gate Convertible Note was estimated at $ 39.4 million and $ 28.0 million, respectively, and recorded as equity and long-term investments in the unaudited condensed consolidated balance sheets.

We rec orded $ 0.4 million and $ 0.7 million in unrealized loss for the three and nine months ended September 30, 2024, 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 recorded $ 0.1 million and $ 0.8 million in unrealized gain as changes in fair values of equity and long-term investments, net in the unaudited condensed consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2023, respectively.

We account for both the Gate 2021 Convertible Note and the Gate 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 Gate, risk-free rate, expected stock price, volatility of its peer companies, and the time until a financing is raised.

As of March 31, 2025, and December 31, 2024, the fair value of the Gate 2021 Convertible Note was estimated at $ 70.0 million and $ 50.9 million, respectively, and recorded as equity and long-term investments in the unaudited condensed consolidated balance sheets.

We rec orded $ 19.1 million in unrealized gain and $ 0.6 million in unrealized loss for the three months ended March 31, 2025 and 2024, respectively, as changes in fair values of equity and long-term investments, net in the unaudited condensed consolidated statements of income and comprehensive income.

As of March 31, 2025, the fair value of the Gate 2025 Convertible Note was e stimated at $ 15.2 million and recorded as equity and long-term investments in the unaudited condensed consolidated balance sheet.

We recorded $ 0.2 million in unrealized gain for the three months ended March 31, 2025 as changes in fair values of equity and long-term investments, net in the una udited condensed consolidated statement of income and comprehensive income.

Equity Investment in Nanolive

On February 18, 2022, TRC entered into an investment and shareholders agreement with Nanolive to purchase 18,750,000 shares of Nanolive Series C preferred stock for $ 9.8 million (equivalent to 9.0 million CHF).

Nanolive SA is 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 therap y.

$ 0.7 million was incurred fo r investment due diligence costs and execution and recorded as part of the equity and long-term investment in the condensed consolidated balance sheets.

On July 20, 2022, under the terms of the TRC Equity Purchase Agreement, TRC transferred to ITH all of TRC’s ownership interests and investments in Nanolive.

ITH has the right to designate one member to Nanolive’s board.

ITH also has the right to designate another member, who will be mutually acceptable to ITH and another stockholder, to Nanolive’s board.

As of September 30, 2024 , no Innoviva designee is serving on Nanolive’s six -member board.

As of September 30, 2024 and December 31, 2023, we held 13.4 % and 15.3 %, respectively, of Nanolive equity ownership.

In 2022, ITH invested $ 10.6 million in 18,750,000 shares of the 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.

As of March 31, 2025 and December 31, 2024, we held 13.0 % of Nanolive equity ownership.

Our investment in Nanolive does not provide us with the ability to control or have significant influence over Nanolive’s operations.

3 unchanged sentences

Because Nanolive’s equity securities are not publicly traded and do not have a readily determinable fair value, we account for our investment in Nanolive’s Series C preferred stock using the measurement alternative.

As of September 30, 2024 and December 31, 2023, $ 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.

As of March 31, 2025 and December 31, 2024, $ 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.

Equity Investment in Lyndra

On February 27, 2025, Strategic Partners entered into a note purchase agreement with Lyndra Therapeutics, Inc.

(“Lyndra”) to acquire a convertible promissory note (the “Lyndra Convertible Note”) with a principal amount of $ 9.2 million.

Lyndra is a clinical-stage company with a novel drug delivery platform that enables the administration of ultra-long-acting oral drugs.

The Lyndra Convertible Note bears an annual interest rate of 8 % and will mature on November 27, 2025 .

The Lyndra Convertible Note would convert into shares of preferred stock of Lyndra upon a qualified financing as defined in the agreement.

Upon maturity or certain events and if no qualified financing has occurred, the principal and unpaid accrued interest may either be repaid in full in cash plus a certain premium or convert into shares of preferred stock of Lyndra as defined in the agreement.

Our investment in Lyndra does not provide us with the ability to control or have significant influence over Lyndra’s operations.

Based on our evaluation, we determined that Lyndra 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 the Lyndra Convertible Note as a trading security.

In late March of 2025, Lyndra began winding down its operations due to its inability to secure additional financing and concurrently initiated a process to seek potential acquirers for the business.

We believe Lyndra’s proprietary platform holds significant value – greater than the carrying value of the Lyndra Convertible Note – thereby supporting full recovery of the Lyndra Convertible Note, which is secured by a first-priority interest in Lyndra’s assets.

As of March 31, 2025, we recorded the Lyndra Convertible Note at $ 9.2 million, reflecting its original cost, as part of equity and long-term investments in the unaudited condensed consolidated balance sheet.

Reconciliation of Equity and Long-Term Investments Balances

3 unchanged sentences

Purchases of trading securities

Purchases of equity and long-term investments

Changes in fair value, net

Reclassification of current portion

Equity and long-term investments as of December 31, 2024

1 unchanged sentence

Changes in fair value, net

Equity and long-term investments as of September 30, 2024

Reclassification of current portion

Equity and long-term investments as of March 31, 2025

Available-for-Sale Securities

1 unchanged sentence

Available-for-sale securities are summarized below:

September 30, 2024

March 31, 2025

(In thousands)

5 unchanged sentences

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

As of September 30, 2024 and December 31, 2023, all available-for-sale investments were money market funds, and there was no credit loss recognized.

As of March 31, 2025 and December 31, 2024, all available-for-sale investments were money market funds, and there was no credit loss recognized.

Fair Value Measurements

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

Estimated Fair Value Measurements as of September 30, 2024 Using:

Estimated Fair Value Measurements as of March 31, 2025 Using:

Types of Instruments

Markets for Identical Assets

Other Observable Inputs

Significant Unobservable Inputs

(In thousands)

4 unchanged sentences

Equity investment - InCarda Warrants

Convertible debt investment - Armata Note

Term loan investment - Armata July 2023 Term Loan

Term loan investment - Armata March 2024 Term Loan

Convertible debt investment - InCarda Note

Term loan investment - Armata March 2025 Term Loan

Convertible debt investment - Armata Note

Convertible debt investment - InCarda 2024 Convertible Note

Convertible debt investment - InCarda 2025 Convertible Note

Convertible debt investment - ImaginAb Note

Convertible debt investment - Gate Note

Convertible debt investment - Gate 2021 Convertible Note

Convertible debt investment - Gate 2025 Convertible Note

Convertible debt investment - Lyndra Convertible Note

Total assets measured at estimated fair value

2 unchanged sentences

Types of Instruments

Markets for Identical Assets

Other Observable Inputs

Significant Unobservable Inputs

(In thousands)

3 unchanged sentences

Equity investment - Armata Warrants

Convertible debt investment - Armata Note

Equity investment - InCarda Warrants

Term loan investment - Armata July 2023 Term Loan

Convertible debt investment - Gate Note

Term loan investment - Armata March 2024 Term Loan

Convertible debt investment - Armata Note

Convertible debt investment - InCarda 2024 Convertible Note

Convertible debt investment - ImaginAB Note

Convertible debt investment - Gate 2021 Convertible Note

Total assets measured at estimated fair value

Total fair value of debt

Contingent value rights

Total liabilities at estimated fair value

There were no transfers between Level 1, Level 2 or Level 3 during the periods presented.

1 unchanged sentence

The fair values of the warrants in Armata classified within Level 2 are based upon observable inputs that may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications.

The Gate Convertible Note, the Armata Convertible Note, the Armata July 2023 Term Loan, the Armata March 2024 Term Loan, the InCarda Convertible Note, the InCarda Warrants, the ImaginAb Convertible Note, private placement positions held by ISP Fund LP, and contingent value rights are classified as Level 3 financial instruments as these securities are not publicly traded and the assumptions used in the valuation model for valuing these securities are based on significant unobservable and observable inputs including those of publicly traded peer companies.

The investments classified as Level 3 financial instruments are securities that are not publicly traded and the assumptions used in the valuation model for valuing these securities are based on significant unobservable and observable inputs including those of publicly traded peer companies.

There are uncertainties on the fair value measurement of the instruments classified under Level 3 due to the use of unobservable inputs and interrelationships between these unobservable inputs, which could result in higher or lower fair value measurements.

3 unchanged sentences

We recognized goodwill of $ 11.5 million and $ 6.4 million from our acquisitions of Entasis and La Jolla, respectively, in 2022.

The carrying amount of goodwill as of September 30, 2024 and December 31, 2023 was $ 17.9 million .

The carrying amount of goodwill as of March 31, 2025 and December 31, 2024 was $ 17.9 million .

We have no t recognized any impairment losses related to goodwill during the periods presented.

Intangible assets with definite lives are amortized over their estimated useful lives.

The carrying basis and accumulated amortization of recognized intangible assets as of September 30, 2024 and December 31, 2023 were as follows:

September 30, 2024

The carrying basis and accumulated amortization of recognized intangible assets as of March 31, 2025 and December 31, 2024 were as follows:

March 31, 2025

(In thousands)

9 unchanged sentences

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.

The useful l ife of the remaining in-process research and development of $ 2.6 million will be determined upon commercialization of the underlying product candidate;

The useful l ife of the remaining in-process research and development of $ 2.6 million, which pertains to zoliflodacin, will be determined upon commercialization of the underlying product candidate;

thus, no amortization expense for this intangible asset was recognized for the periods presented.

1 unchanged sentence

These are intangible assets with determinable lives and are amortized over their estimated useful lives.

We recognized amortization expense of $ 6.5 million and $ 19.4 million for the three and nine months ended September 30, 2024 , respectively.

We recognized amortization expense of $ 6.5 million and $ 15.3 million for the three and nine months ended September 30, 2023 , respectively.

The upfront fee of $ 4.0 million paid to Basilea for the exclusive commercialization right of ZEVTERA ® in the U.S.

in December 2024 was recorded as an intangible asset and is being amortized over the initial term of the agreement (refer to Note 4, “License and Collaboration Arrangements”).

We recognized amortization expense of $ 6.5 million and $ 6.4 million for the three months ended March 31, 2025 and 2024 , respectively.

Future amortization expense is expected to be $ 19.8 million for the remainder of 2025, $ 26.3 million for each of the years from 2026 to 2029 and $ 74.3 million thereafter.

1 unchanged sentence

Inventory consisted of the following:

September 30,

(in thousands)

3 unchanged sentences

Total inventory

As of September 30, 2024 and December 31, 2023 , total inventory included net fair value adjustments resulting from the acquisition of La Jolla of approximately $ 10.9 million and $ 23.0 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 $ 1.8 million and $ 12.1 million, respectively, for the three and nine months ended September 30, 2024 .

The fair value adjustments recorded as part of cost of products sold amounted to $ 5.4 million and $ 19.2 million for the three and nine months ended September 30, 2023, respectively.

As of March 31, 2025 and December 31, 2024, total inventory included net fair value adjustments resulting from the acquisition of La Jolla of approxima tely $ 8.9 mill ion and $ 9.2 million, respectively , which will be amortized an d recognized as cost of products sold when sales occur in future periods.

The fair value adjustments recorded as part of cost of products sold amounted to $ 0.2 million and $ 6.8 million for the three months ended March 31, 2025 and 2024, respectively.

Other Accrued Liabilities

Other accrued liabilities consisted of the following:

September 30,

(in thousands)

3 unchanged sentences

Current portion of lease liabilities

Current portion of deferred royalty obligations

Royalty obligation payable

Current portion of deferred royalty obligations

Accrued license fees and royalties

Total other accrued liabilities

(1) Amount as of March 31, 2025 and December 31, 2024 includes $ 8.6 million and $ 5.3 million advance payments received from our partner for inventory supply as discussed in Note 4, “License and Collaboration Arrangements”.

Other Long-term Liabilities

Other long-term liabilities consisted of the following:

September 30,

(in thousands)

1 unchanged sentence

Long-term portion of lease liabilities

Contingent value rights liability

Total other long-term liabilities

2 unchanged sentences

The following table summarizes stock-based compensation expense:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

3 unchanged sentences

Black-Scholes-Merton assumptions used in calculating the estimated value of stock options granted by Innoviva on the date of grant were as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Risk-free interest rate

1 unchanged sentence

4.1 % - 4.3 %

3.50 % - 4.21 %

Expected term (in years)

1 unchanged sentence

36.7 % - 36.8 %

37.3 % - 38.5 %

Dividend yield

2 unchanged sentences

$ 4.97 - $ 6.93

$ 5.22 - $ 5.97

Stockholders' Equity

3 unchanged sentences

Repurchases may also be made pursuant to a trading plan under Rule 10b5-1 under the Exchange Act, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so because of self-imposed trading blackout periods or other regulatory restrictions.

The share repurchase program was completed in April 2024.

From January to April 2024, we repurchased 986,928 shares in the open market at an average price of $ 15.12 per share for a total amount of approximately $ 14.9 million.

For the three months ended March 31, 2024, we repurchased 634,107 shares in the open market at an average price of $ 15.24 per share for a total amount of approximately $ 9.7 million.

Subsequent to March 31, 2024 and through April 25, 2024, we completed the program by repurchasing 352,821 shares in the open market at an average price of $ 14.91 per share for a total amount of approximately $ 5.3 million.

All repurchased shares were retired.

2 unchanged sentences

Our debt consists of the following:

September 30,

(In thousands)

3 unchanged sentences

Total long-term debt, net

Convertible Subordinated Notes Due 2023

In January 2013, we completed an underwritten public offering of $ 287.5 million aggregate principal amount of our 2023 Notes, which matured on January 15, 2023.

The remaining balance of the 2023 Notes of $ 96.2 million was fully paid upon the maturity date.

Convertible Senior Notes Due 2025

4 unchanged sentences

The 2025 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 for the 2025 Notes is 57.9240 shares of our common stock per $1,000 principal amount of the 2025 Notes (which is equivalent to an initial conversion price of approximately $ 17.26 per share), representing a 30.0 % conversion premium over the last reported sale price of the Company’s common stock on August 1, 2017, which was $ 13.28 per share.

The conversion rate is subject to customary anti-dilution adjustments in certain circumstances.

1 unchanged sentence

Prior to February 15, 2025, the 2025 Notes will be convertible at the option of the holders only upon the occurrence of specified events and during certain periods, as described below .

From, and including, February 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, the 2025 Notes will be convertible at any time.

On or after February 15, 2025, holders of the 2025 Notes may convert their 2025 Notes at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2025 Notes.

Holders of the 2025 Notes may convert all or a portion of their 2025 Notes prior to the close of business on February 15, 2025 only under the following circumstances:

1 unchanged sentence

• for five consecutive business days, if the average trading price per $1,000 of Notes during the prior 10 consecutive trading days is less than 98 % of the product of our closing common stock price and the conversion rate of the 2025 Notes on such day;

• upon the occurrence of specified corporate events, including certain distributions, the occurrence of a fundamental changes (as defined in the indenture governing the 2025 Notes) or a transaction resulting in our common stock converting into other securities or property or assets.

• upon the occurrence of specified corporate events, including certain distributions, the occurrence of a fundamental change (as defined in the indenture governing the 2025 Notes) or a transaction resulting in our common stock converting into other securities or property or assets.

In the event of default or a fundamental change (as defined above), holders of the 2025 Notes may require us to repurchase all or a portion of their 2025 Notes at price equal to 100 % of the principal amount of the 2025 Notes, plus any accrued and unpaid interest.

1 unchanged sentence

Our outstanding 2025 Notes balances consisted of the following:

September 30,

(In thousands)

1 unchanged sentence

Net carrying amount

The following table sets forth total interest expense recognized related to the 2025 Notes for the three and nine months ended September 30, 2024 and 2023:

Three Months Ended September 30,

Nine Months Ended September 30,

The following table sets forth total interest expense recognized related to the 2025 Notes for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

(In thousands)

4 unchanged sentences

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 proceeds include the 2028 Notes sold pursuant to the $ 45.0 million over-allotment option granted by us to the initial purchasers, of which $ 36.0 million was exercised.

The 2028 Notes were sold in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act.

The net proceeds from the sale of the $ 261.0 million aggregate principal amount of 2028 Notes were approximately $ 252.6 million after deducting the initial purchasers’ discounts and commissions and our estimated offering expenses.

We used approximately $ 21.0 million of the net proceeds from the offering to fund the cost of entering into the capped call transactions described below.

In addition, we used $ 165.6 million of the remaining net proceeds to repurchase $ 144.8 million aggregate principal amount of the 2023 Notes in separate and individually negotiated transactions with certain holders of the 2023 Notes, which closed concurrently with the issuance of the 2028 Notes.

We expect to use the remaining net proceeds for general corporate purposes.

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.

5 unchanged sentences

• upon the occurrence of specified corporate events, including certain distributions, the occurrence of a fundamental changes (as defined in the indenture governing the 2028 Notes) or a transaction resulting in our common stock converting into other securities or property or assets.

• upon the occurrence of specified corporate events, including certain distributions, the occurrence of a fundamental change (as defined in the indenture governing the 2028 Notes) or a transaction resulting in our common stock converting into other securities or property or assets.

On or after September 15, 2027, holders of the 2028 Notes may convert their 2028 Notes at any time until the close of the business on the second day immediately preceding the maturity date of the 2028 Notes.

11 unchanged sentences

Our outstanding 2028 Notes balance consisted of the following:

September 30,

(In thousands)

1 unchanged sentence

Net carrying amount

The following table sets forth total interest expense recognized related to the 2028 Notes for the three and nine months ended September 30, 2024 and 2023:

Three months ended September 30,

Nine months ended September 30,

The following table sets forth total interest expense recognized related to the 2028 Notes for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

(In thousands)

3 unchanged sentences

Debt Maturities

The aggregate scheduled maturities of our convertible debt as of September 30, 2024 were as follows:

The aggregate scheduled maturities of our convertible debt as of March 31, 2025 were as follows:

(In thousands)

September 30, 2024

Years ending December 31:

7 unchanged sentences

The La Jolla Royalty Agreement is subject to maximum aggregate royalty payments to HCR of $ 225.0 million.

For the three and nine months ended September 30, 2024, we recognized interest expense of $ 2.6 million and $ 8.1 million, respectively.

The carrying value of the deferred royalty obligation as of September 30, 2024 and December 31, 2023 was $ 71.1 million and $ 69.9 million, respectively (refer to Note 8 “Balance Sheet Components”) .

During the nine months ended September 30, 2024 , we made royalty payments to HCR of $ 6.4 million.

The deferred royalty obligation was valued using Level 3 inputs, and its carrying value as of September 30, 2024 approximates fair value.

For the three months ended March 31, 2025 and 2024, we recognized interest expense of $ 1.6 million and $ 2.7 million, respectively.

The carrying value of the deferred royalty obligation as of March 31, 2025 and December 31, 2024 was $ 67.8 million and $ 69.5 million, respectively (refer to Note 8, “Balance Sheet Components”) .

During the three months ended March 31, 2025 and 2024 , we made royalty payments to HCR of $ 3.0 million and $ 1.9 million, respectively.

The deferred royalty obligation was valued using Level 3 inputs, and its carrying value as of March 31, 2025 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 ® .

1 unchanged sentence

Under the terms of the La Jolla Royalty Agreement, if we are unable to meet certain obligations, including the obligation to use commercially reasonable and diligent efforts to commercialize GIAPREZA ® , HCR would have the right to terminate the La Jolla Royalty Agreement and demand payment of either $ 125.0 million or $ 225.0 million (depending on which obligation we have failed to meet) less aggregate royalties already paid to HCR.

As of September 30, 2024 , inclusive of the aggregate royalties paid to HCR by La Jolla under the La Jolla Royalty Agreement prior to our acquisition, La Jolla paid $ 24.4 million of aggregate royalties to HCR.

As of March 31, 2025 , inclusive of the aggregate royalties paid to HCR by La Jolla under the La Jolla Royalty Agreement prior to our acquisition, La Jolla paid $ 30.2 million of aggregate royalties to HCR.

In the event that we fail to pay such amount if and when due in a timely manner, HCR would have the right to foreclose on the GIAPREZA ® -related assets.

2 unchanged sentences

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 immaterial and, therefore, not recognized as of September 30, 2024 and December 31, 2023.

As a result of this assessment, we determined that the fair value of the embedded derivatives is immaterial and, therefore, not recognized as of March 31, 2025 and December 31, 2024.

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.

4 unchanged sentences

The components of lease cost are as follows:

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

(In thousands)

2 unchanged sentences

Total lease costs

Supplemental cash flow information related to leases are as follows:

Nine Months Ended September 30,

Supplemental cash flow information related to leases is as follows:

Three Months Ended March 31,

(In thousands)

Cash paid for amounts included in the measurement of operating lease liabilities

Operating lease right-of-use asset obtained in exchange for operating lease obligations

As of September 30, 2024, our operating leases have weighted-average remainin g term of approximately 2.7 years and the weighted average discount rate on our operating lease liabilities was 7.2 %.

Future minimum payments on our operating leases as of September 30, 2024 were as follows:

As of March 31, 2025, our operating leases have weighted-average remainin g term of approximately 2.5 years and the weighted average discount rate on our operating lease liabilities was 6.9 %.

Future minimum payments on our operating leases as of March 31, 2025 were as follows:

(In thousands)

September 30, 2024

Years ending December 31:

6 unchanged sentences

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.

As of March 31, 2025, we have approximately $ 1.2 million U.S.

dollar equivalent in outstanding purchase commitments under the agreement for the year 2024, which will be utilized in 2025.

As of March 31, 2025, we have approxim ately $ 6.5 million, $ 7.3 million and $ 5.9 million in outstanding purchase commitments under the agreement for the remainder of 2025 and for the years 2026 and 2027, res pectively.

Legal Proceedings

12 unchanged sentences

On November 14, 2023, La Jolla filed a Third Amended Complaint adding additional infringement claims against the Fresenius Kabi Defendants.

We intend to vigorously enforce our intellectual property rights relating to GIAPREZA ® .

Fact discovery closed on March 31, 2024 and expert discovery was completed on August 19, 2024.

On September 13, 2024, La Jolla filed a motion for partial summary judgment of infringement regarding three claims from U.S.

10,548,943 and 10,335,451.

Briefing for this motion concluded on October 15, 2024.

The court has not yet rendered a decision on this motion.

A trial date has not yet been set in this matter.

Given the current status of this matter, we cannot reasonably estimate a potential future loss or a range of potential future losses, if any, and have not recorded a contingent liability accrual as of September 30, 2024.

Indemnification

On February 18, 2025, La Jolla, as well as The George Washington University (collectively, with the La Jolla entities, the “Plaintiffs”) entered into a settlement agreement (the “Settlement Agreement”) with Gland and the Fresenius Kabi Defendants (collectively, “Defendants”) resolving the Hatch-Waxman Act concerning Gland’s ANDA filing.

Under the terms of the Settlement Agreement, Plaintiffs granted Defendants a perpetual, royalty-free and fully paid-up, non-exclusive, non-sublicensable, non-transferable right and license solely to make, have made, use, sell, offer to sell, import, and/or distribute the product that is subject to Gland’s ANDA in the United States commencing in the early 2030s, subject to certain exceptions as is customary in these type of agreements.

As required by law, the settlement is subject to review by the U.S.

Department of Justice and the Federal Trade Commission.

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.

2 unchanged sentences

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 have not accrued any material liabilities in the condensed consolidated financial statements as a result of these provisions.

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 the income tax expense of $ 3.9 million and $ 14.7 million for the three and nine months ended September 30, 2023, respectively.

The Company’s effective income tax rate for the nine months ended September 30, 2024 was 40.5 % compared to 10.6 % for the same period in 2023.

The income tax expense for the nine months ended September 30, 2024 and 2023 was determined based upon estimates of the Company’s effective income tax rates in various jurisdictions.

Our effective tax rate for the nine months ended September 30, 2024 was higher than the expense computed at the U.S.

federal statutory income tax rate due primarily to valuation allowance against unrealized investment losses, state income taxes and nondeductible expenses, partially offset by foreign-derived intangible income tax deduction and research and development credits.

Subsequent Event

On October 31, 2024, ITH and ImaginAb entered into a First Amendment to the ImaginAb Convertible Note.

Pursuant to this agreement, the principal amount of the ImaginAb Convertible Note was increased from $ 2.7 million to $ 4.8 million, which represents the principal, accrued interest and certain commitment fees as of the amendment date, and an additional cash investment of $ 1.5 million.

All other material terms of the ImaginAb Convertible Note were unchanged.

To date, we have not incurred any material costs and, as of March 31, 2025 , we have not accrued any material liabilities in the unaudited condensed consolidated financial statements as a result of these provisions.

We recorded income tax expense of $ 8.0 mill ion and $ 8.6 million for the three months ended March 31, 2025 and 2024, respectively.

The Company’s effective income tax rate for the three months ended March 31, 2025 was ( 20.7 )% compared to 19.0 % for the same period in 2024.

The income tax expense for the three months ended March 31, 2025 and 2024 was determined based upon estimates of the Company’s effective income tax rates in various jurisdictions.

Our effective tax rate for the three months ended March 31, 2025 , was negative, primarily due to a year-to-date tax expense on a year-to-date pretax loss, driven by the valuation allowance recorded on unrealized losses related to certain non-controlled investments.

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 (loss).

This helps guide decisions related to commercial operations, product development, and regulatory compliance, ensuring resources are allocated effectively to support growth initiatives.

Consolidated net income (loss) also helps inform reinvestment strategies to strengthen our market position and drive innovation.

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

Our revenues are generated primarily from our collaborative arrangements and royalty payments from GSK, located in Great Britain.

We also generate revenue from net product sales of GIAPREZA ® , XERAVA ® , and XACDURO ® , as well as license and other revenues.

Refer to Note 3, “Revenue Recognition”, for more information on our revenues for the periods presented.

Our long-term assets are located within the United States.

The CODM does not review assets at a different level or category than the amounts disclosed in the consolidated balance sheets.

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

Three months ended March 31,

(In thousands)

Total revenue

Cost of products sold

Amortization of acquired intangible assets

Selling and marketing

General and administrative

Research and development - External services

Research and development - Internal expenses

Changes in fair values of equity method investments, net

Changes in fair values of equity and long-term investments, net

Interest and dividend income

Interest expense

Other expense, net

Income tax expense, net

Consolidated net income (loss)

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements