What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-11-06 · 93 added, 116 removed, 134 unchanged (61% of the section changed)

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Important factors that we believe could cause actual results or events to differ materially from our forward‑looking statements include, but are not limited to, risks related to:

lower than expected future royalty revenue from respiratory products partnered with GSK, the commercialization of RELVAR ® /BREO ® ELLIPTA ® , ANORO ® ELLIPTA ® , GIAPREZA ® , XERAVA ® and XACDURO ® in the jurisdictions in which these products have been approved;

lower than expected future royalty revenue from respiratory products partnered with GSK, the commercialization of RELVAR ® /BREO ® ELLIPTA ® , ANORO ® ELLIPTA ® , GIAPREZA ® , XERAVA ® , XACDURO ® , and ZEVTERA ® in the jurisdictions in which these products have been approved;

the strategies, plans and objectives of the Company (including the Company's growth strategy and corporate development initiatives);

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the timing, manner and amount of capital deployment, including potential capital returns to stockholders;

and risks related to the Company’s growth strategy and risks discussed in “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (“SEC”) on February 29, 2024, and as amended on March 5, 2024 and March 22, 2024 (“2023 Form 10-K”), and Item 1A of Part II of our Quarterly Reports on Form 10-Q and below in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Item 2 of Part I.

and risks related to the Company’s growth strategy and risks discussed in “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (“SEC”) on February 26, 2025, and as amended on March 24, 2025 (“2024 Form 10-K”), and Item 1A of Part II of our Quarterly Reports on Form 10-Q and below in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Item 2 of Part I.

All forward-looking statements in this Quarterly Report on Form 10-Q are based on current expectations as of the date hereof and we do not assume any obligation to update any forward-looking statements on account of new information, future events or otherwise, except as required by law.

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Innoviva, Inc.

(and where context requires, together with its subsidiaries referred to as “Innoviva”, the “Company”, or “we” and other similar pronouns) is a company with a portfolio of royalties and innovative healthcare assets.

(and where context requires, together with its subsidiaries referred to as “Innoviva”, the “Company”, or “we” and other similar pronouns) is a company with a core royalties portfolio, a leading critical care and infectious disease platform known as Innoviva Specialty Therapeutics (“IST”), and a portfolio of strategic investments in other healthcare assets.

Our royalty portfolio contains respiratory assets partnered with Glaxo Group Limited (“GSK”), including RELVAR ® /BREO ® ELLIPTA ® (fluticasone furoate/vilanterol, “FF/VI”) and ANORO ® ELLIPTA ® (umeclidinium bromide/ vilanterol, “UMEC/VI”).

Under the Long-Acting

Beta2 Agonist (“LABA”) Collaboration Agreement, Innoviva is entitled to receive royalties from GSK on sales of RELVAR ® /BREO ® ELLIPTA ® as follows:

Under the Long-Acting Beta2 Agonist (“LABA”) Collaboration Agreement, Innoviva is entitled to receive royalties from GSK on sales of RELVAR ® /BREO ® ELLIPTA ® as follows:

15% on the first $3.0 billion of annual global net sales and 5% for all annual global net sales above $3.0 billion;

and royalties from the sales of ANORO ® ELLIPTA ® , which tier upward at a range from 6.5% to 10%.

We expanded our portfolio through the acquisition of Entasis Therapeutics Holdings Inc.

(“Entasis”) on July 11, 2022 and the acquisition of La Jolla Pharmaceutical Company (“La Jolla”) on August 22, 2022.

Our commercial and marketed products include GIAPREZA ® (angiotensin II), approved to increase blood pressure in adults with septic or other distributive shock, and XERAVA ® (eravacycline) approved for the treatment of complicated intra-abdominal infections in adults.

Our third product, XACDURO ® (formerly known as sulbactam-durlobactam or SUL-DUR), was approved by the United States Food and Drug Administration (“FDA”) for the treatment of hospital-acquired and ventilator-associated pneumonias caused by Acinetobacter in adults on May 23, 2023.

We commenced commercial sales of XACDURO ® in the third quarter of 2023.

Our development pipeline includes zoliflodacin, an investigational treatment for uncomplicated gonorrhea that reported positive data in a pivotal Phase 3 clinical trial on November 1, 2023.

As such, we have a wholly owned robust critical care and infectious disease operating platform with a hospital focus anchored by three differentiated products with significant growth potential and a promising drug candidate.

In addition, we own other strategic healthcare assets, such as a large equity stake in Armata Pharmaceuticals (“Armata”), a leader in development of bacteriophages with potential use across a range of infectious and other serious diseases.

We also have economic interests in other healthcare companies.

Our 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 ® (formerly known as sulbactam-durlobactam or SUL-DUR) 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 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, a potentially 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 (“Armata”), a company focused on development of bacteriophages with potential use across a range of infectious and other serious diseases.

Our corporate strategy is currently focused on increasing stockholder value by, among other things, maximizing the potential value of our respiratory assets partnered with GSK, optimizing our operations and augmenting capital allocation.

We continue to diversify our royalty management business through actively pursuing opportunistic acquisitions of promising companies and assets in the healthcare industry and enhancing the returns on our capital.

In particular, our recent acquisitions of Entasis and La Jolla created a robust hospital and infectious disease platform.

Third Quarter 2024 and Recent Highlights:

First Quarter 2025 and Recent Highlights:

Financial Highlights

• Third quarter 2024 gross royalty revenue from GSK was $60.5 million, compared to $57.0 million for the third quarter 2023.

• Third quarter 2024 net product sales were $27.8 million, which included U.S.

net product sales of $19.7 million and ex-U.S.

product sales of $8.1 million.

net product sales consisted of $13.1 million from GIAPREZA ® , $2.3 million from XERAVA ® , and $4.3 million from XACDURO ® , a 68% increase compared to $11.8 million for the third quarter 2023.

• Royalty revenue:

First quarter 2025 gross royalty revenue from GSK was $61.3 million, compared to $61.9 million for the first quarter of 2024.

• Net product sales:

First quarter 2025 net product sales totaled $30.3 million, consisting of $26.4 million in U.S.

net product sales and $3.9 million in ex-US net product sales, compared to $19.1 million in net product sales for the first quarter of 2024.

net product sales included $17.3 million from GIAPREZA ® , $5.8 million from XACDURO ® , and $3.2 million from XERAVA ® , representing a 52% increase compared to total U.S.

net product sales of $17.4 million in the first quarter of 2024.

• Income from operations:

First quarter 2025 income from operation was $41.4 million, an increase of 61% from $25.8 million in the first quarter of 2024.

• Equity and long-term investments:

First quarter 2025 unfavorable changes in fair values of equity and long-term investments totaled $78.8 million, compared to favorable changes of $22.0 million in the first quarter of 2024, primarily due to the share price depreciation of Armata and certain equity investments managed by ISP Fund LP.

• Net income:

First quarter 2025 net loss was $46.6 million, or ($0.74) basic per share, compared to net income of $36.5 million, or $0.58 basic per share, for the first quarter of 2024.

• Cash and cash equivalents:

Totaled $319.1 million.

Royalty and net product sales receivables totaled $77.9 million as of March 31, 2025.

Key Business and R&D Highlights

• XACDURO ® (sulbactam for injection;

durlobactam for injection), co-packaged for intravenous use, a targeted antibacterial treatment for patients with hospital-acquired bacterial pneumonia and ventilator-associated bacterial pneumonia (HABP/VABP) caused by susceptible isolates of Acinetobacter baumannii calcoaceticus complex.

o XACDURO ® was recently nominated for the 2024 Prix Galien USA Award for Best Biotechnology Product, which recognizes excellence in scientific innovation that improves the state of human health.

• Zoliflodacin:

a potential first-in-class, single dose, oral antibiotic is currently being developed in partnership with The Global Antibiotic Research & Development Partnership (GARDP) for the treatment of patients with uncomplicated gonorrhea.

o In September 2024, we presented additional findings on its investigational agent zoliflodacin at the 2024 Sexually Transmitted Infections Prevention Conference in Atlanta.

The first oral presentation demonstrated that zoliflodacin had potent in vitro activity against 200 clinical isolates, consistent with previous US surveillance data.

The second presentation demonstrated that microbiological cure rates for specific subgroups were comparable to the primary endpoint analysis.

Safety in these subgroups was also comparable.

o In October 2024, we had five clinical presentations at IDWeek 2024, which took place in Los Angeles.

One oral presentation on zoliflodacin included a review of the unique public-private partnership that led the clinical development of zoliflodacin.

The second presentation highlighted the activity of sulbactam-durlobactam and standard-of-care antibiotics against Acinetobacter baumannii-calcoaceticus complex for hospitalized patients in the

Three posters were presented including two on zoliflodacin:

In vitro activity against baseline isolates in US participants from the phase 3 trial and a pharmacometrics analysis supporting dose selection.

Surveillance data of eravacycline against clinical pathogens, collected worldwide from multiple infections sites during 2018-2022 was also presented.

o We continue to advance zoliflodacin following its successful Phase 3 clinical trial results and expect to submit an NDA to the U.S.

FDA in early 2025.

a potential first-in-class, single dose, oral antibiotic is currently being developed together with The Global Antibiotic Research & Development Partnership (“GARDP”) for the treatment of patients with uncomplicated gonorrhea.

• Zoliflodacin NDA on track for filing with the U.S.

FDA in the first half of 2025.

• ZEVTERA ® (ceftibiprole):

an advanced-generation cephalosporin antibiotic that is approved in the U.S.

for three specific treatment indications.

ZEVTERA ® is the only FDA-approved methicillin-resistant Staphylococcus aureus (MRSA) cephalosporin antibiotic for treating adult patients with Staphylococcus aureus bloodstream infections (bacteremia) (SAB)

and endocarditis.

ZEVTERA ® is indicated for the treatment of adult patients with SAB, including right-sided infective endocarditis, adult patients with acute bacterial skin and skin structure infections (ABSSSI) and for adult and pediatric patients (3 months to less than 18 years old) with community-acquired bacterial pneumonia (CABP).

• Following the exclusive distribution and license agreement with Basilea, Innoviva anticipates launching ZEVTERA ® in the U.S.

• XACDURO ® (sulbactam for injection;

durlobactam for injection), co-packaged for intravenous use:

a targeted antibacterial treatment for patients with hospital-acquired bacterial pneumonia and ventilator-associated bacterial pneumonia (HABP/VABP) caused by susceptible isolates of Acinetobacter baumannii-calcoaceticus complex.

• In April, the Company presented in vivo and in vitro data on activity of durlobactam against Enterobacterales at the Congress of the European Society of Clinical Microbiology and Infectious Diseases (ESCMID Global).

• Update on Strategic Healthcare Assets

• Innoviva’s portfolio of strategic assets held through the Company’s various subsidiaries was valued at $457.6 million as of March 31, 2025.

In the first quarter of 2025, we invested a total of $34.7 million in various strategic healthcare assets, including $15.0 million in a convertible note of Gate Neurosciences and $10.0 million in a term loan to Armata.

Collaboration Arrangement with GSK

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Actual results may differ from these estimates under different assumptions or conditions.

We believe there have been no significant changes in our critical accounting policies as described in the Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024, and as amended on March 5 and 22, 2024.

We believe there have been no significant changes in our critical accounting policies as described in the Form 10-K for the year ended December 31, 2024 filed with the SEC on February 26, 2025, and as amended on March 24, 2025.

Results of Operations

Royalty Revenue

Total royalty revenue, net, as compared to the prior year periods, was as follows:

Total royalty revenue, net, as compared to the prior year period, was as follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

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amortization of capitalized fees paid

Total net royalty revenue

Total royalty revenue, net

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Total net royalty revenue increased to $57.1 million and $179.2 million for the three and nine months ended September 30, 2024, compared to $53.6 million and $172.7 million, respectively, for the same period a year ago.

The increase of total net royalty revenue was primarily due to sales growth in both RELVAR ® /BREO ® ELLIPTA ® and ANORO ® ELLIPTA ® .

Total royalty revenue, net, decreased marginally to $57.8 million for the three months ended March 31, 2025, compared to $58.4 million for the same period a year ago.

Net Product Sales

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

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

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

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

Our net product sales increased during the periods presented as a result of increased efforts in sales and marketing of our marketed products.

License Revenue

We recognized $8.0 million in license revenue for the second quarter of 2024 as a result of achievement of a regulatory milestone under our license agreement with Zai Lab.

We also recognized $6.5 million in license revenue for the second quarter of 2024 under the Amended Zai Agreement with Zai Lab.

During the third quarter of 2024, we recognized additional license revenue of approximately $4.6 million from Zai Lab arising from a manufacturing stage transfer agreement and the aforementioned Amended Zai Agreement.

We recognized license revenue of $8.0 million for the first quarter of 2023 and $3.0 million for the second quarter of 2023 as a result of achievement of regulatory milestones under our license agreements with Everest and Zai Lab, respectively.

Total product sales, net, as compared to prior year period, was as follows:

Three months ended March 31,

(In thousands)

Rest of the world

Total rest of the world

Total net product sales

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Our net product sales increased during the periods presented, driven by higher sales volume resulting from our strategic commercialization efforts and dedications to delivering our critical care products to healthcare systems.

Cost of Products Sold

Cost of products sold, as compared to the prior year periods, were as follows:

Cost of products sold, as compared to the prior year period, was as follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

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Our inventory includes net fair value adjustments resulting from the acquisition of La Jolla, which are being amortized and recognized as cost of products sold when sales occur.

The fair value adjustments recorded as part of cost of products sold amounted to $1.8 million and $12.1 million for the three and nine months ended September 30, 2024, respectively, and $5.4 million and $19.2 million for the three and nine months ended September 30, 2023, respectively.

Excluding the impact of the amortized fair value adjustments, our cost of products sold increased during the periods presented in 2024 compared to the same periods in 2023 as a result of higher sales volume.

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.

Excluding the impact of the amortized fair value adjustments, our cost of products sold increased during the three months ended March 31, 2025 compared to the same period in 2024 as a result of higher sales volume.

As of March 31, 2025, our total inventory included the remaining net fair value adjustments resulting from the acquisition of La Jolla of approximately $8.9 million, which will be recognized as cost of products sold when sales occur in future periods.

Research and Development

Research and development expenses, as compared to the prior year periods, were as follows:

Research and development expenses, as compared to the prior year period, were as follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

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September 30,

Nine Months Ended

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Total research and development expense

Research and development expenses, which are mainly attributable to post-marketing commitments required by the FDA and ongoing product developments, were $3.6 million and $10.0 million for the three and nine months ended September 30, 2024.

Research and development expenses for the three and nine months ended September 30, 2023, which were mainly attributable to the product development efforts for XACDURO ® , were $4.0 million and $31.6 million, respectively.

The decrease was primarily a result of the FDA approval of XACDURO ® in May 2023 and personnel transfers from the research development function to general and administrative function after the FDA approval.

Research and development expenses, which are mainly attributable to post-marketing commitments required by the FDA and ongoing product developments, were $4.4 million and $3.9 million for the three months ended March 31, 2025 and 2024, respectively.

The increase was primarily due to further advancement of our product candidate, zoliflodacin.

Selling, General & Administrative

Selling, general and administrative expenses, as compared to the prior year periods, were as follows:

Selling, general and administrative expenses, as compared to the prior year period, were as follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

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Our selling, general and administrative expenses are primarily incurred as a result of our ongoing efforts to promote our marketed critical care products and drive revenue, maintain regulatory compliance, and support essential administrative functions for general operations.

The expenses for the three months ended September 30, 2023 were higher compared to the same period this year primarily due to the commercial launch effort of XACDURO ® .

For the nine months ended September 30, 2024, the expenses increased compared to the same period last year due to the ongoing efforts, which led to higher net product sales.

Selling, general and administrative expenses were higher for the three months ended March 31, 2024 compared to the same period in 2025 due to heightened efforts associated with the then commercial launch of XACDURO ® .

Interest and Dividend Income and Other Expense, Net

Interest and dividend income and other expense, net, as compared to the prior year periods, were as follows:

Interest and dividend income and other expense, net, as compared to the prior year period, was as follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

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Other expense, net

Interest and dividend income increased for the three and nine months ended September 31, 2024, compared to the same period a year ago, due to higher interest rates and higher average balances of our cash equivalents, money market funds and other interest-bearing investments.

Interest and dividend income increased marginally for the three months ended March 31, 2025, compared to the same period in 2024, due to higher interest rates and higher average balances of our cash equivalents, money market funds and other interest-bearing investments.

Other expense, net, was primarily expenses incurred by ISP Fund LP.

Interest Expense

Interest expense, as compared to the prior year periods, was as follows:

Interest expense, as compared to the prior year period, was as follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

Interest expense

Interest expense for the three and nine months ended September 30, 2024 comprised mainly of the contractual interest expense and the amortization of debt issuance costs for our 2025 Notes and 2028 Notes, as well as effective interest expense on our deferred royalty obligation.

Interest expense for the nine months ended September 30, 2023 included the amount on the 2023 Notes until the notes were fully paid off on January 15, 2023.

The increase for the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023, was mainly due to higher effective interest rate on our deferred royalty obligation as a result of higher sales performance of GIAPREZA ® .

Interest expense for the three months ended March 31, 2025 and 2024 comprised mainly of the contractual interest expense and the amortization of debt issuance costs for our 2025 Notes and 2028 Notes, as well as effective interest expense on our deferred royalty obligation related to GIAPREZA ® .

The decrease for the three months ended March 31, 2025, compared to the same period in 2024, was mainly due to lower interest expense on our deferred royalty obligation as a result of higher sales performance of GIAPREZA ® .

Changes in Fair Values of Equity Method Investments and Equity and Long-Term Investments

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September 30,

Nine Months Ended

September 30,

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and long-term investments, net

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The changes in fair values of equity method investments for the three and nine months ended September 30, 2024 were unfavorable mainly due to the decrease in Armata's stock price during this period.

We recorded $18.2 million and $43.0 million in unrealized loss for the three and nine months ended September 30, 2024, respectively, and $72.0 million and $67.9 million in unrealized gain for the three and nine months ended September 30, 2023, respectively, related to our equity method investments in Armata.

The changes in fair values of other equity and long-term investments primarily reflected the realized gains and losses and net unrealized gains and losses in our strategic investments in Armata, InCarda, Gate, ImaginAb and those investments managed by ISP Fund LP.

We recorded $17.8 million and $59.8 million of net negative changes in fair values of equity and long-term investments related to the investments managed by ISP Fund LP, for the three and nine months ended September 30, 2024, respectively.

We also recorded $1.2 million net positive and $0.8 million net negative changes in fair values of equity and long-term investments for the three and nine months ended September 30, 2024, respectively, related to other long-term investments we made in Armata.

The changes in fair values of equity method investments for the three months ended March 31, 2025 were unfavorable mainly due to the decrease in Armata's stock price during this period.

We recorded $13.5 million in unrealized losses and $35.3 million in unrealized gains for the three months ended March 31, 2025 and 2024, respectively, related to our equity method investments in Armata.

We recorded $83.7 million of net negative changes in fair values of equity and long-term investments related to the investments managed by ISP Fund LP for the three months ended March 31, 2025.

We also recorded $3.3 million net negative changes in fair values of equity and long-term investments for the three months ended March 31, 2025 related to other long-term investments we made in Armata.

These net negative changes in fair values were partially offset by a favorable net change in fair value of our investments in Gate of $19.3 million.

Provision for Income Taxes

We recorded income tax expense of $5.6 million and $9.6 million for the three and nine months ended September 30, 2024, respectively, compared to income tax expense of $3.9 million and $14.7 million for the three and nine months ended September 30, 2023, respectively.

The effective income tax rate for the nine months ended September 30, 2024 and 2023 was 40.5% and 10.6%, respectively.

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

The effective income tax rate for the three months ended March 31, 2025 and 2024 was (20.7)% and 19.0%, respectively.

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.

Liquidity and Capital Resources

Since our inception, we have financed our operations primarily through private placements and public offerings of equity and debt securities and payments received under collaboration arrangement.

For the nine months ended September 30, 2024, we generated gross royalty revenues from GSK of $189.6 million, net product sales of $68.6 million and license revenue of $19.1 million.

Net cash and cash equivalents totaled $260.6 million, royalties receivable from GSK totaled $60.5 million and accounts receivable associated with our product sales and license revenue totaled $30.5 million as of September 30, 2024.

For the three months ended March 31, 2025, we generated gross royalty revenues from GSK of $61.3 million, net product sales of $30.3 million and license revenue of $0.5 million.

Net cash and cash equivalents totaled $319.1 million, royalties receivable from GSK totaled $61.3 million and accounts receivable associated with our product sales and license revenue totaled $16.7 million as of March 31, 2025.

Adequacy of Cash Resources to Meet Future Needs

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Cash flows, as compared to the prior year period, were as follows:

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

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Net cash used in investing activities

Net cash used in financing activities

Net cash provided by (used in) financing activities

Cash Flows from Operating Activities

Net cash provided by operating activities for the nine months ended September 30, 2024 was $129.5 million, consisting primarily of our net income of $3.1 million, adjusted for net non-cash items, which included $103.8 million in changes in fair value of our investments, $19.4 million of amortization of acquired intangible assets, $12.1 million of amortization of inventory fair value step-up adjustment, $10.5 million of amortization of capitalized fees and depreciation of property and equipment, and $4.7 million of stock-based compensation, partially offset by $15.4 million of deferred income taxes and $9.9 million in net changes in operating assets and liabilities.

Net cash provided by operating activities for the nine months ended September 30, 2023 was $107.8 million, consisting primarily of our net income of $118.2 million, adjusted for net non-cash items, which included $19.2 million of amortization of inventory fair value step-up adjustment, $10.4 million of amortization of capital fees and depreciation of property and equipment, $15.3 million of amortization of acquired intangible assets, partially offset by $63.0 million of net changes in fair value of our investments and $5.0 million net changes in operating assets and liabilities.

Net cash provided by operating activities for the three months ended March 31, 2025 was $48.6 million, consisting primarily of our net loss of $46.6 million, adjusted for net non-cash items, which included $78.8 million in changes in fair value of our investments, $6.5 million of amortization of acquired intangible assets, $3.5 million of amortization of capitalized fees, $2.1 million of stock-based compensation, $1.2 million in allowance for inventory write-down and $2.9 million in net changes in operating assets and liabilities.

Net cash provided by operating activities for the three months ended March 31, 2024 was $37.0 million, consisting primarily of our net income of $36.5 million, adjusted for net non-cash items, which included $6.8 million of amortization of inventory fair value step-up adjustment, $6.4 million of amortization of acquired intangible assets, $3.5 million of amortization of capitalized fees and depreciation of property and equipment, $3.2 million of deferred income taxes, partially offset by $22.0 million of net changes in fair value of our investments and $2.0 million net changes in operating assets and liabilities.

Cash Flows from Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2024 of $48.3 million primarily consisted of $48.1 million in purchases of trading securities, $32.3 million in purchases of equity and long-term investments managed by ISP Fund LP and $20.6 million in net purchases of other investments managed by ISP Fund LP.

Net cash used in investing activities for the three months ended March 31, 2025 of $34.7 million primarily consisted of $34.7 million in purchases of trading securities and $19.9 million in net purchases of other investments managed by ISP Fund LP.

The use of cash for investing activities was partially offset by proceeds of $19.9 million from the sales of equity investments managed by ISP Fund LP.

Net cash used in investing activities for the nine months ended September 30, 2023 of $61.6 million primarily consisted of $60.1 million in purchases of trading securities, $1.2 million in purchases of equity and long-term investments, $24.9 million in purchases of equity investments managed by ISP Fund LP, and $14.7 million from purchase and sales of other investments managed by ISP Fund LP.

The use of cash for investing activities was partially offset by net proceeds of $39.6 million from the sales of equity investments managed by ISP Fund LP.

Net cash used in investing activities for the three months ended March 31, 2024 of $43.0 million primarily consisted of $43.1 million in purchases of trading securities and $8.8 million in purchases of equity and long-term investments managed by ISP Fund LP.

The use of cash for investing activities was partially offset by net proceeds of $5.3 million from the sales of equity investments managed by ISP Fund LP and $3.4 million from the sale of other investments managed by ISP Fund LP.

Cash Flows from Financing Activities

Net cash used in financing activities for the nine months ended September 30, 2024 of $14.0 million was primarily due to $14.8 million for the repurchase of common stock under our stock repurchase program which concluded in April 2024.

Net cash used in financing activities for the nine months ended September 30, 2023 of $157.3 million was primarily due to the payments of $96.2 million upon maturity of the 2023 Notes in January 2023 and $61.1 million for the repurchase of common stock under our current stock repurchase program.

Net cash provided by financing activities for the three months ended March 31, 2025 of $0.2 million was primarily due to net proceeds from issuances of common stock, partially offset by the repurchase of shares to satisfy tax withholding.

Net cash used in financing activities for the three months ended March 31, 2024 of $9.2 million was primarily due to $9.6 million for the repurchase of common stock under our current stock repurchase program.

Contractual Obligations

As of September 30, 2024, our notes payable obligation included $192.5 million related to our 2025 Notes and $261.0 million related to our 2028 Notes, which are due in 2025 and 2028, respectively.

As of March 31, 2025, our notes payable obligation included $192.5 million related to our 2025 Notes and $261.0 million related to our 2028 Notes, which are due in 2025 and 2028, respectively.

Under the terms of the 2025 Notes and 2028 Notes, we will make interest payments of 2.5% and 2.125%, respectively, of outstanding principal.

Refer to Note 11, “Debt” to the Condensed Consolidated Financial Statements for more information.

Our short-term and long-term obligations also include contractual payments related to our operating leases were $3.4 million, with approximately $0.4 million payable through December 31, 2024, and approximately $3.0 million payable through 2029.

Our short-term and long-term obligations also include contractual payments related to our operating leases amounting to $2.6 million, with approximately $1.3 million payable through December 31, 2025, and approximately $1.3 million payable through 2029.

Refer to Note 12, “Commitments and Contingencies” to the Condensed Consolidated Financial Statements for more information.

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Quarterly payments to HCR under the Royalty Agreement start at a maximum royalty rate, with step-downs based on the achievement of annual net product sales thresholds.

The maximum royalty rate through December 31, 2023 was 14%.

Starting January 1, 2024, the maximum royalty rate was increased to 18% based on the terms of the agreement.

The maximum royalty rate is 18% based on the terms of the agreement.

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

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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 $20.9 million in outstanding purchase commitments under the agreement.

We also enter into other agreements in the normal course of business with vendors for commercial, manufacturing, clinical trials and preclinical studies, and other services and products for operating purposes.

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 2. Management’s Discussion and Analysis