What changed in this filing

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Item 1. Financial Statements

2025-08-06 compared with 2025-05-07 · 217 added, 164 removed, 763 unchanged (33% of the section changed)

25 unchanged sentences

Convertible subordinated notes due 2025, net of issuance costs

Income tax payable

Other accrued liabilities

11 unchanged sentences

63,011 and 62,665 issued and outstanding as of

March 31, 2025 and December 31, 2024, respectively

June 30, 2025 and December 31, 2024, respectively

Additional paid-in capital

Accumulated deficit

Retained earnings (accumulated deficit)

Total stockholders’ equity

5 unchanged sentences

(In thousands, except per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Royalty revenue, net of amortization of

capitalized fees paid of $ 3,456 in the

three months ended March 31, 2025

three months ended June 30, 2025

and 2024, and $ 6,912 in the six months

ended June 30, 2025 and 2024

Net product sales

17 unchanged sentences

Income (loss) before income taxes

Income tax expense, net

Income tax benefit (expense), net

Net income (loss) and comprehensive

6 unchanged sentences

(In thousands)

Three Months Ended March 31, 2025

Six Months Ended June 30, 2025

Stockholders’

7 unchanged sentences

Balance as of March 31, 2025

Three Months Ended March 31, 2024

Exercise of stock options and

issuance of common stock units

and stock awards, net of

repurchase of shares to satisfy

tax withholding

Accrued excise tax on common

stock repurchase applied against

tax liability

Stock-based compensation

Conversion of 2025 Notes to common stock

Balance as of June 30, 2025

Six Months Ended June 30, 2024

Retained Earnings

9 unchanged sentences

Balance as of March 31, 2024

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

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

Net income (loss)

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

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

Deferred income taxes

19 unchanged sentences

Purchases of trading securities

Proceeds from trading securities

Purchases of equity investments managed by ISP Fund LP

8 unchanged sentences

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Three Months Ended March 31,

Six Months Ended June 30,

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest

Cash paid for income taxes

Supplemental Disclosure of Non-cash Investing and Financing Activities:

2025 Notes converted to common stock

Accrued interest income converted to long-term investments

10 unchanged sentences

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

Our commercial and marketed products also include GIAPREZA ® (angiotensin II), approved to increase blood pressure in adults with septic or other distributive shock;

Our commercial and marketed products 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;

1 unchanged sentence

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.

In addition, ZEVTERA ® (ceftobiprole), an advanced-generation cephalosporin antibiotic, is 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.

In June 2025, the U.S.

Food and Drug Administration (“FDA”) accepted the new drug application (“NDA”) for zoliflodacin, which has received Qualified Infectious Disease Product designation (“QIDP”), granting it priority review and the potential for extended market exclusivity.

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.

29 unchanged sentences

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

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

Our revenues also include net product sales of GIAPREZA ® , XERAVA ® , XACDURO ® , and, beginning in the second quarter of 2025, ZEVTERA ® .

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 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.

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

Three of our customers each account for 26 %, 26 % and 24 %, respecti vely, of our net product sales for the three months ended June 30, 2025 , and 27 %, 26 % and 25 %, respectively for the six months ended June 30, 2025.

These same customers account for 33 %, 14 % and 14 %, respectively, of our receivables from net product sales, which are included in “Accounts receivable” in our unaudited condensed consolidated balance sheet as of June 30, 2025 .

Three of our customers each account for 32 %, 23 % and 27 %, respectively, of our net product sales for the three months ended June 30, 2024, and 34 %, 24 % and 25 % for the six months ended June 30, 2024.

These same customers account for 31 %, 18 % and 15 %, 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.

26 unchanged sentences

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.

We also invest in ISP Fund LP, whose 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.

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

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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 (loss) per share for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

The following table shows the computation of basic and diluted net income (loss) per share for the three and six months ended June 30, 2025 and 2024:

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands except per share data)

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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,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

7 unchanged sentences

Net revenue recognized under our GSK Agreements was as follows:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

4 unchanged sentences

Net Product Sales

Total net product sales was as follows:

Three Months Ended March 31,

Total net product sales were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

(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.

We derived our net product sales from customers located in the U.S.

and the rest of world as follows:

• approximately 82 % and 18 %, respectively, for the three months ended June 30, 2025, and 84 % and 16 %, respectively, for the six months ended June 30, 2025.

• approximately 87 % and 13 %, respectively, for the three months ended June 30, 2024, and 89 % and 11 %, respectively, for the six months ended June 30, 2024.

License Revenue

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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 months ended March 31, 2025 and 2024 were not material.

Such amounts recorded for the three and six months ended June 30, 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.

Royalties under this arrangement based on the product sales were $ 0.6 million and $ 1.1 million for the three and six months ended June 30, 2025 , respectively.

We recognized $ 8.0 million in license revenue for the three and six months ended June 30, 2024 under this agreement as a result of the achievement of a regulatory milestone.

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

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

We also determined that 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 $ 0.5 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.

Under the Amended Zai Agreement, license revenue recognized for the three months ended June 30, 2025 was not material.

We recognized $ 0.6 million in license revenue for the six months ended June 30, 2025, and $ 6.5 million for the three and six months ended June 30, 2024.

As of June 30, 2025, there was an immaterial amount outstanding under this amendment.

As of December 31, 2024, outstanding amounts of $ 1.6 million were included in “Accounts receivable” in our unaudited condensed consolidated balance sheets as of December 31, 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 use.

3 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 $ 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.

We recognized $ 1.7 million and $ 2.5 million in net product sales for the Supplied Inventory for the three and six months ended June 30, 2025, respectively .

There were no net product sales for the Supplied Inventory recorded for the three and six months ended June 30, 2024.

Amounts outstanding under this agree ment of $ 1.4 million and $ 0.6 million are included in “Accounts receivable” in our unaudited condensed consolidated balance sheets as of June 30, 2025 and December 31, 2024, respectively.

We have also received advance payments of $ 16.1 million and $ 5.3 million as of June 30, 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.

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

We recognized license revenue under the Zai Manufacturing Stage Transfer Agreement of $ 0.9 million for the three and six months ended June 30, 2025 .

No license revenue was recognized under this agreement for the three and six months ended June 30, 2024.

Entasis entered into a collaboration agreement with the Global Antibiotic Research and Development Partnership (“GARDP”) for the development, manufacture and commercialization of the product candidate zoliflodacin in certain countries (“the GARDP Collaboration Agreement”).

Under the terms of the GARDP Collaboration Agreement, GARDP will use commercially reasonable endeavors to perform and fully fund the Phase 3 registrational trial, including the manufacture and supply of the product candidate containing zoliflodacin, in uncomplicated gonorrhea.

We recorded immaterial reimbursements from GARDP under this agreement as reduction to research and development expense during the periods presented.

We recorded immaterial reimbursements from GARDP under this agreement as a reduction to research and development expense during the periods presented.

In addition, under the GARDP Collaboration Agreement, GARDP was granted a worldwide, fully paid, exclusive and royalty-free license, with the right to sublicense, to use our zoliflodacin technology in connection with GARDP’s development, manufacture and commercialization of zoliflodacin in low-income and specified middle-income countries.

7 unchanged sentences

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 is 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 are subject to reduction on account of generic competition and after patent expiration in that jurisdiction.

Pursuant to the PAION License, PAION will be solely responsible for the future development and commercialization of GIAPREZA ® and XERAVA ® in the PAION Territory.

PAION is required to use commercially reasonable efforts to commercialize GIAPREZA ® and XERAVA ® in the PAION Territory.

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

Royalty revenue recognized under this agreement for the three and six months ended June 30, 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.

We recognized $ 0.8 million and $ 1.4 million in cost reimbursements for the three and six months ended June 30, 2025, respectively.

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

Everest Medicines Limited

6 unchanged sentences

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

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

Royalty revenue from Everest recognized for the three and six months ended June 30, 2025 was $ 2.0 million.

Royalty revenue recognized for the three and six months ended June 30, 2024 was $ 1.2 million and $ 1.8 million, respectively.

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 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 .

R evenue recognized under the Everest Supply Agreement for the three and six months ended June 30, 2025 was $ 0.8 million and $ 1.8 million, respectively .

Revenue recognized under the Everest Supply Agreement for the three and six months ended June 30, 2024 was $ 0.8 million and $ 1.7 million, respectively .

In-License Agreements

5 unchanged sentences

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.

ZEVTERA ® was commercially launched in the U.S.

in July 2025, with a small amount sold in May 2025.

Royalty expense incurred on the sales was immaterial during the three and six months ended June 30, 2025.

George Washington University

3 unchanged sentences

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 .

Royalty expense incurred under the GW License for the three and six months ended June 30, 2025 were $ 1.1 million and $ 2.2 million, respectively.

Royalty expense incurred for the three and six months ended June 30, 2024 were $ 0.7 million and $ 1.4 million, respectively .

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

Royalty expense incurred under the Harvard License for the three and six months ended June 30, 2025 wer e $ 0.6 million and $ 0.7 million, r espectively.

Royalty expense incurred for the three and six months ended June 30, 2024 were $ 0.5 million and $ 1.2 million, respectively.

Business Transfer and Subscription Agreement with AstraZeneca

4 unchanged sentences

Royalties on sales of zoliflodacin do not include sales by GARDP in low-income and specified middle-income countries as discussed above.

Our obligation to make these royalty payments expires 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 months ended March 31, 2025 and 2024 was no t material.

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

The royalty expense in respect of durlobactam arising from our net product sales of XACDURO ® for the three and six months ended June 30, 2025 and 2024 was no t material.

Consolidated Entity

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 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.

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.

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

3 unchanged sentences

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.

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 June 30, 2025 and December 31, 2024, and the remaining equity investments managed by ISP Fund LP are expected to be distributed through April 2026.

A cash distribution 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 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.

As of June 30, 2025, we continued to hold approximately 100 % of the economic interest of the Partnership.

As of June 30, 2025 and December 31, 2024, total assets of the Part nership were $ 147.5 million and $ 255.7 million, respectively, with the majority attributable to either current portion of ISP Fund investment or to equity and long-term investments.

As of June 30, 2025 and December 31, 2024 , total liabilities were $ 0.1 million and $ 0.2 million, respectively.

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

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.

During the three and six months ended June 30, 2025 , we recorded $ 0.7 million and $ 1.5 million, respectively, in investment-related expense incurred by the Partnership, generated $ 1.2 million and $ 2.4 million, respectively, in interest income, and recorded $ 0.4 million in net realized and unrealized gains and $ 80.9 million in net realized and unrealized losses, respectively, as changes in fair values of equity and long-term investments, net, in the unaudited condensed consolidated statements of income and comprehensive income.

During the three and six months ended June 30, 2024, we recorded $ 0.1 million and $ 0.3 million, respectively, of net investment-related expense incurred by the Partnership and $ 15.8 million and $ 42.0 million, respectively, of net realized and 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.

The following is a summary of individual investments held by ISP Fund at each balance sheet date:

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Equity and Other Investments and Fair Value Measurements

Equity Investment in Armata

Equity and Other Investments in Armata

Since the first quarter of 2020, Innoviva and its wholly owned subsidiary, Innoviva Strategic Opportunities, LLC (“ISO”), have invested in the common stock, warrants, convertible note, and term loans of Armata Pharmaceuticals, Inc.

4 unchanged sentences

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.

As of June 30, 2025, Innoviva collectively owns 25,076,769 shares of Armata’s common stock, representing a 69.3 % equity interest, a nd held 10,653,847 warra nts with exercise prices 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.

12 unchanged sentences

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.

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

As of June 30, 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 estimate d at $ 47.6 million, $ 4.2 million, $ 44.0 million, $ 31.6 million, $ 41.3 million and $ 10.5 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.

For the common stock and warrants, we recorded $ 13.1 million in unrealized gain and $ 0.4 million in unrealized loss for the three and six months ended June 30, 2025 , respectively, and $ 60.1 million and $ 24.8 million in unrealized loss for the three and six months ended June 30, 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 $ 6.2 million and $ 1.9 million in unrealized gain for the three and six months ended June 30, 2025 , respectively, and $ 16.6 million and $ 4.2 million in unrealized loss for the three and six months ended June 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.

For the term loan issued in July 2023, we recorded $ 1.1 million and $ 1.4 million in unrealized gain for the three and six months ended June 30, 2025 , respectively, and $ 0.6 million and $ 1.0 million in unrealized gain for the three and six months ended June 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.

For the term loan issued in March 2024, we recorded $ 1.4 million and $ 2.0 million in unrealized gain for the three and six months ended June 30, 2025 , respectively, and $ 0.9 million and $ 1.4 million in unrealized gain for the three and six months ended June 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.

For the term loan issued in March 2025, we recorded $ 0.4 million and $ 0.5 million in unrealized gain for the three and six months ended June 30, 2025, respectively, as changes in fair values of equity and long-term investments, net, in the unaudited condensed consolidated 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 December 31,

Three Months Ended March 31,

Six Months Ended March 31,

(In thousands)

Loss from operations

Net income (loss)

Equity Investment in InCarda

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.

Equity and Other Investments in InCarda

Since the third quarter of 2020, Innoviva TRC Holdings, LLC (“ITH”), a wholly owned subsidiary of Innoviva, has invested in the common stock, preferred stock, warrants and convertible notes of InCarda Therapeutics, Inc.

(“InCarda”), a privately held biopharmaceutical company focused on developing 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.

As of June 30, 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.

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

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 June 30, 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 June 30, 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 June 30, 2025, we rec orded $ 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

During the three and six months ended June 30, 2025 and 2024, the change to the carrying amount of our investments in InCarda was not material.

Equity and Other Investments in ImaginAb

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

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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.

As of June 30, 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.

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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 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

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.

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.

As of June 30, 2025 and December 31, 2024, our investment in the preferred stock and common stock amounted to $ 7.6 million and was recorded as equity and long-term investments in the unaudited condensed consolidated balance sheets.

There was no change in the carrying amount of our equity investments in ImaginAb during the six months ended June 30, 2025 and 2024.

In May 2025, ImaginAb fully settled the convertible note of $ 4.8 million for $ 5.1 million, including $ 0.3 million in accrued interest and commitment fees.

Before the repayment by ImaginAb, the convertible note was accounted for as a trading security and 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 December 31, 2024 , we recorded $ 5.0 million in fair value of the ImaginAb convertible note as equity and long-term investments in the condensed consolidated balance sheet.

Changes to the fair value of the ImaginAb convertible note for the three and six months ended June 30, 2025 were immaterial.

During the three and six months ended June 30, 2024, we recorded $ 0.1 million and $ 0.3 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.

Convertible Promissory Note in Syndeio Biosciences

Syndeio Biosciences, Inc.

(formerly known as Gate Neurosciences, Inc.) (“Syndeio”) is a privately held biopharmaceutical company focused on developing the next generation of targeted nervous system therapies, leveraging precision medicine approaches to develop breakthrough drugs for psychiatric and neurologic diseases.

In May 2025, Gate Neurosciences, Inc.

rebranded as Syndeio.

From 2021 to 2024, ITH invested in Syndeio a total of $ 51.5 million in convertible notes (the “Syndeio 2021 Convertible Note”).

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

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

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

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.

We account for both the Syndeio 2021 Convertible Note and the Syndeio 2025 Convertible Note as trading securities, measured at fair value using a Monte Carlo simulation model with the probability of certain qualified events and the assumptions of equity value of Syndeio, risk-free rate, expected stock price, volatility of its peer companies, and the time until a financing is raised.

As of June 30, 2025, and December 31, 2024, the fair value of the Syndeio 2021 Convertible Note was estimated at $ 71.3 million and $ 50.9 million, respectively, and recorded as equity and long-term investments in the unaudited condensed consolidated balance sheets.

We recorded $ 1.4 million and $ 20.5 million in unrealized gain for the three and six months ended June 30, 2025, respectively, as changes in fair values of equity and long-term investments, net in the unaudited condensed consolidated statements of income and comprehensive income.

We recorded $ 0.3 million unrealized gain and $ 0.3 million unrealized loss for the three and six months ended June 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.

As of June 30, 2025, the fair value of the Syndeio 2025 Convertible Note was e stimated at $ 15.6 million and recorded as equity and long-term investments in the unaudited condensed consolidated balance sheet.

We recorded $ 0.4 million and $ 0.6 million in unrealized gains for the three and six months ended June 30, 2025, respectively, as changes in fair values of equity and long-term investments, net in the unaudited condensed consolidated statement of income and comprehensive income.

Equity Investment in Nanolive

In 2022, ITH invested $ 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.

As of June 30, 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.

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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 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

As of June 30, 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.

Convertible Promissory Note in Lyndra

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

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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.

As of June 30, 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

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Purchases of trading securities

Proceeds from trading securities

Net sales and purchases of investments managed by ISP Fund

Changes in fair value, net

Reclassification of current portion

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

Equity and long-term investments as of June 30, 2025

Available-for-Sale Securities

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Available-for-sale securities are summarized below:

March 31, 2025

June 30, 2025

(In thousands)

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

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.

As of June 30, 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 March 31, 2025 Using:

Estimated Fair Value Measurements as of June 30, 2025 Using:

Types of Instruments

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Convertible debt investment - InCarda 2025 Convertible Note

Convertible debt investment - ImaginAb Note

Convertible debt investment - Gate 2021 Convertible Note

Convertible debt investment - Gate 2025 Convertible Note

Convertible debt investment - Syndeio 2021 Convertible Note

Convertible debt investment - Syndeio 2025 Convertible Note

Convertible debt investment - Lyndra Convertible Note

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Convertible debt investment - ImaginAb Note

Convertible debt investment - Gate 2021 Convertible Note

Convertible debt investment - Syndeio 2021 Convertible Note

Total assets measured at estimated fair value

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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 March 31, 2025 and December 31, 2024 was $ 17.9 million .

The carrying amount of goodwill as of June 30, 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 March 31, 2025 and December 31, 2024 were as follows:

March 31, 2025

The carrying basis and accumulated amortization of recognized intangible assets as of June 30, 2025 and December 31, 2024 were as follows:

June 30, 2025

(In thousands)

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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.

We recognized amortization expense of $ 6.5 million and $ 13.0 million for the three and six months ended June 30, 2025 , respectively.

We recognized amortization expense of $ 6.4 million and $ 12.9 million for the three and six months ended June 30, 2024 , respectively.

Future amortization expense is expected to be $ 13.2 million for the remainder of 2025, $ 26.3 million for each of the years from 2026 to 2029 and $ 74.3 million thereafter.

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Total inventory

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.

As of June 30, 2025 and December 31, 2024, total inventory included net fair value adjustments resulting from the acquisition of La Jolla of approxima tely $ 8.5 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 $ 0.4 million and $ 0.6 million for the three and six months ended June 30, 2025 , respectively.

The fair value adjustments recorded as part of cost of products sold amounted to $ 3.5 million and $ 10.3 million for the three and six months ended June 30, 2024, respectively.

Other Accrued Liabilities

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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”.

(1) Amount as of June 30, 2025 and December 31, 2024 includes $ 16.1 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

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The following table summarizes stock-based compensation expense:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

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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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Risk-free interest rate

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4.3 % - 4.6 %

4.1 % - 4.4 %

4.1 % - 4.6 %

Expected term (in years)

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34.0 % - 34.9 %

36.0 % - 36.8 %

Dividend yield

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$ 6.21 - $ 6.71

$ 7.17 - $ 7.92

$ 4.97 - $ 6.93

Stockholders' Equity

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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.

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.

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.

All repurchased shares were retired.

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On August 7, 2017, we completed a private placement of $ 192.5 million aggregate principal amount of our 2025 Notes.

The proceeds include the 2025 Notes sold pursuant to the $ 17.5 million over-allotment option granted by us to the initial purchasers, which option was exercised in full.

The 2025 Notes were sold in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act.

The 2025 Notes are senior unsecured obligations and bear interest at a rate of 2.5 % per year, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2018.

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).

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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:

• after September 30, 2017, if our closing common stock price for at least 20 days out of the most recent 30 consecutive trading days of the preceding quarter is greater than 130 % of the current conversion price of the 2025 Notes;

• 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 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.

The annual effective interest rate on the 2025 Notes is 2.88 %.

In the event of default or a fundamental change (as defined in the indenture), 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.

In June 2025, we elected to settle the 2025 Notes in shares.

Holders may convert their 2025 Notes at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.

During June 2025, $ 0.5 million of the principal amount was converted into 28,962 shares of our common stock.

As of June 30, 2025, the outstanding principal amount was $ 192.0 million.

As a result of the conversion, the annual effective interest rate has been adjusted to 2.90 %.

Our outstanding 2025 Notes balances consisted of the following:

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Net carrying amount

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,

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

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

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Net carrying amount

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,

The following table sets forth total interest expense recognized related to the 2028 Notes for the three and six months ended June 30, 2025 and 2024:

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

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Debt Maturities

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

The aggregate scheduled maturities of our convertible debt as of June 30, 2025 were as follows:

(In thousands)

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

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.

For the three and six months ended June 30, 2025 , we recognized interest expense of $ 1.5 million and $ 3.1 million, respectively.

For the three and six months ended June 30, 2024, we recognized interest expense of $ 2.7 million and $ 5.5 million, respectively.

The carrying value of the deferred royalty obligation as of June 30, 2025 and December 31, 2024 was $ 66.4 million and $ 69.5 million, respectively (refer to Note 8, “Balance Sheet Components”).

During the six months ended June 30, 2025 and 2024 , we made royalty payments to HCR of $ 6.1 million and $ 4.1 million, respectively.

The deferred royalty obligation was valued using Level 3 inputs, and its carrying value as of June 30, 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 ® .

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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 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.

As of June 30, 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 $ 33.3 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.

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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 March 31, 2025 and December 31, 2024.

As a result of this assessment, we determined that the fair value of the embedded derivatives is immaterial and, therefore, not recognized as of June 30, 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.

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The components of lease cost are as follows:

Three months ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

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Supplemental cash flow information related to leases is as follows:

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

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

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:

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

As of June 30, 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 7.0 %.

Future minimum payments on our operating leases as of June 30, 2025 were as follows:

(In thousands)

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Under the agreement, we committed to minimum purchase commitments through December 31, 2027.

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.

As of June 30, 2025, we have approximately $ 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, respectively.

Legal Proceedings

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We also maintain director and officer insurance, which may cover certain liabilities arising from our obligation to indemnify our directors.

To date, we have not incurred any material costs and, as of 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.

To date, we have not incurred any material costs and, as of June 30, 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 $ 8.9 million and $ 16.9 million for the three and six months ended June 30, 2025 , respectively, compared to an income tax benefit of $ 4.6 million for the three months ended June 30, 2024 and an income tax expense of $ 4.0 million for the six months ended June 30, 2024.

The Company’s effective income tax rate for the six months ended June 30, 2025 was 49.7 % compared to 68.4 % for the same period in 2024.

The income tax expense for the six months ended June 30, 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 six months ended June 30, 2025 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.

Segment Reporting

6 unchanged sentences

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.

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

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

2 unchanged sentences

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,

Three months ended June 30,

Six Months Ended June 30,

(In thousands)

4 unchanged sentences

General and administrative

Research and development - External services

Research and development - External services and expenses

Research and development - Internal expenses

4 unchanged sentences

Other expense, net

Income tax expense, net

Income tax expense (benefit), 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