Innoviva, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements The information in this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve substantial risks, uncertainties, and assumptions. All statements contained herein, other than statements of historical fact, including, without limitation, statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, intentions, expectations, goals and objectives may be forward‑looking statements. The words “anticipates,” “believes,” “could,” “designed,” “estimates,” “expects,” “goal,” “intends,” “may,” “objective,” “plans,” “projects,” “pursuing,” “will,” “would” and similar expressions (including the negatives thereof) are intended to identify forward‑looking statements, although not all forward‑looking statements contain these identifying words. We may not actually achieve the plans, intentions, expectations or objectives disclosed in our forward‑looking statements and the assumptions underlying our forward‑looking statements may prove incorrect. Therefore, you should not place undue reliance on our forward‑looking statements. Actual results or events could differ materially from the plans, intentions, expectations and objectives disclosed in the forward‑looking statements that we make. All written and verbal forward‑looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Important factors that we believe could cause actual results or events to differ materially from our forward‑looking statements include, but are not limited to, risks related to: lower than expected future royalty revenue from respiratory products partnered with GSK, the commercialization of RELVAR ® /BREO ® ELLIPTA ® , ANORO ® ELLIPTA ® , GIAPREZA ® , XERAVA ® , 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); the timing, manner, and amount of potential capital returns to shareholders; the status and timing of clinical studies, data analysis and communication of results; the potential benefits and mechanisms of action of product candidates; expectations for product candidates through development and commercialization; the timing of regulatory approval of product candidates; and projections of revenue, expenses and other financial items; the impact of the novel coronavirus (“COVID-19”); the timing, manner and amount of capital deployment, including potential capital returns to stockholders; and risks related to the Company’s growth strategy and risks discussed in “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 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. We encourage you to read our unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q. We also encourage you to read Item 1A of Part I of our 2024 Form 10-K and Item 1A of Part II of our Quarterly Reports on Form 10-Q entitled “Risk Factors,” which contain a more complete discussion of the risks and uncertainties associated with our business. In addition to the risks described above and in Item 1A of Part I of our 2024 Form 10-K and Item 1A of Part II of this report, other unknown or unpredictable factors also could affect our results. Therefore, the information in this report should be read together with other reports and documents that we file with the SEC from time to time, including on Form 10-K, Form 10-Q and Form 8-K, which may supplement, modify, supersede or update those risk factors. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. OVERVIEW Executive Summary Innoviva, Inc. (and where context requires, together with its subsidiaries referred to as “Innoviva”, the “Company”, or “we” and other similar pronouns) is a company with a 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. 36 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: 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%. 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, 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, a potentially 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. 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. Third Quarter 2025 and Recent Highlights: Financial Highlights • Royalty revenue: Third quarter 2025 gross royalty revenue from GSK was $63.4 million, compared to $60.5 million for the third quarter 2024. • Net product sales: Third quarter 2025 net product sales totaled $47.3 million, consisting of $29.9 million in U.S. net product sales and $17.4 million in ex-U.S. net product sales, compared to $27.8 million in net product sales for the third quarter 2024. U.S. net product sales included $18.2 million from GIAPREZA®, $8.5 million from XACDURO®, $3.2 million from XERAVA®, and $0.1 million from ZEVTERA®, representing a 52% increase compared to total U.S. net product sales of $19.7 million in the third quarter 2024. • Income from operations: Third quarter 2025 income from operations was $34.6 million, a 20% decrease from $43.2 million in the third quarter 2024, primarily due to a non-recurring expense related to research and development. • Equity and long-term investments: Third quarter 2025 net favorable changes in fair values of equity and long-term investments totaled $62.3 million, compared to unfavorable changes of $35.2 million in the third quarter 2024, were primarily due to share price appreciation of Armata and other equity investments. • Net income: Third quarter 2025 net income was $89.9 million, or $1.30 basic per share, compared to a net income of $1.2 million, or $0.02 basic per share, for the third quarter 2024. • Cash and cash equivalents: Totaled $476.5 million. Royalty and net product sales receivables totaled $93.5 million as of September 30, 2025. 37 Key Business and R&D Highlights • Zoliflodacin: an investigational, first-in-class, single oral dose, spiropyrimidinetrione antibiotic for the treatment of uncomplicated gonorrhea in adults and pediatric patients 12 years and older. It is being developed in partnership with The Global Antibiotic Research & Development Partnership (“GARDP”). o In October 2025, IST, in collaboration GARDP, presented three sets of data highlighting key subgroup analyses from the pivotal Phase 3 trial for zoliflodacin at the Infectious Disease Society of America’s IDWeek 2025 annual meeting. o Zoliflodacin is currently under Priority Review by the FDA, with a Prescription Drug User Fee Act (“PDUFA”) target action date of December 15, 2025. • Subsequent to the NDA acceptance in June 2025, the FDA indicated in its Day-74 letter that it did not plan to hold an Advisory Committee meeting to discuss the zoliflodacin NDA. • ZEVTERA®(ceftobiprole): an advanced-generation cephalosporin antibiotic approved in the U.S. for three specific indications – Staphylococcus aureus bloodstream infections (bacteremia) (SAB) in adults, including right-sided infective endocarditis, acute bacterial skin and skin structure infections (ABSSSI) in adults, and community-acquired bacterial pneumonia (CABP) in adults and pediatric patients (3 months to less than 18 years old). o In July 2025, IST commercially launched ZEVTERA ® in the U.S. Initial launch activity has been focused on formulary committee engagement and market access programs. • Both ZEVTERA® (ceftobiprole) and XACDURO® (sulbactam for injection; durlobactam for injection) were recently nominated for the 2025 Prix Galien USA Award for Best Pharmaceutical Product by the Galien Foundation, one of the most prestigious honors in the biopharmaceutical and medical technology fields, celebrating groundbreaking achievements that drive meaningful progress. • Capital Allocation o Innoviva’s portfolio of strategic assets held through the Company’s various subsidiaries was valued at $483.0 million as of September 30, 2025. o Innoviva’s Board of Directors has authorized a new share repurchase program under which the Company may repurchase up to $125.0 million of its outstanding shares of common stock. The timing and amount of any share repurchases under the share repurchase program will be subject to the Securities and Exchange Commission Rule 10b-18 and Rule 10b5-1 requirements andwill be determined by Innoviva’s management in its discretion based on ongoing assessments of the capital needs of the business, the market price of Innoviva’s common stock, prevailing stock prices, general market conditions and other considerations. Share repurchases under the program may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, in block trades, accelerated share repurchase transactions, exchange transactions, or any combination thereof or by other means in accordance with federal securities laws. This program has no termination date, may be suspended or discontinued at any time at the Company’s discretion, and does not obligate the Company to acquire any amount of common stock. o In August 2025, a substantial portion of the Company’s 2025 convertible noteholders elected to convert an aggregate principal balance of $192.5 million into 11.1 million shares of Innoviva common stock prior to maturity. o In August 2025, Innoviva invested $15.0 million in a term loan to Armata, which recently announced positive Phase 2 data in Staphylococcus aureus bacteremia. o In September 2025, Innoviva acquired a proprietary long-acting oral drug delivery platform and related assets from Lyndra Therapeutics, Inc. The transaction included an upfront payment of $10.2 million, plus potential milestone and royalty payments. 38 o In October 2025, Innoviva invested $17.5 million in the Series B Preferred Stock of Beacon Biosignals, Inc., an AI-driven neurotechnology company developing treatments for neurological, psychiatric, and sleep disorders. Collaboration Arrangement with GSK LABA Collaboration In November 2002, we entered into the LABA collaboration with GSK to develop and commercialize once-daily LABA products for the treatment of chronic obstructive pulmonary disorder (“COPD”) and asthma (the “LABA Collaboration Agreement”). For the treatment of COPD, the collaboration has developed the following combination products: • RELVAR ® /BREO ® ELLIPTA ® (“FF/VI”) (BREO ® ELLIPTA ® is the proprietary name in the U.S. and Canada and RELVAR ® ELLIPTA ® is the proprietary name outside the U.S. and Canada), a once-daily combination medicine consisting of a LABA, vilanterol (VI), and an inhaled corticosteroid (“ICS”), fluticasone furoate (“FF”), and • ANORO ® ELLIPTA ® (“UMEC/VI”), a once-daily medicine combining a long-acting muscarinic antagonist (“LAMA”), umeclidinium bromide (“UMEC”), with a LABA, vilanterol (VI). As a result of the launch and approval of RELVAR ® /BREO ® ELLIPTA ® and ANORO ® ELLIPTA ® in the U.S., Japan and Europe, in accordance with the LABA Collaboration Agreement, we paid milestone fees to GSK totaling $220.0 million during the year ended December 31, 2014. Although we have no further milestone payment obligations to GSK pursuant to the LABA Collaboration Agreement, we continue to have ongoing commercialization activities under the LABA Collaboration Agreement, including participation in the joint steering committee that are expected to continue over the life of the agreement. The milestone fees paid to GSK were recognized as capitalized fees, which are being amortized over their estimated useful lives commencing upon the commercial launch of the products. Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe there have been no significant changes in our critical accounting policies as described in the Form 10-K for the year ended December 31, 2024 filed with the SEC on February 26, 2025, and as amended on March 24, 2025. Results of Operations Net Revenue Royalty Revenue Total royalty revenue, net, as compared to the prior year period, was as follows: Three Months Ended September 30, Change Nine Months Ended September 30, Change (In thousands) 2025 2024 $ % 2025 2024 $ % Royalties - RELVAR/BREO $ 51,508 $ 48,199 $ 3,309 7 % $ 157,135 $ 154,317 $ 2,818 2 % Royalties - ANORO 11,844 12,313 (469 ) (4 )% 34,816 35,264 (448 ) (1 )% Total royalties 63,352 60,512 2,840 5 % 191,951 189,581 2,370 1 % Less: amortization of capitalized fees paid (3,456 ) (3,456 ) — * (10,368 ) (10,368 ) — * Total royalty revenue, net $ 59,896 $ 57,056 $ 2,840 5 % $ 181,583 $ 179,213 $ 2,370 1 % 39 *Not Meaningful Total net royalty revenue increased to $59.9 million and $181.6 million for the three and nine months ended September 30, 2025, compared to $57.1 million and $179.2 million, respectively, for the same period a year ago. The increase of total net royalty revenue was primarily due to sales growth in RELVAR ® /BREO ® ELLIPTA ® . Net Product Sales Total product sales, net, as compared to prior year period, were as follows: Three Months Ended September 30, Change Nine Months Ended September 30, Change (In thousands) 2025 2024 $ % 2025 2024 $ % U.S. GIAPREZA ® $ 18,152 $ 13,082 $ 5,070 39 % $ 52,519 $ 37,542 $ 14,977 40 % XACDURO ® 8,468 4,262 4,206 99 % 22,790 8,761 14,029 160 % XERAVA ® 3,189 2,363 826 35 % 9,552 9,614 (62 ) (1 )% ZEVTERA ® 113 — 113 * 452 — 452 * Total U.S. 29,922 19,707 10,215 52 % 85,313 55,917 29,396 53 % Rest of the world GIAPREZA ® 307 693 (386 ) (56 )% 1,542 1,423 119 8 % XACDURO ® 15,345 5,521 9,824 178 % 19,537 5,601 13,936 249 % XERAVA ® 1,720 1,901 (181 ) (10 )% 6,674 5,616 1,058 19 % Total rest of the world 17,372 8,115 9,257 114 % 27,753 12,640 15,113 120 % Total net product sales $ 47,294 $ 27,822 $ 19,472 70 % $ 113,066 $ 68,557 $ 44,509 65 % *Not Meaningful Our net product sales increased during the periods presented, driven by higher sales volume resulting from our strategic commercialization efforts and dedication to delivering our critical care products to healthcare systems. The increase in XACDURO ® ex-U.S. product sales is attributable mainly to product sales under the Amended Zai Agreement, which is billed at cost. License Revenue License revenue, as compared to the prior year period, was as follows: Three Months Ended September 30, Change Nine Months Ended September 30, Change (In thousands) 2025 2024 $ % 2025 2024 $ % License and other revenue $ 610 $ 4,630 $ (4,020 ) (87 )% $ 2,066 $ 19,135 $ (17,069 ) (89 )% License revenue for the three and nine months ended September 30, 2025 was derived primarily from the Amended Zai Agreement and the Zai Manufacturing Stage Transfer Agreement. During the third quarter of 2024, we recognized license revenue of approximately $4.6 million arising from the Amended Zai Agreement and the Zai Manufacturing Stage Transfer Agreement. In the second quarter of 2024, we recognized $8.0 million in license revenue upon the achievement of a regulatory milestone in China under our license agreement with Zai Lab, and $6.5 million in license revenue under the Amended Zai Agreement. Cost of Products Sold Cost of products sold, as compared to the prior year period, was as follows: Three Months Ended September 30, Change Nine Months Ended September 30, Change (In thousands) 2025 2024 $ % 2025 2024 $ % Cost of products sold $ 25,643 $ 9,990 $ 15,653 157 % $ 45,075 $ 29,433 $ 15,642 53 % 40 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 $3.5 million and $4.1 million for the three and nine months ended September 30, 2025, respectively, and $1.8 million and $12.1 million for the three and nine months ended September 30, 2024, respectively. Excluding the impact of the amortized fair value adjustments, our cost of products sold increased during the three and nine months ended September 30, 2025 compared to the same periods in 2024 as a result of higher sales volume, as well as cost of products sold under the Amended Zai Agreement. As of September 30, 2025, our total inventory included the remaining net fair value adjustments resulting from the acquisition of La Jolla of approximately $5.0 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 period, were as follows: Three Months Ended September 30, Change Nine Months Ended September 30, Change (in thousands) 2025 2024 $ % 2025 2024 $ % Compensation and related personnel costs $ 1,262 $ 978 $ 284 29 % $ 3,745 $ 4,071 $ (326 ) (8 )% External services and expenses 2,863 2,420 443 18 % 12,696 4,700 7,996 170 % Acquired IPR&D 9,368 — 9,368 * 9,368 — 9,368 * Facilities related 120 40 80 200 % 100 694 (594 ) (86 )% Other 57 113 (56 ) (50 )% 140 524 (384 ) (73 )% Total research and development expense $ 13,670 $ 3,551 $ 10,119 285 % $ 26,049 $ 9,989 $ 16,060 161 % *Not Meaningful Research and development expenses for the three and nine months ended September 30, 2025 were $13.7 million and $26.0 million, respectively. The expenses for the current periods include the $9.4 million allocated cost of the acquired IPR&D as discussed in Note 13, “Asset Acquisition”, in the Condensed Consolidated Financial Statements. During the current year, we also incurred costs related to the continued advancement of our product candidate, zoliflodacin. Research and development expenses for the three and nine months ended September 30, 2024, which were mainly attributable to post-marketing commitments required by the FDA and ongoing product developments, were $3.6 million and $10.0 million, respectively. Selling, General & Administrative Selling, general and administrative expenses, as compared to the prior year period, were as follows: Three Months Ended September 30, Change Nine Months Ended September 30, Change (In thousands) 2025 2024 $ % 2025 2024 $ % Selling, general and administrative $ 27,291 $ 26,219 $ 1,072 4 % $ 81,194 $ 84,364 $ (3,170 ) (4 )% 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. Selling, general and administrative expenses decreased for the nine months ended September 30, 2025 compared to the corresponding period in 2024, during which incremental efforts and expenditures were associated with the commercial launch of XACDURO ® in September 2023. 41 Interest and Dividend Income and Other Expense, Net Interest and dividend income and other expense, net, as compared to the prior year period, was as follows: Three Months Ended September 30, Change Nine Months Ended September 30, Change (In thousands) 2025 2024 $ % 2025 2024 $ % Interest and dividend income $ 5,472 $ 5,500 $ (28 ) (1 )% $ 14,935 $ 13,373 $ 1,562 12 % Other expense, net $ (479 ) $ (914 ) $ 435 (48 )% $ (2,252 ) $ (3,123 ) $ 871 (28 )% Interest and dividend income increased for the nine months ended September 30, 2025, compared to the same period in 2024, due to 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 period, was as follows: Three Months Ended September 30, Change Nine Months Ended September 30, Change (In thousands) 2025 2024 $ % 2025 2024 $ % Interest expense $ (4,015 ) $ (5,807 ) $ 1,792 (31 )% $ (13,389 ) $ (17,460 ) $ 4,071 (23 )% Our interest expense for the three and nine months ended September 30, 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 and nine months ended September 30, 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 ® , as well as the settlement of our 2025 Notes in August 2025. Changes in Fair Values of Equity Method Investments and Equity and Long-Term Investments Changes in fair values of equity and long-term investments, as compared to the prior year periods, were as follows: Three Months Ended September 30, Change Nine Months Ended September 30, Change (In thousands) 2025 2024 $ % 2025 2024 $ % Changes in fair values of equity method investments, net $ 30,751 $ (18,231 ) $ 48,982 (269 )% $ 30,284 $ (42,997 ) $ 73,281 (170 )% Changes in fair values of equity and long-term investments, net $ 31,510 $ (16,936 ) $ 48,446 (286 )% $ (22,509 ) $ (60,827 ) $ 38,318 (63 )% The changes in fair values of equity method investments for the three and nine months ended September 30, 2025 were driven by fluctuations in Armata's stock price between the reporting periods. We recorded $30.8 million and $30.3 million in unrealized gain for the three and nine months ended September 30, 2025, respectively, compared to $18.2 million and $43.0 million in unrealized loss for the three and nine months ended September 30, 2024, respectively. 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, Lyndra and those investments managed by ISP Fund LP. We recorded $11.7 million in net positive changes and $69.2 million in 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, 2025, respectively. We also recorded $16.3 million and $22.0 million net positive changes in fair values of equity and long-term investments for the three and nine months ended September 30, 2025, respectively, related to other long-term investments we made in Armata, and net positive changes in fair value of our investments in Syndeio of $5.7 million and $26.8 million for the three and nine months ended September 30, 2025, respectively. 42 Provision for Income Taxes We recorded income tax expense of $7.9 million and $24.8 million for the three and nine months ended September 30, 2025, respectively, compared to income tax expense of $5.6 million and $9.6 million for the three and nine months ended September 30, 2024, respectively. The effective income tax rate for the nine months ended September 30, 2025 and 2024 was 18.8% and 40.5%, respectively. Liquidity and Capital Resources Liquidity Since our inception, we have financed our operations primarily through private placements and public offerings of equity and debt securities and payments received under collaboration arrangement. For the nine months ended September 30, 2025, we generated gross royalty revenues from GSK of $192.0 million, net product sales of $113.1 million and license revenue of $2.1 million. Net cash and cash equivalents totaled $476.5 million, royalties receivable from GSK totaled $63.4 million and accounts receivable associated with our product sales and license revenue totaled $30.2 million as of September 30, 2025. Adequacy of Cash Resources to Meet Future Needs We believe that our cash and cash equivalents will be sufficient to meet our anticipated debt service and operating needs, as well our ongoing share repurchase program, for at least the next 12 months based upon current operating plans and financial forecasts. Our long-term capital requirements will depend on many factors including the amount of our royalty revenues, sales growth of our currently marketed products, timing of regulatory approval of our product candidates and outcome of our acquisitions and strategic investments. If our current operating plans and financial forecasts change, we may require additional funding sooner in the form of public or private equity offerings or debt financings. Furthermore, if in our view favorable financing opportunities arise, we may seek additional funding in the form of public or private equity offerings or debt financings at any time. However, future financing may not be available in amounts or on terms acceptable to us, if at all. This could leave us without adequate financial resources to fund our operations as currently planned. In addition, from time to time we may restructure or reduce our debt, including through privately negotiated repurchases, tender offers, redemptions, amendments, or otherwise, all allowable with the terms of our debt agreements. Cash Flows Cash flows, as compared to the prior year period, were as follows: Nine Months Ended September 30, (In thousands) 2025 2024 Change Net cash provided by operating activities $ 142,417 $ 129,451 $ 12,966 Net cash provided by (used in) investing activities $ 16,860 $ (48,308 ) $ 65,168 Net cash provided by (used in) financing activities $ 12,272 $ (14,026 ) $ 26,298 Cash Flows from Operating Activities Net cash provided by operating activities for the nine months ended September 30, 2025 was $142.4 million, consisting primarily of our net income of $107.0 million, adjusted for net non-cash items, which included $19.6 million of amortization of acquired intangible assets, $10.5 million of amortization of capitalized fees and depreciation of property and equipment, $9.4 million of acquired IPR&D, $6.9 million of stock-based compensation, $4.1 million of inventory fair value step-up adjustments and $1.5 million in amortization of debt discount and issuance costs, partially offset by $7.8 million in net changes in fair value of our investments and $13.4 million in net changes in operating assets and liabilities. 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. 43 Cash Flows from Investing Activities Net cash provided by investing activities for the nine months ended September 30, 2025 of $16.9 million primarily consisted of $71.9 million in sales of equity investments and net purchases and sales of other investments managed by ISP Fund LP and $5.1 million in proceeds from trading securities, partially offset by $49.7 million in purchases of trading securities, $9.4 million in cash paid for acquired IPR&D and $1.1 million purchases of property and equipment. Net cash used in investing activities for the nine months ended September 30, 2024 of $48.3 million primarily consisted of $48.1 million in purchases of trading securities, $32.3 million in purchases of equity and long-term investments managed by ISP Fund LP and $20.6 million in net purchases of other investments managed by ISP Fund LP. The use of cash for investing activities was partially offset by proceeds of $52.8 million from the sales of equity investments managed by ISP Fund LP. Cash Flows from Financing Activities Net cash provided by financing activities for the nine months ended September 30, 2025 of $12.3 million was primarily due to proceeds from exercise of warrants of $10.7 million and net proceeds from issuances of common stock of $1.7 million. 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. Contractual Obligations As of September 30, 2025, our notes payable obligation comprised of $261.0 million related to our 2028 Notes, which is due in 2028. Under the terms of the 2028 Notes, we make interest payments of 2.125% 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 amounting to $1.7 million, with approximately $0.4 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. As part of our acquisition of La Jolla, we recognized its deferred royalty obligation in connection with the La Jolla Royalty Agreement with HCR. Under the terms of the Agreement, HCR is entitled to receive quarterly royalties on worldwide net sales of GIAPREZA ® until either January 1, 2031 or when the maximum aggregate royalty payments have been made, whichever occurs first. Quarterly payments to HCR under the Royalty Agreement start at a maximum royalty rate, with step-downs based on the achievement of annual net product sales thresholds. The maximum royalty rate 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. Additionally, we have certain contingent payment obligations under various in-license agreements which we are required to make royalty payments or milestone payments upon successful completion and achievement of certain milestones. Refer to Note 4, “License and Collaboration Arrangements” to the Condensed Consolidated Financial Statements for more information. We also entered into a Commercial Supply Agreement with Corden Pharma CHENÔVE SAS (“Corden”), under which we engaged Corden to manufacture and supply certain products related to XACDURO ® and to perform certain services and studies. Under the agreement, we committed to minimum purchase commitments through December 31, 2027. As of September 30, 2025, we have approximately $14.6 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.