Innoviva Reports Fourth Quarter 2018 Financial Results

  • Total net revenue rose 15% to $79.9 million in the fourth quarter of
    2018 compared with the fourth quarter of 2017.1
  • Income before income taxes increased 25% from the fourth quarter of
    2017 to $73.1 million.

BRISBANE, Calif.–(BUSINESS WIRE)–Innoviva, Inc. (NASDAQ: INVA) (the Company) today reported financial
results for the fourth quarter ended December 31, 2018.

  • Gross royalty revenues of $83.3 million from Glaxo Group Limited
    (“GSK”) for the fourth quarter of 2018 included royalties of $64.8
    million from global net sales of RELVAR®/BREO®
    ELLIPTA®, royalties of $12.1 million from global net sales
    of ANORO® ELLIPTA® and $6.4 million from global
    net sales of TRELEGY® ELLIPTA®.2
  • Total operating expenses for the fourth quarter of 2018 were $2.6
    million compared with $3.1 million (including $2.9 million for
    insurance recovery and legal fee discount) in the fourth quarter of
    2017. Total non-cash operating expenses for the fourth quarter of 2018
    included $0.5 million in stock-based compensation compared to $2.4
    million in stock-based compensation for the fourth quarter of 2017.
  • In the fourth quarter of 2018, the Company recorded an income tax
    benefit of approximately $196.1 million related to the reversal of a
    valuation allowance on its deferred tax assets. This non-cash income
    tax benefit is non-recurring and relates primarily to $0.8 billion of
    U.S. federal net operating losses, and certain federal R&D credits
    which are expected to be utilized in the future. The Company expects
    to recognize income tax expense in 2019 and future periods, primarily
    based on the 21% federal tax rate, but it doesn’t expect to use cash
    to pay income taxes until after it utilizes the available deferred tax
    assets.
  • Net cash and cash equivalents, short-term investments and marketable
    securities totaled $114.9 million, and royalties receivable from GSK
    totaled $83.3 million, as of December 31, 2018.

Global net sales of RELVAR®/BREO® ELLIPTA®
increased 7% versus the fourth quarter of 2017 –U.S. net sales decreased
2% as increased pricing discounts in the respiratory sector offset
volume growth while non-U.S. sales continued their strong growth and
increased 19% compared to 2017. Global net sales of ANORO®
ELLIPTA® grew 26% versus the fourth quarter of 2017 – U.S.
net sales increased 22% due to continued growth of the LABA/LAMA class
while non-U.S. sales were up 37%”, stated Geoffrey Hulme, interim
Principal Executive Officer.

Hulme continued, “With the efforts taken by the new board of directors
and management in 2018, Innoviva enters 2019 with simplified operations,
lower debt levels, and increasing cash balances. Although the exact
timing of generic Advair in the U.S. was unknowable, the approval was
expected. And, despite changing market dynamics in the U.S., we believe
in the value proposition of Breo and the Ellipta device and are pleased
by the continued strong growth of the respiratory products ex-U.S. in
the face of generic Advair. Management and the board remain focused on
optimizing capital allocation and maximizing shareholder value.”

Recent Highlights

  • GSK Net Sales:

    • Fourth quarter 2018 net sales of RELVAR®/BREO®
      ELLIPTA® by GSK were $431.6 million, up 7% from $405.3
      million in the fourth quarter of 2017, with $236.4 million in net
      sales from the U.S. market and $195.2 million from non-U.S.
      markets.
    • Fourth quarter 2018 net sales of ANORO® ELLIPTA® by
      GSK were $186.2 million, up 26% from $147.3 million in the fourth
      quarter of 2017, with $125.7 million net sales from the U.S.
      market and $60.5 million from non-U.S. markets.
    • Fourth quarter 2018 net sales of TRELEGY® ELLIPTAby
      GSK were $99.0 million with $75.8 million in net sales from the
      U.S. market and $23.2 million in net sales from non-U.S. markets.
      TRELEGY® ELLIPTA® was approved in the U.S.
      in September 2017.
  • Product Updates:

    • In November 2018, the European Commission authorized an expanded
      label of TRELEGY® ELLIPTA® (fluticasone
      furoate/umeclidinium/ vilanterol ‘FF/UMEC/VI’) for once daily use
      in patients with moderate to severe chronic obstructive pulmonary
      disease (COPD) not adequately treated with dual bronchodilators or
      with an inhaled corticosteroid (ICS) and a long-acting β2-agonist
      (LABA).

1 The fourth quarter of 2017 included $2.4 million of revenue
attributable to the completion of the company’s performance obligations
under the MABA program.
2 For TRELEGY ®
ELLIPTA®, Innoviva is entitled to 15% of royalty payments
made by GSK that are assigned to TRC, LLC.

About Innoviva

Innoviva, Inc. (referred to as “Innoviva”, the “Company”, or “we” and
other similar pronouns) is focused on royalty management. Innoviva’s
portfolio includes the 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® and ANORO® ELLIPTA®. 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”), relating to TRELEGY®
ELLIPTA® and any other product or combination of products
that may be discovered and 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®.

ANORO®, RELVAR®, BREO®, TRELEGY®
and ELLIPTA® are trademarks of the GlaxoSmithKline group of
companies.

Forward Looking Statements

This press release contains certain “forward-looking” statements as that
term is defined in the Private Securities Litigation Reform Act of 1995
regarding, among other things, statements relating to goals, plans,
objectives and future events. Innoviva intends such forward-looking
statements to be covered by the safe harbor provisions for
forward-looking statements contained in Section 21E of the Securities
Exchange Act of 1934 and the Private Securities Litigation Reform Act of
1995. The words “anticipate”, “expect”, “goal”, “intend”, “objective”,
“opportunity”, “plan”, “potential”, “target” and similar expressions are
intended to identify such forward-looking statements. Such
forward-looking statements involve substantial risks, uncertainties and
assumptions. These statements are based on the current estimates and
assumptions of the management of Innoviva as of the date of this press
release and are subject to known and unknown risks, uncertainties,
changes in circumstances, assumptions and other factors that may cause
the actual results of Innoviva to be materially different from those
reflected in the forward-looking statements. Important factors that
could cause actual results to differ materially from those indicated by
such forward-looking statements include, among others, risks related to:
expected cost savings; lower than expected future royalty revenue from
respiratory products partnered with GSK; the commercialization of RELVAR®/BREO®
ELLIPTA®, ANORO® ELLIPTA® and TRELEGY®
ELLIPTA® in the jurisdictions in which these products have
been approved; the strategies, plans and objectives of Innoviva
(including Innoviva’s growth strategy and corporate development
initiatives beyond the existing respiratory portfolio); the timing,
manner, and amount of potential capital returns to shareholders; the
status and timing of clinical studies, data analysis and communication
of results; the potential benefits and mechanisms of action of product
candidates; expectations for product candidates through development and
commercialization; the timing of regulatory approval of product
candidates; and projections of revenue, expenses and other financial
items. Other risks affecting Innoviva are described under the headings
“Risk Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” contained in Innoviva’s Annual
Report on Form 10-K for the year ended December 31, 2017 and Innoviva’s
Quarterly Report on Form 10-Q for the quarters ended March 31, June 30
and September 30, 2018, which are on file with the Securities and
Exchange Commission (“SEC”) and available on the SEC’s website at www.sec.gov.
Additional factors may be described in those sections of Innoviva’s
Annual Report on Form 10-K for the year ended December 31, 2018, to be
filed with the SEC in the first quarter of 2019. Past performance is not
necessarily indicative of future results. No forward-looking statements
can be guaranteed and actual results may differ materially from such
statements. Given these uncertainties, you should not place undue
reliance on these forward-looking statements. The information in this
press release is provided only as of the date hereof, and Innoviva
assumes no obligation to update its forward-looking statements on
account of new information, future events or otherwise, except as
required by law.

 
INNOVIVA, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
               
Three Months Ended Year Ended
December 31, December 31,
2018 2017 2018 2017
Revenue:
Royalty revenue from a related party, net $ 79,858 $ 67,084 $ 261,004 $ 214,118
Revenue from collaborative arrangements from a related party       2,436         3,099  
Total net revenue (1) 79,858 69,520 261,004 217,217
 
Operating expenses:
Research and development 342 1,355
General and administrative 2,638 5,690 14,349 24,147
General and administrative – proxy contest and litigation costs (2,921 ) 8,111
General and administrative – cash severance expenses 5,704
General and administrative – related party           2,700      
Total operating expenses   2,638     3,111     22,753     33,613  
 
Income from operations 77,220 66,409 238,251 183,604
 
Other income (expense), net (16 ) 70 (5,702 ) (7,038 )
Interest income 519 393 1,660 1,311
Interest expense   (4,581 )   (8,354 )   (23,954 )   (43,601 )
Income before income taxes 73,142 58,518 210,255 134,276
Income tax benefit (expense), net   196,073     (4 )   196,073     (4 )
Net income 269,215 58,514 406,328 134,272
Net income attributable to noncontrolling interest   5,455     129     11,272     129  
Net income attributable to Innoviva stockholders $ 263,760   $ 58,385   $ 395,056   $ 134,143  
 
Basic net income per share attributable to Innoviva stockholders $ 2.61 $ 0.55 $ 3.92 $ 1.25
Diluted net income per share attributable to Innoviva stockholders $ 2.34 $ 0.50 $ 3.53 $ 1.17
 
Shares used to compute basic net income per share 100,979 106,156 100,849 106,945
Shares used to compute diluted net income per share 113,299 119,189 113,408 119,866
 
(1) Total net revenue is comprised of the following (in thousands):
           
    Three Months Ended Year Ended
December 31, December 31,
2018   2017   2018   2017  
(unaudited) (unaudited)
 
Royalties from a related party $ 83,313 $ 70,539 $ 274,827 $ 227,941
Amortization of capitalized fees paid to a related party   (3,455 )   (3,455 )   (13,823 )   (13,823 )
Royalty revenue 79,858 67,084 261,004 214,118
Strategic alliance – MABA program license       2,436         3,099  
Total net revenue $ 79,858   $ 69,520   $ 261,004   $ 217,217  
 
         
INNOVIVA, INC.
Condensed Consolidated Balance Sheets
(in thousands)
 
December 31, December 31,
2018 2017  
(unaudited) (1)
 
Assets
Cash, cash equivalents and marketable securities $ 114,908 $ 129,075
Other current assets 84,135 71,294
Property and equipment, net 160 209
Capitalized fees paid to a related party, net 152,899 166,722
Deferred tax assets 196,054
Other assets   37   37  
Total assets $ 548,193 $ 367,337  
 
 
Liabilities and stockholders’ equity (deficit)
Other current liabilities $ 1,436 $ 3,822
Accrued interest payable 4,264 5,920
Convertible subordinated notes, net 238,664 238,123
Convertible senior notes, net 130,734 124,158
Senior secured term loans, net 13,457 237,081
Other long-term liabilities 586 940
 
Innoviva stockholders’ equity (deficit) 153,583 (242,859 )
Noncontrolling interest   5,469   152  
 
Total liabilities and stockholders’ equity (deficit) $ 548,193 $ 367,337  
 

(1) The selected consolidated balance sheet amounts at December
31, 2017 are derived from audited financial statements.

 
INNOVIVA, INC.
Cash Flows Summary
(in thousands)
       
Year Ended
December 31,
2018 2017
(unaudited)
Net cash provided by operating activities $ 223,531 $ 141,749
Net cash provided by (used in) investing activities 3,519 (23,236 )
Net cash used in financing activities (237,969 ) (163,193 )
 

Contacts

Investors & Media:
Dan Zacchei /
Alex Kovtun

Sloane & Company
212-446-9500
[email protected]
/ [email protected]

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