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Item 1A. Risk Factors

2026-02-25 compared with 2025-02-26 · 34 added, 78 removed, 956 unchanged (10% of the section changed)

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If GSK does not devote sufficient resources to the commercialization and development of these products, is unsuccessful in its efforts, or chooses to reprioritize its commercial programs, our business would be materially harmed.

• Our debt including our convertible subordinated notes and convertible senior notes are senior in capital structure and cash flow, respectively, to our common stockholders.

• Our debt including our convertible notes are senior in capital structure and cash flow, respectively, to our common stockholders.

Satisfying the obligations relating to our debt could adversely affect our liquidity or the amount or timing of potential distributions to our stockholders.

• GSK has indicated to us that it believes its consent may be required before we can engage in certain royalty monetization transactions with third parties, which may inhibit our ability to engage in these transactions.

• If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of the FDA, the EMA or other comparable regulatory authorities, or do not otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of that product candidate.

• If clinical trials of our and our related parties' product candidates fail to demonstrate safety and efficacy to the satisfaction of the FDA, the EMA or other comparable regulatory authorities, or do not otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of that product candidate.

• We rely on collaborations with third parties for the development of both our product and commercial candidates, and we may seek additional collaborations in the future.

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• If we engage in future acquisitions or strategic collaborations, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities and subject us to other risks.

• Even if we complete the necessary preclinical studies and clinical trials, the regulatory approval process is expensive, time-consuming and uncertain and may prevent us or any future collaborators from obtaining approvals for the commercialization of some or all of our product candidates.

• The regulatory approval process is expensive, time-consuming and uncertain and may prevent us or any future collaborators from obtaining approvals for the commercialization of some or all of our product candidates.

As a result, we cannot predict when or if, and in which territories, we, or any future collaborators, will obtain marketing approval to commercialize a product candidate.

Risks Related to our Business and Industry

Currently, we derive most of our revenues from GSK and our near-term success depends in large part on GSK’s ability to successfully develop and commercialize the products in the respiratory programs partnered with GSK.

Currently, we derive the majority of our revenues from GSK and our near-term success depends in large part on GSK’s ability to successfully develop and commercialize the products in the respiratory programs partnered with GSK.

Pursuant to the GSK Agreements, GSK is responsible for the development and commercialization of products in the partnered respiratory programs.

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Thus, after the introduction of a generic competitor, a significant percentage of the sales of any branded product and products that may compete with such branded product is typically lost to the generic product.

In January 2019, Mylan announced that the FDA approved Wixela Inhu (fluticasone propionate and salmeterol inhalation powder, USP), the first generic of ADVAIR DISKUS ® .

In that same month, Teva announced that the FDA approved two of their products for adolescent and adult patients with asthma, one of which is AirDuo RespiClick ® (fluticasone propionate and salmeterol inhalation powder), a non-AB substitutable generic version of Advair ® .

In January 2020, Astra Zeneca launched an authorized generic version of Symbicort.

In December 2020, Hikma/Vectura announced that it received FDA approval and launched its generic version of GSK’s Advair Diskus ® .

In April 2016, the FDA issued draft guidance documents covering Fluticasone Furoate/Vilanterol Trifenatate (FF/VI), the active ingredients used in RELVAR ® /BREO ® ELLIPTA ® .

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This may make it difficult for GSK to sell our partnered products at a price acceptable to us or GSK or to generate revenues in line with our analysts’ or investors’ expectations, which may cause the price of our securities to fall.

The Inflation Reduction Act of 2022 (“IRA”) establishes a drug price negotiation program under which the Centers for Medicare & Medicaid Services (“CMS”) is authorized to negotiate maximum fair prices (“MFPs”) for certain high-expenditure, single-source drugs reimbursed under Medicare Part D and Part B.

RELVAR ® /BREO ® ELLIPTA ® has been selected for negotiation under this program, with its negotiated MFP scheduled to take effect beginning January 1, 2027, and ANORO ® ELLIPTA ® has been selected in a subsequent negotiation cycle, with its negotiated MFP expected to take effect in 2028.

As a result, these products will be subject to government-negotiated prices in the Medicare channel, which is expected to result in lower net realized prices relative to historical levels and may also influence pricing dynamics in the commercial market through reference pricing, formulary positioning, or other payer actions.

More recently, the presidential administration and the U.S.

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The treatment paradigm for COPD and asthma constantly evolves.

For instance, in November 2018, the GOLD guidelines were revised to favorably position bronchodilator monotherapy and LABA/LAMA treatment ahead of ICS/LABA for the treatment of COPD unless the patient has frequent exacerbations, or an eosinophil count greater than 300 per cubic microliter.

The use of ICS in COPD is also recommended for patients requiring triple therapy (LABA, LAMA, ICS).

If the treatment paradigms were to change further, causing our partnered products to fall out of favor, or if GSK were unable, or did not devote sufficient resources, to maintain or continue increasing RELVAR ® /BREO ® ELLIPTA ® and ANORO ® ELLIPTA ® sales, our results of operations would likely suffer, and the price of our securities could fall.

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In addition, GSK may determine to focus its commercialization efforts on its own products.

For example, in January 2015, GSK launched Incruse ® (UMEC) in the U.S., which is a LAMA for the treatment of COPD.

GSK may determine to focus its marketing efforts on Incruse, which could have the effect of decreasing the potential market share of ANORO ® ELLIPTA ® and lowering the royalties we may receive for such product.

Alternatively, GSK may decide to market to eventually compete directly against sales of RELVAR ® /BREO ® ELLIPTA ® .

In the event GSK does not devote sufficient resources to the commercialization of our partnered products or chooses to reprioritize its commercial programs, our business, operations and stock price would be negatively affected.

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Any failure by us to effectively limit such risks as we implement our acquisitions or strategic investments could have a material adverse effect on our business, financial condition or results of operations and may negatively impact our net income and cause the price of our securities to fall.

We have a significant amount of debt including our convertible subordinated notes and convertible senior notes that are senior in capital structure and cash flow, respectively, to our common stockholders.

We have a significant amount of debt including our convertible notes that are senior in capital structure and cash flow, respectively, to our common stockholders.

Satisfying the obligations relating to our debt could adversely affect our liquidity or the amount or timing of potential distributions to our stockholders.

As of December 31, 2024, we had $453.5 million in total debt outstanding, comprised primarily of $192.5 million in principal outstanding under our convertible senior notes due 2025 (the “2025 Notes”) and $261.0 million in principal outstanding under our convertible notes due 2028 (the “2028 Notes”) (the 2025 Notes and 2028 Notes, hereinafter, the “Notes”).

The Notes are unsecured debt and, with the exception of the 2028 Notes, are not redeemable by us prior to the maturity date.

As of December 31, 2025, we had $261.0 million in total debt outstanding, comprised of the principal outstanding under our convertible notes due 2028 (the “2028 Notes”).

The 2028 Notes are unsecured debt.

Holders of the 2028 Notes may require us to purchase all or any portion of their 2028 Notes at 100% of their principal amount, plus any unpaid interest, upon a fundamental change.

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Risks Related to Our Dependence on Third Parties

We rely on third parties to conduct the clinical trials for our product candidates, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials or failing to comply with applicable regulatory requirements.

We rely on third parties to conduct the clinical trials for our products and product candidates, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials or failing to comply with applicable regulatory requirements.

We have engaged contract research organizations, or CROs, to conduct our ongoing and planned clinical trials.

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Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibilities.

For example, we will remain responsible for ensuring that each of our clinical trials is

conducted in accordance with the general investigational plan and protocols for the trial.

For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial.

Moreover, the FDA requires us to comply with regulatory standards, commonly referred to as good clinical practices, or GCPs, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected.

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If a present or future collaborator were to be involved in a business combination, the continued pursuit and emphasis on our drug development or commercialization program could be delayed, diminished or terminated.

Our reliance on third parties to manufacture our product candidates increases the risk that we will not have sufficient quantities of our product candidates or products or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.

We do not own or operate manufacturing facilities to produce clinical or commercial supplies of the product candidates that we are developing or evaluating.

We have limited personnel with experience in drug manufacturing and lack the resources and the capabilities to manufacture any of our product candidates on a clinical or commercial scale.

We currently rely on third parties for supply of our product candidates, and our strategy is to outsource all manufacturing of our product candidates and approved products, if any, to third parties.

Our reliance on third parties to manufacture our product candidates and approved products increases the risk that we will not have sufficient quantities of our product candidates or approved products or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.

We do not own or operate manufacturing facilities to produce clinical supplies of the product candidates that we are developing or evaluating or commercial supplies of our approved products.

We have limited personnel with experience in drug manufacturing and lack the resources and the capabilities to manufacture any of our product candidates on a clinical scale or our approved products on a commercial scale.

We currently rely on third parties for supply of our product candidates and approved products, and our strategy is to outsource all manufacturing of our product candidates and approved products, if any, to third parties.

To conduct clinical trials of our product candidates, we will need to identify suitable manufacturers with the capabilities to manufacture our compounds in large quantities in a manner consistent with existing regulations.

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If we are not successful in achieving this form of funding for our clinical trials, we will need to seek alternative means of funding which may not be available to the same extent, if at all.

Our reliance on government funding for certain of our programs adds uncertainty to our research, development and commercialization efforts with respect to those programs and may impose requirements that increase the costs of the research, development and commercialization of product candidates developed under those government-funded programs.

Aspects of certain of our development programs are currently being supported, in part, with funding from the NIH, NIAID, CARB-X and the DOD.

Contracts and grants awarded by the U.S.

government, its agencies and its partners, including our awards from the NIH, NIAID, CARB-X, and the DOD, include provisions that reflect the government’s substantial rights and remedies, many of which are not typically found in commercial contracts, including powers of the government to:

• terminate agreements, in whole or in part, for any reason or no reason at all;

• provide grant support to potential competitor programs;

• reduce or modify the government’s obligations under such agreements without the consent of the other party;

• claim rights, including intellectual property rights, in products and data developed under such agreements;

• audit contract-related costs and fees, including allocated indirect costs;

• suspend the contractor or grantee from receiving new contracts pending resolution of alleged violations of procurement laws or regulations;

• impose U.S.

manufacturing requirements for products that embody inventions conceived or first reduced to practice under such agreements;

• suspend or debar the contractor or grantee from doing future business with the government;

• control and potentially prohibit the export of products;

• pursue criminal or civil remedies under the False Claims Act, False Statements Act and similar remedy provisions specific to government agreements;

• limit the government’s financial liability to amounts appropriated by the U.S.

Congress on a fiscal-year basis, thereby leaving some uncertainty about the future availability of funding for a program even after it has been funded for an initial period.

Our and our investees' reliance on non-profit and government funding for certain of our and our investees' programs adds uncertainty to our and our investees' research, development and commercialization efforts with respect to those programs and may impose requirements that increase the costs of the research, development and commercialization of product candidates developed under those non-profit and government-funded programs.

We may not have the right to prohibit the U.S.

government from using certain technologies developed by us, and may not be able to prohibit third-party companies, including our competitors, from using those technologies in providing products and services to the U.S.

government from using certain technologies developed by us and our investees, and may not be able to prohibit third-party companies, including our competitors, from using those technologies in providing products and services to the U.S.

government generally takes the position that it has the right to royalty-free use of technologies that are developed under U.S.

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Based on the results of its audits, the government may adjust our contract-related costs and fees, including allocated indirect costs.

In addition to government funding, we receive grants and other financial support from non-profit organizations and philanthropic funders to support our research and development activities.

Such funding is typically awarded for specified research programs and is subject to milestone-based payments, reporting requirements, intellectual property restrictions, stewardship obligations, and other compliance conditions similar to those imposed under government awards.

If we fail to comply with these requirements, we may be required to repay funds, become ineligible for future funding, and suffer reputational harm.

Our reliance on non-profit and philanthropic funding subjects us to risks outside of our control, including the availability of funding, changes in the strategic priorities of funding organizations, economic downturns affecting charitable giving, and the discontinuation or reduction of grant programs.

Non-profit funders may also impose restrictions on the use, licensing, pricing, or commercialization of technologies developed with their support, which could limit our flexibility in pursuing commercial opportunities or entering into strategic collaborations.

Any reduction, delay, or termination of such funding could materially adversely affect our research programs, financial condition, and results of operations.

Risks Related to the Commercialization of Our Product Candidates

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To distributors and patients, counterfeit products may be visually indistinguishable from the authentic version.

Counterfeit medicines pose a risk to patient health and safety because of the conditions under which they are

manufactured - often in unregulated, unlicensed, uninspected and unsanitary sites - as well as the lack of regulation of their contents.

Counterfeit medicines pose a risk to patient health and safety because of the conditions under which they are manufactured - often in unregulated, unlicensed, uninspected and unsanitary sites - as well as the lack of regulation of their contents.

The industry’s failure to mitigate the threat of counterfeit medicines could adversely impact our business and reputation by impacting patient confidence in our authentic products, potentially resulting in lost sales, product recalls, and an increased threat of litigation.

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Any of these transactions could be material to our financial condition and results of operations.

If we fail to properly evaluate or integrate acquisitions, we may not achieve the anticipated benefits of any such acquisitions, and we may

incur costs in excess of what we anticipate.

If we fail to properly evaluate or integrate acquisitions, we may not achieve the anticipated benefits of any such acquisitions, and we may incur costs in excess of what we anticipate.

The failure to successfully evaluate and execute acquisitions or otherwise adequately address these risks could materially harm our business and financial results.

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If our current licensees, or any future licensors or licensees, are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised, and we might not be able to prevent third parties from making, using and selling competing products.

If there are material defects in the form or preparation of our

patents or patent applications, such patents or applications may be invalid and/or unenforceable.

If there are material defects in the form or preparation of our patents or patent applications, such patents or applications may be invalid and/or unenforceable.

Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.

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Even if patents covering our product candidates are obtained, once the patent life has expired for a product candidate, we may be open to competition from competitive medications, including generic medications.

Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such product candidates might expire before or shortly after such product

candidates are commercialized.

As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing product candidates similar or identical to ours.

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The policies of the FDA, the EMA and other regulatory authorities may change.

For example, in December 2016, the 21st Century Cures Act, or Cures Act, was signed into law.

The Cures Act, among other things, is intended to modernize the regulation of drugs and spur innovation, but not all its provisions have yet been implemented.

Additionally, in August 2017, the FDA issued final guidance setting forth its current thinking with respect to development programs and clinical trial designs for antibacterial drugs to treat serious bacterial diseases in patients with an unmet medical need.

In the U.S., Congress has enacted significant healthcare and FDA-related legislation in recent years, including the 21st Century Cures Act and subsequent user fee reauthorization acts, and may continue to consider additional reforms affecting drug development, clinical trial requirements, approval standards, manufacturing oversight and post-approval obligations.

The FDA has also issued numerous guidance documents and initiatives addressing, among other topics, the use of real-world evidence, decentralized and hybrid clinical trials, diversity in clinical trial enrollment, data integrity, cybersecurity, manufacturing quality, and the development of antibacterial and antifungal therapies.

We cannot predict what if any effect the Cures Act or any existing or future guidance from the FDA or other regulatory authorities will have on the development of our product candidates.

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Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access.

Other federal health reform measures have been proposed and adopted in the United States.

For example, the Medicare Access and CHIP Reauthorization Act of 2015 ended the use of the statutory formula for clinician payment and established a quality payment incentive program, also referred to as the Quality Payment Program.

This program provides clinicians with two ways to participate, including through the Advanced Alternative Payment Models, or APMs, and the Merit-based Incentive Payment System, or MIPS.

In November 2019, CMS issued a final rule finalizing the changes to the Quality Payment Program.

It is unclear how payment reductions or the introduction of the Quality Payment Program will impact overall physician reimbursement under the Medicare program.

It is also unclear if changes in Medicare payments to providers would impact such providers’ willingness to prescribe and administer our products, if approved.

Heightened governmental scrutiny over the manner in which drug manufacturers price their marketed products and the practices of pharmacy benefit managers and other supply chain entities has also resulted in several U.S.

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Further, restrictive or unfavorable pricing, coverage, or reimbursement determinations for our medicines or product candidates by governments, regulatory agencies, courts, or private payers, including in relation to the implementation of the Inflation Reduction Act, reference pricing, and compulsory licensing, may adversely impact our business and financial results.

In addition, government price reporting and payment regulations are complex, and require ongoing assessment of the methods by

which we calculate and report pricing.

In addition, government price reporting and payment regulations are complex, and require ongoing assessment of the methods by which we calculate and report pricing.

Calculation methodologies are inherently subjective and are subject to review and challenge by government agencies.

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Because a portion of our current revenues and near-term projected revenues have historically been derived from products under the GSK Agreements, disputes with GSK could harm our business and cause the price of our securities to fall.

Historically, all of our current and near-term projected revenues have been derived from products under the GSK Agreements.

Historically, much of our current and near-term projected revenues have been derived from products under the GSK Agreements.

We expect royalties from such products will likely continue to comprise a portion of our revenues in the future.

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For example, GSK could promote its non‑GSK/Innoviva respiratory products or a partnered product for which we are entitled to receive a lower percentage of royalties, delay or terminate the development or commercialization of the respiratory programs covered by the GSK Agreements, or take other actions, such as making public statements, that have a negative effect on our stock price.

In this regard and by way of example, sales of Advair ® , GSK’s approved medicine for both COPD and asthma, continue to be significantly greater than sales of RELVAR ® /BREO ® ELLIPTA ® , and GSK has indicated publicly that it intends to continue commercializing Advair ® .

Also, given the potential future royalty payments which GSK may be obligated to pay under the GSK Agreements, GSK may seek to acquire us in order to reduce those payment obligations.

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• delays in or disruptions to the conduct of preclinical programs and clinical trials;

• constraints on the movement of products and supplies through the supply chain, which can disrupt our ability to conduct clinical trials and develop our products;

• constraints on the movement of products and supplies through the supply chain, which can disrupt our ability to conduct clinical trials and develop and commercialize our products;

• price increases in raw materials and capital equipment, as well as increasing price competition in our markets;

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and other jurisdictions in which we do business routinely examine our tax returns and are intensifying their scrutiny and examinations of cross-border tax issues, which could unfavorably impact our results of operations.

Further, actions taken with respect to tax-related matters by associations such as the Organisation for Economic Co-operation and Development and the

European Commission could influence tax laws in countries in which we operate, such as the recent enactments by both the EU and non-EU countries of a global minimum tax.

Further, actions taken with respect to tax-related matters by associations such as the Organisation for Economic Co-operation and Development and the European Commission could influence tax laws in countries in which we operate, such as the recent enactments by both the EU and non-EU countries of a global minimum tax.

Modifications to key elements of the U.S.

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uncertainty regarding the severity and duration of a pandemic; impacts to business operations; decreased demand for certain of our products; increased costs of doing business; manufacturing disruptions and delays; supply chain disruptions and shortages, including challenges related to reliance on third-party suppliers resulting in reduced availability of materials or components used in the development, manufacturing, distribution or administration of our products; evolving macroeconomic factors and conditions, including general economic uncertainty, unemployment rates and recessionary pressures; changes in labor markets, including challenges related to our human capital and talent development; unknown consequences on our business performance and initiatives stemming from the substantial investment of time and other resources to any potential pandemic response; increased difficulty and uncertainty regarding predicting or estimating future performance; pace of post-pandemic recovery, disruption and volatility within the financial or credit markets; and our financial performance in general.

Under the Services Agreement with Sarissa Capital, we may rely on Sarissa Capital to assist in our strategic investing activity.

On December 11, 2020, we entered into the Services Agreement pursuant to which Sarissa Capital provides substantial assistance to us in connection with our acquisition strategy.

Pursuant to the terms of the Services Agreement, and subject to the limitations set forth therein, Sarissa Capital will, among other things:

(i) assist Innoviva in the development of an overall acquisition and investment process and strategy;

(ii) advise Innoviva on market trends, market dynamics and merger and acquisition activity;

(iii) identify potential transaction targets;

(iv) assist in due diligence of transaction targets and the negotiation and execution of transactions;

(v) advise on the growth and operational plans, performance and integration of target companies once an investment or acquisition is made;

and (vi) assist in the identification of director and officer candidates for target companies.

The services are provided by Sarissa Capital personnel and we have limited or no ability to control the manner upon which the services are provided.

In the event that Sarissa Capital fails to adequately perform the required services, our investment activity operations and financial performance may be negatively impacted.

Our investment into the Partnership, managed by Sarissa Capital, could subject us to various risks and uncertainties, any of which could impact our investment results and could materially and adversely affect our business, financial condition and results of operations.

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On December 11, 2020, we entered into the Partnership Agreement and invested $300 million of our cash reserves to be managed by Sarissa Capital as the investment manager to the Partnership.

While we expect that a portion of our revenues will continue to be derived from our royalty management business and the sales of our products, as a result of this investment, we may derive a material portion of our income from assets managed by Sarissa Capital.

The investment strategy of Sarissa Capital will focus on a concentrated portfolio of “long” positions in publicly or privately traded securities (debt or equity) and derivatives of, and other financial instruments related to, each of the foregoing, specifically in the areas of healthcare, pharmaceuticals and biotechnology.

The risks associated with this investment strategy may be substantially greater than the risks associated with traditional fixed-income investment strategies or other low-yield strategies.

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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-K

Item 1A. Risk Factors