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Item 2. Management’s Discussion and Analysis

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

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

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

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

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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;

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Innoviva, Inc.

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

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

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

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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:

Our wholly owned, critical care and infectious disease operating platform with a hospital focus, is anchored by a portfolio of four commercial and marketed products, as well as an FDA-approved product which is expected to be available to patients in the second half of 2026:

• GIAPREZA® (angiotensin II) for increasing blood pressure in adults with septic or other distributive shock;

• XACDURO® (sulbactam for injection;

durlobactam for injection), co-packaged for intravenous use for the treatment of hospital-acquired and ventilator-associated bacterial pneumonia caused by Acinetobacter;

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

• ZEVTERA® (ceftobiprole), an advanced-generation cephalosporin antibiotic for the treatment of staphylococcus aureus bacteremia, including those with right-sided endocarditis, acute bacterial skin and skin structure infections, and community-acquired bacterial pneumonia, licensed from Basilea Pharmaceutica Ltd, Allschwil (SIX:

BSLN) (“Basilea”) for U.S.

commercialization and commercially launched in the third quarter of 2025;

• NUZOLVENCE® (formerly known as zoliflodacin), approved by the FDA on December 12, 2025, for the treatment of uncomplicated urogenital gonorrhea in adults and adolescents.

In addition, we own other strategic healthcare assets, such as a significant stake in Armata Pharmaceuticals, Inc.

(“Armata”), a leader in development of bacteriophages with potential use across a range of infectious and other serious diseases.

We also have economic interests in other healthcare companies through our portfolio approach.

Our disciplined focus on deploying capital in areas of significant unmet medical need with high value creation potential has driven a meaningful transformation of our company over the years from a pure-play royalty business to a diversified biopharmaceutical company with a strong, fast-growing, differentiated operating platform and multiple other assets with significant promise.

We believe we are well-positioned to deliver significant long-term shareholder value.

Our company structure and organization are tailored to our focused activities of managing our respiratory assets partnered with GSK, commercializing our marketed products, developing our product candidates, optimizing capital allocation, and providing for certain essential reporting and management functions of a public company.

First Quarter 2026 and Recent Highlights:

Financial Highlights

• Total revenue:

$98.0 million, yielding 11% growth compared to $88.6 million for the first quarter 2025.

• Royalty revenue:

Third quarter 2025 gross royalty revenue from GSK was $63.4 million, compared to $60.5 million for the third quarter 2024.

gross royalty revenue from GSK was $58.6 million, compared to $61.3 million for the first quarter 2025.

• 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.

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.

$41.4 million ($34.2 million U.S.

and $7.2 million ex-US), representing 37% growth compared to $30.3 million in the same quarter of 2025.

net product sales primarily consisted of $19.7 million from GIAPREZA ® , $11.6 million from XACDURO ® , and $2.5 million from XERAVA ® .

• 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.

$38.2 million, compared to $41.4 million for the first quarter 2025, reflecting continued investment in commercial activities, as well as product and business 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 favorable changes in fair value of equity and long-term investments totaled $191.2 million, primarily attributable to share price appreciation of Armata.

Innoviva’s strategic healthcare investments were valued at $773.3 million as of March 31, 2026, and consisted of $603.4 million in Armata, $138.2 million in other strategic equity and convertible debt, and $31.7 million held by ISP Fund.

• 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.

$186.6 million ($2.52 basic earnings per share) was driven primarily by higher revenue and the positive impact of changes in the fair values of equity and long-term investments.

• Cash and cash equivalents:

totaled $603.1 million.

Royalty and net product sales receivables totaled $93.5 million as of September 30, 2025.

Royalty and net product sales receivables totaled $92.6 million as of March 31, 2026.

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.

• NUZOLVENCE ® (zoliflodacin):

a first-in-class, single-dose oral medication for the treatment of uncomplicated urogenital gonorrhea due to Neisseria gonorrhoeae in adults and pediatric patients 12 years and older weighing at least 35kg, developed in partnership with The Global Antibiotic Research & Development Partnership ("GARDP").

o In December 2025, IST received U.S.

FDA approval of NUZOLVENCE ® , one of the first new treatments approved by the FDA for uncomplicated urogenital gonorrhea in nearly two decades.

o The Company remains on track to make NUZOLVENCE ® available to patients in the second half of 2026.

• Strategic healthcare assets

o Innoviva’s strategic healthcare asset portfolio experienced meaningful growth this quarter, including notable value crystallization at Armata.

Innoviva remains focused on disciplined capital deployment across healthcare opportunities where it believes its strategic perspective and operating experience can support long-term sustained returns.

• 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.

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

o During the first quarter of 2026, Innoviva repurchased 971,066 shares for $20.4 million under its $125 million share repurchase program.

Since its inception, and through the end of this quarter, the Company has repurchased 1,198,921 shares for $25.0 million, reflecting the Company’s continued confidence in its intrinsic value and long-term outlook.

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”).

In November 2002, we entered into the LABA Collaboration Agreement 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:

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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.

We are 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.

On sales of ANORO ® ELLIPTA ® , royalties are upward tiering and range from 6.5% to 10%.

Critical Accounting Policies and Estimates

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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 ® .

Total net royalty revenue decreased to $55.2 million for the three months ended March 31, 2026, compared to $57.8 million for the same period a year ago.

The decrease in total net royalty revenue was primarily due to lower net sales driven by pricing pressures in the United States.

Net Product Sales

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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:

product sales is attributable mainly to product sales under an interim supply agreement with Zai Lab, which is billed at cost.

License and Other Revenue

License and other revenue, as compared to the prior year period, was as follows:

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License and other revenue

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.

License and other revenue for the three months ended March 31, 2026 was derived primarily from our ongoing arrangements with Zai Lab as discussed in Note 4, “License, Collaboration and Other Arrangements”, to the Condensed Consolidated Financial Statements.

Cost of Products Sold

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Cost of products sold

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.

The cost of products sold also includes the inventory step-up value from the acquisition of La Jolla, which is recorded upon the sale of such inventory.

The step-up value included above amounted to $1.1 million and $0.2 million for the three months ended March 31, 2026 and 2025, respectively.

Our cost of products sold increased during the three months ended March 31, 2026, driven by higher product sales volume.

As of March 31, 2026, our total inventory included the remaining net fair value adjustments resulting from the acquisition of La Jolla of approximately $2.2 million, which will be recognized as cost of products sold when sales occur in future periods.

Research and Development

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Compensation and related personnel costs

External services and expenses

Acquired IPR&D

External services

Facilities related

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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.

Research and development expenses for the three months ended March 31, 2026 were $5.2 million.

The expenses for the current period include additional personnel and facilities costs in support of the acquired IPR&D as discussed in Note 13, “Asset Acquisition”, in the Condensed Consolidated Financial Statements.

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

Selling, General & Administrative

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Selling, general and administrative

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.

Our selling, general and administrative expenses were $32.4 million and $27.5 million for the three months ended March 31, 2026 and 2025, respectively.

The increase during the current period is 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.

Interest and Dividend Income and Other Expense, Net

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Other expense, net

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.

Interest and dividend income increased for the three months ended March 31, 2026, compared to the same period in 2025, 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.

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Interest expense

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.

Our interest expense for the three months ended March 31, 2026 and 2025 comprised mainly of the contractual interest expense and the amortization of debt issuance costs for our 2028 Notes, as well as effective interest expense on our deferred royalty obligation related to GIAPREZA ® .

The increase for the three months ended March 31, 2026, compared to the same period in 2025, was mainly due to higher interest expense on our deferred royalty obligation as a result of higher sales performance of GIAPREZA ® .

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

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and long-term investments, net

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.

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The changes in fair values of equity method investments for the three months ended March 31, 2026 were favorable mainly due to the appreciation in Armata’s stock price.

We recorded $157.7 million in unrealized gain for the three months ended March 31, 2026, compared to $13.5 million in unrealized loss for the three months ended March 31, 2025.

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, Syndeio, Lyndra and those investments managed by ISP Fund LP.

We recorded $47.8 million net positive changes in fair values of equity and long-term investments for the three months ended March 31, 2026 related to other long-term investments we made in Armata, and net negative changes in fair value of our investments in Syndeio of $13.8 million for the three months ended March 31, 2026.

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

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

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

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.

We recorded income tax expense of $48.0 million for the three months ended March 31, 2026, compared to income tax expense of $8.0 million for the three months ended March 31, 2025.

The effective income tax rate for the three months ended March 31, 2026 and 2025 was 20.5% and (20.7)%, respectively.

Liquidity and Capital Resources

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

For the nine months ended September 30, 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.

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

For the three months ended March 31, 2026, we generated gross royalty revenues from GSK of $58.6 million, net product sales of $41.4 million and license and other revenue of $1.5 million.

Cash and cash equivalents totaled $603.1 million, royalties receivable from GSK totaled $58.6 million and accounts receivable associated with our product sales and license and other revenue totaled $34.0 million as of March 31, 2026.

As of March 31, 2026, we had one outstanding convertible note, the 2028 Notes, in an aggregate principal amount of $261.0 million, which will become due in March 2028.

Future interest payments associated with this note total $13.9 million.

On November 3, 2025, our Board of Directors authorized a share repurchase program under which we may repurchase up to $125.0 million of Innoviva’s outstanding shares of common stock.

From program inception through March 31, 2026, we have repurchased Innoviva common stock in the open market for total price of approximately $25.0 million.

This program has no termination date, may be suspended or discontinued at any time at our discretion and does not oblige us to acquire any amount of common stock.

In 2024, we elected to unwind our capital accounts in ISP Fund LP.

During the current year, we received $47.5 million cash distributions and expect to receive the remaining investments in 2026.

Adequacy of Cash Resources to Meet Future Needs

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

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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.

Net cash provided by operating activities for the three months ended March 31, 2026 was $35.3 million, consisting primarily of our net income of $186.6 million, adjusted for net non-cash items, which included $41.0 million of deferred income taxes, $6.6 million of amortization of acquired intangible assets, $3.5 million of amortization of capitalized fees and depreciation of property and equipment, $2.6 million of stock-based compensation and $1.1 million of inventory fair value step-up adjustments, offset by $191.2 million in net changes in fair value of our investments and $16.3 million in net changes in operating assets and liabilities.

Net cash provided by operating activities for the three months ended March 31, 2025 was $48.6 million, consisting primarily of our net loss of $46.6 million, adjusted for net non-cash items, which included $78.8 million in changes in fair value of our investments, $6.5 million of amortization of acquired intangible assets, $3.5 million of amortization of capitalized fees, $2.1 million of stock-based compensation, $0.2 million of inventory fair value step-up adjustments and $2.9 million in net changes in operating assets and liabilities.

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.

Net cash provided by investing activities for the three months ended March 31, 2026 of $37.0 million primarily consisted of $43.3 million in sales of equity investments managed by ISP Fund LP and $6.7 million in net purchases and sales of other investments managed by ISP Fund LP, partially offset by $10.0 million in purchases of trading securities and $2.5 million in purchases of equity investments managed by ISP Fund LP.

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

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

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.

Net cash used in financing activities for the three months ended March 31, 2026 of $20.1 million was primarily due to $20.2 million in repurchases of our common stock under the ongoing stock repurchase program.

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

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.

As of March 31, 2026, our notes payable obligation comprised of $261.0 million related to our 2028 Notes, which are 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.

Our short-term and long-term obligations also include contractual payments related to our operating leases amounting to $14.8 million, with approximately $0.9 million payable through December 31, 2026, amounts ranging between $1.2 million and $1.5 million payable in each of the years 2027 to 2030, and $8.5 million payable thereafter.

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

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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.

Refer to Note 4, “License, Collaboration and Other 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.

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

As of March 31, 2026, we have approximately $13.0 million U.S.

dollar equivalent 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.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis