Theravance: Innoviva Reports Record Fourth Quarter And Full Year 2017 Financial Results

The following excerpt is from the company's SEC filing.

Royalties earned of $70.5 million in the fourth quarter of 2017, up 51% from the fourth quarter of 2016.

Royalties earned in 2017 reached $227.9 million, up 56% from 2016.

Net income attributable to Innoviva stockholders of $58.4 million for the fourth quarter of 2017 (up 129% from the fourth quarter of 2016), or $0.55 per basic share.

Management to host a conference call and webcast today at 5:00 p.m. eastern time.

BRISBANE, Calif., February 8, 2018

Innoviva, Inc. (NASDAQ: INVA) (the Company) today reported financial results for the fourth quarter and full year 2017. Gross royal ties earned on net sales of RELVAR

 ELLIPTA

, ANORO

 and TRELEGY

 from Glaxo Group Limited (GSK) during the fourth quarter of 2017 were $70.5 million, up 51% from $46.8 million in the fourth quarter of 2016.

Income from operations for the fourth quarter of 2017 was $66.4 million, compared with $37.7 million for the same period in 2016.  Adjusted EBITDA rose 65% to $72.3 million for the fourth quarter of 2017, from $43.7 million in the fourth quarter of 2016.

Net cash and cash equivalents, short-term investments and marketable securities totaled $129.1 million as of December 31, 2017. During the fourth quarter, Innoviva completed its previously announced capital return program through the repurchase of $80.0 million in Innoviva common stock through a accelerated share repurchase (ASR) program. Royalties receivable from GSK totaled $70.5 million at December 31, 2017.

“We had a successful fourth quarter of 2017 that included strong commercial performance of RELVAR

, the initiation of sales by GSK in the U.S. market of TRELEGY

, the completion of our 2017 $150 million capital return plan with the successful execution of our ASR program, and the continued growth in our income from operations and adjusted EBITDA, which reached $183.6 million and $207.5 million in 2017, respectively” said Eric d’Esparbes, interim Principal Executive Officer of Innoviva. “We remain confident in the trajectory of our respiratory portfolio and our financial performance.”

Recent Highlights

GSK Net Sales:

Fourth quarter 2017 net sales of RELVAR

by GSK were $405.3 million, up 48% from $273.0 million in the fourth quarter of 2016, with $241.6 million in net sales from the U.S. market and $163.7 million from non-U.S. markets.

Fourth quarter 2017 net sales of ANORO

by GSK were $147.3 million, up 62% from $90.7 million in the fourth quarter of 2016, with $103.3 million of sales from the U.S. market and $44.0 million from non-U.S. markets.

Fourth quarter 2017 net sales of TRELEGY

 by GSK were $2.8 million in the U.S. market.

Product Updates:

Announced positive data from a study comparing ANORO

 and Stiolto Respimat, for symptomatic patients with chronic obstructive pulmonary disease (COPD).

Announced in November 2017 the filing of a supplemental New Drug Application with the U.S. Food and Drug Administration for an expanded indication for the use of TRELEGY

 in COPD.

Capital Return Program:

Completed in December 2017 the $80.0 million ASR program by purchasing 6.1 million shares of common stock at an average price of $13.09 per share.

In 2017, in the aggregate, Innoviva repurchased $97.5 million of common stock or 7.4 million shares (7% of outstanding shares at the beginning of the year), and repaid $85.9 million of its long term debt.

Additional Financial Results for the Fourth Quarter and Full Year 2017

Total net royalty revenue for the fourth quarter of 2017 was $67.1 million, up 55% compared with $43.4 million in the fourth quarter of 2016. Gross royalty revenues for the fourth quarter of 2017 included royalties of $60.8 million from global net sales of RELVAR

, royalties of $9.5 million from global net sales of ANORO

 and $0.2 million from net sales of TRELEGY

 in the U.S. market.

For the full year 2017, net royalty revenues were $214.1 million, compared to $132.7 million in 2016, an increase of 61% during the period.

Total operating expenses for the fourth quarter of 2017 were $3.1 million (net of $2.7 million

in D&O insurance recovery for litigation costs resulting from proxy contest) compared with $6.0 million in the fourth quarter of 2016.

For the full year 2017, total operating expenses were $33.6 million (including $8.1 million in net proxy contest and litigation costs) compared to $24.6 million for the full year of 2016.

Net income attributable to Innoviva stockholders in the fourth quarter of 2017 was $58.4 million (or $0.55 per basic share), up 129% from the fourth quarter of 2016.

For the full year 2017, net income attributable to Innoviva stockholders was up 125% compared to 2016, reaching $134.1 million (or $1.25 per basic share), compared to $59.5 million in 2016 (or $0.54 per basic share). Adjusted earnings per share for the full year 2017 was $1.40 per share, compared with $0.66 per share in the full year 2016.

Adjusted EBITDA for the fourth quarter of 2017 was $72.2 million, up 65% from the fourth quarter of 2016. Adjusted earnings per share for the fourth quarter of 2017 was $0.55 per share, compared with $0.26 per share in the fourth quarter of 2016.

Conference Call and Webcast Information

Innoviva management will host a webcast and conference call at 5:00 p.m. EDT/2:00 p.m. PDT to discuss the financial results. To participate in the live call, dial (877) 837-3908 from the U.S., or (973) 890-8166 for international callers, and enter Conference ID: 2397629. A live webcast of the call will be available by following this link:

INVA Earnings Call Webcast

or from the investor relations section of the company website at www.inva.com and will be archived for 30 days. A telephone replay of the call will be available through February 15, by dialing (404) 537-3406.

Non-GAAP Financial Measures

To supplement the consolidated financial statements presented in accordance with generally accepted accounting principles in the United States, or GAAP, Innoviva uses the non-GAAP financial measures of adjusted EBITDA and adjusted earnings per share. Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance or financial position that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. A reconciliation of these non-GAAP financial measures to the closest GAAP financial measure is presented in the accompanying financial table under the headings “Reconciliation of Non-GAAP Financial Measures to GAAP.”

Innoviva believes that the non-GAAP financial information provided in this release can assist investors, research analysts and others in understanding and assessing Innoviva’s on-going operations, financial performance and prospects for the future and provides an additional tool to use in comparing Innoviva’s financial results with other companies in Innoviva’s industry or with similar operating profiles, without regard to financing or capital structures. Adjusted EBITDA and adjusted earnings per share are used as supplemental financial operating measures by Innoviva’s management and frequently discussed with external users of its financial statements.

Adjusted EBITDA is determined by taking GAAP net income attributable to Innoviva stockholders and adding back interest expense (income), taxes, stock-based compensation expense, write off of debt issuance costs, depreciation expense and amortization of capitalized fees paid to a related party. Innoviva believes the non-GAAP measure of adjusted EBITDA is important as it measures the Company’s ability to generate cash to pay interest costs and support its indebtedness, and it is also used currently in the Company’s annual performance review process. Innoviva’s method of computing adjusted EBITDA may not be the same method used to compute similar measures reported by other companies.

Adjusted earnings per share is determined by taking adjusted net income and dividing the total by the fully diluted number of shares outstanding used to calculate the GAAP diluted EPS. Adjusted net income is determined by taking GAAP net income attributable to Innoviva stockholders and adding back stock-based compensation expense, write off of debt issuance costs, amortization of debt discount, depreciation expense and amortization of capitalized fees paid to a related party. Innoviva believes the non-GAAP measure of adjusted earnings per share provides useful information about the Company’s core operating performance, and enhances the overall understanding of the Company’s past financial performance and its prospects for the future. Innoviva’s method of computing adjusted earnings per share may not be the same method used to compute similar measures reported by other companies.

Adjusted EBITDA, adjusted net income and adjusted earnings per share should not be considered in isolation or as a substitute to net income, income from operations, cash flows from operating activities, earnings per share or any other measure of financial performance presented in accordance with GAAP. Adjusted earnings per share is not intended to represent cash flow per share and does not represent a measure of liquidity or cash available for distribution. The principal limitation of these non-GAAP financial measures is that it excludes significant elements that are required by GAAP to be recorded in Innoviva’s consolidated financial statements. In addition, it is subject to inherent limitations as it reflects the exercise of judgments by management in determining these non-GAAP financial measures. In order to compensate for these limitations, management of Innoviva presents its non-GAAP financial measures in connection with its GAAP results. Investors are encouraged to review the reconciliation of Innoviva’s non-GAAP financial measures to their most directly comparable GAAP financial measure.

About Innoviva

Innoviva is focused on bringing compelling new medicines to patients in areas of unmet need by leveraging its significant expertise in the development, commercialization and financial management of bio-pharmaceuticals. Innoviva’s portfolio is anchored by the respiratory assets partnered with Glaxo Group Limited (GSK), including RELVAR

, ANORO® ELLIPTA

, which were jointly developed by Innoviva and GSK. Under the agreement with GSK, Innoviva is eligible to receive associated royalty revenues from RELVAR

 and ANORO

. In addition, Innoviva retains a 15 percent economic interest in royalty payments made by GSK for TRELEGY

 and earlier-stage programs partnered with Theravance BioPharma, Inc. For more information, please visit Innoviva’s website at www.inva.com.

, 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 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

 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, amount and planned growth of anticipated potential capital returns to shareholders (including, without limitation, statements regarding

Innoviva’s expectations of future purchases under future capital return programs and future cash dividends); 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, 2016 and Innoviva’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, 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, 2017, to be filed with the SEC in the first quarter of 2018. In addition to the risks described above and in Innoviva’s other filings with the SEC, other unknown or unpredictable factors also could affect Innoviva’s results. 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.

Contact:

Interim Principal Executive Officer and Sr. Vice President and Chief Financial Officer 

650-238-9640

investor.relations@inva.com

INNOVIVA, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

Three Months Ended

Year Ended

(unaudited)

Revenue:

Royalty revenue from a related party, net

67,084

43,391

214,118

132,684

Revenue from collaborative arrangements from a related party

Total revenue

69,520

43,612

217,217

133,569

Operating expenses:

Research and development

General and administrative

24,147

23,188

General and administrative - proxy contest and litigation costs

(2,921

Total operating expenses

33,613

24,581

Income from operations

66,409

37,661

183,604

108,988

Other income (expense), net

(7,042

Interest income

Interest expense

(8,354

(13,000

(43,601

(52,416

58,514

25,470

134,272

59,536

Net income attributable to noncontrolling interest

Net income attributable to Innoviva stockholders

58,385

134,143

Basic earnings per share

Diluted earnings per share

Shares used in computing basic earnings per share

106,156

107,640

106,945

110,280

Shares used in computing diluted earnings per share

119,189

120,188

119,866

123,233

(1) Revenue is comprised of the following (in thousands):

Royalties from a related party

70,539

46,847

227,941

146,507

Amortization of capitalized fees paid to a related party

(3,455

(3,456

(13,823

Strategic alliance - MABA program

Total revenue from a related party

(2) Amounts include stock-based compensation expense as follows (in thousands):

Total stock-based compensation

INNOVIVA, INC.

Condensed Consolidated Balance Sheets

Assets

Cash, cash equivalents and marketable securities

129,075

150,433

Related party receivables from collaborative arrangements

70,540

Property and equipment, net

Capitalized fees paid to a related party, net

166,722

180,545

Other assets

Total assets

367,337

378,996

Liabilities and stockholders’ deficit

Other current liabilities

Accrued interest payable

Deferred revenue

Convertible subordinated notes, net

238,123

237,597

Convertible senior notes, net

124,158

Senior secured term loans, net

237,081

Non-recourse notes, net

478,496

Other long-term liabilities

Innoviva stockholders’ deficit

(242,859

(352,991

Noncontrolling interest

Total liabilities and stockholders’ deficit

(1) The selected consolidated balance sheet amounts at December 31, 2016 are derived from audited financial statements.

Cash Flows Summary

Net cash provided by operating activities

141,748

60,984

Net cash used in investing activities

(23,236

(4,580

Net cash used in financing activities

(163,192

(97,568

Reconciliation from GAAP net income to adjusted EBITDA:

GAAP net income attributable to Innoviva stockholders

Non-GAAP adjustments:

Interest expense (income), net

12,829

42,290

51,834

Stock-based compensation

Write off of debt issuance costs

Depreciation

72,268

43,670

207,504

133,621

Reconciliation from GAAP net income to adjusted net income for computing adjusted earnings per share:

Amortization of debt discount

Adjusted net income

65,741

30,841

167,482

81,787

Adjusted earnings per share

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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Other recent filings from the company include the following:

Departure of Directors or Certain - Sept. 11, 2018
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