Innoviva Reports Fourth Quarter 2022 Financial Results and Highlights Recent Company Progress

28 Feb 2023
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Phase 3NDAFinancial StatementExecutive ChangeAcquisition
Royalties of $54.7 million in the fourth quarter of 2022 for RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA® Net product sales of $14.6 million in the fourth quarter of 2022 for GIAPREZA® and XERAVA® $100 million share repurchase program initiated in the fourth quarter of 2022 Sapna Srivastava, Ph.D., appointed to the Company’s Board of Directors BURLINGAME, Calif.--(BUSINESS WIRE)-- Innoviva Inc. (NASDAQ: INVA) (“Innoviva” or “the Company”), a diversified holding company with a portfolio of royalties and other healthcare assets, today reported financial results for the fourth quarter ended December 31, 2022. Gross royalty revenues of $54.7 million from Glaxo Group Limited (“GSK”) for the fourth quarter of 2022 included royalties of $44.3 million from global net sales of RELVAR®/BREO® ELLIPTA® and royalties of $10.4 million from global net sales of ANORO® ELLIPTA®. Income before income taxes decreased to a loss of $64.7 million, compared to income of $56.5 million in the same quarter of 2021, driven primarily by reduced royalty revenue contribution following Theravance Respiratory Company LLC (“TRC”) divestiture partially offset by GIAPREZA® and XERAVA® revenues, incremental operating expenses related to recent acquisitions, and adverse contribution from net changes in fair value of equity and long-term investments. Decrease in fair values of equity and long-term investments of $85.4 million in the fourth quarter of 2022 was driven mainly by a $117.3 million unrealized loss related to share price decline for Armata Pharmaceuticals Inc. (“Armata”) over the time period, much of which has since been recouped due to favorable year to date share price performance in 2023. Net cash provided by operating activities was $201.7 million in 2022, compared to $363.8 million in 2021, driven primarily by reduced revenues following TRC divestiture as well as additional incremental operating expenses, including one-time costs, following recent acquisitions. Net cash and cash equivalents totaled $291.0 million, and royalty and product sale receivables totaled $64.1 million as of December 31, 2022. Pavel Raifeld, Chief Executive Officer of Innoviva, stated: “Our diversified core royalty business remains solid. RELVAR®/BREO® ELLIPTA® global net sales decreased in the fourth quarter of 2022 primarily due to unfavorable prior period adjustments in the U.S., despite stable volume trends. ANORO® ELLIPTA® global net sales decreased slightly compared to the fourth quarter of 2021 mainly due to foreign exchange rate changes.” Mr. Raifeld continued: “We continue to advance our strategy of building a best-in-class hospital and infectious disease business formed through acquisitions of Entasis Therapeutics and La Jolla Pharmaceutical. Notably, GIAPREZA® and XERAVA® had their strongest quarter ever, the FDA accepted our SUL-DUR NDA with Priority Review, and enrollment in our Phase 3 registrational trial of zoliflodacin remains on track, with study completion anticipated in 2023. We believe this platform will afford us multiple opportunities to create and crystalize shareholder value.” “While capital markets volatility has significantly impacted income over the past quarter, primarily manifesting through decline in Armata’s share price, most losses have been recouped following recent stock rallies. We remain excited about our prospects and continue to be disciplined with our capital, executing on the $100 million share buyback program and optimizing our operating footprint following recent acquisitions,” said Mr. Raifeld. Recent Highlights GSK Net Sales: Fourth quarter 2022 net sales of RELVAR®/BREO® ELLIPTA® by GSK were $295.2 million with $83.0 million in net sales from the U.S. market and $212.2 million from non-U.S. markets. Fourth quarter 2022 net sales of ANORO® ELLIPTA® by GSK were $159.8 million with $82.6 million net sales from the U.S. market and $77.2 million from non-U.S. markets. Clinical Updates: On November 30, 2022, the U.S. Food and Drug Administration (FDA) granted priority review for SUL-DUR, an investigational drug for the treatment of infections caused by Acinetobacter baumannii-calcoaceticus complex (ABC), including multi-drug resistant and carbapenem-resistant strains. The FDA is currently planning to hold an advisory committee meeting to discuss this New Drug Application. The target PDUFA date (or action date) is May 29, 2023. At the annual meeting of the Infectious Disease Society of America which took place from October 19 to October 23, 2022 in Washington, D.C., Entasis Therapeutics, a wholly owned subsidiary of the Company, had six presentations on SUL-DUR, reinforcing the positive safety and efficacy findings from the Company’s pivotal Phase 3 ATTACK trial. Additionally, at the same annual meeting of the Infectious Disease Society of America, La Jolla Pharmaceutical, another wholly owned subsidiary of the Company, had five abstracts on XERAVA® focused primarily on its use in combination therapies. Enrollment in the phase 3 registrational trial for zoliflodacin, a first-in-class oral antibiotic for the treatment of gonorrhea being developed in partnership with GARD-P, remains on track, and study completion is anticipated in 2023. Corporate Updates: Innoviva’s Board of Directors authorized a share repurchase program in the fourth quarter of 2022 under which the Company may repurchase up to $100.0 million of its outstanding shares of common stock. In January 2023, Sapna Srivastava, Ph.D., a highly experienced executive within the biopharmaceutical and banking industries, joined the Company’s Board of Directors. In January 2023, we closed a $30 million convertible debt facility with Armata, supporting the clinical development of its multiple innovative bacteriophage assets as well as advanced biologics cGMP manufacturing capabilities. In January 2023, we invested an additional $5 million in Gate Neurosciences, Inc. to support the clinical development of their differentiated pipeline of neuropsychiatric therapeutics. In January 2023, we paid off our convertible notes due 2023 in the amount of $96.2 million. About Innoviva Innoviva is a diversified holding company with a portfolio of royalties and other healthcare assets. Innoviva’s royalty portfolio includes 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® and ANORO® ELLIPTA®. Innoviva’s other healthcare assets include infectious disease and hospital assets stemming from acquisitions of Entasis Therapeutics, including its lead asset sulbactam-durlobactam, and La Jolla Pharmaceutical, including GIAPREZA® (angiotensin II), approved to increase blood pressure in adults with septic or other distributive shock and XERAVA® (eravacycline) for the treatment of complicated intra-abdominal infections in adults. ANORO®, RELVAR® and BREO® are trademarks of the GSK group of companies. Forward Looking Statements This press release contains certain “forward-looking” statements as that term is defined in the Private Securities Litigation Reform Act of 1995 regarding, among other things, statements relating to goals, plans, objectives, and future events. Innoviva intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. The words “anticipate”, “expect”, “goal”, “intend”, “objective”, “opportunity”, “plan”, “potential”, “target” and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements involve substantial risks, uncertainties, and assumptions. These statements are based on the current estimates and assumptions of the management of Innoviva as of the date of this press release and are subject to known and unknown risks, uncertainties, changes in circumstances, assumptions and other factors that may cause the actual results of Innoviva to be materially different from those reflected in the forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, among others, risks related to: expected cost savings; lower than expected future royalty revenue from respiratory products partnered with GSK; the commercialization of RELVAR®/BREO® ELLIPTA®, ANORO® ELLIPTA®, GIAPREZA® and XERAVA® in the jurisdictions in which these products have been approved; the strategies, plans and objectives of Innoviva (including Innoviva’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. Other risks affecting Innoviva are described under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Innoviva’s Annual Report on Form 10-K for the year ended December 31, 2021 and Quarterly Reports on Form 10-Q, which are on the Securities and Exchange Commission (“SEC”) and available on the SEC’s website at . Additional risk factors are presented on Form 8-K filed on August 23, 2022. Past performance is not necessarily indicative of future results. No forward-looking statements can be guaranteed, and actual results may differ materially from such statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. The information in this press release is provided only as of the date hereof, and Innoviva assumes no obligation to update its forward-looking statements on account of new information, future events or otherwise, except as required by law. INNOVIVA, INC. Condensed Consolidated Statements of Income (in thousands, except per share data) (Unaudited) Three Months Ended Year Ended December 31, December 31, 2022 2021 2022 2021 Revenue: Royalty revenue, net (1) $ 51,216 $ 107,680 $ 311,645 $ 391,866 Net product sales 14,587 - 19,694 - Total revenue 65,803 107,680 331,339 391,866 Expenses: Cost of products sold (inclusive of amortization of inventory fair value adjustments) 10,113 - 13,793 - Selling, general and administrative 17,390 3,113 63,538 16,187 Research and development 10,049 40 41,432 576 Amortization of acquired intangible assets 4,070 - 5,581 - Gain on TRC sale - - (266,696 ) Loss on debt extinguishment - - 20,662 Changes in fair values of equity method investments, net 117,275 9,025 161,749 (84,392 ) Changes in fair values of equity and long-term investments, net (31,868 ) 33,917 (8,462 ) (6,638 ) Interest and dividend income (3,188 ) (454 ) (6,369 ) (1,839 ) Interest expense 4,028 4,841 15,789 19,070 Other expense (income), net 2,622 708 3,373 3,626 Total expenses 130,491 51,190 44,390 (53,410 ) Income before income taxes (64,688 ) 56,490 286,949 445,276 Income tax expense 3,626 10,839 66,687 76,439 Net income (68,314 ) 45,651 220,262 368,837 Net income attributable to noncontrolling interest - 35,305 6,341 102,983 Net income attributable to Innoviva stockholders $ (68,314 ) $ 10,346 $ 213,921 $ 265,854 Basic net income per share attributable to Innoviva stockholders $ (0.98 ) $ 0.15 $ 3.07 $ 3.24 Diluted net income per share attributable to Innoviva stockholders $ (0.98 ) $ 0.14 $ 2.37 $ 2.87 Shares used to compute basic net income per share 69,656 69,492 69,644 82,062 Shares used to compute diluted net income per share 69,656 81,770 95,249 94,310 (1) Total net revenue is comprised of the following (in thousands): Three Months Ended Year Ended December 31, December 31, 2022 2021 2022 2021 (unaudited) (unaudited) Royalties $ 54,671 $ 111,135 $ 325,468 $ 405,689 Amortization of capitalized fees (3,455 ) (3,455 ) (13,823 ) (13,823 ) Royalty revenue, net $ 51,216 $ 107,680 $ 311,645 $ 391,866 INNOVIVA, INC. Condensed Consolidated Balance Sheets (in thousands) (unaudited) December 31, December 31, 2022 2021 Assets Cash and cash equivalents $ 291,049 $ 201,525 Royalty and product sale receivables 64,073 110,711 Inventory, net 55,897 - Prepaid expense and other current assets 32,492 1,437 Property and equipment, net 170 12 Equity and long-term investments 403,013 483,845 Capitalized fees 97,607 111,430 Right-of-use assets 3,265 97 Goodwill 26,713 - Intangible assets 252,919 - Deferred tax assets, net - 17,327 Other assets 4,299 11 Total assets $ 1,231,497 $ 926,395 Liabilities and stockholders’ equity Other current liabilities $ 32,322 $ 1,655 Accrued interest payable 4,359 4,152 Deferred revenues 2,094 - Convertible subordinated notes, due 2023, net 96,193 240,364 Convertible senior notes, due 2025, net 190,583 154,289 Convertible senior notes, due 2028, net 253,597 - Other long term liabilities 70,918 - Deferred tax liabilities 5,771 Income tax payable - long term 9,872 - Innoviva stockholders’ equity 565,788 414,743 Noncontrolling interest - 111,192 Total liabilities and stockholders’ equity $ 1,231,497 $ 926,395 INNOVIVA, INC. Cash Flows Summary (in thousands) (unaudited) Year Ended December 31, 2022 2021 Net cash provided by operating activities $ 201,726 $ 363,813 Net cash provided by (used in) investing activities (56,634 ) 43,722 Net cash used in financing activities (55,568 ) (452,497 ) Net change $ 89,524 $ (44,962 ) Cash and cash equivalents at beginning of period 201,525 246,487 Cash, cash equivalents and restricted cash at end of period $ 291,049 $ 201,525
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