Innoviva, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

(Mark One)
☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File No. 000-30319

INNOVIVA, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	94-3265960 (I.R.S. Employer Identification No.)
1350 Old Bayshore Highway, Suite 400 Burlingame , CA (Address of principal executive offices)	94010 (Zip Code)

Registrant’s telephone number, including area code: ( 650 ) 238-9600

Title of Each Class	Trading Symbol(s)	Name of Each Exchange On Which Registered
Common Stock $0.01 Par Value	INVA	The Nasdaq Stock Market LLC

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

Indicate by check mark if the registrant is a well‑known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  No 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check One):

Large accelerated filer 
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No 

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant based upon the closing price of the registrant’s Common Stock on The Nasdaq Global Select Market on June 30, 2021 was $ 840,846,560 . This calculation does not reflect a determination that persons are affiliates for any other purpose.

On February 14, 2022, there were 69,565,501 shares of the registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Specified portions of the registrant’s definitive Proxy Statement to be issued in conjunction with the registrant’s 2022 Annual Meeting of Stockholders, which is expected to be filed not later than 120 days after the registrant’s fiscal year ended December 31, 2021, are incorporated by reference into Part III of this Annual Report. Except as expressly incorporated by reference, the registrant’s Proxy Statement shall not be deemed to be a part of this Annual Report on Form 10-K/A.

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EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A (the "Amendment") amends the Annual Report on Form 10-K of Innoviva, Inc. (the "Company") for the year ended December 31, 2021, originally filed on February 28, 2022 (the "Original Filing") solely for the purpose of attaching the Audited Consolidated Financial Statements of Armata Pharmaceuticals, Inc. for the year ended December 31, 2021 and the Consent of Ernst & Young LLP Independent Registered Public Accounting Firm of Armata Pharmaceuticals, Inc. as Exhibit 99.1 and Exhibit 23.2, respectively. These exhibits were not available at the time of our Original Filing.

In accordance with applicable Securities and Exchange Commission ("SEC") rules and as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, this Amendment includes new certifications from the Company's Principal Executive Officer and Principal Financial Officer dated as of the date of filing of this Amendment.

This Amendment consists solely of the preceding cover page, this explanatory note, Part II., Item 8., "Financial Statements and Supplementary Data", in its entirety, Part IV., Item 15., "Exhibits and Financial Statement Schedules," in its entirety, the Exhibits, the signature page, and the new certifications from the Company's Principal Executive Officer and Principal Financial Officer.

This Amendment does not reflect events occurring after the date of the Original Filing and does not amend or update in any way the disclosures made in the Original Filing, except as described above. In particular, the information included in this Amendment under Part II, Item 8 is identical in all respects to the information included under such caption in the Original Filing. This Amendment should be read in conjunction with the Original Filing and with the Company's subsequent filings with the SEC.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

	Page
Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020	4
Consolidated Statements of Income for each of the three years in the period ended December 31, 2021	5
Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 2021	6
Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended December 31, 2021	7
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2021	8
Notes to Consolidated Financial Statements	9
Reports of Independent Registered Public Accounting Firm (PCAOB ID 248 )	32

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INNOVIVA, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	December 31, — 2021	2020
Assets
Current assets:
Cash and cash equivalents	$ 201,525	$	246,487
Related party receivables from collaborative arrangements	110,711		93,931
Prepaid expenses and other current assets	1,437		1,640
Total current assets	313,673		342,058
Property and equipment, net	12		28
Equity and long-term investments	483,845		438,258
Capitalized fees paid to a related party, net	111,430		125,253
Deferred tax assets, net	17,327		93,759
Other assets	108		214
Total assets	$ 926,395	$	999,570
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$ 27	$	66
Accrued personnel-related expenses	619		490
Accrued interest payable	4,152		4,152
Other accrued liabilities	1,009		1,402
Total current liabilities	5,807		6,110
Long-term debt, net of discount and issuance costs	394,653		385,517
Other long-term liabilities	—		106
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock: $ 0.01 par value, 230 shares authorized, no shares issued and outstanding	—		—
Common stock: $ 0.01 par value, 200,000 shares authorized, 69,566 and 101,392 issued and outstanding as of December 31, 2021 and December 31, 2020 respectively	696		1,014
Treasury stock: at cost, 32,005 and no shares at December 31, 2021 and December 31, 2020, respectively	( 393,829	)	—
Additional paid-in capital	1,264,024		1,260,900
Accumulated deficit	( 456,148	)	( 722,002	)
Total Innoviva stockholders’ equity	414,743		539,912
Noncontrolling interest	111,192		67,925
Total stockholders’ equity	525,935		607,837
Total liabilities and stockholders’ equity	$ 926,395	$	999,570

See accompanying notes to consolidated financial statements.

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INNOVIVA, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

	Year Ended December 31, — 2021	2020		2019
Royalty revenue from a related party, net of amortization of capitalized fees paid to a related party of $ 13,823 in the years ended December 31, 2021, 2020, 2019 respectively	$ 391,866	$	326,794	$	261,016
Revenue from collaborative arrangement with a related party	—		10,000		—
Total net revenue	391,866		336,794		261,016
Operating expenses:
Research and development	576		1,788		—
General and administrative	16,187		13,883		14,656
Total operating expenses	16,763		15,671		14,656
Income from operations	375,103		321,123		246,360
Interest and dividend income	1,839		1,524		5,540
Other expense, net	( 3,626	)	( 348	)	( 345	)
Interest expense	( 19,070	)	( 18,331	)	( 18,660	)
Changes in fair values of equity and long-term investments, net	91,030		50,277		—
Income before income taxes	445,276		354,245		232,895
Income tax expense, net	76,439		60,431		41,902
Net income	368,837		293,814		190,993
Net income attributable to noncontrolling interest	102,983		69,412		33,705
Net income attributable to Innoviva stockholders	$ 265,854	$	224,402	$	157,288
Basic net income per share attributable to Innoviva stockholders	$ 3.24	$	2.21	$	1.55
Diluted net income per share attributable to Innoviva stockholders	$ 2.87	$	2.02	$	1.43
Shares used to compute Innoviva basic and diluted net income per share:
Shares used to compute basic net income per share	82,062		101,320		101,150
Shares used to compute diluted net income per share	94,310		113,554		113,409

See accompanying notes to consolidated financial statements.

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INNOVIVA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

	Year Ended December 31, — 2021	2020	2019
Net income	$ 368,837	$ 293,814	$	190,993
Unrealized gain on marketable securities, net	—	—		30
Reclassifications to net income	—	( 27	)	—
Comprehensive income	368,837	293,787		191,023
Comprehensive income attributable to noncontrolling interest	102,983	69,412		33,705
Comprehensive income attributable to Innoviva stockholders	$ 265,854	$ 224,375	$	157,318

See accompanying notes to consolidated financial statements.

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INNOVIVA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

						Accumulated Other
Common Stock				Paid-In		Comprehensive		Accumulated	Treasury Stock				Noncontrolling	Stockholders’
Shares		Amount		Capital		Income (Loss)		Deficit	Shares		Amount		Interest	Equity
Balance as of December 31, 2018	101,098	$	1,011	$	1,256,267	$ ( 3	)	$ ( 1,103,692	)	—	$ —		$ 5,469	$	159,052
Distributions to noncontrolling interest	—		—		—	—		—		—	—		( 10,553	)	( 10,553	)
Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding	190		2		536	—		—		—	—		—		538
Stock-based compensation	—		—		2,056	—		—		—	—		—		2,056
Net income	—		—		—	—		157,288		—	—		33,705		190,993
Other comprehensive income	—		—		—	30		—		—	—		—		30
Balance as of December 31, 2019	101,288	$	1,013	$	1,258,859	$ 27		$ ( 946,404	)	—	$ —		$ 28,621	$	342,116
Distributions to noncontrolling interest	—		—		—	—		—		—	—		( 30,474	)	( 30,474	)
Equity activity of noncontrolling interest from a consolidated variable interest entity	—		—		—	—		—		—	—		366		366
Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding	104		1		343	—		—		—	—		—		344
Stock-based compensation	—		—		1,698	—		—		—	—		—		1,698
Net income	—		—		—	—		224,402		—	—		69,412		293,814
Other comprehensive income	—		—		—	( 27	)	—		—	—		—		( 27	)
Balance as of December 31, 2020	101,392	$	1,014	$	1,260,900	$ —		$ ( 722,002	)	—	$ —		$ 67,925	$	607,837
Distributions to noncontrolling interest	—		—		—	—		—		—	—		( 59,457	)	( 59,457	)
Equity activity of noncontrolling interest from a consolidated variable interest entity	—		—		—	—		—		—	—		( 259	)	( 259	)
Exercise of stock options, and issuance of common stock units and stock awards, net of repurchase of shares to satisfy tax withholding	179		2		1,107	—		—		—	—		—		1,109
Repurchase of common stock	( 32,005	)	( 320	)	—	—		—		32,005	( 393,829	)	—		( 394,149	)
Stock-based compensation	—		—		2,017	—		—		—	—		—		2,017
Net income	—		—		—	—		265,854		—	—		102,983		368,837
Balance as of December 31, 2021	69,566	$	696	$	1,264,024	$ —		$ ( 456,148	)	32,005	$ ( 393,829	)	$ 111,192	$	525,935

See accompanying notes to consolidated financial statements.

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INNOVIVA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31, — 2021	2020		2019
Cash flows from operating activities
Net income	$ 368,837	$	293,814	$	190,993
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes	76,432		60,420		41,875
Depreciation and amortization	13,832		13,840		13,874
Stock-based compensation	2,017		1,698		2,056
Amortization of debt discount and issuance costs	9,136		8,397		7,799
Loss on write-off of property and equipment	—		—		104
Loss on extinguishment of debt	—		—		216
Amortization of discount on short-term investments	—		( 343	)	( 2,229	)
Amortization of lease guarantee	—		( 135	)	( 325	)
Changes in fair values of equity and long-term investments, net	( 89,309	)	( 50,277	)	—
Other non-cash items	( 259	)	21		—
Changes in operating assets and liabilities:
Receivables from collaborative arrangements	( 16,780	)	( 14,504	)	3,859
Prepaid expenses and other current assets	203		( 678	)	( 113	)
Other assets	—		—		27
Accounts payable	( 39	)	56		( 1	)
Accrued personnel-related expenses and other accrued liabilities	( 257	)	804		( 439	)
Accrued interest payable	—		—		( 112	)
Other long-term liabilities	—		—		( 126	)
Net cash provided by operating activities	363,813		313,113		257,458
Cash flows from investing activities
Maturities of marketable securities	—		86,000		213,924
Purchases of marketable securities	—		( 12,943	)	( 231,915	)
Purchases of equity and long-term investments	( 66,278	)	( 87,981	)	—
Purchases of equity investments managed by ISP Fund LP	( 190,970	)	( 14,877	)	—
Sales of equity investments managed by ISP Fund LP	21,440		—		—
Purchase and sales of other investments managed by ISP Fund LP, net	279,530		(285,123	)	—
Purchases of property and equipment	—		( 13	)	( 12	)
Net cash provided by (used in) investing activities	43,722		( 314,937	)	( 18,003	)
Cash flows from financing activities
Repurchase of common stock	( 394,149	)	—		—
Distributions to noncontrolling interest	( 59,457	)	( 30,474	)	( 10,553	)
Repurchase of shares to satisfy tax withholding	( 60	)	( 92	)	( 89	)
Payments of principal on senior secured term loans	—		—		( 13,750	)
Payments of cash dividends to stockholders	—		—		( 11	)
Proceeds from issuances of common stock, net	1,169		436		627
Net proceeds from the issuance of variable interest entity’s equity	—		345		—
Net cash used in financing activities	( 452,497	)	( 29,785	)	( 23,776	)
Net increase (decrease) in cash and cash equivalents	( 44,962	)	( 31,609	)	215,679
Cash and cash equivalents at beginning of period	246,487		278,096		62,417
Cash and cash equivalents at end of period	$ 201,525	$	246,487	$	278,096
Supplemental disclosure of cash flow information
Cash paid for interest	$ 9,933	$	9,933	$	10,974

See accompanying notes to consolidated financial statements.

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INNOVIVA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Operations

Innoviva Inc. (referred to as “Innoviva”, the “Company”, or “we” and other similar pronouns) is a company with a portfolio of royalties and other healthcare assets. Our royalty portfolio contains respiratory assets partnered with Glaxo Group Limited (“GSK”), including RELVAR ® /BREO ® ELLIPTA ® (fluticasone furoate/ vilanterol, “FF/VI”), ANORO ® ELLIPTA ® (umeclidinium bromide/ vilanterol, “UMEC/VI”) and TRELEGY ® ELLIPTA ® (the combination FF/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 %. Innoviva is also entitled to 15 % of royalty payments made by GSK under its agreements originally entered into with us, and since assigned to Theravance Respiratory Company, LLC (“TRC”), including TRELEGY ® ELLIPTA ® and any other product or combination of products that may be discovered or developed in the future under the LABA Collaboration Agreement and the Strategic Alliance Agreement with GSK (referred to herein as the “GSK Agreements”), which have been assigned to TRC other than RELVAR ® /BREO ® ELLIPTA ® and ANORO ® ELLIPTA ® .

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Innoviva, our wholly owned subsidiaries and certain variable interest entities for which we are the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. For consolidated entities where we own or are exposed to less than 100% of the economics, we record net income (loss) attributable to noncontrolling interest in our consolidated statements of income equal to the percentage of the economic or ownership interest retained in such entity by the respective noncontrolling party.

Prior Period Reclassifications

The Company reclassified certain prior period amounts related to the investments managed by ISP Fund LP to conform with the current year presentation. These reclassifications were from purchases of equity and long-term investments of $ 388.0 million to: (i) purchases of equity investments managed by ISP Fund LP of $ 14.9 million, (ii) purchase and sales of other investments managed by ISP Fund LP, net of $ 285.1 million. These changes were not deemed material and did not impact total cash flows from investing activities, and any other consolidated financial statements.

Use of Management’s Estimates

The preparation of consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. Management evaluates its significant accounting policies and estimates on an ongoing basis. We base our estimates on historical experience and other relevant assumptions that we believe to be reasonable under the circumstances. These estimates also form the basis for making judgments about the carrying values of assets and liabilities when these values are not readily apparent from other sources.

Certain Risks and Concentrations

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, equity and long-term investments. Although we deposit our cash with multiple financial institutions, our deposits, at times, may exceed federally insured limits. Refer to “Segment Reporting” below for concentrations with respect to revenues and geographic locations.

Segment Reporting

We operate in a single segment, which is to provide capital return to stockholders by maximizing the potential value of our respiratory assets partnered with GSK. Revenues are generated from our collaborative arrangements and royalty payments from GSK, located in Great Britain. Our facilities are located within the United States.

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INNOVIVA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Variable Interest Entities

We evaluate our ownership, contractual and other interest in entities to determine if they are variable interest entities (“VIE”). We evaluate whether we have a variable interest in those entities and the nature and extent of those interests. Based on our evaluation, if we determine we are the primary beneficiary of a VIE, we consolidate the entity in our financial statements .

Cash and Cash Equivalents

We consider all highly liquid investments purchased with a maturity of three months or less on the date of purchase to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.

Investments in Marketable Securities

We invest in short-term investments and marketable securities, primarily corporate notes, government securities, government agencies, and government commercial papers. We limit the amount of credit exposure with any one issuer, industry or geographic area for investments other than instruments backed by the U.S. federal government. We classify our marketable securities as available-for-sale securities and report them at fair value in cash equivalents or short-term marketable securities on the consolidated balance sheets with related unrealized gains and losses included as a component of stockholders’ equity. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income on the consolidated statements of operations. Realized gains and losses, if any, on available-for-sale securities are included in interest income. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income.

We regularly review all of our investments for other-than-temporary declines in estimated fair value. Our review includes the consideration of the cause of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized loss position, the severity and duration of the unrealized losses, whether we have the intent to sell the securities and whether it is more likely than not that we will be required to sell the securities before the recovery of their amortized cost basis. When we determine that the decline in estimated fair value of an investment is below the amortized cost basis and the decline is other-than-temporary, we reduce the carrying value of the security and record a loss for the amount of such decline to other income (expense), net.

Equity and Long-Term Investments

We invest from time to time in equity and debt securities of private or public companies. If we determine that we have control over these companies under either voting or VIE models, we include them in our consolidated financial statements. If we determine that we do not have control over these companies under either voting or VIE models, we then determine if we have an ability to exercise significant influence via voting interests, board representation or other business relationships.

We may account for the investments where we exercise significant influence using either an equity method of accounting or at fair value by electing the fair value option under Accounting Standards Codification ("ASC") Topic 825, Financial Instruments . If the fair value option is applied to an investment that would otherwise be accounted for under the equity method, we apply it to all our financial interests in the same entity (equity and debt, including guarantees) that are eligible items. All gains and losses from fair value changes, unrealized and realized, are presented as changes in fair values of equity and long-term investments, net on the consolidated statements of income.

If we conclude that we do not have an ability to exercise significant influence over an investee, we may elect to account for the security without a readily determinable fair value using the measurement alternative under ASC Topic 312, Investments - Equity Securities . This measurement alternative allows us to measure the equity investment at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

We also invest in ISP Fund LP, which investments consist of money market funds and equity securities in the healthcare, pharmaceutical and biotechnology industries. Pursuant to the Partnership Agreement entered in December 2020, we became a limited partner of this partnership, and our contributions are subject to a 36-month lock-up period which restriction prevents us to have control and access to the contributions and related investments. These investments are classified as long-term investments on the consolidated balance sheets.

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INNOVIVA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value of Financial Instruments

We define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Our valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. We classify these inputs into the following hierarchy:

Level 1 —Quoted prices for identical instruments in active markets.

Level 2 —Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 —Unobservable inputs and little, if any, market activity for the assets.

Financial instruments include cash equivalents, marketable securities, receivables from collaborative arrangements, accounts payable, and accrued liabilities. Cash equivalents and marketable securities are carried at estimated fair value. The carrying values of receivables from collaborative arrangements, accounts payable, and accrued liabilities approximate their estimated fair values due to the relatively short-term nature of these instruments.

Property and Equipment

Property and equipment, which consisted of equipment, computer equipment, software, office furniture and fixtures, was immaterial as of December 31, 2021 and 2020, respectively.

Property, equipment and leasehold improvements are stated at cost less accumulated depreciation. Property, equipment and leasehold improvements are depreciated using the straight-line method as follows:

Leasehold improvements	Shorter of remaining lease terms or useful life
Equipment, furniture and fixtures	5 - 7 years
Software and computer equipment	3 years

Capitalized Fees Paid to a Related Party

We capitalize fees paid to licensors related to agreements for approved products or commercialized products. We capitalize these fees as capitalized fees paid to a related party (“Capitalized Fees”) and amortize them on a straight-line basis over their estimated useful lives upon the commercial launch of the product, shortly after its regulatory approval. The estimated useful lives of these Capitalized Fees are determined on a country-by-country and product-by-product basis, as the later of the expiration or termination of the last patent right covering the compound in such product in such country and 15 years from first commercial sale of such product in such country, unless the Collaboration Agreement is terminated earlier. Consistent with our policy for classification of costs under the research and development collaborative arrangements, the amortization of these Capitalized Fees is recognized as a reduction of royalty revenue. We review our Capitalized Fees for impairment on a product-by-product basis for each major geographic area when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The recoverability of Capitalized Fees is measured by comparing the asset’s carrying amount to the expected undiscounted future cash flows that the asset is expected to generate. The determination of recoverability typically requires various estimates and assumptions, including estimating the useful life over which cash flows will occur, their amount, and the asset’s residual value, if any. We derive the required cash flow estimates from near-term forecasted product sales and long-term projected sales in the corresponding market.

Revenue Recognition

Revenue is recognized when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. Revenue is recognized through a five-step process: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price for the contract; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue as a performance obligation is satisfied.

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INNOVIVA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We recognize the royalty revenue on net sales of products with respect to which we have contractual royalty rights in the period in which the royalties are earned. The net sales reports provided by our partner are based on its methodology and assumptions to estimate rebates and returns, which it monitors and adjusts regularly in light of contractual and legal obligations, historical trends, past experience and projected market conditions. Our partner may make significant adjustments to its sales based on actual results recorded, which could cause our royalty revenue to fluctuate. We have the ability to conduct periodic royalty audits to evaluate the information provided by our partner. Royalties are recognized net of amortization of capitalized fees associated with any approval and launch milestone payments made to our partner.

Fair Value of Stock‑Based Compensation Awards

We use the Black-Scholes-Merton option pricing model to estimate the fair value of options granted under our equity incentive plans and rights to acquire stock granted under our employee stock purchase plan (“ESPP”). The Black-Scholes-Merton option valuation model requires the use of assumptions, including the expected term of the award and the expected stock price volatility. We use the “simplified” method as described in Staff Accounting Bulletin No. 107, “ Share-Based Payment ,” for the expected option term. We use our historical volatility to estimate expected stock price volatility.

Restricted stock units (“RSUs”) and restricted stock awards (“RSAs”) are measured based on the fair market values of the underlying stock on the dates of grant.

Stock-based compensation expense is calculated based on awards ultimately expected to vest and is reduced for estimated forfeitures at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differed from those estimates. Our estimated annual forfeiture rates for stock options, RSUs and RSAs are based on our historical forfeiture experience.

The estimated fair value of stock options, RSUs and RSAs is expensed on a ratable or straight-line basis over the expected term of the grant or expected term of the vesting. Compensation expense is recorded over the requisite service period based on management’s best estimate as to whether it is probable that the shares awarded are expected to vest.

Compensation expense for purchases under the ESPP is recognized based on the fair value of the common stock on the date of offering, less the purchase discount percentage provided for in the plan.

Income Taxes

We utilize the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and the tax basis of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The recognition and measurement of tax benefits requires significant judgment. Our judgment might change as new information becomes available. We continue to evaluate our deferred tax assets each reporting period to determine whether adjustments to our valuation allowance are required and deferred tax assets will be realized based on the consideration of all available positive and negative evidence, including the differences between our anticipated and actual future operating results, using a “more likely than not” standard.

We assess all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is greater than 50% likely to be realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and we determine whether the factors underlying the sustainability assertion have changed and whether the amount of the recognized tax benefit is still appropriate.

Comprehensive Income

Comprehensive income is comprised of net income and other comprehensive income (loss). Other comprehensive income (loss) consists of changes in unrealized and realized gains and losses on our marketable securities and the related tax impact of these changes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Related Parties

While GSK no longer had an ownership stake in our outstanding common stock as of December 31, 2021, GSK was considered a related party during the year ended December 31, 2021 due to our collaborative arrangement with them. Transactions with GSK are described in Note 3, “Revenue Recognition and Collaborative Arrangements.”

Sarissa Capital ow ned 9.5 % of o ur outstanding common stock as of December 31, 2021 . Transactions with Sarissa Capital are described in Note 4, “Consolidated Entities”. Sarissa Capital is considered to be a related party because two of its principals are members of our Board of Directors.

Recently Adopted Accounting Standards Updates

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes , which is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. We adopted ASU 2019-12 effective January 1, 2021. The adoption did not have a material impact on our consolidated financial statements.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements . This ASU improves the codification by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements is codified in the disclosure section of the codification. The ASU also improves various topics in the codification so that entities can apply guidance more consistently. The ASU is effective for fiscal years beginning after December 15, 2020. We adopted ASU 2020-10 effective January 1, 2021. The adoption did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Standards or Updates Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity , which is intended to simplify the accounting for convertible instruments by removing certain separation models in Subtopic 470-20 for convertible instruments. As a result, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost as long as no other features require bifurcation and recognition as derivatives. The elimination of the separation models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument within the scope of ASU 2020-06. The ASU is effective for fiscal years beginning after December 15, 2021, and for interim periods within those fiscal years with early adoption permitted. The Company is evaluating the effect of adopting ASU 2020-06 for both of our convertible notes due in 2023 and 2025 and is currently finalizing its analysis of the financial impact of the adoption. Upon adoption, we may apply the modified retrospective method through a cumulative effect adjustment, if any, to the accumulated deficit, compute the dilutive EPS of our notes due in 2025 under the if-converted method going forward, and update our long-term debt balance on the consolidated balance sheets accordingly.

2. NET INCOME PER SHARE

Basic net income per share attributable to Innoviva stockholders is computed by dividing net income attributable to Innoviva stockholders by the weighted-average number of shares of common stock outstanding. Diluted net income per share attributable to Innoviva stockholders is computed by dividing net income attributable to Innoviva stockholders by the weighted-average number of shares of common stock and dilutive potential common stock equivalents then outstanding. Dilutive potential common stock equivalents include the assumed exercise, vesting and issuance of employee stock awards using the treasury stock method, as well as common stock issuable upon assumed conversion of our convertible subordinated notes due 2023 (the “2023 Notes”) using the if-converted method.

Our convertible senior notes due 2025 (the “2025 Notes”) are convertible, based on the applicable conversion rate, into cash, shares of our common stock or a combination thereof, at our election. Our current intent is to settle the principal amount of the 2025 Notes in cash upon conversion. The impact of the assumed conversion premium to diluted net income per share is computed using the treasury stock method. As the average market price per share of our common stock as reported on The Nasdaq Global Select Market was lower than the initial conversion price of $ 17.26 per share, there was no dilutive effect of the assumed conversion premium for the years ended December 31, 2021, 2020, and 2019 respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table shows the computation of basic and diluted net income per share for the years ended December 31, 2021, 2020 and 2019:

(In thousands except per share data)	Year Ended December 31, — 2021	2020	2019
Numerator:
Net income attributable to Innoviva stockholders, basic	$ 265,854	$ 224,402	$ 157,288
Add: interest expense on 2023 Notes	4,736	4,717	4,648
Net income attributable to Innoviva stockholders, diluted	$ 270,590	$ 229,119	$ 161,936
Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders	82,062	101,320	101,150
Dilutive effect of 2023 Notes	12,189	12,189	12,189
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan	59	45	70
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders	94,310	113,554	113,409
Net income per share attributable to Innoviva stockholders
Basic	$ 3.24	$ 2.21	$ 1.55
Diluted	$ 2.87	$ 2.02	$ 1.43

Anti‑dilutive Securities

The following common stock equivalents were not included in the computation of diluted net income per share because their effect was anti‑dilutive:

(In thousands)	Year Ended December 31, — 2021	2020	2019
Outstanding options and awards granted under equity incentive plan and employee stock purchase plan	979	1,193	1,130

3. REVENUE RECOGNITION AND COLLABORATIVE ARRANGEMENTS

Revenue from Collaborative Arrangements

We recognize royalty revenue on net sales of products with respect to which we have contractual royalty rights in the period in which the royalties are earned. Royalties, which may include adjustments of estimates of net sales in prior periods, are recognized net of amortization of capitalized fees associate with any approval and launch milestone payments made to GSK.

Net revenue recognized under our GSK Agreements was as follows:

(In thousands)	Year Ended December 31, — 2021	2020		2019
Royalties from a related party - RELVAR/BREO	$ 234,066	$	221,536	$	189,424
Royalties from a related party - ANORO	44,935		45,992		42,625
Royalties from a related party - TRELEGY	126,688		73,089		42,790
Total royalties from a related party	405,689		340,617		274,839
Less: amortization of capitalized fees paid to a related party	( 13,823	)	( 13,823	)	( 13,823	)
Royalty revenue	391,866		326,794		261,016
Strategic alliance - MABA program	—		10,000		—
Total net revenue from GSK	$ 391,866	$	336,794	$	261,016

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

LABA Collaboration

As a result of the launch and approval of RELVAR ® /BREO ® ELLIPTA ® and ANORO ® ELLIPTA ® in the U.S., Japan and Europe, we paid milestone fees to GSK totaling $ 220.0 million during the year ended December 31, 2014. The milestone fees paid to GSK were recognized as capitalized fees paid to a related party, which are being amortized over their estimated useful lives commencing upon the commercial launch of the product. The amortization expense is recorded as a reduction to the royalties from GSK.

We are entitled to receive annual 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. Sales of single‑agent LABA medicines and combination medicines would be combined for the purposes of this royalty calculation. For other products combined with a LABA from the LABA Collaboration, such as ANORO ® ELLIPTA ® , royalties are upward tiering and range from 6.5 % to 10 %.

We are also entitled to 15 % of royalty payments made by GSK under its agreements originally entered into with us, and since assigned to TRC in connection with the Spin-Off, including TRELEGY ® ELLIPTA ® , which royalties are upward tiering and range from 6.5 % to 10 %.

2004 Strategic Alliance

During the year ended December 31, 2020, we recognized $ 10.0 million in revenue from a termination fee paid in connection with the termination of the Bifunctional Muscarinic Antagonist-Beta2 Agonist (“MABA”) program under the Strategic Alliance Agreement with GSK.

4. CONSOLIDATED ENTITIES

We consolidate the financial results of TRC and Pulmoquine Therapeutics, Inc. (“Pulmoquine”), which we have determined to be VIEs. As we have the power to direct the economically significant activities of these entities and the obligation to absorb losses of, or the right to receive benefits from them, we are the primary beneficiary of the entities. We also consolidate the financial results of ISP Fund LP (the “Partnership”), which is our partnership with Sarissa Capital, as we have determined that the Partnership is a VIE and we are its primary beneficiary.

Theravance Respiratory Company, LLC

The primary source of revenue for TRC is the royalties generated from the net sales of TRELEGY ® ELLIPTA ® by GSK. As of December 31, 2021, TRC held equity and long-term investments in InCarda Therapeutics, Inc. (“InCarda”), ImaginAb, Inc. ("ImaginAb") and Gate Neurosciences, Inc. ("Gate"). Refer to Note 5, “Financial Instruments and Fair Value Measurements,” for more information.

The summarized financial information for TRC is presented as follows:

Balance sheets

	December 31,	December 31,
(In thousands)	2021	2020
Assets
Cash and cash equivalents	$ 50,713	$ 38,081
Receivables from collaborative arrangements	42,492	24,946
Prepaid expenses and other current assets	71	—
Equity and long-term investments	37,695	16,959
Total assets	$ 130,971	$ 79,986
Liabilities and LLC Members’ Equity
Current liabilities	$ 252	$ 508
LLC members’ equity	130,719	79,478
Total liabilities and LLC members’ equity	$ 130,971	$ 79,986

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Income statements

(In thousands)	Year Ended December 31, — 2021	2020		2019
Royalty revenue from a related party	$ 126,688	$	73,089	$ 42,790
Revenue from collaborative arrangements	—		10,000	—
Total net revenue	126,688		83,089	42,790
Operating expenses	3,956		2,612	3,380
Income from operations	122,732		80,477	39,410
Other income, net	—		38	243
Changes in fair values of equity and long-term investments	( 1,541	)	1,147	—
Net income	$ 121,191	$	81,662	$ 39,653

Pulmoquine Therapeutics, Inc.

In April 2020, we purchased 5,808,550 shares of Series A preferred stock of Pulmoquine for $ 5.0 million in cash. These shares represented a majority voting interest in Pulmoquine. Pulmoquine was a biotechnology company focused on the research and development of an aerosolized formulation of hydroxychloroquine to treat respiratory infections. In August 2021, the directors and stockholders of Pulmoquine voted to cease and terminate all operations and activities of Pulmoquine as soon as practicable. We received a total net distribution of $ 2.4 million in cash as a result of the dissolution, which was finalized at the end of 2021.

As of December 31, 2021 and 2020, total assets attributable to Pulmoquine were nil and $ 3.5 million. Pulmoquine did not generate revenue. The total operating expenses for the years ended December 31, 2021 and 2020 were $ 0.7 million and $ 2.0 million, respectively.

The net loss for the years ended December 31, 2021 and 2020 were $ 0.5 million and $ 2.2 million, respectively.

ISP Fund LP

In December 2020, Innoviva Strategic Partners LLC, our wholly owned subsidiary (“Strategic Partners”), contributed $ 300.0 million to ISP Fund LP (the "Partnership") for investing in “long” positions in the healthcare, pharmaceutical and biotechnology sectors and became a limited partner. The general partner of the Partnership ("General Partner") is an affiliate of Sarissa Capital.

The Partnership Agreement provides for Sarissa Capital to receive management fees from the Partnership, payable quarterly in advance, measured based on the Net Asset Value of Strategic Partners' capital account in the Partnership. In addition, General Partner is entitled to an annual performance fee based on the Net Profits of the Partnership during the annual measurement period. For the year ended December 31, 2021 and 2020, we paid management and annual performance incentive fees totaling $ 3.1 million and $ 0.2 million, respectively.

The Partnership Agreement includes a lock-up period of thirty-six months after which Strategic Partners is entitled to make withdrawals from the Partnership as of such lock-up expiration date and each anniversary thereafter, subject to certain limitations.

In May 2021, Strategic Partners received a distribution of $ 110.0 million from the Partnership to provide funding to Innoviva for a strategic repurchase of the Company's shares held by GSK. The distribution is a component of "Purchases and sales of other investments held by ISP Fund, net" on the consolidated statements of cash flows. Pursuant to the letter agreement entered into between Strategic Partners, the Partnership, and Sarissa Capital Fund GP LP on May 20, 2021, Strategic Partners agreed to make additional capital contributions to the Partnership in an aggregate amount equal to the amount of the May 2021 distribution prior to March 31, 2022. The capital contributions will then be subject to a 36-month lock up period from the contribution date. Refer to Note 10, "Shareholders' Equity," for more information on the GSK share repurchase.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2021 , we continued to hold 100 % of the economic interest of Partnership. As of December 31, 2021 and 2020 , total assets of the Partnership were $ 195.8 million and $ 299.3 million, respectively, which were mainly attributable to equity and long-term investments. During the year ended December 31, 2021, the Partnership incurred $ 3.6 million in net investment-related expense, generated $ 1.8 million interest and dividend income, and recorded net $ 10.5 million realized gains and net $ 2.4 million unrealized loss as changes in fair values of equity and long-term investments on the consolidated statements of income. During the year ended December 31, 2020, the Partnership incurred $ 0.4 million in net investment-related expense and recorded an unrealized loss of $ 0.4 million as changes in fair values of equity and long-term investments on the consolidated statements of income.

5. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Equity Investment in Armata

During the first quarter of 2020, Innoviva acquired 8,710,800 shares of common stock as well as warrants to purchase 8,710,800 additional shares of common stock of Armata Pharmaceuticals, Inc. (“Armata”) for approximately $ 25.0 million in cash. Armata is a clinical stage biotechnology company focused on precisely targeted bacteriophage therapeutics for antibiotic-resistant infections.

On January 26, 2021, Innoviva Strategic Opportunities LLC (“ISO”), our wholly owned subsidiary, entered into a securities purchase agreement with Armata to acquire 6,153,847 shares of Armata common stock and warrants to purchase 6,153,847 additional shares of Armata common stock for approximately $ 20.0 million. The investment was closed in two tranches on January 26, 2021 and March 17, 2021. The additional investment increased Innoviva and ISO’s combined ownership to 59.6 % as of March 31, 2021. Armata also entered into a voting agreement with the Company and ISO, pursuant to which the Company and ISO agreed not to vote or take any action by written consent with respect to any common shares held by the Company and ISO that represent, in the aggregate, more than 49.5 % of the total number of voting shares of Armata’s common stock for voting on the matters related to election or removal of Armata’s board members. The voting agreement will expire the earlier of the second anniversary of the agreement effective date and approval by the FDA of any of Armata's product candidates for marketing and commercial distribution.

On October 28, 2021, ISO purchased an additional 1,212,122 shares of Armata common stock for approximately $ 4.0 million. The investments support Armata’s ongoing advancement of its bacteriophage development programs. As of December 31, 2021 , three of the eight members of Armata’s board of directors are also members of the board of directors of Innoviva. As of December 31, 2021 and 2020, we owned approximately 59.3 % and 46.6 %, respectively, of Armata’s common stock.

The investments in Armata provide Innoviva and ISO the ability to have significant influence, but not control over Armata’s operations. Armata's business and affairs are managed under the direction of its board of directors, which Innoviva and ISO do not control. Based on our evaluation, we determined that Armata is a VIE, but Innoviva and ISO are not the primary beneficiary of the VIE. We continue to elect the fair value option to account for both Armata’s common stock and warrants. The fair value of Armata’s common stock is measured based on its closing market price. The warrants purchased in 2020 and 2021 have an exercise price of $ 2.87 and $ 3.25 per share, respectively. All warrants are exercisable immediately within five years from the issuance date of the warrants and include a cashless exercise option. We use the Black-Scholes-Merton pricing model to estimate the fair value of these warrants with the following input assumptions: Armata’s closing market price on the valuation date, the risk-free interest rate computed based on the U.S. Treasury yield, the remaining contractual term as the expected term, and the expected stock price volatility calculated based on the historical volatility of the common stock of Armata and its peer companies.

As of December 31, 2021, the fair values of our holdings of Armata common stock and warrants were estimated at $ 88.1 million and $ 58.6 million, respectively. As of December 31, 2020, the fair values of our holdings of Armata common stock and warrants were estimated at $ 26.0 million and $ 18.0 million, respectively . The total fair value of both financial instruments in the amount of $ 146.7 million and $ 44.0 million was recorded as equity and long-term investments on the consolidated balance sheets as of December 31, 2021 and 2020, respectively. We recorded $ 78.7 million and $ 19.0 million unrealized gains as changes in fair values of equity and long-term investments, net on the consolidated statements of income for the years ended December 31, 2021 and 2020, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Equity Investment in Entasis

During the second quarter of 2020, we purchased 14,000,000 shares of common stock as well as warrants to purchase 14,000,000 additional shares of common stock of Entasis Therapeutics, Inc. (“Entasis”) for approximately $ 35.0 million in cash. Entasis is a clinical-stage biotechnology company focused on the discovery and development of novel antibacterial products.

During the third quarter of 2020, we purchased 4,672,897 shares of Entasis common stock as well as warrants to purchase 4,672,897 additional shares of its common stock for approximately $ 12.5 million in cash. Innoviva has a right to designate two members to Entasis' board. As of December 31, 2021 , no Innoviva designees are serving on Entasis' six -member board.

On May 3, 2021, ISO entered into a securities purchase agreement with Entasis to acquire 10,000,000 shares of Entasis common stock and warrants to purchase 10,000,000 additional shares of Entasis common stock for approximately $ 20.0 million. The investment was closed in two tranches on May 3, 2021 and June 11, 2021. This investment supports the continued development of Entasis' novel pipeline of pathogen-targeted antibacterial product candidates. As of December 31, 2021 and 2020, we owned approximately 59.9 % and 51.0 %, respectively, of Entasis’s common stock.

The investments in Entasis provide Innoviva the ability to have significant influence, but not control over Entasis’s operations. Entasis's business and affairs are managed under the direction of its board of directors, which Innoviva and ISO do not control. Based on our evaluation, we determined that Entasis is a VIE, but Innoviva is not the primary beneficiary of the VIE. We elected the fair value option to account for both Entasis’s common stock and warrants at fair value. The fair value of Entasis’s common stock is measured based on its closing market price at each balance sheet date. The warrants have an exercise price of $ 2.50 per share and $ 2.675 per share for those warrants acquired in the second and third quarter of 2020, respectively. The warrants acquired in the second quarter of 2021 have an exercise price of $ 2.00 per share. All of the warrants are exercisable immediately within five years from the issuance date of the warrants and include a cashless exercise option. We use the Black-Scholes-Merton pricing model to estimate the fair value of these warrants with the following input assumptions: Entasis’s closing market price on the valuation date, the risk-free interest rate computed based on the U.S. Treasury yield, the remaining contractual term as the expected term, and the expected stock price volatility calculated based on the historical volatility of the common stock of Entasis and its peer companies.

As of December 31, 2021, the fair values of our holdings of Entasis common stock and warrants were estimated at $ 62.8 million and $ 40.9 million, respectively. As of December 31, 2020, the fair values of our holdings of Entasis common stock and warrants were estimated at $ 46.1 million and $ 31.9 million, respectively. The total fair value of both financial instruments in the amount of $ 103.7 million and $ 78.0 million was recorded as equity and long-term investments on the consolidated balance sheets as of December 31, 2021 and 2020, respectively. We recorded $ 5.7 million and $ 30.5 million unrealized gains as changes in fair values of equity and long-term investments, net on the consolidated statements of income for the years ended December 31, 2021 and 2020, respectively.

Equity Investment in InCarda

During the third quarter of 2020, TRC purchased 20,469,432 shares of Series C preferred stock and warrants to purchase 5,117,358 additional shares of Series C preferred stock of InCarda Therapeutics, Inc. (“InCarda”) for $ 15.8 million, which includes $ 0.8 million of transaction costs. InCarda is a privately held biopharmaceutical company focused on developing inhaled therapies for cardiovascular diseases. The investment is intended to fund the ongoing clinical development of InRhythm (flecainide for inhalation), the company’s lead program, for the treatment of a recent-onset episode of paroxysmal atrial fibrillation. TRC has the right to designate one member to InCarda’s board. As of December 31, 2021 , one of InCarda's eight board members is designated by TRC. As of December 31, 2021 and 2020, TRC he ld 13.0 % and 13.4 % of InCarda equity ownership.

The investment in InCarda does not provide TRC the ability to control or have significant influence over InCarda's operations. Based on our evaluation, we determined that InCarda is a VIE, but TRC is not the primary beneficiary of the VIE. We have accounted for the investment in Series C preferred shares in InCarda using the measurement alternative because the securities are not publicly traded and do not have a readily determinable fair value. Under the measurement alternative, the equity investment is initially recorded at its allocated cost, but the carrying value may be adjusted through earnings upon an impairment or when there is an observable price change involving the same or a similar investment with the same issuer. As of December 31, 2021 and 2020, we recorded $ 15.8 million for our investment in InCarda's series C preferred stock as equity and long-term investments on the consolidated balance sheets. T here was no impairment or other change to the value of the InCarda's Series C preferred stock as of December 31, 2021 and 2020, respectively.

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INNOVIVA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The warrants are recorded at fair value and subject to remeasurement at each balance sheet date. The warrants are exercisable immediately with an exercise price of $ 0.7328 per share. In September 2021, TRC and InCarda entered into an amendment to extend the expiration date of the warrants from October 6, 2021 to March 31, 2022 . We use the Black-Scholes-Merton pricing model to estimate the fair value of the warrants with the following input assumptions: the exercise price of the warrants, the risk-free interest rate computed based on the U.S. Treasury yield, the remaining contractual term as the expected term, and the expected stock price volatility calculated based on the historical volatility of the common stock of its public peer companies.

As of December 31, 2021 and 2020, the fair value of InCarda’s warrants was estimated at $ 0.4 million and $ 1.1 million, respectively, and recorded as equity and long-term investments on the consolidated balance sheets. We recorded $ 0.7 million unrealized loss and $ 1.1 million unrealized gains as changes in fair values of equity and long-term investments, net on the consolidated statements of income for the years ended December 31, 2021 and 2020, respectively.

Equity Investment in ImaginAb

On March 18, 2021, TRC entered into a securities purchase agreement with ImaginAb, Inc. ("ImaginAb") to purchase 4,051,724 shares of ImaginAb Series C preferred stock for $ 4.7 million. On the same day, TRC also entered into a securities purchase agreement with one of ImaginAb's common stockholders to purchase 4,097,157 shares of ImaginAb common stock for $ 1.3 million. ImaginAb is a privately held biotechnology company focused on clinically managing cancer and autoimmune diseases via molecular imaging. $ 0.4 million was incurred for investment due diligence costs and execution and recorded as part of the equity and long-term investment on the consolidated balance sheet. As of December 31, 2021 , one of ImaginAb's five board members is designated by TRC, and TRC held 14.5 % of ImaginAb's equity.

The investment in ImaginAb does not provide TRC the ability to control or have significant influence over ImaginAb's operations. Based on our evaluation, we determined that ImaginAb is a VIE, but TRC is not the primary beneficiary of the VIE. Because ImaginAb's equity securities are not publicly traded and do not have a readily determinable fair value, we have accounted for our investment in ImaginAb's Series C preferred stock and common stock using the measurement alternative. Under the measurement alternative, the equity investment is initially recorded as its allocated cost, but the carrying value may be adjusted through earnings upon an impairment or when there is an observable price change involving the same or a similar investment with the same issuer. As of December 31, 2021, $ 6.4 million was recorded as equity and long-term investments on the consolidated balance sheets and there was no change to the fair value of our investment.

Convertible Promissory Note in Gate Neurosciences

On November 24, 2021, TRC entered into a Convertible Promissory Note Purchase Agreement with Gate Neurosciences, Inc. ("Gate") to acquire a convertible promissory note (the "Convertible Note") with a principal amount of $ 15.0 million. Gate is a privately held biopharmaceutical company focused on developing the next generation of targeted nervous system therapies, leveraging precision medicine approaches to develop breakthrough drugs for psychiatric and neurologic diseases. The investment is intended to fund its ongoing development and research. The Convertible Note bears an annual interest rate of 8 % and will convert into common stock shares upon a qualified event or into shares of shadow preferred stock ("Shadow Preferred") upon a qualified financing. A qualifying event can be a qualified initial price offering, a qualified merger, or a merger with a special-purpose acquisition company ("SPAC").

The number of common stock shares to be issued in a qualified event shall be equal to the amount due on the conversion date divided by the lesser of a capped conversion price (the "Capped Conversion Price") and the qualified event price (the "Qualified Event Price"). The Capped Conversion Price is calculated as $50.0 million divided by the number of common stock outstanding at such time on a fully diluted basis. The Qualified Event Price is the price per share determined by the qualified event. A qualified financing is a sale or series of sales of preferred stock where (i) at least 50 percent of counterparties are not existing shareholders, (ii) net proceeds to Gate are at least $35.0 million, and (iii) the stated or implied equity valuation of Gate is at least $80.0 million. Shadow Preferred means preferred stock having identical rights, preferences and restrictions as the preferred stock that would be issued in a qualified financing.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The investment in Gate does not provide TRC the ability to control or have significant influence over Gate's operations. Based on our evaluation, we determined that Gate is a VIE, but TRC is not the primary beneficiary of the VIE. We have accounted for the convertible debt investment as a trading security, measured at fair value using a Monte Carlo simulation model with the probability of certain qualified events. TRC has the right to designate one board member to Gate's board. As of December 31, 2021, TRC has not designated a board member to Gate's board, which currently consists of two directors. As of December 31, 2021, $ 15.9 million, which includes $ 0.9 million of transaction costs, was recorded as equity and long-term investments on the consolidated balance sheets. We recorded $ 0.8 million unrealized loss as changes in fair values of equity and long-term investments, net on the consolidated statements of income for the years ended December 31, 2021.

Summarized Financial Data

As of December 31, 2021, the total changes in fair values of our equity investments in Armata and Entasis exceeded 10% of our income before income taxes. Rule 4-08(g) of Regulation S-X, according to the SEC guidance, requires summarized financial information of these entities in an annual report if either the investment, asset or income test as set in the rule exceeds the 10% level individually or in aggregate. The summarized financial information, including the portion we do not own in these entities, is presented for Armata and Entasis, respectively, on a one quarter lag regardless of the date of our investments as follows:

Armata Pharmaceuticals, Inc.

Balance Sheet Information

	September 30,	September 30,
(In thousands)	2021	2020
Current assets	$ 14,178	$ 17,024
Noncurrent assets	$ 28,493	$ 28,651
Current liabilities	$ 5,254	$ 7,070
Noncurrent liabilities	$ 13,662	$ 13,986

Income Statement Information

(In thousands)	For the twelve months ended September 30, — 2021		For the nine months ended September 30, — 2020
Revenue	$ 3,989		$ 319
Loss from operations	$ ( 24,227	)	$ ( 15,134	)
Net loss	$ ( 23,732	)	$ ( 15,557	)

Entasis Therapeutics Holdings, Inc.

Balance Sheet Information

	September 30,	September 30,
(In thousands)	2021	2020
Current assets	$ 49,746	$ 68,398
Noncurrent assets	$ 1,020	$ 1,564
Current liabilities	$ 9,348	$ 6,862
Noncurrent liabilities	$ 183	$ 864

Income Statement Information

(In thousands)	For the twelve months ended September 30, — 2021		For the six months ended September 30, — 2020
Loss from operations	$ ( 52,323	)	$ ( 26,080	)
Net loss	$ ( 125,413	)	$ ( 24,529	)

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INNOVIVA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Available-for-Sale Securities

The estimated fair value of available-for-sale securities is based on quoted market prices for these or similar investments that were based on prices obtained from a commercial pricing service. Available-for-sale securities are summarized below:

	December 31, 2021	Gross	Gross
	Amortized	Unrealized	Unrealized	Estimated
(In thousands)	Cost	Gains	Losses	Fair Value
Money market funds (1)	$ 145,132	$ —	$ —	$ 145,132
Total	$ 145,132	$ —	$ —	$ 145,132

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

	December 31, 2020	Gross	Gross
	Amortized	Unrealized	Unrealized	Estimated
(In thousands)	Cost	Gains	Losses	Fair Value
Money market funds (1)	$ 204,808	$ —	$ —	$ 204,808
Total	$ 204,808	$ —	$ —	$ 204,808

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

As of December 31, 2021 , all investments were money market funds, and there was no credit loss.

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INNOVIVA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value Measurements

Our available-for-sale securities, equity and long-term investments are measured at fair value on a recurring basis and our debt is carried at amortized cost basis. The estimated fair values were as follows:

	Estimated Fair Value Measurements as of December 31, 2021 Using: — Quoted Price in Active Markets for	Significant Other	Significant
	Identical	Observable	Unobservable
Types of Instruments	Assets	Inputs	Inputs
(In thousands)	Level 1	Level 2	Level 3	Total
Assets
Money market funds	$ 145,132	$ —	$ —	$ 145,132
Investments held by ISP Fund LP (1)	193,677	—	2,068	195,745
Equity investment - Armata Common Stock	88,101	—	—	88,101
Equity investment - Armata Warrants	—	58,595	—	58,595
Equity investment - Entasis Common Stock	62,794	—	—	62,794
Equity investment - Entasis Warrants	—	40,914	—	40,914
Equity investment - InCarda Warrants	—	—	411	411
Convertible debt investment - Gate Note	—	—	15,100	15,100
Total assets measured at estimated fair value	$ 489,704	$ 99,509	$ 17,579	$ 606,792
Debt
2023 Notes	$ —	$ 261,769	$ —	$ 261,769
2025 Notes	—	234,498	—	234,498
Total fair value of debt	$ —	$ 496,267	$ —	$ 496,267

(1) The investments held by ISP Fund LP, consisted of $ 192.2 million equity investments and $ 3.5 million money market funds, are subject to a 36 -month lock-up period from our initial contribution date, December 11, 2020.

	Estimated Fair Value Measurements as of December 31, 2020 Using:
	Quoted Price
	in Active	Significant
	Markets for	Other	Significant
	Identical	Observable	Unobservable
Types of Instruments	Assets	Inputs	Inputs
(In thousands)	Level 1	Level 2	Level 3	Total
Assets
Money market funds	$ 204,808	$ —	$ —	$ 204,808
Investments held by ISP Fund LP (1)	299,288	—	—	299,288
Equity investment - Armata Common Stock	25,958	—	—	25,958
Equity investment - Armata Warrants	—	18,049	—	18,049
Equity investment - Entasis Common Stock	46,122	—	—	46,122
Equity investment - Entasis Warrants	—	31,882	—	31,882
Equity investment - InCarda Warrants	—	—	1,147	1,147
Total assets measured at estimated fair value	$ 576,176	$ 49,931	$ 1,147	$ 627,254
Debt
2023 Notes	$ —	$ 239,779	$ —	$ 239,779
2025 Notes	—	206,135	—	206,135
Total fair value of debt	$ —	$ 445,914	$ —	$ 445,914

(1) The investments held by ISP Fund LP, consisted of $ 14.5 million equity investments and $ 284.8 million money market funds, are subject to a 36 -month lock-up period from our initial contribution date, December 11, 2020.

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INNOVIVA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The fair values of our equity investments in Armata’s and Entasis's common stock and public traded investments held by ISP Fund LP are based on the quoted prices in active markets and are classified as Level 1 financial instruments. The fair values of the warrants of Armata and Entasis classified within Level 2 are based upon observable inputs that may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research publications.

InCarda’s warrants, Gate's convertible note, and private placement positions held by ISP Fund LP are classified as Level 3 financial instruments as these securities are not publicly traded and the assumptions used in the valuation model for valuing these securities are based on significant unobservable and observable inputs including those of publicly traded peer companies.

The fair values of our 2023 Notes and our 2025 Notes are based on recent trading prices of the respective instruments.

6. CAPITALIZED FEES PAID TO A RELATED PARTY

Capitalized fees paid to a related party, which consist of registrational and launch-related milestone fees paid to GSK, were as follows:

(In thousands)	Amortization period	December 31, — 2021	2020
United States	2013-2030	$ 120,000	$	120,000
Europe	2013-2029	60,000		60,000
Japan	2013-2019	40,000		40,000
Gross carrying value		220,000		220,000
Accumulated amortization		( 108,570	)	( 94,747	)
Net carrying value		$ 111,430	$	125,253

These milestone fees are amortized over their estimated useful lives commencing upon the commercial launch of the product in their respective regions with the amortization expense recorded as a reduction in revenue from collaborative arrangements. As of December 31, 2021, the weighted average remaining amortization period wa s 8.1 years.

Additional information regarding these milestone fees is included in Note 3, “Revenue Recognition and Collaborative Arrangements.” Amortization expense for each of the years ended December 31, 2021, 2020 and 2019 was $ 13.8 million . The remaining estimated amortization expense is $ 13.8 million for each of the years from 2022 to 2026 and $ 42.3 million thereafter.

7. STOCK‑BASED COMPENSATION

Equity Incentive Plans

In May 2012, we adopted the 2012 Equity Incentive Plan (the “2012 Plan”). The 2012 Plan provides for the grant of incentive stock options, nonstatutory stock options, RSAs, RSUs and Stock Appreciation Rights to employees, non-employee directors and consultants. As of December 31, 2021 , total shares remaining available for issuance under the 2012 Plan were 4,978,521 .

Employee Stock Purchase Plan

Under the 2004 Employee Stock Purchase Plan (the “ESPP”), our employees may purchase common stock through payroll deductions at a price equal to 85 % of the lower of the fair market value of the stock at the beginning of the offering period or at the end of each applicable purchase period. The ESPP provides for consecutive and overlapping offering periods of 24 months in duration, with each offering period composed of four consecutive six-month purchase periods. The purchase periods end on either May 15 or November 15. ESPP contributions are limited to a maximum of 15 % of an employee’s eligible compensation. The maximum number of shares that an employee may purchase in any purchase period is 2,500 . An employee may not purchase shares with a value greater than $ 25,000 in any calendar year.

As of December 31, 2021 , total shares remaining available for issuance under the ESPP were 171,827 .

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INNOVIVA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Director Compensation Program

Our non-employee directors receive compensation for services provided as a director. Each member of our Board of Directors who is not an employee receives both cash and equity compensation for services as a director, member of a committee of the Board of Directors, lead independent director and chairman, as applicable.

Each of our independent directors receives periodic automatic grants of equity awards under a program implemented under the 2012 Plan. These grants are non‑discretionary. Only our independent directors or affiliates of such directors are eligible to receive automatic grants under the 2012 Plan. Under the program, each individual who first became a non-employee director will, on the date such individual joins the Board of Directors, automatically be granted a one‑time grant of RSUs covering a number of shares of our common stock calculated as $ 125,000 ($ 250,000 prior to the October 2017 Amendments) divided by our common stock closing share price on the date of grant as reported on The Nasdaq Global Select Market, rounded down to the nearest whole share (the “Initial RSUs”), plus a one‑time grant of RSUs covering a number of shares of our common stock calculated as $ 225,000 ($ 250,000 prior to the October 2017 Amendments) divided by our common stock closing share price on the date of grant as reported on The Nasdaq Global Select Market, which would be pro-rated for the number of whole months remaining until the anniversary of the prior year’s stockholders’ meeting, rounded down to the nearest whole share (the “Pro Rata RSUs”). The Initial RSUs vest in two equal annual installments, while Pro Rata RSUs vest in a single installment at the sooner of the next annual stockholder meeting or the one-year grant anniversary, in each case subject to the non-employee director’s continuous service through the applicable vesting date.

Annually, upon his or her re‑election to the Board of Directors at the Annual Meeting of Stockholders, each non-employee director is automatically granted an RSU covering a number of shares of our common stock calculated as $ 225,000 ($ 250,000 prior to the October 2017 Amendments) divided by our common stock closing share price on the date of grant as reported on The Nasdaq Global Select Market, rounded down to the nearest whole share. These RSUs will vest at the sooner of the next annual stockholder meeting or the one-year anniversary of grant, subject to the non-employee director’s continuous service through the applicable vesting date. Following the amendment to our non-employee director compensation program, both the annual RSUs and Initial RSUs described above remained unchanged with the exception that the number of shares of our common stock subject to each award has been reduced.

These RSUs will vest in full upon the director’s death, the occurrence of a change in control or, with respect to awards made after the October 2017 Amendments, the director’s disability before the director’s service terminates. Director RSUs carry dividend equivalent rights to be credited with an amount equal to all cash dividends paid on the underlying shares of common stock while unvested. Dividend equivalents are subject to the same terms and conditions, including vesting, as the RSUs to which they attach and are paid in cash upon vesting.

Stock‑Based Compensation Expense

Stock‑based compensation expense is included in the consolidated statements of income as follows:

(In thousands)	Year Ended December 31, — 2021	2020	2019
General and administrative	$ 2,017	$ 1,698	$ 2,056

Stock‑based compensation expense included in the consolidated statements of income by award type is as follows:

(In thousands)	Year Ended December 31, — 2021	2020	2019
Stock options	$ 490	$ 242	$ —
RSUs	1,280	1,149	1,431
RSAs	200	273	615
ESPP	47	34	10
Total stock-based compensation expense	$ 2,017	$ 1,698	$ 2,056

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INNOVIVA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2021, the unrecognized stock-based compensation cost and the estimated weighted-average amortization period were as follows:

(In thousands)	Unrecognized Compensation Cost
Stock options	$ 1,507	2.8
RSUs	574	0.5
RSAs	327	2.6
Total unrecognized compensation expense	$ 2,408

Compensation Awards

The following table summarizes equity award activity under the 2012 Plan and prior plans and related information:

(In thousands, except per share data) — Balance as of December 31, 2020	1,155	$	22.28	85	$	13.30	30	$	14.61
Granted	116		13.28	117		12.81	19		12.44
Exercised	( 73	)	14.69	—		—	—		—
Released RSUs/RSAs	—		—	( 86	)	13.28	( 14	)	14.57
Forfeited	( 432	)	23.81	—		—	( 6	)	13.80
Balance as of December 31, 2021	766		20.79	116		12.82	29		13.35

As of December 31, 2021 , the aggregate intrinsic value of the options outstanding and options exercisable was $ 1.3 million and $ 0.3 million , respectively. All outstanding optio ns were exercisable. The weighted average remaining contractual term was 4.43 years.

The total intrinsic value of the options exercised was $ 0.2 million, $ 0.1 million and $ 0.2 million for the years ended December 31, 2021, 2020, and 2019, respectively. The total estimated fair value of options vested was $ 0.6 million for the year ended December 31, 2021. The total estimated fair value of options vested was no t material for the year ended December 31, 2020 and 2019, respectively.

The total estimated fair value of RSUs vested was $ 1.1 million, $ 1.3 million, and $ 1.4 million in the years ended December 31, 2021, 2020, and 2019, respectively.

The total estimated fair value of RSAs vested was $ 0.2 million, $ 0.6 million, and $ 0.9 million in the years ended December 31, 2021, 2020, and 2019, respectively.

Valuation Assumptions

The weighted-average assumptions used in calculating the estimated value of our stock options on the date of grant as follows:

	Year Ended December 31, — 2021	2020
Risk-free interest rate	1.1 %	0.4 %
Expected term (in years)	6.11	6.11
Volatility	44.9 %	46.9 %
Dividend yield	0.0 %	0.0 %
Weighted-average estimated fair value of stock options granted	$ 5.84	$ 6.28

There were no grants of stock options during the year ended December 31, 2019.

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INNOVIVA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. DEBT

Our debt consists of:

(In thousands)	December 31, — 2021	2020
2023 Notes	$ 240,984	$	240,984
2025 Notes	192,500		192,500
Total debt	433,484		433,484
Unamortized debt discount and issuance costs	( 38,831	)	( 47,967	)
Net long-term debt	$ 394,653	$	385,517

Convertible Senior Notes Due 2025

On August 7, 2017, we completed a private placement of $ 192.5 million aggregate principal amount of our 2025 Notes. The proceeds include the 2025 Notes sold pursuant to the $ 17.5 million over-allotment option granted by us to the initial purchasers, which option was exercised in full. The 2025 Notes were sold in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The 2025 Notes are senior unsecured obligations and bear interest at a rate of 2.5 % per year, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2018.

The 2025 Notes are convertible, based on the applicable conversion rate, into cash, shares of our common stock or a combination thereof, at our election. The initial conversion rate for the 2025 Notes is 57.9240 shares of our common stock per $1,000 principal amount of the 2025 Notes (which is equivalent to an initial conversion price of approximately $ 17.26 per share), representing a 30.0 % conversion premium over the last reported sale price of the Company’s common stock on August 1, 2017, which was $ 13.28 per share. The conversion rate is subject to customary anti-dilution adjustments in certain circumstances. The 2025 Notes will mature on August 15, 2025, unless repurchased or converted in accordance with their terms prior to such date. Prior to February 15, 2025, the 2025 Notes will be convertible at the option of the holders only upon the occurrence of specified events and during certain periods. From, and including, February 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, the 2025 Notes will be convertible at any time.

In accordance with accounting guidance for debt with conversion and other options, we separately account for the liability and equity components of the 2025 Notes by allocating the proceeds between the liability component and the embedded conversion option (“equity component”) due to our ability to settle the conversion obligation of the 2025 Notes in cash, common stock or a combination of cash and common stock, at our option. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature using the income approach. The allocation was performed in a manner that reflected our non-convertible debt borrowing rate for similar debt. The equity component of the 2025 Notes of $ 67.3 million was recognized as a debt discount and represents the difference between the proceeds from the issuance of the 2025 Notes and the fair value of the liability of the 2025 Notes on the date of issuance. The excess of the principal amount of the liability component over its carrying amount (“debt discount”) is amortized to interest expense using the effective interest method over the term of the 2025 Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

Our outstanding 2025 Notes balances consisted of the following:

(In thousands)	December 31, — 2021	2020
Liability component
Principal	$ 192,500	$	192,500
Debt discount and issuance costs, net	( 38,211	)	( 46,766	)
Net carrying amount	$ 154,289	$	145,734
Equity component, net	$ 65,361	$	65,361

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INNOVIVA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table sets forth total interest expense recognized related to the 2025 Notes for the years ended December 31, 2021, 2020 and 2019:

(In thousands)	Year Ended December 31, — 2021	2020	2019
Contractual interest expense	$ 4,813	$ 4,813	$ 4,813
Amortization of debt issuance costs	657	601	551
Amortization of debt discount	7,898	7,230	6,618
Total interest and amortization expense	$ 13,368	$ 12,644	$ 11,982

Convertible Subordinated Notes Due 2023

In January 2013, we completed an underwritten public offering of $ 287.5 million aggregate principal amount of unsecured convertible subordinated notes, which will mature on January 15, 2023. The financing raised proceeds, net of issuance costs, of approximately $ 281.2 million, less $ 36.8 million to purchase two privately negotiated capped call option transactions in connection with the issuance of the notes. The 2023 Notes bear interest at the rate of 2.125 % per year that is payable semi-annually in arrears in cash on January 15 and July 15 of each year, beginning on July 15, 2013.

The 2023 Notes were convertible, at the option of the holder, into shares of our common stock at an initial conversion rate of 35.9903 shares per $1,000 principal amount of the 2023 Notes, subject to adjustment in certain circumstances, which represents an initial conversion price of approximately $ 27.79 per share.

In connection with the offering of the 2023 Notes, we entered into two privately negotiated capped call option transactions with a single counterparty. The capped call option transaction is an integrated instrument consisting of a call option on our common stock purchased by us with a strike price equal to the initial conversion price of $ 27.79 per share for the underlying number of shares and a cap price of $ 38.00 per share, both of which are subject to adjustments consistent with the 2023 Notes. The cap component is economically equivalent to a call option sold by us for the underlying number of shares with an initial strike price of $ 38.00 per share. As an integrated instrument, the settlement of the capped call coincides with the due date of the convertible debt. Upon settlement, we would receive from our hedge counterparty a number of shares of our common shares that would range from zero , if the stock price was below $ 27.79 per share, to a maximum of 2,779,659 shares, if the stock price is above $38.00 per share. However, if the market price of our common stock, as measured under the terms of the capped call transactions, exceeds $38.00 per share, there is no incremental anti-dilutive benefit from the capped call.

As a result of the partial conversion by certain holders of the 2023 Notes in July 2014, and dividends declared and paid in 2014 and 2015, the conversion rate with respect to our 2023 Notes was adjusted in total to 50.5818 shares of our common stock per $1,000 principal amount of the 2023 Notes, which represents a conversion price of approximately $ 19.77 per share. As a result of the conversion rate adjustments, the capped call strike price and cap price were also adjusted to $ 19.77 and $ 27.04 , respectively.

For the year ending December 31, 2016, we retired a portion of our 2023 Notes with a face value of $ 14.1 million and carrying value of $ 13.9 million by way of purchase in the open market.

Debt Maturities

The aggregate scheduled maturities of our long-term debt as of December 31, 2021 are as follows:

(In thousands)
Years ending December 31:
2022	$ —
2023	240,984
2024	—
2025	192,500
Total	$ 433,484

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INNOVIVA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. COMMITMENTS AND CONTINGENCIES

Operating Lease

In 2014, our facility leases in South San Francisco, California were assigned to Theravance Biopharma, Inc. However, if Theravance Biopharma, Inc. were to default on its lease obligations, we had in substance guaranteed the lease payments for these facilities. This lease concluded in May 2020, and we have no further obligations for the lease.

In 2019, we entered into an operating lease in Burlingame, California for approximately 2,111 rentable square feet. The new lease commenced in November 2019 with a term of thirty-six calendar months.

Minimum lease payments on our corporate headquarters as of December 31, 2021 are as follows:

(In thousands)
Years ending December 31:
2022	$ 109
Thereafter	—
Total	$ 109

Indemnifications and Other Contingencies

We indemnify our officers and directors for certain events or occurrences, subject to certain limits. We believe the fair value of these indemnification agreements is minimal. We may be subject to contingencies that may arise from matters such as product liability claims, legal proceedings, shareholder suits and tax matters. We have not recognized any liabilities relating to these matters as of December 31, 2021 .

10. SHAREHOLDERS' EQUITY

On May 20, 2021, the Company entered into a share repurchase agreement with GSK to buy back 32,005,260 shares of its common stock at $ 12.25 per share from GSK, representing all of the shares of common stock or other capital interests of Innoviva owned by GSK or its affiliates. The total consideration, including related transaction fees, was $ 394.1 million. The share repurchase was completed on May 25, 2021. These shares are recorded as treasury stock on the consolidated balance sheets.

11. INCOME TAXES

Income tax expense consists of the following:

(In thousands)	Year Ended December 31, — 2021	2020	2019
Current
State	$ 7	$ 11	$ 26
Deferred
Federal	70,893	60,408	41,567
State	5,539	12	309
	76,432	60,420	41,876
Total income tax expense, net	$ 76,439	$ 60,431	$ 41,902

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INNOVIVA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The impacts of the differences between the expected U.S. federal statutory income tax to our income tax expense are as follows:

(In thousands)	Year Ended December 31, — 2021	2020		2019
Expected tax at federal statutory rate	$ 93,507	$	74,392	$	48,908
State income tax, net of federal benefit	848		( 26	)	325
Federal and state research credits	1,260		—		—
Noncontrolling interest	( 21,626	)	( 14,577	)	( 7,078	)
Other	1,129		839		326
Change in valuation allowance	1,321		( 197	)	( 579	)
Income tax expense (benefit), net	$ 76,439	$	60,431	$	41,902

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and deferred tax liabilities are as follows:

(In thousands)	As of December 31, — 2021	2020
Deferred tax assets
Net operating loss carryforwards	$ 64,813	$	121,839
Research and development tax credit carryforwards	53,467		55,211
Other	743		1,100
Total deferred tax assets before valuation allowance	119,023		178,150
Valuation allowance	( 64,744	)	( 63,423	)
Total deferred tax assets	54,279		114,727
Deferred tax liabilities
Debt issuance discount and other	( 9,158	)	( 10,596	)
Unrealized gain on investment, net	( 27,794	)	( 10,372	)
Net deferred tax assets	$ 17,327	$	93,759

We record deferred tax assets if the realization of such assets is more likely than not to occur. Significant management judgment is required in determining whether a valuation allowance against the deferred tax assets is required. We have considered all available evidence, both positive and negative, such as our historical operating results and predictability of future taxable income, in making such determination. We are also required to exercise significant management’s judgment in forecasting future taxable income. Specifically, we evaluate the following criteria when considering a valuation allowance:

• the history of tax net operating losses in recent years;

• predictability of operating results;

• profitability for a sustained period of time; and

• level of profitability on a quarterly basis.

As of December 31, 2021, we recognized $ 76.4 million income tax expense and reduced the deferred tax assets by the same amount mainly based on the taxable income generated during the year.

As of December 31, 2021, we had federal net operating loss carryforwards of approximately $ 92.9 million , which expire from 2033 through 2035. We also had federal research and development tax credit carryforwards of approximately $ 42.1 million , which will expire beginning 2022. We also had state net operating loss carryforwards of approximately $ 648.6 million expiring in the beginning of 2029 and state research tax credits of approximately $ 31.6 million , which do not expire.

Utilization of net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code and similar state provisions. Annual limitations may result in expiration of net operating loss and tax credit carryforwards before some or all of such amounts have been utilized.

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INNOVIVA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We conducted an Internal Revenue Code of 1986, as amended, Section 382 (“Section 382”) analysis through October 31, 2021 to determine whether an ownership change had occurred since inception. The Section 382 study concluded that it is more likely than not that the Company did not experience an ownership change during the testing period. However, notwithstanding the applicable annual limitations, no portion of the net operating loss or credit carryforwards is expected to expire before becoming available to reduce federal and state income tax liabilities as a result of those identified ownership changes. If we undergo another ownership change, the utilization of the pre-ownership change net operating loss carryforwards or pre-ownership change tax attributes, such as research tax credits, to offset the post-ownership change income may be subject to an annual limitation, pursuant to Sections 382 and 383 of the Internal Revenue Code of 1986, as amended. Similar rules may apply under state tax laws.

Our policy is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2021 and 2020, we had no accrued interest or penalties.

Uncertain Tax Positions

A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits are as follows:

(In thousands) — Unrecognized tax benefits as of December 31, 2018	$ 15,413
Gross decrease in tax portions for 2019	( 71	)
Unrecognized tax benefits as of December 31, 2019	15,342
Net decrease in tax portions for 2020	( 157	)
Unrecognized tax benefits as of December 31, 2020	15,185
Net decrease in tax portions for 2021	( 313	)
Unrecognized tax benefits as of December 31, 2021	$ 14,872

Our total unrecognized tax benefits as of December 31, 2021 were $ 14.9 million . Total unrecognized tax benefits that, if recognized, would affect our effective tax rate, were $ 8.4 million as of December 31, 2021.

We are subject to taxation in the U.S. and various state jurisdictions. The tax years 2004 through 2013, 2015 and forward remain open to examination by the federal and most state tax authorities due to net operating loss and overall credit carryforward positions.

12. SUBSEQUENT EVENTS

On February 9, 2022, ISO entered into a securities purchase agreement with Armata to acquire 9,000,000 shares of Armata common stock and warrants to purchase 4,500,000 additional shares of common stock with an exercise price of $ 5.00 per share for $ 45.0 million. The investment is set to close in two tranches. The first tranche consisting of approximately 3.6 million shares of common stock and warrants to purchase approximately 1.8 million shares of common stock for an aggregate purchase price of approximately $ 18.1 million was consummated simultaneously with the execution of the agreement. The second tranche consisting of approximately 5.4 million shares of common stock and warrants to purchase approximately 2.7 million shares of common stock for an aggregate purchase price of $ 26.9 million will be consummated upon satisfaction of certain closing conditions, which is expected to occur in the first quarter of 2022. Upon closing of the second tranche, we expect to own approximately 70 % of Armata’s outstanding stock. The investment is intended to aid Armata in advancing its clinical pipeline and strengthening its bacteriophage platform.

On February 9, 2022, Armata also entered a second amended and restated voting agreement with the Company and ISO, pursuant to which the Company and ISO agreed not to vote or take any action by written consent with respect to any common shares held by the Company and ISO that represent, in the aggregate, more than 49.5 % of the total number of voting shares of Armata’s common stock for voting on the matters related to election or removal of Armata’s board. The Company and ISO also agreed not to amend Armata’s bylaws to reduce its maximum number of directors or set the number of directors who may serve on Armata’s board. The voting agreement will expire the earlier of the second anniversary of the agreement effective date and approval by the FDA of any of Armata’s product candidates for marketing and commercial distribution.

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INNOVIVA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On February 17, 2022, ISO entered into a securities purchase agreement with Entasis to purchase a convertible promissory note for a total purchase price of $ 15.0 million. The note bears an annual interest rate of 0.59 % and will mature and become payable on August 18, 2022 unless it is converted at the conversion price of $ 1.48 before the maturity date. This financing is expected to support Entasis’ product development and operations into August 2022. With this financing, we have become the primary beneficiary of Entasis and expect to consolidate its financial position and results of operations effective on the date of the transaction. Entasis was valued at $ 85.3 million based on its close trading price on February 17, 2022.

On February 18, 2022, TRC entered into an investment and shareholders agreement with Nanolive SA ("Nanolive") to purchase 18,750,000 shares of Series C preferred stock for $ 9.8 million (equivalent to 9.0 million CHF). Nanolive SA is a Swiss privately held life sciences company focused on developing breakthrough imaging solutions that accelerate research in growth industries such as drug discovery and cell therapy. TRC owns 16.1 % of Nanolive's equity and has a right to designate one board member to Nanolive's board.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Innoviva, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Innoviva, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 28, 2022 expressed an unqualified opinion.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Consolidation of Investees

As described further in Notes 4 and 5 to the financial statements, certain of the Company’s investees have complex structures and agreements which must be evaluated for consolidation, including determining whether the investee is a variable interest entity (“VIE”), and if so, whether the Company is the primary beneficiary. This assessment is performed at the inception of the investment and upon the occurrence of reconsideration events and requires significant judgment by management.

As of December 31, 2021, the carrying values of the Company’s consolidated VIEs’ total assets and total liabilities aggregated to $326.8 million and $0.5 million, respectively. As of December 31, 2021, the Company’s investments in unconsolidated VIEs was $250.4 million.

We identified the assessment of consolidation of investees as a critical audit matter. The principal consideration for our determination that the consolidation determination for the Company’s investees either at inception or upon a reconsideration event is a critical audit matter is that there is significant judgment required by management to interpret complex structures and agreements. This required a high degree of auditor judgment and an increased audit effort.

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Our audit procedures related to consolidation assessment included the following, among others.

• We tested the design and operating effectiveness of controls related to management’s initial accounting assessment for each investment and the reassessment upon reconsideration events.

• We evaluated the Company’s consolidation accounting analysis for all significant investees by performing procedures including, but not limited to:

o Obtaining an understanding of the composition and governance of the investee, its board of directors and management.

o Reading the purchase agreements and other related documents and evaluating the structures and terms of the agreements to verify whether the investees should be considered VIEs.

o If an investee is determined to be a VIE, considering whether the Company appropriately determined the primary beneficiary of the VIE by evaluating the investment arrangements of the entity to determine if the Company has the power to direct activities and if the Company has the obligation to absorb losses of the entity or the right to receive benefits from the entity that could be significant to the VIE.

o For those investees for which the Company has determined consolidation is appropriate, evaluating whether the Company consolidated the balances at the appropriate amounts, including applying appropriate audit procedures to the investees’ financial statements.

o Evaluating other audit evidence obtained to determine if there were additional reconsideration events that had not been identified by the Company, including reading board minutes and confirming the terms of certain agreements, as applicable.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2019.

San Francisco, California

February 28, 2022

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this Annual Report on Form 10‑K/A:

Financial Statements:

The following financial statements and schedules of the Registrant are contained in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10‑K/A:

	Page
Consolidated Balance Sheets as of December 31, 2021 and 2020	4
Consolidated Statements of Income for each of the three years in the period ended December 31, 2021	5
Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 2021	6
Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended December 31, 2021	7
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2021	8
Notes to Consolidated Financial Statements	9
Reports of Independent Registered Public Accounting Firm (PCAOB ID 248)	32

Financial Statement Schedules:

All schedules have been omitted because of the absence of conditions under which they are required or because the required information, where material, is shown in the financial statements, financial notes or supplementary financial information.

(b) Exhibits required by Item 601 of Regulation S‑K:

The information required by this Item is set forth on the exhibit index that follows the signature page of this report.

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Exhibits

Exhibit Number	Description	Form	Incorporated by Reference — Exhibit	Filing Date/Period End Date
3.1	Amended and Restated Certificate of Incorporation	S‑1	3.3	7/26/2004
3.2	Certificate of Amendment of Restated Certificate of Incorporation	10‑Q	3.4	3/31/2007
3.3	Certificate of Ownership and Merger Merging LABA Merger Sub, Inc. with and into Theravance, Inc., as filed with the Secretary of State of the State of Delaware, effective on January 7, 2016	8‑K	3.1	1/8/2016
3.4	Amended and Restated Bylaws, amended and restated as of February 8, 2017	8‑K	3.1	2/9/2017
4.1	Specimen certificate representing the common stock of the registrant	10‑K	4.1	12/31/2006
4.2	Indenture, dated as of January 24, 2013 by and between Theravance, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee	8‑K	4.1	1/25/2013
4.3	Form of 2.125% Convertible Subordinated Note Due 2023 (included in Exhibit 4.4 )
4.4	Indenture (including form of Note) with respect to Innoviva’s 2.50% Convertible Senior Notes due 2025, dated as of August 7, 2017, between Innoviva and The Bank of New York Mellon Trust Company, N.A., as trustee	8‑K	4.1	8/7/2017
4.5	Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934	10-K	4.9	2/19/2020
10.1	Employee Stock Purchase Plan, as amended April 27, 2010	10‑Q	10.4	6/30/2010
10.2	Collaboration Agreement between the registrant and Glaxo Group Limited, dated as of November 14, 2002	10‑Q	10.1	6/30/2014
10.3	Amended and Restated Investors’ Rights Agreement by and among the registrant and the parties listed therein, dated as of May 11, 2004	S‑1	10.13	6/10/2004
10.4*	Strategic Alliance Agreement between the registrant and Glaxo Group Limited, dated as of March 30, 2004	10‑K	10.13	12/31/2013
10.5+	Description of Cash Bonus Program, as amended	10‑K	10.22	12/31/2009
10.6+	Amendment to Change in Control Severance Plan effective December 16, 2009	10‑K	10.47	12/31/2009
10.7+	2009 Change in Control Severance Plan adopted December 16, 2009	10‑K	10.48	12/31/2009
10.8	Second Amendment to Amended and Restated Governance Agreement among the registrant, Glaxo Group Limited, GlaxoSmithKline plc and GlaxoSmithKline LLC, dated as of November 29, 2010	8‑K	10.2	11/29/2010
10.9	Amendment to Strategic Alliance Agreement, dated October 3, 2011	10‑K	10.34	12/31/2011
10.10+	2012 Equity Incentive Plan, as approved by the board of directors February 8, 2012 and approved by stockholders May 16, 2012 and forms of equity award	10‑Q	10.38	6/30/2012
10.11	Base Capped Call Transaction, dated January 17, 2013	8‑K	10.1	1/23/2013
10.12	Additional Capped Call Transaction, dated January 18, 2013	8‑K	10.2	1/23/2013
10.13	Master Agreement by and among Theravance, Inc., Theravance Biopharma, Inc. and Glaxo Group Limited, dated March 3, 2014	8‑K/A	10.1	3/6/2014
10.14*	Collaboration Agreement Amendment by and between Theravance, Inc. and Glaxo Group Limited, dated March 3, 2014	8‑K/A	10.2	3/6/2014
10.15*	Strategic Alliance Agreement Amendment by and between Theravance, Inc. and Glaxo Group Limited, dated March 3, 2014	8‑K/A	10.3	3/6/2014
10.16	Transition Services Agreement between Theravance and Theravance Biopharma, dated June 2, 2014.	8‑K	10.2	6/5/2014
10.17	Tax Matters Agreement between Theravance and Theravance Biopharma, dated June 2, 2014.	8‑K	10.3	6/5/2014
10.18	Employee Matters Agreement between Theravance and Theravance Biopharma, dated June 1, 2014.	8‑K	10.4	6/5/2014
10.19	Theravance Respiratory Company, LLC Limited Liability Company Agreement between Theravance and Theravance Biopharma, dated May 31, 2014.	8‑K	10.5	6/5/2014

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10.20	Amendment/Clarification to Transition Services Agreement between Theravance and Theravance Biopharma, dated March 2, 2015	10‑Q	10.64	3/31/2015
10.21+	First Amendment to 2009 Change In Control Severance Plan (Renamed 2009 Severance Plan)	8‑K	10.2	7/29/2015
10.22	Form of Notice of Performance‑Based Restricted Stock Award and Restricted Stock Award Agreement under 2012 Equity Incentive Plan (director form)	10‑K	10.76	2/23/2018
10.23+	Second Amendment to 2009 Severance Plan	10‑Q	10.81	7/26/2018
10.24+	Offer Letter with Marianne Zhen, dated September 7, 2018	8‑K	10.1	9/11/2018
10.25+	Offer Letter between Innoviva, Inc. and Pavel Raifeld, dated May 20, 2020.	8‑K	10.1	5/26/2020
10.26	Strategic Advisory Agreement, dated as of December 11, 2020, by and between Sarissa Capital Management LP and Innoviva, Inc.	8‑K	10.1	12/14/2020
10.27	Amended and Restated Limited Partnership Agreement of ISP Fund LP, dated as of December 11, 2020, by and among ISP Fund LP, Sarissa Capital Fund GP LP, Innoviva Strategic Partners LLC and the other parties named therein.	8‑K	10.2	12/14/2020
10.28	Share Repurchase Agreement, dated as of May 2021, by and between Innoviva, Inc. and Glaxo Group Limited	8-K	10.1	5/20/2021
10.29	Letter Agreement, dated as of May 20, 2021, by and among Innoviva Strategic Partners LLC, ISP Fund LP and Sarissa Capital Fung GP LP	8-K	10.2	5/20/2021
21.1	List of Subsidiaries
23.1	Consent of Independent Registered Public Accounting Firm
23.2	Consent of Independent Registered Public Accounting Firm of Armata Pharmaceuticals, Inc.
24.1	Power of Attorney (see signature page to the Original Filing)
31.1	Certification of Principal Executive Officer Pursuant to Rule 13a‑14 under the Securities Exchange Act of 1934
31.2	Certification of Principal Financial Officer Pursuant to Rule 13a‑14 under the Securities Exchange Act of 1934
32	Certifications Pursuant to 18 U.S.C. Section 1350
99.1	Audited Consolidated Financial Statements of Armata Pharmaceuticals, Inc. at December 31, 2021 and 2020 and for the two years ended December 31, 2021
101	The following materials from Registrant’s Annual Report on Form 10‑K for the year ended December 31, 2021, formatted in Extensible Business Reporting Language (XBRL) includes: (i) Consolidated Balance Sheets as of December 31, 2021 and 2020, (ii) Consolidated Statements of Income for the years ended December 31, 2021, 2020 and 2019, (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019, (iv) Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2021, 2020 and 2019, (v) Consolidated Statements of Cash Flows for years ended December 31, 2021, 2020 and 2019, and (vi) Notes to Consolidated Financial Statements.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101)

Management contract or compensatory plan or arrangement required to be filed pursuant to Item 15(b) of Form 10‑K.
Confidential treatment has been granted for certain portions which are omitted in the copy of the exhibit electronically filed with the Securities and Exchange Commission. The omitted information has been filed separately with the Securities and Exchange Commission pursuant to Innoviva, Inc.’s application for confidential treatment.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 17, 2022	INNOVIVA, INC. — By:	/s/ PAVEL RAIFELD Pavel Raifeld Chief Executive Officer

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