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What changed in Innoviva, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Innoviva, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+436 added−441 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-28)

Top changes in Innoviva, Inc.'s 2023 10-K

436 paragraphs added · 441 removed · 302 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

124 edited+44 added−74 removed174 unchanged
Biggest changeIn Phase 3 development for COPD • Trimbow (a fixed-dose, twice daily combination of formoterol, beclomethasone and glycopyrronium) manufactured by Chiesi and indicated for use in COPD in the E.U. • Foster (beclomethasone dipropionate in combination with formoterol fumarate) manufactured by Chiesi and indicated for use in asthma and COPD outside the U.S. • Enerzair Breezehaler (QVM149) (a fixed-dose combination of indacaterol, mometasone and glycopyrronium) developed by Novartis as a triple therapy/single inhaler for the treatment of asthma and approved in the E.U., Canada, and Japan 5 Table of Contents • Breztri Aerosphere (fixed dose combination of formoterol, glycopyrronium and budesonide) developed by AstraZeneca as a triple therapy single inhaler twice-daily medication for COPD and approved in the U.S. in July 2020 • Nucala (mepolizumab; an interleukin-5 antagonist monoclonal antibody) developed by GSK for add on maintenance treatment of severe asthma in patients 12 years and older and approved in the U.S. in June 2019 • Xolair ® (omalizumab, an anti-IgE antibody) developed by Genentech for patients 6 years of age and older with moderate to severe persistent asthma uncontrolled by inhaled corticosteroids and approved in 2003.
Biggest changeIn the U.S., the product was approved in October 2015 at a lower strength as a twice-daily COPD treatment, and was licensed to Sunovion in December 2016, and launched in May 2017 • Stiolto (U.S.)/Spiolto (E.U.) Respimat ® (tiotropium combined with olodaterol) marketed by Boehringer Ingelheim for the treatment of COPD • Bevespi Aerosphere ® (glycopyrronium bromide in combination with formoterol fumarate) marketed by AstraZeneca 6 Table of Contents • Duaklir ® Genuair ® (aclidinium bromide in combination with formoterol fumarate) developed by AstraZeneca as a maintenance bronchodilator treatment for COPD and approved in November 2014 in the EU and March 2019 in the U.S. • Atectura ® Breezhaler ® (indacaterol in combination with mometasone) marketed by Novartis • Trimbow ® (a fixed-dose, twice daily combination of formoterol, beclomethasone and glycopyrronium) manufactured by Chiesi and indicated for use in COPD in the E.U. • Foster (beclomethasone dipropionate in combination with formoterol fumarate) manufactured by Chiesi and indicated for use in asthma and COPD outside the U.S. • Enerzair ® Breezehaler ® (a fixed-dose combination of indacaterol, mometasone and glycopyrronium) developed by Novartis as a triple therapy/single inhaler for the treatment of asthma and approved in the E.U., Canada, and Japan • Breztri ® Aerosphere ® (fixed dose combination of formoterol, glycopyrronium and budesonide) developed by AstraZeneca as a triple therapy single inhaler twice-daily medication for COPD and approved in the U.S. in July 2020 • Nucala ® (mepolizumab; an interleukin-5 antagonist monoclonal antibody) developed by GSK for add on maintenance treatment of severe asthma in patients 12 years and older and approved in the U.S. in June 2019 • Xolair ® (omalizumab, an anti-IgE antibody) developed by Genentech for patients 6 years of age and older with moderate to severe persistent asthma uncontrolled by inhaled corticosteroids and approved in 2003.
Failure to comply with the FDCA and other applicable U.S. requirements at any time during the product development process, approval process or after approval may subject us to a variety of administrative or judicial sanctions, any of which could have a material adverse effect on us.
Failure to comply with the FDCA and other applicable U.S. requirements at any time during the product development process, approval process or after approval may subject us to a variety of administrative or judicial sanctions, any of which could have a material adverse effect on us.
For example, in the U.S. and most major foreign markets, drugs like GIAPREZA and XERAVA that are administered in the hospital must be purchased by the hospital and generally are not reimbursed by third-party payors. Hospitals instead are reimbursed for patient cases based on patients’ diagnosed conditions under the U.S.
For example, in the U.S. and most major foreign markets, drugs like GIAPREZA ® , XERAVA ® and XACDURO ® that are administered in the hospital must be purchased by the hospital and generally are not reimbursed by third-party payors. Hospitals instead are reimbursed for patient cases based on patients’ diagnosed conditions under the U.S.
There are currently no effective antibiotics indicated for the treatment of multidrug-resistant Acinetobacter infections. Durlobactam is the first clinical-stage BLI with sufficient broad-spectrum activity against class A, C, and D β-lactamases to potentially restore the efficacy of β-lactam antibiotics against multidrug-resistant Acinetobacter .
There are currently no effective antibiotics specifically indicated for the treatment of multidrug-resistant Acinetobacter infections. Durlobactam is the first clinical-stage BLI with sufficient broad-spectrum activity against class A, C, and D β-lactamases to potentially restore the efficacy of β-lactam antibiotics against multidrug-resistant Acinetobacter .
GIAPREZA mimics the body’s endogenous angiotensin II peptide, which is central to the renin-angiotensin-aldosterone system (“RAAS”), which in turn regulates blood pressure. GIAPREZA is marketed in the U.S. by La Jolla and is marketed in Europe and Great Britain by PAION Deutschland GmbH (“PAION”) on behalf of La Jolla.
GIAPREZA mimics the body’s endogenous angiotensin II peptide, which is central to the renin-angiotensin-aldosterone system (“RAAS”), which in turn regulates blood pressure. GIAPREZA is marketed in the U.S. by La Jolla and is marketed in Europe and Great Britain by PAION Deutschland GmbH on behalf of La Jolla.
A clinical hold may occur at any time during the life of an IND and may affect one or more specific studies or all studies conducted u1nder the IND. All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with cGCP.
A clinical hold may occur at any time during the life of an IND and may affect one or more specific studies or all studies conducted under the IND. All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with cGCP.
In addition, Acinetobacter has the ability to remain viable for up to 100 days in dry conditions and easily spreads via air or water droplets, which explains why the pathogen can often be found in many locations in the intensive care unit, or ICU, including bedrails, bedside tables, monitors of mechanical ventilators, intravenous pumps, door handles, stethoscopes and many other locations.
In addition, Acinetobacter can remain viable for up to 100 days in dry conditions and easily spreads via air or water droplets, which explains why the pathogen can often be found in many locations in the intensive care unit, or ICU, including bedrails, bedside tables, monitors of mechanical ventilators, intravenous pumps, door handles, stethoscopes and many other locations.
Of significant concern, one study reported greater than 98% of Acinetobacter isolates in an ICU from non-clinical sources such as bedrails and door handles, were determined to be multidrug resistant. Pneumonia and bloodstream infections caused by drug-resistant Acinetobacter can have mortality rates approaching 50%.
Of significant concern, one study reported greater than 98% of Acinetobacter isolates in an ICU from non-clinical sources, such as bedrails and door handles, were determined to be multidrug resistant. Pneumonia and bloodstream infections caused by drug-resistant Acinetobacter can have mortality rates up to 50%.
The failure to comply with the 21 Table of Contents applicable requirements at any time during the product development process, approval process or after approval may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and untitled letters, product recalls, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts, restitution, disgorgement of profits or civil or criminal penalties.
The failure to comply with the applicable requirements at any time during the product development process, approval process or after approval may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and untitled letters, product recalls, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts, restitution, disgorgement of profits or civil or criminal penalties.
In the randomized, Phase 3 study ATHOS-3, GIAPREZA demonstrated clinical benefit in patients who were not adequately responding to available vasopressors, including catecholamines and vasopressin. GIAPREZA’s principal competition as a treatment in patients not adequately responding to available vasopressors is the use of these same vasopressors at increased doses.
In the randomized, Phase 3 study ATHOS-3, GIAPREZA ® demonstrated clinical benefit in patients who were not adequately responding to available vasopressors, including catecholamines and vasopressin. GIAPREZA ® ’s principal competition as a treatment in patients not adequately responding to available vasopressors is the use of these same vasopressors at increased doses.
Moreover, any drug products manufactured or distributed pursuant to FDA approvals are subject to continuing regulation by the FDA, including, among other things: • record-keeping requirements; • reporting of adverse experiences with the drug; • providing the FDA with updated safety and efficacy information; 25 Table of Contents • drug sampling and distribution requirements; • notifying the FDA and gaining its approval of specified manufacturing or labeling changes; • complying with certain electronic records and signature requirements; and • complying with FDA promotion and advertising requirements.
Moreover, any drug products manufactured or distributed pursuant to FDA approvals are subject to continuing regulation by the FDA, including, among other things: • record-keeping requirements; • reporting of adverse experiences with the drug; • providing the FDA with updated safety and efficacy information; • drug sampling and distribution requirements; • notifying the FDA and gaining its approval of specified manufacturing or labeling changes; • complying with certain electronic records and signature requirements; and • complying with FDA promotion and advertising requirements.
Baseline Acinetobacter isolates tested were greater than 95% carbapenem resistant. SUL-DUR met the primary efficacy endpoint of 28-day all-cause mortality compared to colistin in the CRABC m-MITT population of Part A. SUL-DUR mortality was 19.0% (12/63) compared to 32.3% (20/62) in the colistin arm (treatment difference of -13.2%; 95% CI: -30.0, 3.5).
Baseline Acinetobacter isolates tested were greater than 95% carbapenem resistant. XACDURO met the primary efficacy endpoint of 28-day all-cause mortality compared to colistin in the CRABC m-MITT population of Part A. XACDURO mortality was 19.0% (12/63) compared to 32.3% (20/62) in the colistin arm (treatment difference of -13.2%; 95% CI: -30.0, 3.5).
If a complete response letter is issued, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application. Expedited Review and Approval The FDA has various programs, including Fast Track and priority review, which are intended to expedite or simplify the process for developing and/or reviewing drugs.
If a complete response letter is issued, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application. 24 Table of Contents Expedited Review and Approval The FDA has various programs, including Fast Track and priority review, which are intended to expedite or simplify the process for developing and/or reviewing drugs.
Our Strategic Partnership with Sarissa Capital Strategic Advisory Agreement On December 11, 2020, we entered into a Strategic Advisory Agreement (the “Services Agreement”) with Sarissa Capital Management LP (“Sarissa Capital”), pursuant to which Sarissa Capital provides a variety of strategic services to us in order to assist 31 Table of Contents us in the development and execution of our acquisition strategy intended to diversify our assets and the potential sources of revenue.
Our Strategic Partnership with Sarissa Capital Strategic Advisory Agreement On December 11, 2020, we entered into a Strategic Advisory Agreement (the “Services Agreement”) with Sarissa Capital Management LP (“Sarissa Capital”), pursuant to which Sarissa Capital provides a variety of strategic services to us in order to assist us in the development and execution of our acquisition strategy intended to diversify our assets and the potential sources of revenue.
The primary endpoint was mean arterial pressure 7 Table of Contents (“MAP”) response, defined as a MAP of 75 mm Hg or higher or an increase in MAP from baseline of at least 10 mm Hg without an increase in the dose of background vasopressors at Hour 3 (Khanna et al, New England Journal of Medicine 2017; 377:419–430).
The primary endpoint was mean arterial pressure (“MAP”) response, defined as a MAP of 75 mm Hg or higher or an increase in MAP from baseline of at least 10 mm Hg without an increase in the dose of background vasopressors at Hour 3 (Khanna et al, New England Journal of Medicine 2017; 377:419–430).
This was a two-part trial with Part A being the randomized, comparative portion (SUL-DUR vs colistin) in patients with documented Acinetobacter hospital-acquired bacterial pneumonia (HABP), ventilator-associated bacterial pneumonia (VAPB), ventilated pneumonia (VP), or bacteremia, and Part B being an open-labeled portion including Acinetobacter infections resistant to, or having previously failed colistin or polymyxin B treatment.
This was a two-part trial with Part A being the randomized, comparative portion (XACDURO vs colistin) in patients with documented Acinetobacter hospital-acquired bacterial pneumonia (HABP), ventilator-associated bacterial pneumonia (VAPB), ventilated pneumonia (VP), or bacteremia, and Part B being an open-labeled portion including Acinetobacter infections resistant to, or having previously failed colistin or polymyxin B treatment.
In addition, the data show 20 Table of Contents significant resistance against two of the four standard antibiotics indicated for gonorrhea, ciprofloxacin, a fluoroquinolone, and azithromycin, a macrolide. Competition We are initially developing zoliflodacin as a single oral dose treatment for uncomplicated gonorrhea. Gonorrhea is commonly treated with 500mg intramuscular ceftriaxone, a generically available agent.
In addition, the data show significant resistance against two of the four standard antibiotics indicated for gonorrhea, ciprofloxacin, a fluoroquinolone, and azithromycin, a macrolide. Competition We are initially developing zoliflodacin as a single oral dose treatment for uncomplicated gonorrhea. Gonorrhea is commonly treated with 500mg intramuscular ceftriaxone, a generically available agent.
Similar trends were demonstrated in 28-day and 14-day all-cause mortality favoring SUL-DUR across all study populations evaluated to date. A statistically significant difference in clinical cure at Test of Cure (TOC) was observed with 61.9% in SUL-DUR arm compared to 40.3% in the colistin arm (95% CI 2.9-40.3).
Similar trends were demonstrated in 28-day and 14-day all-cause mortality favoring XACDURO across all study populations evaluated to date. A statistically significant difference in clinical cure at Test of Cure (TOC) was observed with 61.9% in the XACDURO arm compared to 40.3% in the colistin arm (95% CI 2.9-40.3).
Overall adverse events (AEs) in the safety population were comparable between treatment groups with 87.9% (80/91) in the SUL-DUR arm vs. 94.2% (81/86) in the colistin arm in Part A, 89.3% (25/28) in Part B. Drug related AEs were 12.1% (10.7% in Part B) with SUL-DUR compared to 30.2% with colistin.
Overall adverse events (AEs) in the safety population were comparable between treatment groups with 87.9% (80/91) in the XACDURO arm vs. 94.2% (81/86) in the colistin arm in Part A, 89.3% (25/28) in Part B. Drug related AEs were 12.1% (10.7% in Part B) with XACDURO compared to 30.2% with colistin.
Any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs that may be implemented and/or any significant taxes or fees that may be imposed on us could have an adverse impact on our results of operations. 29 Table of Contents Legislation was introduced to the U.S.
Any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs that may be implemented and/or any significant taxes or fees that may be imposed on us could have an adverse impact on our results of operations. Legislation was introduced to the U.S.
SUL-DUR met the primary safety objective with a statistically significant lower incidence of nephrotoxicity as measured by the RIFLE classification for acute kidney injury. SUL-DUR nephrotoxicity was 13.2% (12/91) versus 37.6% (32/85) in the colistin arm (p = 0. 0002).
XACDURO met the primary safety objective with a statistically significant lower incidence of nephrotoxicity as measured by the RIFLE classification for acute kidney injury. XACDURO nephrotoxicity was 13.2% (12/91) versus 37.6% (32/85) in the colistin arm (p = 0. 0002).
These sanctions could include: • refusal to approve pending applications; • withdrawal of an approval; • imposition of a clinical hold; • warning letters, untitled letters and similar communications; • product seizures or recalls; or • total or partial suspension of production or distribution, or injunctions, fines, restitution, disgorgement of profits or civil or criminal investigations and penalties brought by the FDA and the Department of Justice, or DOJ, or other The process required by the FDA before a drug may be marketed in the United States generally involves the following: • completion of preclinical laboratory tests, animal studies and formulation studies conducted according to Good Laboratory Practices or other applicable regulations; • submission to the FDA of an IND application, which must become effective before human clinical trials may begin; • approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial may be initiated; • performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for its intended use, conducted in accordance with current good clinical practices, or cGCP, which are ethical and scientific quality standards and FDA requirements for conducting, recording and reporting clinical trials to assure that the rights, safety and well-being of trial participants are protected; • preparation and submission to the FDA of an NDA; • satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product is produced to assess compliance with current good manufacturing practices, or cGMP, requirements to assure that the facilities, methods and controls are adequate to preserve the drug’s safety, identity, strength, quality and purity; and • FDA review and approval of the NDA.
These sanctions could include: • refusal to approve pending applications; • withdrawal of an approval; • imposition of a clinical hold; • warning letters, untitled letters and similar communications; • product seizures or recalls; or • total or partial suspension of production or distribution, or injunctions, fines, restitution, disgorgement of profits or civil or criminal investigations and penalties brought by the FDA and the Department of Justice, or DOJ, or other The process required by the FDA before a drug may be marketed in the United States generally involves the following: • completion of preclinical laboratory tests, animal studies and formulation studies conducted according to Good Laboratory Practices or other applicable regulations; • submission to the FDA of an IND application, which must become effective before human clinical trials may begin; • approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial may be initiated; • performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for its intended use, conducted in accordance with current good clinical practices, or cGCP, which are ethical and scientific quality standards and FDA requirements for conducting, recording and reporting clinical trials to assure that the rights, safety and well-being of trial participants are protected; • preparation and submission to the FDA of an NDA; • satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product is produced to assess compliance with current good manufacturing practices, or cGMP, requirements to assure that the facilities, methods and controls are adequate to preserve the drug’s safety, identity, strength, quality and purity; and • FDA review and approval of the NDA. 22 Table of Contents Once a pharmaceutical candidate is identified for development, it enters the preclinical testing stage.
In Part B, the 28-day all-cause mortality was 17.9% (5/28) and consistent with that observed in Part A. Safety analyses from a total of 177 patients treated with SUL-DUR suggested that SUL-DUR was generally well-tolerated with a favorable safety profile compared to colistin.
In Part B, the 28-day all-cause mortality was 17.9% (5/28) and consistent with that observed in Part A. Safety analyses from a total of 177 patients treated with XACDURO suggested that XACDURO was generally well-tolerated with a favorable safety profile compared to colistin.
However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 24 Table of Contents years from the product’s approval date and only those claims covering such approved drug product, a method for using it or a method for manufacturing it may be extended.
However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date and only those claims covering such approved drug product, a method for using it or a method for manufacturing it may be extended.
The reference member state prepares a draft assessment and drafts of the related materials within 120 days after receipt of a valid application. Within 90 days of receiving the reference member state’s assessment report, each 26 Table of Contents concerned member state must approve the assessment report and related materials, unless they identify a serious risk to public health.
The reference member state prepares a draft assessment and drafts of the related materials within 120 days after receipt of a valid application. Within 90 days of receiving the reference member state’s assessment report, each concerned member state must approve the assessment report and related materials, unless they identify a serious risk to public health.
It remains to be seen how these developments will impact regulatory requirements for product candidates and products in the United Kingdom. Reimbursement Significant uncertainty exists as to the coverage and reimbursement status of products approved by the FDA and other government authorities.
It remains to be seen how these developments will impact regulatory requirements for product candidates and products in the United Kingdom. 27 Table of Contents Reimbursement Significant uncertainty exists as to the coverage and reimbursement status of products approved by the FDA and other government authorities.
In addition, several firms have been developing new formulations of Advair/Seretide (salmeterol /fluticasone propionate) and Symbicort (formoterol fumerate/budesonide) which may be marketed as generics or branded generics relative to the existing products from GSK and AstraZeneca, respectively. All of these efforts represent potential competition for any of our partnered products.
In addition, several firms have developed and launched new formulations of Advair/Seretide (salmeterol /fluticasone propionate) and Symbicort (formoterol fumerate/budesonide) which may be marketed as generics or branded generics relative to the existing products from GSK and AstraZeneca, respectively. All of these efforts represent potential competition for any of our partnered products.
Raifeld, served on the investment team at Sarissa Capital Management LP. Earlier, he was a senior member of the healthcare investment banking team at Credit Suisse Securities (USA) LLC. Previously, Mr. Raifeld worked as a consultant, primarily specializing in advising biopharmaceutical companies, at McKinsey & Company, Inc. and The Boston Consulting Group Ltd. Mr.
Prior to his appointment, Mr. Raifeld, served on the investment team at Sarissa Capital Management LP. Earlier, he was a senior member of the healthcare investment banking team at Credit Suisse Securities (USA) LLC. Previously, Mr. Raifeld worked as a consultant, primarily specializing in advising biopharmaceutical companies, at McKinsey & Company, Inc. and The Boston Consulting Group Ltd. Mr.
If we are unable to successfully change treatment practices, the commercial prospects for GIAPREZA will be limited, and our business may suffer.
If we are unable to successfully change treatment practices, the commercial prospects for XERAVA ® will be limited, and our business may suffer.
The term “remuneration” 27 Table of Contents has been broadly interpreted to include anything of value. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers, among others, on the other.
The term “remuneration” has been broadly interpreted to include anything of value. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers, among others, on the other.
Upon approving an application for a QIDP, the FDA will extend by an additional 5 years any non-patent marketing exclusivity period awarded, such as a 5-year exclusivity period awarded for 14 Table of Contents an NCE. This extension is in addition to any pediatric exclusivity extension awarded. XERAVA has been awarded this 5-year exclusivity under FDASIA.
Upon approving an application for a QIDP, the FDA will extend by an additional 5 years any non-patent marketing exclusivity period awarded, such as a 5-year exclusivity period awarded for an NCE. This extension is in addition to any pediatric exclusivity extension awarded. XERAVA ® has been awarded this 5-year exclusivity under FDASIA.
The issued U.S. patents, and patents that may issue from the pending U.S. patent applications, will expire between 2034 and 2044, absent any disclaimers, extensions, or adjustments of patent term. The foreign patents, and patents that may issue from the pending foreign patent applications, will expire between 2034 and 2044, absent any disclaimers, extensions, or adjustments of patent term.
The issued U.S. patents, and patents that may issue from the pending U.S. patent applications, will expire between 2034 and 2040, absent any disclaimers, extensions, or adjustments of patent term. The foreign patents, and patents that may issue from the pending foreign patent applications, will expire between 2034 and 2037, absent any disclaimers, extensions, or adjustments of patent term.
The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulation require the expenditure of substantial time and financial resources. U.S.
The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulation require the expenditure of substantial time and financial resources. 21 Table of Contents U.S.
They must be conducted under protocols detailing, among other things, the objectives of the trial, dosing procedures, subject selection and 22 Table of Contents exclusion criteria and the safety and effectiveness criteria to be evaluated.
They must be conducted under protocols detailing, among other things, the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteria to be evaluated.
In December 2019, the federal appellate court upheld the district court ruling that the individual mandate was unconstitutional and remanded the case back to the district court to determine whether the remaining provisions of the ACA are invalid as well. The case has been appealed to the U.S. Supreme Court where a ruling remains pending.
In December 2019, the federal appellate court upheld the district court ruling that the individual mandate was unconstitutional and remanded the case back to the district court to determine whether the remaining provisions of the ACA are invalid as well. The case has been appealed to the U.S.
In addition, a QIDP will receive priority review and qualify for a Fast Track designation. QIDPs are defined as antibacterial or antifungal drugs intended to treat serious or life-threatening infections, including those caused by an antibacterial or antifungal resistant pathogen or qualifying pathogens identified by the FDA. XERAVA and SUL-DUR have been designated by the FDA as a QIDP.
In addition, a QIDP will receive priority review and qualify for a Fast Track designation. QIDPs are defined as antibacterial or antifungal drugs intended to treat serious or life-threatening infections, including those caused by an antibacterial or antifungal resistant pathogen or qualifying pathogens identified by the FDA.
Sulbactam, the β-lactam antibiotic used in SUL-DUR has superior microbiological potency against Acinetobacter compared to other β-lactam antibiotics based on in vitro and in vivo analyses. Historically, physicians used sulbactam to successfully treat Acinetobacter infections before development of broad β-lactamase mediated resistance rendered sulbactam on its own largely 15 Table of Contents ineffective.
Sulbactam, the β-lactam antibiotic used in XACDURO has superior microbiological potency against Acinetobacter compared to other β-lactam antibiotics based on in vitro and in vivo analyses. Historically, physicians used sulbactam to successfully treat Acinetobacter infections before development of broad β-lactamase mediated resistance rendered sulbactam on its own largely ineffective.
Zhen served as the Corporate Controller at Steelwedge Software Inc. from 2012 to 2014, Intelmate from 2011 to 2012 and Model N, Inc. from 2007 to 2011. Previously, Ms. Zhen served as a member of the board of directors of CalCPA Peninsula Silicon Valley Chapter. Ms.
Prior to joining Innoviva in October 2014, Ms. Zhen served as the Corporate Controller at Steelwedge Software Inc. from 2012 to 2014, Intelmate from 2011 to 2012 and Model N, Inc. from 2007 to 2011. Previously, Ms. Zhen served as a member of the board of directors of CalCPA Peninsula Silicon Valley Chapter. Ms.
Likewise, any foreign patents that may issue from the pending foreign patent applications will expire in 2037. We also owned 5 issued U.S. patents, 1 pending U.S. patent application, 32 issued foreign patents and 17 pending foreign patent applications relating to other tetracycline-related intellectual property.
Likewise, any foreign patents that may issue from the pending foreign patent applications will expire in 2037. We also owned 7 issued U.S. patents, 1 pending U.S. patent application, 39 issued foreign patents and 12 pending foreign patent applications relating to other tetracycline-related intellectual property.
Since the TCA does not provide for mutual recognition of batch testing and release, products must be quality control tested and released in the EU. However, the UK will unilaterally waive batch testing requirements for UK imports from the EU for products placed on the market before January 2023.
Since the TCA does not provide for mutual recognition of batch testing and release, products must be quality control tested and released in the EU. However, the UK has unilaterally waived batch testing requirements for UK imports from the EU for products placed on the market prior to January 2023.
As of February 15, 2023, the intellectual property portfolio relating to GIAPREZA included 3 issued U.S. patents, 8 pending U.S. patent applications, 7 issued foreign patents and 10 pending foreign patent applications.
As of February 15, 2023, the intellectual property portfolio relating to GIAPREZA ® also included 4 issued U.S. patents, 6 pending U.S. patent applications, 8 issued foreign patents and 10 pending foreign patent applications.
Specifically, the primary endpoint was achieved by 70% of GIAPREZA-treated patients compared to 23% of placebo-treated patients (p Primary Endpoint: Mean Arterial Pressure Response (1),(2) (1) GIAPREZA FDA prescribing information (2) MAP response of 75 mm Hg or higher or an increase from baseline of at least 10 mm Hg at Hour 3 without an increase in the dose of background vasopressors 8 Table of Contents GIAPREZA provides the ability to rapidly achieve and adjust therapeutic response.
Specifically, the primary endpoint was achieved by 70% of GIAPREZA-treated patients compared to 23% of placebo-treated patients (p 9 Table of Contents ATHOS-3 Primary Endpoint Results (1) Charts, graphs and tables derived from FDA prescribing information (2) MAP response of 75 mm Hg or higher or an increase from baseline of at least 10 mm Hg at Hour 3 without an increase in the dose of background vasopressors GIAPREZA provides the ability to rapidly achieve and adjust therapeutic response.
IGNITE4 was a multinational, randomized, double-blind, active controlled study in 499 patients with clinical evidence of cIAIs requiring urgent surgical or percutaneous intervention who received either XERAVA or meropenem. The primary endpoint was clinical cure, defined as complete resolution or significant improvement of signs or symptoms of the index infection, at the TOC visit.
IGNITE1 was a multinational, randomized, double-blind, active-controlled study in 538 patients with clinical evidence of cIAIs requiring urgent surgical or percutaneous intervention who received either XERAVA or ertapenem. The primary endpoint was clinical cure, defined as complete resolution or significant improvement of signs or symptoms of the index infection, at the test of cure (“TOC”) visit.
Code of Business Conduct that applies to all directors, officers and employees. The Code of Business Conduct, as amended through March 9, 2021, is available on the corporate governance section of our website at www.inva.com .
Code of Business Conduct that applies to all directors, officers and employees. The Code of Business Conduct, as amended through January 24, 2023, is available on the corporate governance section of our website at www.inva.com .
Our Strategy Our corporate strategy is currently focused on increasing stockholder value by, among other things, maximizing the potential value of our respiratory assets partnered with GSK, optimizing our operations and augmenting capital allocation.
Our Strategy Our corporate strategy is currently focused on increasing stockholder value by, among other things, maximizing the potential value of our respiratory assets partnered with GSK, creating value through our critical care and infectious disease platform, optimizing our operations, and augmenting capital allocation.
Zoliflodacin has also been designated as a QIDP by the FDA for the treatment of uncomplicated gonorrhea.
XERAVA ® and XACDURO ® have been designated by the FDA as a QIDP. Zoliflodacin has also been designated as a QIDP by the FDA for the treatment of uncomplicated gonorrhea.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal and civil statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
In addition, certain marketing practices, including off-label promotion, have also been alleged to violate false claims laws. 28 Table of Contents The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal and civil statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
Some applications have been granted and others are pending. 30 Table of Contents In addition, as of February 15, 2023, we also owned 2 issued U.S. patent, 1 pending U.S. patent application and 11 pending foreign patent applications that relate to crystalline forms of eravacycline, any U.S. patent that may issue from the pending patent application will expire in 2037 absent any disclaimers, extensions, or adjustments of patent term.
In addition, as of February 15, 2023, we also owned 2 issued U.S. patent, 1 pending U.S. patent application, 2 granted foreign patents and 9 pending foreign patent applications that relate to crystalline forms of eravacycline, any U.S. patent that may issue from the pending patent application will expire in 2037 absent any disclaimers, extensions, or adjustments of patent term.
The product is a combination of sulbactam, a β-lactam antibiotic, and durlobactam, our novel β-lactamase inhibitor (“BLI”) with broad spectrum β-lactamase coverage including Classes A, C and D, that we are developing for the treatment of a variety of serious infections caused by carbapenem-resistant Acinetobacter .
XACDURO ® is a novel IV antibiotic. The product is a combination of sulbactam, a β-lactam antibiotic, and durlobactam, a novel β-lactamase inhibitor (“BLI”) with broad spectrum β-lactamase coverage including Classes A, C and D, that was specifically developed for the treatment of a variety of serious infections caused by carbapenem-resistant Acinetobacter .
A drug that, if approved, would represent a significant improvement in the safety or effectiveness of the treatment, prevention or diagnosis of a serious disease or condition may receive priority review. Requests for priority review generally must be submitted at the 23 Table of Contents time of NDA submission.
A drug that, if approved, would represent a significant improvement in the safety or effectiveness of the treatment, prevention or diagnosis of a serious disease or condition may receive priority review. Requests for priority review generally must be submitted at the time of NDA submission. The FDA has agreed to specified performance goals in the review process of NDAs.
IGNITE1 and IGNITE4 Study Design (1) Solomkin et al, JAMA Surgery 2017; 152(3):224-232 (2) Solomkin et al, Clinical Infectious Diseases 2018; 69(6):921-9 (3) TOC visit was conducted 25 to 31 calendar days after the first dose of the study drug was administered XERAVA demonstrated statistical noninferiority in clinical cure rate in the micro-ITT population, which included all randomized subjects who had baseline bacterial pathogens that caused cIAIs and against at least one of which the investigational drug has in vitro (in a test tube) antibacterial activity (N=846). 11 Table of Contents Primary Endpoint: Clinical Cure Rate (1) (1) XERAVA FDA prescribing information (2) Noninferiority margins of 10% and 12.5% were used for IGNITE1 and IGNITE4, respectively Clinical cure rates across patients with gram-negative, gram-positive and anaerobic pathogens, including those with resistant strains, are shown in the following tables.
The TOC visit was conducted 25 to 31 calendar days after the first dose of the study drug was administered. 11 Table of Contents IGNITE1 and IGNITE4 Study Design (1) Solomkin et al, JAMA Surgery 2017; 152(3):224-232 (2) Solomkin et al, Clinical Infectious Diseases 2018; 69(6):921-9 (3) TOC visit was conducted 25 to 31 calendar days after the first dose of the study drug was administered XERAVA demonstrated statistical noninferiority in clinical cure rate in the micro-ITT population, which included all randomized subjects who had baseline bacterial pathogens that caused cIAIs and against at least one of which the investigational drug has in vitro (in a test tube) antibacterial activity (N=846).
XERAVA competes with a number of antibiotics that are currently marketed for the treatment of cIAI and other multidrug resistant infections, including: AVYCAZ (ceftazidime and avibactam, marketed by AbbVie Inc.); MERREM IV ® (meropenem, marketed by AstraZeneca PLC); PRIMAXIN ® (imipenem and cilastatin, marketed by Merck & Co., Inc.); RECARBRIO™ (imipenem, cilastatin, and relebactam, marketed by Merck & Co., Inc.); TYGACIL ® (tigecycline, marketed by Pfizer Inc.); VABOMERE™ (meropenem and vaborbactam, marketed by Melinta Therapeutics, Inc.); ZERBAXA ® (ceftolozane and tazobactam, marketed by Merck & Co., Inc.); ZOSYN ® (piperacillin and tazobactam, marketed by Pfizer Inc.); and current and future generic versions of marketed antibiotics.
If we are unable to successfully change treatment practices, the commercial prospects for GIAPREZA ® will be limited, and our business may suffer. 16 Table of Contents XERAVA ® competes with a number of antibiotics that are currently marketed for the treatment of cIAI and other multidrug resistant infections, including: AVYCAZ (ceftazidime and avibactam, marketed by AbbVie Inc.); MERREM IV ® (meropenem, marketed by AstraZeneca PLC); PRIMAXIN ® (imipenem and cilastatin, marketed by Merck & Co., Inc.); RECARBRIO™ (imipenem, cilastatin, and relebactam, marketed by Merck & Co., Inc.); TYGACIL ® (tigecycline, marketed by Pfizer Inc.); VABOMERE™ (meropenem and vaborbactam, marketed by Melinta Therapeutics, Inc.); ZERBAXA ® (ceftolozane and tazobactam, marketed by Merck & Co., Inc.); ZOSYN ® (piperacillin and tazobactam, marketed by Pfizer Inc.); and current and future generic versions of marketed antibiotics.
In all of our manufacturing agreements, we require that contract manufacturers produce active pharmaceutical ingredients (“APIs”) and drug products in accordance with the FDA’s current Good Manufacturing Practices (“cGMPs”) and all other applicable laws and regulations. We maintain confidentiality agreements with potential and existing manufacturers in order to protect our proprietary rights related to GIAPREZA and XERAVA.
In all of our manufacturing agreements, we require that contract manufacturers produce active pharmaceutical ingredients (“APIs”) and drug products in accordance with the FDA’s current Good Manufacturing Practices (“cGMPs”) and all other applicable laws and regulations.
The GDPR provides for potentially significant sanctions and contains extraterritoriality measures intended to bring non-EU companies under the regulation. In addition to the GDPR, individual countries in Europe and elsewhere in the world have enacted similar data privacy legislation. This legislation imposes increased compliance obligations and regulatory risk, including the potential for significant fines for noncompliance.
In addition to the GDPR, individual countries in Europe and elsewhere in the world have enacted similar data privacy legislation. This legislation imposes increased compliance obligations and regulatory risk, including the potential for significant fines for noncompliance.
These sanctions could include: • refusal to approve pending applications; • withdrawal of an approval; • imposition of a clinical hold; • warning letters, untitled letters and similar communications; • product seizures or recalls; • total or partial suspension of production or distribution; or • injunctions, fines, restitution, disgorgement of profits or civil or criminal investigations and penalties brought by the FDA and DOJ, or other governmental entities.
These sanctions could include: • refusal to approve pending applications; • withdrawal of an approval; • imposition of a clinical hold; • warning letters, untitled letters and similar communications; • product seizures or recalls; • total or partial suspension of production or distribution; or • injunctions, fines, restitution, disgorgement of profits or civil or criminal investigations and penalties brought by the FDA and DOJ, or other governmental entities. 26 Table of Contents From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA.
Fluoroquinolone antibiotics were first used to treat gonorrhea in 1949 and have been one of the most successful classes of antibiotics against N. gonorrhoeae , but even so resistance was identified in 1969. One member of this class, ciprofloxacin, was introduced in 1980 and resistance was identified in 1990.
For example, penicillin was introduced for N. gonorrhoeae infections in 1943, and initial resistance was reported in 1945. Fluoroquinolone antibiotics were first used to treat gonorrhea in 1949 and have been one of the most successful classes of antibiotics against N. gonorrhoeae , but even so resistance was identified in 1969.
Clinical Development Plan Completed Clinical Trials Phase 3 registration trial: We completed ATTACK, a Phase 3 registration trial of SUL-DUR for the treatment of patients with carbapenem-resistant Acinetobacter infections, with positive top-line data announced in October 2021. ATTACK enrolled 207 patients at 95 clinical sites in 16 countries.
Acinetobacter Treatment Trial Against Colistin (“ATTACK”) We completed ATTACK, a Phase 3 registration trial of XACDURO for the treatment of patients with carbapenem-resistant Acinetobacter infections, with positive top-line data announced in October 2021 and published in The Lancet Infectious Diseases in May 2023. ATTACK enrolled 207 patients at 95 clinical sites in 16 countries.
Zoliflodacin was generally well tolerated in these trials at doses we would expect to be clinically active for treating uncomplicated gonorrhea. Administration of a high-fat meal was associated with an increase in zoliflodacin plasma concentration, suggesting that zoliflodacin could be administered with or without food. Preclinical Data We have generated biochemical, microbiological and in vivo data on zoliflodacin.
Administration of a high-fat meal was associated with an increase in zoliflodacin plasma concentration, suggesting that zoliflodacin could be administered with or without food. Preclinical Data We have generated biochemical, microbiological and in vivo data on zoliflodacin.
N. gonorrhoeae is the bacterial pathogen responsible for gonorrhea and has a strong propensity for uptake of chromosomal DNA from other genera of Neisseria which allows the bacteria to accumulate many mutations in chromosomal genes leading to frequent resistance of antibiotics. For example, penicillin was introduced for N. gonorrhoeae infections in 1943, and initial resistance was reported in 1945.
Antibiotics remain the mainstay for treating uncomplicated gonorrhea caused by N. gonorrhoeae. 18 Table of Contents N. gonorrhoeae is the bacterial pathogen responsible for gonorrhea and has a strong propensity for uptake of chromosomal DNA from other genera of Neisseria which allows the bacteria to accumulate many mutations in chromosomal genes leading to frequent resistance of antibiotics.
We file patent applications directed to our key product candidates to establish intellectual property positions. These patent applications are intended to protect new chemical entities relating to these product candidates as well as their manufacturing processes, intermediates and uses in the treatment of diseases.
These patent applications are intended to protect new chemical entities relating to these product candidates as well as their manufacturing processes, intermediates and uses in the treatment of diseases. The intellectual property portfolios for our commercial products, advanced product candidates, and various compounds are summarized below.
It later changed its name to Theravance, Inc. in April 2002. In June 2014, we spun-off our research and development operations. In January 2016, we rebranded and changed our name to Innoviva, Inc.
The Company was incorporated in Delaware in November 1996 under the name Advanced Medicine, Inc., and began operations in May 1997. It later changed its name to Theravance, Inc. in April 2002. In June 2014, we spun-off our research and development operations. In January 2016, we rebranded and changed our name to Innoviva, Inc.
The occasional absence of symptoms, more frequent in women, is thought to be one reason for sustained levels of infection. Antibiotics remain the mainstay for treating uncomplicated gonorrhea caused by N. gonorrhoeae.
The occasional absence of symptoms, more frequent in women, is thought to be one reason for sustained levels of infection.
(“Entasis”) on July 11, 2022 and the acquisition of La Jolla Pharmaceutical Company (“La Jolla”) on August 22, 2022.
We expanded our portfolio through the acquisition of Entasis Therapeutics Holdings Inc. (“Entasis”) on July 11, 2022 and the acquisition of La Jolla Pharmaceutical Company (“La Jolla”) on August 22, 2022.
Those two are as follows: • RELVAR ® /BREO ® ELLIPTA ® (“FF/VI”) (BREO ® ELLIPTA ® is the proprietary name in the U.S. and Canada and RELVAR ® ELLIPTA ® is the proprietary name outside the U.S. and Canada), a once-daily combination medicine consisting of a LABA, vilanterol (“VI”), and an inhaled corticosteroid (“ICS”), fluticasone furoate (“FF”), and, • ANORO ® ELLIPTA ® (“UMEC/VI”), a once-daily medicine combining a long-acting muscarinic antagonist (“LAMA”), umeclidinium bromide (“UMEC”), with a LABA, VI. 4 Table of Contents As a result of the launch and approval of RELVAR ® /BREO ® ELLIPTA ® and ANORO ® ELLIPTA ® in the U.S., Japan and Europe, in accordance with the LABA Collaboration Agreement, we paid milestone fees to GSK totaling $220.0 million during the year ended December 31, 2014.
Those two are as follows: • RELVAR ® /BREO ® ELLIPTA ® (“FF/VI”) (BREO ® ELLIPTA ® is the proprietary name in the U.S. and Canada and RELVAR ® ELLIPTA ® is the proprietary name outside the U.S. and Canada), a once-daily combination medicine consisting of a LABA, vilanterol (“VI”), and an inhaled corticosteroid (“ICS”), fluticasone furoate (“FF”), and, • ANORO ® ELLIPTA ® (“UMEC/VI”), a once-daily medicine combining a long-acting muscarinic antagonist (“LAMA”), umeclidinium bromide (“UMEC”), with a LABA, VI.
(“Tetraphase”), and is marketed in Europe and Great Britain by PAION on behalf of Tetraphase and is marketed in mainland China, Taiwan, Hong Kong, Macau, South Korea, Singapore, the Malaysian Federation, the Kingdom of Thailand, the Republic of Indonesia, the Socialist Republic of Vietnam and the Republic of the Philippines by Everest Medicines Limited (“Everest”).
(“Tetraphase”), and is marketed in Europe and Great Britain by PAION on behalf of Tetraphase and is marketed in mainland China, Taiwan, Hong Kong, Macau, South Korea, Singapore, the Malaysian Federation, the Kingdom of Thailand, the Republic of Indonesia, the Socialist Republic of Vietnam and the Republic of the Philippines by Everest Medicines Limited (“Everest”). cIAIs are the second most common source of severe sepsis in the ICU cIAIs are defined as consequences of perforations of the gastrointestinal tract that result in contamination of the peritoneal space.
In 2020 the CDC once again updated its treatment guideline, now recommending a 500mg intramuscular injection of ceftriaxone for treatment of uncomplicated gonorrhea. This follows a 2019 update in the United Kingdom where recommended empirical treatment of gonorrhea is now 1 g intramuscular ceftriaxone monotherapy.
This follows a 2019 update in the United Kingdom where recommended empirical treatment of gonorrhea is now 1 g intramuscular ceftriaxone monotherapy.
Once a pharmaceutical candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information and analytical data, to the FDA as part of the IND.
Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information and analytical data, to the FDA as part of the IND. Some preclinical or nonclinical testing may continue even after the IND is submitted.
Diversity, Equity and Inclusion We have created an environment that fosters individual development while maintaining consistency in our corporate values and code of conduct. We offer seminars from external resources on diversity, equity and inclusion, or DEI, best practices and promote the fair treatment and full participation of all people in our workplace.
We offer seminars from external resources on diversity, equity and inclusion, or DEI, best practices and promote the fair treatment and full participation of all people in our workplace.
Microbiological eradication and clinical cure in urogenital infections with a single dose of zoliflodacin, the primary endpoint of the trial, was comparable to ceftriaxone, with 100% cure rate in both the 3.0g zoliflodacin and ceftriaxone groups in the per-protocol population. The results of this clinical trial were published in The New England Journal of Medicine in 2018.
In this trial, 179 randomized patients received treatment and zoliflodacin was generally well tolerated, with efficacy outcomes comparable to ceftriaxone. Microbiological eradication and clinical cure in urogenital infections with a single dose of zoliflodacin, the primary endpoint of the trial, was comparable to ceftriaxone, with 100% cure rate in both the 3.0g zoliflodacin and ceftriaxone groups in the per-protocol population.
Information about our Executive Officers The following table sets forth the name, age, and position of each of our executive officers as of February 28, 2023: Name Age Positions Held Pavel Raifeld 39 Chief Executive Officer Marianne Zhen 54 Chief Accounting Officer Pavel Raifeld , CFA, was appointed Chief Executive Officer in May 2020. Prior to his appointment, Mr.
Information about our Executive Officers The following table sets forth the name, age, and position of each of our executive officers as of February 29, 2024: Name Age Positions Held Pavel Raifeld 40 Chief Executive Officer Stephen Basso 58 Chief Financial Officer Marianne Zhen 55 Chief Accounting Officer 33 Table of Contents Pavel Raifeld , CFA, was appointed Chief Executive Officer in May 2020.
We rely on third-party manufacturers to produce GIAPREZA and XERAVA and expect to continue to do so in the foreseeable future to meet our development and commercial needs.
Manufacturing Manufacturing of RELVAR ® /BREO ® ELLIPTA ® (FF/VI) and ANORO ® ELLIPTA ® (UMEC/VI) is performed by GSK. We rely on third-party manufacturers to produce GIAPREZA ® , XERAVA ® , and XACDURO ® and expect to continue to do so in the foreseeable future to meet our development and commercial needs.
FDA as a vasoconstrictor indicated to increase blood pressure in adults with septic or other distributive shock.
GIAPREZA ® (angiotensin II) GIAPREZA ® (angiotensin II) injection is approved by the U.S. FDA as a vasoconstrictor indicated to increase blood pressure in adults with septic or other distributive shock.
We have retained commercial rights in all other countries, including the major markets in North America, Europe and Asia-Pacific. Gonorrhea Uncomplicated gonorrhea is an N. gonorrhoeae infection of the urethra, cervix, pharynx or rectum, and is more common than complicated gonorrhea, which includes spread of the infection to other tissues and potentially the bloodstream.
Gonorrhea Uncomplicated gonorrhea is an N. gonorrhoeae infection of the urethra, cervix, pharynx or rectum, and is more common than complicated gonorrhea, which includes spread of the infection to other tissues and potentially the bloodstream.
The intellectual property portfolios for our commercial products, advanced product candidates, and various compounds are summarized below. GIAPREZA As of February 15, 2023 , the licensed intellectual property portfolio relating to GIAPREZA ® included 12 issued U.S. patents, 2 pending U.S. patent applications, 8 issued foreign patents and 15 pending foreign patent applications.
GIAPREZA ® As of February 15, 2023, the licensed intellectual property portfolio relating to GIAPREZA ® included 12 issued U.S. patents, 2 pending U.S. patent applications, 9 issued foreign patents and 12 pending foreign patent applications.
A drug is an NCE if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance.
Specifically, the FDCA provides a 5-year period of marketing exclusivity within the U.S. to the applicant that gains approval of an NDA for an NCE. A drug is an NCE if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance.
Ceftriaxone is currently the only CDC-recommended option for the treatment of gonorrhea and, until recently, was administered with azithromycin, a broad-spectrum antibiotic, to provide coverage against other sexually transmitted diseases that tend to occur concurrently with gonorrhea. However, rising resistance of N. gonorrhoeae to azithromycin recently prompted the CDC to now recommend 500mg ceftriaxone monotherapy.
As widespread use of these antibiotics drove the emergence of drug-resistant N. gonorrhoeae strains, treatment guidelines have subsequently been amended. Ceftriaxone is currently the only CDC-recommended option for the treatment of gonorrhea and, until recently, was administered with azithromycin, a broad-spectrum antibiotic, to provide coverage against other sexually transmitted diseases that tend to occur concurrently with gonorrhea.
Market Opportunity N. gonorrhoeae is an immediate global public health threat with 82.4 million cases worldwide in 2020 (WHO estimate). Cases of gonorrhea in the United States have reached an estimated 1.6 million per year. The WHO worldwide estimate of approximately 82.4 million new cases includes infected adolescents and adults aged 15–49 years.
Market Opportunity N. gonorrhoeae is an immediate global public health threat with 82.4 million cases worldwide in 2020 (WHO estimate). Cases of gonorrhea in the United States have reached an estimated 1.6 million per year. The CDC estimates that the cases of gonorrhea in the United States have been increasing at least 10% per year since 2009.
Clinical Cure Rates at TOC by Selected Baseline Pathogens in the Micro-ITT Population (1) N=Number of subjects in the micro-ITT Population; N1=Number of subjects with a specific pathogen; n=Number of subjects with a clinical cure at the TOC visit (1) XERAVA FDA prescribing information (2) Comparators included ertapenem and meropenem for IGNITE1 and IGNITE4, respectively (3) Includes Streptococcus anginosus, Streptococcus constellatus, and Streptococcus intermedius (4) Includes Bacteroides caccae, Bacteroides fragilis, Bacteroides ovatus, Bacteroides thetaiotaomicron, Bacteroides uniformis, Bacteroides vulgatus, Clostridium perfringens, and Parabacteroides distasonis 12 Table of Contents XERAVA Demonstrated High Clinical Cure Rates Against Resistant Pathogens (1) CEPH-R=cephalosporin-resistant; ESBL=extended-spectrum β-lactamases; MDR=multidrug resistance; N=Number of subjects in the micro-ITT Population; N1=Number of subjects with a specific pathogen; n=Number of subjects with a clinical cure at the TOC visit (1) Ditch et al, 2018 ASM Microbe Annual Meeting (2) Comparators included ertapenem and meropenem for IGNITE1 and IGNITE4, respectively (3) Data on file from IGNITE1 and IGNITE4 micro-ITT population The most common adverse reactions that were reported in XERAVA-treated patients in IGNITE1 and IGNITE4 were infusion site reactions.
IGNITE1 and IGNITE4 Primary Endpoint Results (1) (1) Charts, graphs and tables derived from FDA prescribing information (2) Noninferiority margins of 10% and 12.5% were used for IGNITE1 and IGNITE4, respectively Clinical cure rates across patients with gram-negative, gram-positive and anaerobic pathogens, including those with resistant strains, are shown in the following tables. 12 Table of Contents Clinical Cure Rates at TOC by Selected Baseline Pathogens in the Micro-ITT Population (1) N=Number of subjects in the micro-ITT Population; N1=Number of subjects with a specific pathogen; n=Number of subjects with a clinical cure at the TOC visit (1) Charts, graphs and tables derived from FDA prescribing information (2) Comparators included ertapenem and meropenem for IGNITE1 and IGNITE4, respectively (3) Includes Streptococcus anginosus, Streptococcus constellatus, and Streptococcus intermedius (4) Includes Bacteroides caccae, Bacteroides fragilis, Bacteroides ovatus, Bacteroides thetaiotaomicron, Bacteroides uniformis, Bacteroides vulgatus, Clostridium perfringens, and Parabacteroides distasonis The most common adverse reactions that were reported in XERAVA-treated patients in IGNITE1 and IGNITE4 were infusion site reactions.
Employees receive an annual base salary and are eligible to earn performance-based cash bonuses. To create and maintain a successful work environment, we offer a comprehensive package of additional benefits that support the physical and mental health and wellness of all of our employees and their families and flexible working arrangements.
To create and maintain a successful work environment, we offer a comprehensive package of additional benefits that support the physical and mental health and wellness of all of our employees and their families and flexible working arrangements. Additionally, we grant equity awards in order to allow employees to share in the performance of the Company.
If we are unable to successfully change treatment practices, the commercial prospects for XERAVA will be limited, and our business may suffer. Regulatory Exclusivity GIAPREZA and XERAVA are New Chemical Entities (“NCEs”) approved by the U.S. FDA. In the U.S., NCEs approved by the FDA are eligible for market exclusivity under the U.S.
There are at least two additional early-stage clinical programs developing investigational therapies for multidrug-resistant Acinetobacter infections. If we are unable to successfully change treatment practices, the commercial prospects for XACDURO ® will be limited, and our business may suffer. Regulatory Exclusivity GIAPREZA ® , XERAVA ® and XACDURO ® are New Chemical Entities (“NCEs”) approved by the U.S. FDA.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny potential acquisition or strategic collaboration may entail numerous risks, including: • increased operating expenses and cash requirements; • the assumption of additional indebtedness or contingent liabilities; • assimilation of operations, intellectual property and drugs of an acquired company, including challenges associated with integrating new personnel; • the diversion of our management’s attention from our existing drug programs and initiatives in pursuing such a strategic partnership, merger or acquisition; • retention of key employees, the loss of key personnel and uncertainties in our ability to maintain key business relationships; • risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing drugs or drug candidates and regulatory approvals; and • our inability to generate revenue from acquired technology and/or drugs sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs.
Biggest changeAny potential acquisition or strategic collaboration may entail numerous risks, including but not limited to: • increased operating expenses and cash requirements; • the assumption of additional indebtedness or contingent liabilities; • assimilation of operations, intellectual property and drugs of an acquired company, including challenges associated with integrating new personnel; • the diversion of our management’s attention from our existing drug programs and initiatives in pursuing such a strategic partnership, merger or acquisition; • retention of key employees, the loss of key personnel and uncertainties in our ability to maintain key business relationships; • risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing drugs or drug candidates and regulatory approvals; and • our inability to generate revenue from acquired technology and/or drugs sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs. 57 Table of Contents Risks Related to Our Intellectual Property If we are unable to obtain and maintain patent protection for our technology and product candidates, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and drugs similar or identical to ours, and our ability to successfully commercialize our technology and product candidates may be adversely affected.
These and other risks associated with our international operations may compromise our ability to achieve or maintain profitability. Risks Related to Our Business and Managing Our Growth We have pursued and may continue to pursue acquisitions. Acquisitions could be difficult to integrate, divert the attention of key personnel, disrupt our business, dilute stockholder value and impair our financial results.
These and other risks associated with our international operations may compromise our ability to achieve or maintain profitability. Risks Related to Managing Our Growth We have pursued and may continue to pursue acquisitions. Acquisitions could be difficult to integrate, divert the attention of key personnel, disrupt our business, dilute stockholder value and impair our financial results.
As a result, we cannot predict when or if, and in which territories, we, or any future collaborators, will obtain marketing approval to commercialize a product candidate.
As a result, we cannot predict when or if, and in which territories, we, or any future collaborators, will obtain marketing approval to commercialize a product candidate.
Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities.
Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities.
The applicable federal, state and foreign healthcare laws that may affect our ability to operate include the following: • the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under federal healthcare programs such as Medicare and Medicaid; • federal civil and criminal false claims laws, including the federal False Claims Act, which impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; • the civil monetary penalties statute, which imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent; • HIPAA, which created additional federal criminal and civil statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of whether the payor is public or private, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters; • HIPAA, as amended by the HITECH Act of 2009, and their respective implementing regulations, which impose obligations on “covered entities,” including certain healthcare providers, health plans, and healthcare clearinghouses, as well as their respective “business associates” that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; • the federal Physician Payments Sunshine Act, created under Section 6002 of Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA, and its implementing regulations, which created annual reporting requirements for manufacturers of drugs, devices, biologicals and medical supplies for certain payments and “transfers of value” provided to covered recipients, including physicians, as defined by such law, and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and 61 Table of Contents • analogous state and foreign laws, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or to adopt compliance programs as prescribed by state laws and regulations, or that otherwise restrict payments that may be made to healthcare providers; state and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and drug pricing; state and local laws requiring the licensure of pharmaceutical sales representatives; and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
The applicable federal, state and foreign healthcare laws that may affect our ability to operate include the following: • the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under federal healthcare programs such as Medicare and Medicaid; 64 Table of Contents • federal civil and criminal false claims laws, including the federal False Claims Act, which impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; • the civil monetary penalties statute, which imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent; • HIPAA, which created additional federal criminal and civil statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of whether the payor is public or private, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters; • HIPAA, as amended by the HITECH Act of 2009, and their respective implementing regulations, which impose obligations on “covered entities,” including certain healthcare providers, health plans, and healthcare clearinghouses, as well as their respective “business associates” that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; • the federal Physician Payments Sunshine Act, created under Section 6002 of Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA, and its implementing regulations, which created annual reporting requirements for manufacturers of drugs, devices, biologicals and medical supplies for certain payments and “transfers of value” provided to covered recipients, including physicians, as defined by such law, and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and • analogous state and foreign laws, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or to adopt compliance programs as prescribed by state laws and regulations, or that otherwise restrict payments that may be made to healthcare providers; state and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and drug pricing; state and local laws requiring the licensure of pharmaceutical sales representatives; and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
The amount of royalties and milestone payments, if any, we receive will depend on many factors, including the following: • the extent and effectiveness of the sales and marketing and distribution support GSK provides to our partnered products; • market acceptance and demand for our partnered products; • changes in the treatment paradigm or standard of care for COPD or asthma, for instance through changes to the GOLD (Global Initiative for Chronic Obstructive Lung Disease) guidelines; • the competitive landscape of generic and branded products and developing therapies that compete with our products owned by GSK (such as Advair ® ) but which are not partnered with us and pricing pressure in the respiratory markets targeted by our partnered products; • the size of the market for our partnered products; • the mix of sales of our partnered products; • decisions as to the timing of product launches, pricing and discounts; • reprioritization of GSK’s commercial efforts on other products owned by GSK (such as Advair ® ), which are not partnered with us; • GSK’s ability to expand the indications for which our partnered products can be marketed; • a satisfactory efficacy and safety profile as demonstrated in a broad patient population; • acceptance of, and ongoing satisfaction with, our partnered products by the medical community, patients receiving therapy and third-party payors; • timing and amounts of payor rebate adjustments and prior period rebate adjustments; 34 Table of Contents • seasonal fluctuations of demand; • the ability of patients to be able to afford our partnered products or obtain health care coverage that covers our partnered products; • safety concerns in the marketplace for respiratory therapies in general and with our partnered products in particular; • regulatory developments relating to the manufacture or continued use of our partnered products; • the requirement to conduct additional post‑approval studies or trials for our partnered products; • GSK’s ability to obtain regulatory approval of our partnered products in additional countries; • the unfavorable outcome of any potential litigation relating to our partnered products; • general economic conditions in the jurisdictions where our partnered products are sold, including microeconomic disruptions or slowdowns; or • if our royalty revenue or operating results fall below the expectations of investors or securities analysts or below any guidance we may provide to the market, the price of our common stock could decline substantially.
The amount of royalties and milestone payments, if any, we receive will depend on many factors, including but not limited to the following: • the extent and effectiveness of the sales and marketing and distribution support GSK provides to our partnered products; • market acceptance and demand for our partnered products; • changes in the treatment paradigm or standard of care for COPD or asthma, for instance through changes to the GOLD (Global Initiative for Chronic Obstructive Lung Disease) guidelines; • the competitive landscape of generic and branded products and developing therapies that compete with our products owned by GSK (such as Advair ® ) but which are not partnered with us and pricing pressure in the respiratory markets targeted by our partnered products; • the size of the market for our partnered products; • the mix of sales of our partnered products; • decisions as to the timing of product launches, pricing and discounts; • reprioritization of GSK’s commercial efforts on other products owned by GSK, which are not partnered with us; • GSK’s ability to expand the indications for which our partnered products can be marketed; 35 Table of Contents • a satisfactory efficacy and safety profile as demonstrated in a broad patient population; • acceptance of, and ongoing satisfaction with, our partnered products by the medical community, patients receiving therapy and third-party payors; • timing and amounts of payor rebate adjustments and prior period rebate adjustments; • seasonal fluctuations of demand; • the ability of patients to be able to afford our partnered products or obtain health care coverage that covers our partnered products; • safety concerns in the marketplace for respiratory therapies in general and with our partnered products in particular; • regulatory developments relating to the manufacture or continued use of our partnered products; • the requirement to conduct additional post‑approval studies or trials for our partnered products; • GSK’s ability to obtain regulatory approval of our partnered products in additional countries; • the unfavorable outcome of any potential litigation relating to our partnered products; • general economic conditions in the jurisdictions where our partnered products are sold, including microeconomic disruptions or slowdowns; or • if our royalty revenue or operating results fall below the expectations of investors or securities analysts or below any guidance we may provide to the market, the price of our common stock could decline substantially.
We may experience numerous unforeseen events prior to, during, or because of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including: • the FDA, the EMA or other comparable regulatory authority may change from the views they have expressed to us as to the design, implementation, and/or interpretation of our clinical trials; • the FDA may withdraw Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program; • regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; • we may not reach agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites; • clinical trials of product candidates may produce negative or inconclusive results; • we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs; • we may not be able to complete our clinical trials in a timely manner, if at all, for example because the number of patients required for clinical trials of our product candidates may be larger than we anticipate; 42 Table of Contents • enrollment in these clinical trials may be slower than we anticipate, participants may drop out of these clinical trials at a higher rate than we anticipate, or we may fail to recruit suitable patients to participate in a trial; • we may fail to comply with regulatory requirements applicable to them, to the FDA’s or other comparable regulatory authority’s, satisfaction; • third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; • regulators may issue a clinical hold, or regulators or institutional review boards may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; • the cost of clinical trials of our product candidates may be greater than we anticipate; • the FDA, the EMA or other comparable regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with whom we enter into agreements for clinical and commercial supplies; • the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; • our product candidates, once exposed to greater numbers of patients, may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or institutional review boards to suspend or terminate the clinical trials or cause regulatory authorities to refuse to approve our product candidates or approve them only with significant restrictions on distribution or use; • even if our clinical trials are successful, the FDA, the EMA or other comparable regulatory authorities may determine that the overall risk-benefit profiles of our product candidates are insufficient to support marketing authorization; and • the approval policies or regulations of the FDA, the EMA or other comparable regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
We may experience numerous unforeseen events prior to, during, or because of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including but not limited to: • the FDA, the EMA or other comparable regulatory authority may change from the views they have expressed to us as to the design, implementation, and/or interpretation of our clinical trials; • the FDA may withdraw Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program; • regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; • we may not reach agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites; • clinical trials of product candidates may produce negative or inconclusive results; • we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs; • we may not be able to complete our clinical trials in a timely manner, if at all, for example because the number of patients required for clinical trials of our product candidates may be larger than we anticipate; • enrollment in these clinical trials may be slower than we anticipate, participants may drop out of these clinical trials at a higher rate than we anticipate, or we may fail to recruit suitable patients to participate in a trial; • we may fail to comply with regulatory requirements applicable to them, to the FDA’s or other comparable regulatory authority’s, satisfaction; • third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; • regulators may issue a clinical hold, or regulators or institutional review boards may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; • the cost of clinical trials of our product candidates may be greater than we anticipate; • the FDA, the EMA or other comparable regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with whom we enter into agreements for clinical and commercial supplies; • the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; 44 Table of Contents • our product candidates, once exposed to greater numbers of patients, may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or institutional review boards to suspend or terminate the clinical trials or cause regulatory authorities to refuse to approve our product candidates or approve them only with significant restrictions on distribution or use; • even if our clinical trials are successful, the FDA, the EMA or other comparable regulatory authorities may determine that the overall risk-benefit profiles of our product candidates are insufficient to support marketing authorization; and • the approval policies or regulations of the FDA, the EMA or other comparable regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
Our collaborations and any future collaborations we might enter into may pose a number of risks, including: • collaborators often have significant discretion in determining the efforts and resources that they will apply to these collaborations; • collaborators may not perform their obligations as expected or contractually obligated; • collaborators may not pursue development and commercialization of any product candidates that achieve regulatory approval or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities; • collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; • product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates; 47 Table of Contents • a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such products; • disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive; • collaborators may not properly maintain or defend our or their intellectual property rights or may use our or their proprietary information in such a way as to invite litigation that could jeopardize or invalidate such intellectual property or proprietary information or expose us to potential litigation; • collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; • collaborators may be subject to geo-political actions, natural disasters or other occurrences, including public health epidemics such as the COVID-19 pandemic; • collaborations may be terminated for the convenience of the collaborator and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates; and • collaborators’ decisions may limit the availability of the product supplies required for development, clinical and commercial activities.
Our collaborations and any future collaborations we might enter into may pose a number of risks, including but not limited to: • collaborators often have significant discretion in determining the efforts and resources that they will apply to these collaborations; • collaborators may not perform their obligations as expected or contractually obligated; • collaborators may not pursue development and commercialization of any product candidates that achieve regulatory approval or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities; • collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; • product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates; • a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such products; • disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive; • collaborators may not properly maintain or defend our or their intellectual property rights or may use our or their proprietary information in such a way as to invite litigation that could jeopardize or invalidate such intellectual property or proprietary information or expose us to potential litigation; • collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; • collaborators may be subject to geo-political actions, natural disasters or other occurrences, including public health epidemics such as the COVID-19 pandemic; • collaborations may be terminated for the convenience of the collaborator and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates; and 50 Table of Contents • collaborators’ decisions may limit the availability of the product supplies required for development, clinical and commercial activities.
We or our collaborators may seek regulatory approval for our product candidates outside of the United States and, accordingly, we expect that we will be subject to additional risks related to operating in foreign countries if we obtain the necessary approvals, including: • differing regulatory requirements in foreign countries; • the potential for so-called parallel importing, which is what happens when a local seller, faced with high or higher local prices, opts to import goods from a foreign market with low or lower prices rather than buying them locally; 52 Table of Contents • unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements; • economic weakness, including inflation, or political instability in foreign economies and markets; • compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; • foreign taxes, including withholding of payroll taxes; • foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country; • difficulties staffing and managing foreign operations; • workforce uncertainty in countries where labor unrest is more common than in the United States; • reduced level of reimbursement, pricing and insurance regimes compared to the United States; • potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign regulations; • challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods, fires, and public health epidemics, such as the COVID-19 pandemic.
We or our collaborators may seek regulatory approval for our product candidates outside of the United States and, accordingly, we expect that we will be subject to additional risks related to operating in foreign countries if we obtain the necessary approvals, including but not limited to: • differing regulatory requirements in foreign countries; • the potential for so-called parallel importing, which is what happens when a local seller, faced with high or higher local prices, opts to import goods from a foreign market with low or lower prices rather than buying them locally; • unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements; • economic weakness, including inflation, or political instability in foreign economies and markets; • compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; • foreign taxes, including withholding of payroll taxes; • foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country; • difficulties staffing and managing foreign operations; • workforce uncertainty in countries where labor unrest is more common than in the United States; • reduced level of reimbursement, pricing and insurance regimes compared to the United States; • potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign regulations; • challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods, fires, and public health epidemics, such as the COVID-19 pandemic.
The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on several factors, including: • the efficacy and potential advantages compared to alternative treatments; • the potential and perceived advantages and disadvantages of the product candidates, including cost and clinical benefit relative to alternative treatments; • the convenience and ease of administration compared to alternative treatments; • the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; • acceptance by physicians, patients, operators of hospitals, including in-hospital formularies, and treatment facilities and parties responsible for coverage and reimbursement of the product; • the availability of coverage and adequate reimbursement by third-party payors and government authorities; • the ability to manufacture our product in sufficient quantities and yields; • the strength and effectiveness of marketing and distribution support; • the prevalence and severity of any side effects; 50 Table of Contents • limitations or warnings, including distribution or use restrictions, contained in the product’s approved labeling or an approved REMS; • whether the product is designated under physician treatment guidelines as a first-line therapy or as a second- or third-line therapy for particular infections; • the approval of other new products for the same indications; • the timing of market introduction of the approved product as well as competitive products; • the emergence of bacterial resistance to the product; and • the rate at which resistance to other drugs in the target infections grow.
The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on several factors, including but not limited to: • the efficacy and potential advantages compared to alternative treatments; • the potential and perceived advantages and disadvantages of the product candidates, including cost and clinical benefit relative to alternative treatments; • the convenience and ease of administration compared to alternative treatments; • the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; • acceptance by physicians, patients, operators of hospitals, including in-hospital formularies, and treatment facilities and parties responsible for coverage and reimbursement of the product; • the availability of coverage and adequate reimbursement by third-party payors and government authorities; • the ability to manufacture our product in sufficient quantities and yields; • the strength and effectiveness of marketing and distribution support; • the prevalence and severity of any side effects; • limitations or warnings, including distribution or use restrictions, contained in the product’s approved labeling or an approved REMS; • whether the product is designated under physician treatment guidelines as a first-line therapy or as a second- or third-line therapy for particular infections; • the approval of other new products for the same indications; • the timing of market introduction of the approved product as well as competitive products; 53 Table of Contents • the emergence of bacterial resistance to the product; and • the rate at which resistance to other drugs in the target infections grow.
The anticipated benefits of the acquisition could be materially reduced by a number of factors, including the following: • the future revenue and gross margins of the acquired products may be materially different from those we originally anticipated; • we could incur material unanticipated expenses; • claims or lawsuits may arise from the acquisition transaction or from their previous business operations; • we may experience difficulties in implementing effective internal controls over financial reporting as part of our integration actions; and • potential growth, expected financial results, perceived synergies and anticipated opportunities may not be realized through the ongoing integration actions.
The anticipated benefits of the acquisition could be materially reduced by a number of factors, including but not limited to the following: • the future revenue and gross margins of the acquired products may be materially different from those we originally anticipated; • we could incur material unanticipated expenses; • claims or lawsuits may arise from the acquisition transaction or from their previous business operations; • we may experience difficulties in implementing effective internal controls over financial reporting as part of our integration actions; and • potential growth, expected financial results, perceived synergies and anticipated opportunities may not be realized through the ongoing integration actions.
These requirements include, for example: • specialized accounting systems unique to government awards; • mandatory financial audits and potential liability for price adjustments or recoupment of government funds after such funds have been spent; • adhering to stewardship principles imposed by CARB-X as a condition of the award; • public disclosures of certain award information, which may enable competitors to gain insights into our research program; and • mandatory socioeconomic compliance requirements, including labor standards, non-discrimination and affirmative action programs and environmental compliance requirements.
These requirements include, for example: • specialized accounting systems unique to government awards; 52 Table of Contents • mandatory financial audits and potential liability for price adjustments or recoupment of government funds after such funds have been spent; • adhering to stewardship principles imposed by CARB-X as a condition of the award; • public disclosures of certain award information, which may enable competitors to gain insights into our research program; and • mandatory socioeconomic compliance requirements, including labor standards, non-discrimination and affirmative action programs and environmental compliance requirements.
Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all. If a present or future collaborator were to be involved in a business combination, the continued pursuit and emphasis on our drug development or commercialization program could be delayed, diminished or terminated.
Collaboration agreements may not lead to development or successful commercialization of product or commercial candidates in the most efficient manner or at all. If a present or future collaborator were to be involved in a business combination, the continued pursuit and emphasis on our drug development or commercialization program could be delayed, diminished or terminated.
Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for many reasons, including the following: • the research methodology used may not be successful in identifying potential product candidates; • competitors may develop alternatives that render our product candidates obsolete or less attractive; • product candidates we develop may nevertheless be covered by third parties’ patents or other exclusive rights; • a product candidate may on further study be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria; • a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; • a product candidate may not be accepted as safe and effective by patients, the medical community or third-party payors, if applicable; and • the FDA, the EMA or other regulatory authorities may not approve or agree with the intended use of a new product candidate.
Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for many reasons, including but not limited to the following: • the research methodology used may not be successful in identifying potential product candidates; • competitors may develop alternatives that render our product candidates obsolete or less attractive; • product candidates we develop may nevertheless be covered by third parties’ patents or other exclusive rights; • a product candidate may on further study be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria; • a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; • a product candidate may not be accepted as safe and effective by patients, the medical community or third-party payors, if applicable; and 45 Table of Contents • the FDA, the EMA or other regulatory authorities may not approve or agree with the intended use of a new product candidate.
Satisfying the obligations relating to our debt could adversely affect our liquidity or the amount or timing of potential distributions to our stockholders. • GSK has indicated to us that it believes its consent may be required before we can engage in certain royalty monetization transactions with third parties, which may inhibit our ability to engage in these transactions. • If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of the FDA, the EMA or other comparable regulatory authorities, or do not otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of that product candidate. • We rely on collaborations with third parties for the development of our product candidates, and we may seek additional collaborations in the future.
Satisfying the obligations relating to our debt could adversely affect our liquidity or the amount or timing of potential distributions to our stockholders. • GSK has indicated to us that it believes its consent may be required before we can engage in certain royalty monetization transactions with third parties, which may inhibit our ability to engage in these transactions. 34 Table of Contents • If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of the FDA, the EMA or other comparable regulatory authorities, or do not otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of that product candidate. • We rely on collaborations with third parties for the development of both our product and commercial candidates, and we may seek additional collaborations in the future.
We have conducted an analysis to determine whether an ownership change had occurred since inception through December 31, 2022 and concluded that it is more likely than not that the Company did not experience an ownership change during the testing period.
We have conducted an analysis to determine whether an ownership change had occurred since inception through December 31, 2023 and concluded that it is more likely than not that the Company did not experience an ownership change during the testing period.
Similar regulatory requirements apply outside the United States, including the International Council for Harmonisation of Technical Requirements for the Registration of Pharmaceuticals for Human Use, or ICH. 46 Table of Contents We are also required to register certain ongoing clinical trials and post the results of certain completed clinical trials on government-sponsored, publicly accessible databases, such as ClinicalTrials.gov, within specified timeframes.
Similar regulatory requirements apply outside the United States, including the International Council for Harmonisation of Technical Requirements for the Registration of Pharmaceuticals for Human Use, or ICH. We are also required to register certain ongoing clinical trials and post the results of certain completed clinical trials on government-sponsored, publicly accessible databases, such as ClinicalTrials.gov, within specified timeframes.
If we are unable to do so, we may be unable to develop or commercialize the affected technology and product candidates, which could materially harm our business, financial condition, results of operations, and prospects. We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming and unsuccessful.
If we are unable to do so, we may be unable to develop or commercialize the affected technology and product candidates, which could materially harm our business, financial condition, results of operations, and prospects. 59 Table of Contents We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming and unsuccessful.
Our failure to comply with all regulatory requirements, and later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, may yield various results, including: • litigation involving patients taking our products; • restrictions on our products, manufacturers or manufacturing processes; • restrictions on the labeling or marketing of a product; • restrictions on product distribution or use; • requirements to conduct post-marketing studies or clinical trials; • warning or untitled letters; • withdrawal of the products from the market; • refusal to approve pending applications or supplements to approve applications that we submit; • recall of products; • fines, restitution or disgorgement of profits or revenues; • suspension or withdrawal of marketing approvals; • damage to relationships with any potential collaborators; • unfavorable press coverage and damage to our reputation; • refusal to permit the import or export of our products; • product seizure; or • injunctions or imposition of civil or criminal penalties.
Our failure to comply with all regulatory requirements, and later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, may yield various results, including but not limited to: • litigation involving patients taking our products; • restrictions on our products, manufacturers or manufacturing processes; 63 Table of Contents • restrictions on the labeling or marketing of a product; • restrictions on product distribution or use; • requirements to conduct post-marketing studies or clinical trials; • warning or untitled letters; • withdrawal of the products from the market; • refusal to approve pending applications or supplements to approve applications that we submit; • recall of products; • fines, restitution or disgorgement of profits or revenues; • suspension or withdrawal of marketing approvals; • damage to relationships with any potential collaborators; • unfavorable press coverage and damage to our reputation; • refusal to permit the import or export of our products; • product seizure; or • injunctions or imposition of civil or criminal penalties.
The long-term impact of the TCJA on the overall economy, the industries in which we operate and our partners business cannot be reliably 66 Table of Contents predicted at this early stage of the new law’s implementation. There can be no assurance that the TCJA will not negatively impact our operating results, financial condition, and future business operations.
The long-term impact of the TCJA on the overall economy, the industries in which we operate and our partners business cannot be reliably predicted at this early stage of the new law’s implementation. There can be no assurance that the TCJA will not negatively impact our operating results, financial condition, and future business operations.
During challenging and uncertain economic times and in tight credit markets, there may be a disruption or delay in the performance of our third‑party contractors, suppliers or 41 Table of Contents partners. If such third parties are unable to satisfy their commitments to us, our business and results of operations would be adversely affected.
During challenging and uncertain economic times and in tight credit markets, there may be a disruption or delay in the performance of our third‑party contractors, suppliers or partners. If such third parties are unable to satisfy their commitments to us, our business and results of operations would be adversely affected.
In addition, many of the factors that cause, or lead to, delays of clinical trials may ultimately lead to the denial of regulatory approval of a product candidate. 43 Table of Contents If we are not successful in discovering, developing, and commercializing additional product candidates, our ability to expand and achieve our strategic objectives would be impaired.
In addition, many of the factors that cause, or lead to, delays of clinical trials may ultimately lead to the denial of regulatory approval of a product candidate. If we are not successful in discovering, developing, and commercializing additional product candidates, our ability to expand and achieve our strategic objectives would be impaired.
Such challenges may result in loss of 55 Table of Contents exclusivity or freedom to operate, a patent being held unenforceable, and/or in one or more or in patent claims being narrowed or invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products or limit the duration of the patent protection of our technology and products.
Such challenges may result in loss of exclusivity or freedom to operate, a patent being held unenforceable, and/or in one or more or in patent claims being narrowed or invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products or limit the duration of the patent protection of our technology and products.
The continuing efforts of governments, pharmaceutical benefit management organizations (“PBMs”), insurance companies, managed care organizations and other payors of health care costs to contain or reduce costs of health care has adversely affected the price, market access, and total revenues of RELVAR ® /BREO ® ELLIPTA ® , and ANORO ® ELLIPTA ® and may continue to adversely 35 Table of Contents affect them in the future.
The continuing efforts of governments, pharmaceutical benefit management organizations (“PBMs”), insurance companies, managed care organizations and other payors of health care costs to contain or reduce costs of health care has adversely affected the price, market access, and total revenues of RELVAR ® /BREO ® ELLIPTA ® , and ANORO ® ELLIPTA ® and may continue to adversely affect them in the future.
If these studies 39 Table of Contents are substantially delayed or fail to prove the safety and effectiveness of product candidates in development partnered with GSK, GSK may not receive regulatory approval for such product candidates and our business and financial condition could be materially harmed and the price of our securities might fall.
If these studies are substantially delayed or fail to prove the safety and effectiveness of product candidates in development partnered with GSK, GSK may not receive regulatory approval for such product candidates and our business and financial condition could be materially harmed and the price of our securities might fall.
The risks associated with this investment strategy may be substantially greater than the risks associated with traditional fixed-income investment strategies or other low-yield strategies. 67 Table of Contents We have limited rights to remove the general partner of the Partnership and do not have any right to participate in the management of the Partnership or the investment activity of Sarissa Capital.
The risks associated with this investment strategy may be substantially greater than the risks associated with traditional fixed-income investment strategies or other low-yield strategies. We have limited rights to remove the general partner of the Partnership and do not have any right to participate in the management of the Partnership or the investment activity of Sarissa Capital.
Furthermore, if we or others later identify undesirable side effects caused by our product candidates, several potentially significant negative consequences could result, including: • regulatory authorities may suspend or withdraw approvals of such product candidate; • regulatory authorities may require additional warnings on the label or impose distribution or use restrictions; • we may be required to change the way a product candidate is administered or conduct additional clinical trials, including one or more post-market studies; • we could be sued and held liable for harm caused to patients; 45 Table of Contents • we may be required to implement a REMS, including the creation of a medication guide outlining the risks of such side effects for distribution to patients, and/or other elements to assure safe use; • we may need to conduct a recall; and • our reputation may suffer.
Furthermore, if we or others later identify undesirable side effects caused by our product candidates, several potentially significant negative consequences could result, including but not limited to: • regulatory authorities may suspend or withdraw approvals of such product candidate; • regulatory authorities may require additional warnings on the label or impose distribution or use restrictions; • we may be required to change the way a product candidate is administered or conduct additional clinical trials, including one or more post-market studies; • we could be sued and held liable for harm caused to patients; • we may be required to implement a REMS, including the creation of a medication guide outlining the risks of such side effects for distribution to patients, and/or other elements to assure safe use; • we may need to conduct a recall; and • our reputation may suffer.
If we experience delays in obtaining approval or if we fail to obtain approval of our product candidates, the commercial prospects for our product candidates may be harmed and our ability to generate revenues will be impaired. Failure to obtain marketing approval in foreign jurisdictions would prevent certain of our product candidates from being marketed in these territories.
If we experience delays in obtaining approval or if we fail to obtain approval of our product candidates, the commercial prospects for our product candidates may be harmed and our ability to generate revenues will be impaired. 62 Table of Contents Failure to obtain marketing approval in foreign jurisdictions would prevent certain of our product candidates from being marketed in these territories.
Patient enrollment is affected by other factors including: • the size and nature of the patient population; • the severity of the disease under investigation; • the proximity and availability of clinical trial sites for prospective patients; • the eligibility criteria for participation in the clinical trial; 44 Table of Contents • the design of the clinical trial; • the perceived risks and benefits of the product candidate under study; • our ability to recruit clinical trial investigators with appropriate experience; • the availability of drugs approved to treat the diseases under study; • the patient referral practices of physicians; • our ability to obtain and maintain patient consents; • the ability to monitor patients adequately during and after treatment; • the risk that patients enrolled in clinical trials will drop out of the trials before completion; and • the impact of public health epidemics, such as the COVID-19 pandemic.
Patient enrollment is affected by other factors including but not limited to: • the size and nature of the patient population; • the severity of the disease under investigation; • the proximity and availability of clinical trial sites for prospective patients; • the eligibility criteria for participation in the clinical trial; • the design of the clinical trial; • the perceived risks and benefits of the product candidate under study; • our ability to recruit clinical trial investigators with appropriate experience; • the availability of drugs approved to treat the diseases under study; • the patient referral practices of physicians; • our ability to obtain and maintain patient consents; • the ability to monitor patients adequately during and after treatment; • the risk that patients enrolled in clinical trials will drop out of the trials before completion; and • the impact of public health epidemics, such as the COVID-19 pandemic.
We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. There are a variety of risks associated with marketing our product candidates internationally, which could affect our business.
We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. 55 Table of Contents There are a variety of risks associated with marketing our product candidates internationally, which could affect our business.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions. We have incurred litigation and may incur additional litigation.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions. 70 Table of Contents We have incurred litigation and may incur additional litigation.
It is unclear how payment reductions 62 Table of Contents or the introduction of the Quality Payment Program will impact overall physician reimbursement under the Medicare program. It is also unclear if changes in Medicare payments to providers would impact such providers’ willingness to prescribe and administer our products, if approved.
It is unclear how payment reductions or the introduction of the Quality Payment Program will impact overall physician reimbursement under the Medicare program. It is also unclear if changes in Medicare payments to providers would impact such providers’ willingness to prescribe and administer our products, if approved.
Investors should consult with their own tax advisors with respect to such legislation and the potential tax consequences of investing in common stock. We are subject to evolving and complex tax laws, which may result in additional liabilities and affect our results of operations.
Investors should consult with their own tax advisors with respect to such legislation and the potential tax consequences of investing in common stock. 71 Table of Contents We are subject to evolving and complex tax laws, which may result in additional liabilities and affect our results of operations.
The ability of RELVAR ® /BREO ® ELLIPTA ® , and ANORO ® ELLIPTA ® to succeed and achieve the anticipated level of sales depends on the 38 Table of Contents commercial and development performance of GSK to achieve and maintain a competitive advantage over other products with the same intended use in the targeted markets.
The ability of RELVAR ® /BREO ® ELLIPTA ® , and ANORO ® ELLIPTA ® to succeed and achieve the anticipated level of sales depends on the commercial and development performance of GSK to achieve and maintain a competitive advantage over other products with the same intended use in the targeted markets.
Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative effect on our business. We may not be able to protect our intellectual property rights throughout the world.
Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative effect on our business. 60 Table of Contents We may not be able to protect our intellectual property rights throughout the world.
We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our 57 Table of Contents efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
As we pursue or consummate a strategic acquisition or investment, we may value the acquired or funded company incorrectly, fail to successfully manage our operations as our asset diversity increases, expend unforeseen costs during the acquisition or integration process, or 40 Table of Contents encounter other unanticipated risks or challenges.
As we pursue or consummate a strategic acquisition or investment, we may value the acquired or funded company incorrectly, fail to successfully manage our operations as our asset diversity increases, expend unforeseen costs during the acquisition or integration process, or encounter other unanticipated risks or challenges.
The outbreak of the novel coronavirus (“COVID-19”) has negatively impacted the global economy, disrupted global supply chains, and created significant volatility and disruption of financial markets. The Company is closely monitoring developments related to the COVID-19 pandemic to assess its impact on the Company’s business.
The outbreak of COVID-19 has negatively impacted the global economy, disrupted global supply chains, and created significant volatility and disruption of financial markets. The Company is closely monitoring developments related to the COVID-19 pandemic to assess its impact on the Company’s business.
We may not have the right to prohibit the U.S. government from using certain technologies developed by us, and may not be able to prohibit third-party companies, including our competitors, from using those technologies in providing products and services to the 49 Table of Contents U.S. government.
We may not have the right to prohibit the U.S. government from using certain technologies developed by us, and may not be able to prohibit third-party companies, including our competitors, from using those technologies in providing products and services to the U.S. government.
If we do not adequately protect our intellectual property, competitors may be able to use our technologies and erode or negate any competitive advantage that we may have, which could harm our business 54 Table of Contents and ability to achieve profitability.
If we do not adequately protect our intellectual property, competitors may be able to use our technologies and erode or negate any competitive advantage that we may have, which could harm our business and ability to achieve profitability.
One payor’s determination to provide coverage for a drug does not assure 51 Table of Contents that other payors will also provide coverage and adequate reimbursement for the drug. Additionally, a third-party payor’s decision to provide coverage for a therapy does not imply that an adequate reimbursement rate will be approved.
One payor’s determination to provide coverage for a drug does not assure that other payors will also provide coverage and adequate reimbursement for the drug. Additionally, a third-party payor’s decision to provide coverage for a therapy does not imply that an adequate reimbursement rate will be approved.
While we expect that a portion of our revenues will continue to be derived from our royalty management business, as a result of this investment, we may derive a material portion of our income from assets managed by Sarissa Capital.
While we expect that a portion of our revenues will continue to be derived from our royalty management business and the sales of our products, as a result of this investment, we may derive a material portion of our income from assets managed by Sarissa Capital.
In the event that any adverse regulatory changes were to occur to any of our products, our business would be harmed, and the price of our securities could fall. 37 Table of Contents Any adverse developments or results or perceived adverse developments or results with respect to the ongoing studies for FF/VI in asthma or COPD, for UMEC/VI in COPD, or any future studies would significantly harm our business and the price of our securities could fall, and if regulatory authorities in those countries in which approval has not yet been granted determine that the ongoing studies for FF/VI in asthma or COPD or the ongoing studies for UMEC/VI for COPD do not demonstrate adequate safety and efficacy, the continued development of FF/VI or UMEC/VI or both could be significantly delayed, they might not be approved by these regulatory authorities, and even if approved they may be subject to restrictive labeling, any of which might harm our business, and the price of our securities could fall.
Any adverse developments or results or perceived adverse developments or results with respect to the ongoing studies for FF/VI in asthma or COPD, for UMEC/VI in COPD, or any future studies would significantly harm our business and the price of our securities could fall, and if regulatory authorities in those countries in which approval has not yet been granted determine that the ongoing studies for FF/VI in asthma or COPD or the ongoing studies for UMEC/VI for COPD do not demonstrate adequate safety and efficacy, the continued development of FF/VI or UMEC/VI or both could be significantly delayed, they might not be approved by these regulatory authorities, and even if approved they may be subject to restrictive labeling, any of which might harm our business, and the price of our securities could fall.
Any marketing approval 58 Table of Contents we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.
Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.
In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements. Our product candidates may be subject to government price controls that may affect our revenue.
Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements. Our product candidates may be subject to government price controls that may affect our revenue.
If those collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates. 33 Table of Contents • Even if any of our product candidates receives marketing approval, such product candidate may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success. • We might not be able to successfully integrate our operations with those of Entasis and/or La Jolla and other assets that we may acquire. • If we engage in future acquisitions or strategic collaborations, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities and subject us to other risks. • Even if we complete the necessary preclinical studies and clinical trials, the regulatory approval process is expensive, time-consuming and uncertain and may prevent us or any future collaborators from obtaining approvals for the commercialization of some or all of our product candidates.
If those collaborations are not successful, we may not be able to capitalize on the market potential of these product or commercial candidates. • Even if any of our product candidates receives marketing approval, such product candidate may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success. • Our operations could be disrupted by failure of our information systems or cyber-attacks. • If we engage in future acquisitions or strategic collaborations, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities and subject us to other risks. • Even if we complete the necessary preclinical studies and clinical trials, the regulatory approval process is expensive, time-consuming and uncertain and may prevent us or any future collaborators from obtaining approvals for the commercialization of some or all of our product candidates.
Even if we can establish and maintain arrangements with third-party manufacturers, reliance on third-party manufacturers entails risks, including: • reliance on the third party for regulatory compliance and quality assurance; • the possible breach of the manufacturing agreement by the third party; • the possible misappropriation of our proprietary information, including our trade secrets and know-how; • the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us; and • supply chain disruptions due to geo-political actions, natural disasters or public healthy crises, including epidemics such as the COVID-19 pandemic. 48 Table of Contents Third-party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements outside the United States.
Even if we can establish and maintain arrangements with third-party manufacturers, reliance on third-party manufacturers entails risks, including but not limited to: • reliance on the third party for regulatory compliance and quality assurance; • the possible breach of the manufacturing agreement by the third party; • the possible misappropriation of our proprietary information, including our trade secrets and know-how; • the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us; and • supply chain disruptions due to geo-political actions, natural disasters or public healthy crises, including epidemics such as the COVID-19 pandemic.
On August 16, 2022, President Biden signed the Inflation Reduction Act, or the IRA. The IRA contains a number of tax related provisions including a 15% minimum corporate income tax on certain large corporations as well as an exercise tax on stock repurchases, both provisions are effective for tax years beginning after December 31, 2022.
The IRA contains a number of tax related provisions including a 15% minimum corporate income tax on certain large corporations as well as an exercise tax on stock repurchases, both provisions are effective for tax years beginning after December 31, 2022.
In addition, to the extent we pursue and complete a monetization transaction or a transaction that modifies our corporate structure, the structure of such transaction may qualify as a fundamental change under the Notes, which could trigger the put rights of the holders of the Notes, in which case we would be required to use a portion of the net proceeds from such transaction to repurchase any Notes put to us.
In addition, to the extent we pursue and complete a monetization transaction or a transaction that modifies our corporate structure, the structure of such transaction may qualify as a fundamental change under the Notes, which could trigger the put rights of the holders of the Notes, in which case we would be required to use a portion of the net proceeds from such transaction to repurchase any Notes put to us. 42 Table of Contents Satisfying the obligations of this debt could adversely affect the amount or timing of any distributions to our stockholders.
If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of the FDA, the EMA or other comparable regulatory authorities, or do not otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of that product candidate.
Any such delays could negatively impact our business, financial condition, results of operations and prospects. 43 Table of Contents If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of the FDA, the EMA or other comparable regulatory authorities, or do not otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of that product candidate.
As of December 31, 2022, we had $549.7 million in total debt outstanding, comprised primarily of $96.2 million in principal that remains outstanding under our convertible subordinated notes due 2023 (the “2023 Notes”), $192.5 million in principal outstanding under our convertible senior notes due 2025 (the “2025 Notes”) and $261.0 million in principal outstanding under our convertible notes due 2028 (the “2028 Notes”) (the 2023 Notes, 2025 Notes and 2028 Notes, hereinafter, the “Notes”).
As of December 31, 2023, we had $453.5 million in total debt outstanding, comprised primarily of $192.5 million in principal outstanding under our convertible senior notes due 2025 (the “2025 Notes”) and $261.0 million in principal outstanding under our convertible notes due 2028 (the “2028 Notes”) (the 2025 Notes and 2028 Notes, hereinafter, the “Notes”).
If GSK does not devote sufficient resources to the commercialization or development of these products, is unsuccessful in its efforts, or chooses to reprioritize its commercial programs, our business would be materially harmed.
We are dependent on GSK for the successful commercialization and development of products under the GSK Agreements. If GSK does not devote sufficient resources to the commercialization or development of these products, is unsuccessful in its efforts, or chooses to reprioritize its commercial programs, our business would be materially harmed.
Efforts to ensure that our future business arrangements with third parties will comply with applicable healthcare laws and regulations may involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws.
It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws.
Entities offering contracts or grants may have requirements to apply for or to otherwise be eligible to receive certain contracts or grants that our competitors may be able to satisfy that we cannot.
However, there is often significant competition for these contracts or grants. Entities offering contracts or grants may have requirements to apply for or to otherwise be eligible to receive certain contracts or grants that our competitors may be able to satisfy that we cannot.
Between January 1, 2022 and December 31, 2022, the high and low sales prices of our common stock as reported on The Nasdaq Global Select Market varied between $10.92 and $18.97 per share.
Between January 1, 2023 and December 31, 2023, the high and low sales prices of our common stock as reported on The Nasdaq Global Select Market varied between $10.64 and $16.43 per share.
Any failure to maintain regulatory approval would limit GSK’s ability to commercialize the product candidates in any respiratory program partnered with GSK, which could materially and adversely affect our business and financial condition, and which may cause the price of our securities to fall. Acquisitions or strategic investments we have made or may make could turn out to be unsuccessful.
Any failure to maintain regulatory approval would limit GSK’s ability to commercialize the product candidates in any respiratory program partnered with GSK, which could materially and adversely affect our business and financial condition, and which may cause the price of our securities to fall.
Non-compliance with U.K. and EU requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development of products for the pediatric population, also can result in significant financial penalties.
Non-compliance with U.K. and EU requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development of products for the pediatric population, also can result in significant financial penalties. Similarly, failure to comply with the U.K.’s or EU’s requirements regarding the protection of personal information can also lead to significant penalties and sanctions.
Any adverse developments to the regulatory status of either RELVAR ® /BREO ® ELLIPTA ® or ANORO ® ELLIPTA ® in the countries in which they have received regulatory approval, including labeling restrictions, safety findings, or any other limitation to usage, would harm our business and may cause the price of our securities to fall.
Any adverse change in FDA policy or guidance regarding the use of LABAs to treat asthma could significantly harm our business and the price of our securities could fall. 38 Table of Contents Any adverse developments to the regulatory status of either RELVAR ® /BREO ® ELLIPTA ® or ANORO ® ELLIPTA ® in the countries in which they have received regulatory approval, including labeling restrictions, safety findings, or any other limitation to usage, would harm our business and may cause the price of our securities to fall.
These provisions include: • requiring supermajority stockholder voting to effect certain amendments to our Certificate of Incorporation and Bylaws; • restricting the ability of stockholders to call special meetings of stockholders; • prohibiting stockholder action by written consent; and 68 Table of Contents • establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on by stockholders at meetings.
These provisions include: • requiring supermajority stockholder voting to effect certain amendments to our Certificate of Incorporation and Bylaws; • restricting the ability of stockholders to call special meetings of stockholders; • prohibiting stockholder action by written consent; and • establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on by stockholders at meetings. 73 Table of Contents In addition, some provisions of Delaware law may also discourage, delay or prevent someone from acquiring us or merging with us.
Any delays or adverse developments or perceived additional delays or adverse developments with respect to the commercialization of RELVAR ® /BREO ® ELLIPTA ® and ANORO ® ELLIPTA ® including if sales or payor coverage does not meet investors’, analysts’, or our expectations, would significantly harm our business and the price of our securities could fall. 36 Table of Contents We are dependent on GSK for the successful commercialization and development of products under the GSK Agreements.
Any delays or adverse developments or perceived additional delays or adverse developments with respect to the commercialization of RELVAR ® /BREO ® ELLIPTA ® and ANORO ® ELLIPTA ® including if sales or payor coverage does not meet investors’, analysts’, or our expectations, would significantly harm our business and the price of our securities could fall.
Any uncertainty about whether or when we could engage in a royalty monetization transaction, the potential impact on the enforceability of the GSK Agreements or the loss of potential royalties from the respiratory programs partnered with GSK, could impair our ability to pursue a return of capital strategy for our stockholders ahead of our receipt of significant royalties from GSK, result in significant reduction in the market price of our securities and cause other material harm to our business. 64 Table of Contents General Risks Factors Our internal computer systems, or third-parties that we work with, may fail or suffer security breaches, which could result in a material disruption of our business.
Any uncertainty about whether or when we could engage in a royalty monetization transaction, the potential impact on the enforceability of the GSK Agreements or the loss of potential royalties from the respiratory programs partnered with GSK, could impair our ability to pursue a return of capital strategy for our stockholders ahead of our receipt of significant royalties from GSK, result in significant reduction in the market price of our securities and cause other material harm to our business.
Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question.
Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In this case, we could ultimately be forced to cease use of such trademarks.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation.
In any infringement litigation, any award of monetary damages we receive may not be commercially valuable. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation.
Additionally, California recently enacted legislation that has been dubbed the first “GDPR-like” law in the United States. Known as the California Consumer Privacy Act (“CCPA”), it creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households.
Additionally, the California Consumer Privacy Act (“CCPA”) creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households.
Following the expiration of the lock-up period, we are able to make annual withdrawals subject to 25% gating provision such that we would receive our entire account in the Partnership over four fiscal quarters.
Under the terms of the Partnership Agreement, subject to limited exceptions, we are able to make annual withdrawals subject to 25% gating provision such that we would receive our entire account in the Partnership over four fiscal quarters.
Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters Even if we complete the necessary preclinical studies and clinical trials, the regulatory approval process is expensive, time-consuming and uncertain and may prevent us or any future collaborators from obtaining approvals for the commercialization of some or all of our product candidates.
If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed. 61 Table of Contents Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters Even if we complete the necessary preclinical studies and clinical trials, the regulatory approval process is expensive, time-consuming and uncertain and may prevent us or any future collaborators from obtaining approvals for the commercialization of some or all of our product candidates.
The need to restate our financial results could, among other potential adverse effects, result in our incurring substantial costs, affect our ability to timely file our periodic reports until such restatement is completed, divert the attention of our management and employees from managing our business, result in material changes to our historical and future financial results, result in investors losing confidence in our operating results, subject us to securities class action litigation, and cause our stock price to decline. 65 Table of Contents Our employees or third party providers, or employees or third party providers of our portfolio companies may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading.
The need to restate our financial results could, among other potential adverse effects, result in our incurring substantial costs, affect our ability to timely file our periodic reports until such restatement is completed, divert the attention of our management and employees from managing our business, result in material changes to our historical and future financial results, result in investors losing confidence in our operating results, subject us to securities class action litigation, and cause our stock price to decline.
Thus, the cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition. 59 Table of Contents Any product candidate for which we obtain marketing approval could be subject to post-marketing restrictions or recall or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our product candidates, when and if any of them are approved.
Any product candidate for which we obtain marketing approval could be subject to post-marketing restrictions or recall or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our product candidates, when and if any of them are approved.
Similarly, failure to comply with the U.K.’s or EU’s requirements regarding the protection of personal information can also lead to significant penalties and sanctions. 60 Table of Contents Our current and future relationships with healthcare professionals, principal investigators, consultants, customers and third-party payors in the United States and elsewhere may be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims, physician payment transparency, health information privacy and security and other healthcare laws and regulations, which could expose us to penalties.
Our current and future relationships with healthcare professionals, principal investigators, consultants, customers and third-party payors in the United States and elsewhere may be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims, physician payment transparency, health information privacy and security and other healthcare laws and regulations, which could expose us to penalties.
To obtain coverage and reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies.
To obtain coverage and reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed.
Our current and anticipated future dependence upon others for the manufacture of our product candidates may adversely affect our future profit margins and our ability to develop product candidates and commercialize any products that receive marketing approval on a timely and competitive basis.
Our current and anticipated future dependence upon others for the manufacture of our product candidates may adversely affect our future profit margins and our ability to develop product candidates and commercialize any products that receive marketing approval on a timely and competitive basis. 51 Table of Contents We may not be able to win government or non-profit contracts or grants to fund our product development activities.
A fundamental change is generally defined to include a merger involving us, an acquisition of a majority of our outstanding common stock, and, under the 2023 Notes, the change of a majority of our board of directors without the approval of the board of directors.
A fundamental change is generally defined to include a merger involving us, an acquisition of a majority of our outstanding common stock.
Any performance failure or regulatory noncompliance on the part of our distributors could delay clinical development or marketing approval of our product candidates or commercialization of our products, resulting in additional losses and depriving us of potential product revenue.
Any performance failure or regulatory noncompliance on the part of our distributors could delay clinical development or marketing approval of our product candidates or commercialization of our products, resulting in additional losses and depriving us of potential product revenue. 49 Table of Contents We rely on collaborations with third parties for the development of both our product and commercial candidates, and we may seek additional collaborations in the future.
Frequently, product candidates that have shown promising results in early preclinical or clinical studies have subsequently suffered significant setbacks or failed in later clinical or non‑clinical studies. In addition, clinical and non‑clinical studies of potential products often reveal that it is not possible or practical to continue development efforts for these product candidates.
In addition, clinical and non‑clinical studies of potential products often reveal that it is not possible or practical to continue development efforts for these product candidates.
Enrollment delays in these clinical trials may result in increased development costs for our product candidates, which would reduce the capital we have available to support current and future product candidates and may result in the need to raise additional capital earlier than planned and could cause the value of our common stock to decline and limit our ability to obtain additional financing.
Enrollment delays in these clinical trials may result in increased development costs for our product candidates, which would reduce the capital we have available to support current and future product candidates and may result in the need to raise additional capital earlier than planned and could cause the value of our common stock to decline and limit our ability to obtain additional financing. 46 Table of Contents Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial potential or result in significant negative consequences following any potential marketing approval.
In addition, we may experience regulatory delays or rejections because of many factors, including changes in regulatory policy during the period of our product candidate development. Any such delays could negatively impact our business, financial condition, results of operations and prospects.
In addition, we may experience regulatory delays or rejections because of many factors, including changes in regulatory policy during the period of our product candidate development.
In particular, GSK has a substantial respiratory product portfolio in addition to the partnered products that are covered by the GSK Agreements. GSK may make respiratory product portfolio decisions or statements about its portfolio which may be, or may be perceived to be, harmful to the respiratory products partnered with us.
GSK may make respiratory product portfolio decisions or statements about its portfolio which may be, or may be perceived to be, harmful to the respiratory products partnered with us.
Many of the pharmaceutical companies competing in respiratory markets are international in scope with substantial financial, technical and personnel resources that permit them to discover, develop, obtain regulatory approval and commercialize new products in a highly efficient and low-cost manner at competitive prices to consumers.
For example, sales of generic Advair ® , GSK’s approved medicine for both COPD and asthma, continue to have a negative impact on sales of RELVAR ® /BREO ® ELLIPTA ® . 39 Table of Contents Many of the pharmaceutical companies competing in respiratory markets are international in scope with substantial financial, technical and personnel resources that permit them to discover, develop, obtain regulatory approval and commercialize new products in a highly efficient and low-cost manner at competitive prices to consumers.
On December 11, 2020, we entered into the Partnership Agreement and invested $300 million of our cash reserves to be managed by Sarissa Capital as the investment manager to the Partnership.
Historically, we have invested our cash reserves in short-term investments and marketable securities, primarily corporate notes, government securities, government agencies, and commercial papers. On December 11, 2020, we entered into the Partnership Agreement and invested $300 million of our cash reserves to be managed by Sarissa Capital as the investment manager to the Partnership.
If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed. 63 Table of Contents Risks Related to our Alliance with GSK Because a portion of our current revenues and near-term projected revenues have historically been derived from products under the GSK Agreements, disputes with GSK could harm our business and cause the price of our securities to fall.
Risks Related to our Alliance with GSK Because a portion of our current revenues and near-term projected revenues have historically been derived from products under the GSK Agreements, disputes with GSK could harm our business and cause the price of our securities to fall.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also have a smaller rented facility in Waltham, Massachusetts. We believe that these facilities are sufficient for our current operational needs and that suitable additional space will be available on commercially reasonable terms to accommodate expansion of our operations, if necessary.
Biggest changeWe believe that these facilities are sufficient for our current operational needs and that suitable additional space will be available on commercially reasonable terms to accommodate expansion of our operations, if necessary.
ITEM 2. PROPERTIES Our headquarters consist of a lease of 2,111 square feet of office space in Burlingame, California, which expires in December 2023. Our other material leased property is a combination of office space and laboratory facility of approximately 20,000 square feet located in Waltham, Massachusetts, which expires in December 2025.
ITEM 2. PROPERTIES Our headquarters consist of a lease of 2,111 square feet of office space in Burlingame, California, which expires in December 2027. Our other material leased property is a combination of office space and laboratory facility of approximately 20,000 square feet located in Waltham, Massachusetts, which expires in December 2025.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS The information called for by this Item is incorporated herein by reference in Item 8. “Financial Statements and Supplementary Data,” Note 13. “Commitments and Contingencies”. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 69 Table of Contents PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS The information called for by this Item is incorporated herein by reference in Item 8. “Financial Statements and Supplementary Data,” Note 13. “Commitments and Contingencies”. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 75 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeNotwithstanding anything to the contrary set forth in any of our previous or future filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate this Annual Report on Form 10‑K or future filings made by us under those statutes, this Stock Performance Graph section shall not be deemed filed with the SEC and shall not be deemed incorporated by reference into any of those prior filings or into any future filings made by us under those statutes. 70 Table of Contents COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Innoviva, Inc., the Nasdaq Composite Index, Nasdaq Biotechnology Index, and Nasdaq S&P Small Cap 600 Pharma Index. * $100 invested on December 31, 2017 in stock or index, including reinvestment of dividends.
Biggest changeNotwithstanding anything to the contrary set forth in any of our previous or future filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate this Annual Report on Form 10‑K or future filings made by us under those statutes, this Stock Performance Graph section shall not be deemed filed with the SEC and shall not be deemed incorporated by reference into any of those prior filings or into any future filings made by us under those statutes.
Upon changing our corporate name to Innoviva, Inc. on January 7, 2016, we changed the stock ticker symbol to “INVA” effective January 11, 2016. Holders As of February 14, 2023, there were 64 stockholders of record of our common stock.
Upon changing our corporate name to Innoviva, Inc. on January 7, 2016, we changed the stock ticker symbol to “INVA” effective January 11, 2016. Holders As of February 14, 2024, there were 63 stockholders of record of our common stock.
Purchases of Equity Securities by the Issuer The following table reflects share repurchases of our common stock for the three months ended December 31, 2022: Period Total Number of Shares Purchases Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1) October 1, 2022 to October 31, 2022 — $ — — $ — November 1, 2022 to November 30, 2022 — — — — December 1, 2022 to December 31, 2022 647,394 13.13 647,394 91,496,562 Total 647,394 $ 13.13 647,394 $ 91,496,562 (1) On October 31, 2022, the Board of Directors of Innoviva authorized and approved a stock repurchase program pursuant to which we may purchase up to $100.0 million of our outstanding common stock.
Purchases of Equity Securities by the Issuer The following table reflects share repurchases of our common stock for the three months ended December 31, 2023: Period Total Number of Shares Purchases Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1) October 1, 2023 to October 31, 2023 556,406 $ 13.07 556,406 $ 23,131,237 November 1, 2023 to November 30, 2023 287,723 13.61 287,723 19,215,246 December 1, 2023 to December 31, 2023 277,706 15.14 277,706 15,011,394 Total 1,121,835 $ 13.72 1,121,835 (1) On October 31, 2022, the Board of Directors of Innoviva authorized and approved a stock repurchase program pursuant to which we may purchase up to $100.0 million of our outstanding common stock.
As many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
As many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.3 Dividends We have not paid any cash dividends on our common stock since September 30, 2015.
Stock Performance Graph The graph set forth below compares the cumulative total stockholder return on our common stock for the period commencing on December 31, 2017 and ending on December 31, 2022, with the cumulative total return of (i) the Nasdaq Composite Index, (ii) the Nasdaq S&P Small Cap 600 Pharma Index and (iii) the Nasdaq Biotechnology Index over the same period.
This program has no termination date, may be suspended or discontinued at any time at the Company’s discretion and does not obligate the Company to acquire any amount of common stock. 76 Table of Contents Stock Performance Graph The graph set forth below compares the cumulative total stockholder return on our common stock for the period commencing on December 31, 2018 and ending on December 31, 2023, with the cumulative total return of (i) the Nasdaq Composite Index, (ii) the Nasdaq S&P Small Cap 600 Pharma Index and (iii) the Nasdaq Biotechnology Index over the same period.
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This program has no termination date, may be suspended or discontinued at any time at the Company’s discretion and does not obligate the Company to acquire any amount of common stock.
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The payment of cash dividends in the future will be dependent upon our revenues and earnings, capital requirements and general financial condition. The payment of any cash dividends will be within the discretion of our board of directors at such time.
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ITEM 6. [ Reserved] 71 Table of Contents
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In addition, our board of directors is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future. Further, our ability to declare dividends may be limited by restrictive covenants contained in any of our existing or future indebtedness.
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Securities Authorized for Issuance Under Equity Compensation Plans Securities Authorized for Issuance Under Equity Compensation Plans: See Part III, Item 12 of this Form 10-K for additional information required.
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COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Innoviva, Inc., the Nasdaq Composite Index, Nasdaq Biotechnology Index, and Nasdaq S&P Small Cap 600 Pharma Index. * $100 invested on December 31, 2018 in stock or index, including reinvestment of dividends.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeRefer to Note 5, “Consolidated Entities and Acquisitions”, to the Consolidated Financial Statements for more information related to our acquisitions of Entasis and La Jolla and the sale of our ownership interest in TRC. 77 Table of Contents Results of Operations Net Revenue Royalty Revenue Total net revenue from GSK, as compared to the prior years, was as follows: Change Year Ended December 31, 2022 2021 (In thousands) 2022 2021 2020 $ % $ % Royalties - RELVAR/BREO $ 215,034 $ 234,066 $ 221,536 $ (19,032 ) (8 )% $ 12,530 6 % Royalties - ANORO 38,405 44,935 45,992 (6,530 ) (15 )% (1,057 ) (2 )% Royalties - TRELEGY 72,029 126,688 73,089 (54,659 ) (43 )% 53,599 73 % Total royalties 325,468 405,689 340,617 (80,221 ) (20 )% 65,072 19 % Less: amortization of capitalized fees paid (13,823 ) (13,823 ) (13,823 ) — * — * Royalty revenue 311,645 391,866 326,794 (80,221 ) (20 )% 65,072 20 % Strategic alliance - MABA program — — 10,000 — * (10,000 ) * Total net royalty revenue $ 311,645 $ 391,866 $ 336,794 $ (80,221 ) (20 )% $ 55,072 16 % * Not Meaningful Total net revenue decreased to $311.6 million for the year ended December 31, 2022, compared to the year ended December 31, 2021.
Biggest changeResults of Operations Net Revenue Royalty Revenue Total royalty revenue, net, as compared to the prior years, was as follows: Change Year Ended December 31, 2023 2022 (In thousands) 2023 2022 2021 $ % $ % Royalties – RELVAR/BREO $ 208,042 $ 215,034 $ 234,066 $ (6,992 ) (3 )% $ (19,032 ) (8 )% Royalties – ANORO 44,627 38,405 44,935 6,222 16 % (6,530 ) (15 )% Royalties – TRELEGY — 72,029 126,688 (72,029 ) (100 )% (54,659 ) (43 )% Total royalties 252,669 325,468 405,689 (72,799 ) (22 )% (80,221 ) (20 )% Less: amortization of capitalized fees paid (13,823 ) (13,823 ) (13,823 ) — * — * Total net royalty revenue $ 238,846 $ 311,645 $ 391,866 $ (72,799 ) (23 )% $ (80,221 ) (20 )% * Not Meaningful Total royalty revenue, net, decreased to $238.8 million for the year ended December 31, 2023, compared to $311.6 million for the year ended December 31, 2022.
The milestone fees paid to GSK were recognized as capitalized fees paid, which are being amortized over their estimated useful lives commencing upon the commercial launch of the products.
The milestone fees paid to GSK were recognized as capitalized fees, which are being amortized over their estimated useful lives commencing upon the commercial launch of the products.
Net Product Sales Net product sales we recognized from the date of acquisition of La Jolla, which occurred on August 22, 2022, to December 31, 2022 was $19.7 million, consisting of net sales of GIAPREZA ® and XERAVA ® for $14.2 million and $5.5 million, respectively.
Net product sales we recognized from the date of acquisition of La Jolla, which occurred on August 22, 2022, to December 31, 2022 was $19.7 million, consisting of net sales of GIAPREZA ® and XERAVA ® for $14.2 million and $5.5 million, respectively.
Non-cash charges included a $153.3 million net decrease in fair values of equity method investments and other equity and long-term investments, $25.0 of deferred income taxes, $13.9 million of amortization of capitalized fees and depreciation of property and equipment and $5.6 million in amortization of acquired intangible assets, $20.7 million in loss on the extinguishment of debt, $7.3 million in stock-based compensation expense, $10.0 million in inventory fair value adjustments included in cost of products sold and $2.1 million in the amortization of debt discount and issuance costs.
Non-cash charges included a $153.3 million net decrease in fair values of equity method investments and equity and long-term investments, $25.0 of deferred income taxes, $13.9 million of amortization of capitalized fees and depreciation of property and equipment and $5.6 million in amortization of acquired intangible assets, $20.7 million in loss on the extinguishment of debt, $7.3 million in stock-based compensation expense, $10.0 million in inventory fair value adjustments included in cost of products sold and $2.1 million in the amortization of debt discount and issuance costs.
Cash Flows from Financing Activities Net cash used in financing activities for the year ended December 31, 2022 of $55.6 million included $165.1 million for the repurchase of convertible subordinated notes due 2023, $69.8 million in distributions to noncontrolling interest, $43.9 million for the purchase of Entasis noncontrolling interest, $21.0 million for purchases of capped call options associated with our 2028 Notes and $8.5 million for the repurchase of common stock.
Net cash used in financing activities for the year ended December 31, 2022 of $55.6 million included $165.1 million for the repurchase of convertible subordinated notes due 2023, $69.8 million in distributions to noncontrolling interest, $43.9 million for the purchase of Entasis noncontrolling interest, $21.0 million for purchases of capped call options associated with our 2028 Notes and $8.5 million for the repurchase of common stock.
Cash Flows from Investing Activities Net cash used in investing activities for the year ended December 31, 2022 of $56.6 million included $159.1 million in cash paid for the acquisition of La Jolla, net of cash acquired, $58.7 million in purchases of equity and long-term investments, $60.9 million in purchases of equity investments managed by ISP Fund LP, $50.0 million in purchases of a trading security managed by ISP Fund LP and $23.4 million in net purchases and sales of other investments managed by ISP Fund LP.
Net cash used in investing activities for the year ended December 31, 2022 of $56.6 million included $159.1 million in cash paid for the acquisition of La Jolla, net of cash acquired, $58.7 million in purchases of equity and long-term investments, $60.9 million in purchases of equity investments managed by ISP Fund LP, $50.0 million in purchases of a trading security managed by ISP Fund LP and $23.4 million in net purchases and sales of other investments managed by ISP Fund LP.
Non-cash items included a net gain of $266.7 million recognized on the sale of TRC, partially offset by total non-cash charges of $241.3 million.
Non-cash items included a net gain of $266.7 million recognized on the sale of TRC, partially offset by net non-cash charges of $241.3 million.
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.
If we ever undergo an 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.
Royalties are recognized net of amortization of capitalized fees associated with any approval and launch milestone payments made to GSK. 75 Table of Contents Revenue Recognition from Product Sales We started recognizing revenue from product sales as a result of our acquisition of La Jolla.
Royalties are recognized net of amortization of capitalized fees associated with any approval and launch milestone payments made to GSK. 81 Table of Contents Revenue Recognition from Product Sales We started recognizing revenue from product sales as a result of our acquisition of La Jolla.
We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. 74 Table of Contents Business Combinations We use the acquisition method of accounting under Accounting Standards Codification (“ASC”) Topic 805, Business Combinations .
We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. Business Combinations We use the acquisition method of accounting under Accounting Standards Codification (“ASC”) Topic 805, Business Combinations .
Refer to Note 4, “License and Collaboration Arrangements” to the Consolidated Financial Statements for more information. We also enter into agreements in the normal course of business with vendors for manufacturing, clinical trials and preclinical studies, and other services and products for operating purposes.
Refer to Note 4, “License and Collaboration Arrangements” to the Consolidated Financial Statements for more information. We also enter into agreements in the normal course of business with vendors for manufacturing, clinical trials and preclinical studies, and other services and products for operating purposes. 90 Table of Contents
External services costs consist primarily of fees paid to consultants, contractors and contract manufacturing organizations. Research and development expenses for the years ended December 31, 2021 and 2020 were attributable to the product development efforts of Pulmoquine Therapeutics Inc., which was dissolved at the end of 2021.
External services costs consist primarily of fees paid to consultants, contractors and contract manufacturing organizations. Research and development expenses for the year ended December 31, 2021 were attributable to the product development efforts of Pulmoquine Therapeutics Inc., which was dissolved at the end of 2021.
Based upon our analyses of past, current and future sales and trends, there have been no indicators of impairment and no impairment charges have been recorded on the Capitalized Fees as of December 31, 2022. 76 Table of Contents Variable Interest Entities The primary beneficiary of a variable interest entity (“VIE’) is required to consolidate the assets and liabilities of the VIE.
Based upon our analyses of past, current and future sales and trends, there have been no indicators of impairment and no impairment charges have been recorded on the Capitalized Fees as of December 31, 2023. 82 Table of Contents Variable Interest Entities The primary beneficiary of a variable interest entity (“VIE’) is required to consolidate the assets and liabilities of the VIE.
Our company structure and organization are tailored to our focused activities of managing our respiratory assets partnered with GSK, commercializing our marketed products, developing of our product candidates, optimizing capital allocation, and providing for certain essential reporting and management functions of a public company. As of December 31, 2022, we had 101 employees.
Our company structure and organization are tailored to our focused activities of managing our respiratory assets partnered with GSK, commercializing our marketed products, developing of our product candidates, optimizing capital allocation, and providing for certain essential reporting and management functions of a public company. As of December 31, 2023, we had 112 employees.
Refer to Note 12, “Debt” to the Consolidated Financial Statements for more information. Our short-term and long-term obligations also include contractual payments related to our operating leases amounting to $4.1 million, with approximately $1.5 million payable through December 31, 2023 and approximately $1.3 million payable in each of the years 2024 and 2025.
Refer to Note 12, “Debt” to the Consolidated Financial Statements for more information. Our short-term and long-term obligations also include contractual payments related to our operating leases amounting to $3.1 million, with approximately $1.4 million payable through December 31, 2024 and 2025 and approximately $0.1 million payable in each of the years 2026 and 2027.
On March 30, 2022, Strategic Partners made an additional capital contribution of $110.0 million to the Partnership pursuant to the letter agreement entered into between Strategic Partners, the Partnership and Sarissa Capital Fund GP LP on May 20, 2021. The capital contributions will then be subject to a 36-month lock up period from the contribution date.
On March 30, 2022, Strategic Partners made an additional capital contribution of $110.0 million to the Partnership pursuant to the letter agreement entered into between Strategic Partners, the Partnership and Sarissa Capital Fund GP LP on May 20, 2021. The capital contribution is subject to a 36-month lock-up period from the contribution date.
Loss on Debt Extinguishment We recognized a loss of $20.7 million due to the total premium payment of $20.4 million and the write-off of $0.3 million debt issuance costs in connection with the repurchase of $144.8 million aggregate principal amount of our 2023 Notes in March 2022.
Loss on Debt Extinguishment For the year ended December 31, 2022, we recognized a loss of $20.7 million due to the total premium payment of $20.4 million and the write-off of $0.3 million debt issuance costs in connection with the repurchase of $144.8 million aggregate principal amount of our 2023 Notes in March 2022.
See the section entitled “Special Note Regarding Forward Looking Statements” above for more information. Management Overview Innoviva, Inc. (referred to as “Innoviva”, the “Company”, the “Registrant” or “we” and other similar pronouns) is a company with a portfolio of royalties and innovative healthcare assets.
See the section entitled “Special Note Regarding Forward Looking Statements” above for more information. Management Overview Innoviva, Inc. (and where context requires, together with its subsidiaries referred to as “Innoviva”, the “Company”, the “Registrant” or “we” and other similar pronouns) is a company with a portfolio of royalties and innovative healthcare assets.
Net Income Attributable to Noncontrolling Interests Net income attributable to noncontrolling interests, as compared to the prior years, was as follows: Change Year Ended December 31, 2022 2021 (In thousands) 2022 (1) 2021 2020 $ % $ % Net income attributable to noncontrolling interest $ 6,341 $ 102,983 $ 69,412 $ (96,642 ) (94 )% $ 33,571 48 % (1) The year ended December 31, 2022 represents the period from the initial date of consolidation of Entasis on February 17, 2022 to the date of the acquisition of Entasis on July 11, 2022, and the period from January 1, 2022 through the date of the sale of our ownership interest in TRC on July 20, 2022.
Net Income Attributable to Noncontrolling Interest Net income attributable to noncontrolling interests, as compared to the prior years, was as follows: Change Year Ended December 31, 2022 2022 (1) (In thousands) 2023 2022 (1) 2021 $ % $ % Net income attributable to noncontrolling interest $ — $ 6,341 $ 102,983 $ (6,341 ) (100 )% $ (96,642 ) (94 )% (1) The year ended December 31, 2022 represents the period from the initial date of consolidation of Entasis on February 17, 2022 to the date of the acquisition of Entasis on July 11, 2022, and the period from January 1, 2022 through the date of the sale of our ownership interest in TRC on July 20, 2022.
We expanded our portfolio of royalties and innovative healthcare assets through the acquisition of Entasis Therapeutics Holdings Inc. (“Entasis”) on July 11, 2022 and the acquisition of La Jolla Pharmaceutical Company (“La Jolla”) on August 22, 2022.
We expanded our portfolio through the acquisition of Entasis Therapeutics Holdings Inc. (“Entasis”) on July 11, 2022 and the acquisition of La Jolla Pharmaceutical Company (“La Jolla”) on August 22, 2022.
We derived approximately 96% of our net product sales for the same period from customers located in the U.S. and 4% for the rest of the world.
We derived approximately 91% of our net product sales for the same period from customers located in the U.S. and 9% from the rest of the world.
As of December 31, 2022, 2021 and 2020, we also had state net operating loss carryforwards of approximately $955.3 million, $648.6 million and $650.7 million, respectively, which will expire beginning 2029. As of December 31, 2022, 2021 and 2020, we had federal research and development tax credit carryforwards of nil, $42.1 million, and $43.6 million, respectively.
As of December 31, 2023, 2022 and 2021, we also had state net operating loss carryforwards of approximately $1.0 billion, $955.3 million and $648.6 million, respectively, which will expire beginning 2029. As of December 31, 2021, we had federal research and development tax credit carryforwards of $42.1 million.
Factors Affecting Comparability Our historical financial condition and results of operations for the periods presented may not be comparable, either between periods or going forward due to the factors described below. • Adoption of Accounting Standards Update (“ASU”) 2020-06 effective January 1, 2022; • Accounting consolidation of Entasis on February 17, 2022 and purchase of remaining noncontrolling interest in Entasis on July 11, 2022; • Sale of our 15% ownership interest in TRC on July 20, 2022; and • Acquisition of La Jolla on August 22, 2022.
As of December 31, 2023, the fair value of these warrants was minimal. 83 Table of Contents Factors Affecting Comparability Our historical financial condition and results of operations for the periods presented may not be comparable, either between periods or going forward due to the factors described below. • Adoption of Accounting Standards Update (“ASU”) 2020-06 effective January 1, 2022; • Accounting consolidation of Entasis on February 17, 2022 and purchase of remaining minority interest in Entasis on July 11, 2022; • Sale of our 15% ownership interest in TRC on July 20, 2022; and • Acquisition of La Jolla on August 22, 2022.
Cash provided by operating activities for the year ended December 31, 2021 was $363.8 million, consisting primarily of our net income of $368.8 million, adjusted for non-cash items such as $76.4 million of deferred income taxes, $13.8 million of depreciation and amortization, $9.1 million amortization of debt discount and issuance costs, $2.0 million of stock-based compensation expense, partially offset by a $89.3 million net increase in fair values of equity method investments and other equity and long-term investments and an increase in receivables from collaborative arrangements of $16.8 million.
Cash provided by operating activities for the year ended December 31, 2021 was $363.8 million, consisting primarily of our net income of $368.8 million, adjusted for non-cash items such as $76.4 million of deferred income taxes, $13.8 million of depreciation and amortization, $9.1 million amortization of debt discount and issuance costs, $2.0 million of stock-based compensation expense, partially offset by a $89.3 million net increase in fair values of equity method investments and equity and long-term investments and an increase in receivables from collaborative arrangements of $16.8 million. 89 Table of Contents Cash Flows from Investing Activities Net cash used in investing activities for the year ended December 31, 2023 of $66.8 million included $65.1 million for purchases trading securities, $31.2 million for purchases of equity investments managed by ISP Fund LP, $41.3 million in net purchases and sales of other investments managed by ISP Fund LP and $1.2 million for purchases of equity and long-term investments.
The amounts for the years ended December 31, 2022, 2021 and 2020 also include $9.2 million in unrealized losses, $5.7 million in unrealized gains and $30.5 million in unrealized gains, respectively, we recorded from our then investments in Entasis.
The changes in fair values of equity method investments for the years ended December 31, 2022 and 2021 also include $9.2 million in unrealized losses and $5.7 million in unrealized gains, respectively, we recorded from our then equity method investments in Entasis.
Income Taxes Income tax expense, net, as compared to the prior years, was as follows: Change Year Ended December 31, 2022 2021 (In thousands) 2022 2021 2020 $ % $ % Income tax expense, net $ 66,687 $ 76,439 $ 60,431 $ (9,752 ) (13 )% $ 16,008 26 % As of December 31, 2022, 2021 and 2020, we had net operating loss carryforwards for federal income taxes of $411.5 million, $92.9 million and $361.5 million, respectively.
Income Taxes Income tax expense, net, as compared to the prior years, was as follows: Change Year Ended December 31, 2023 2022 (In thousands) 2023 2022 2021 $ % $ % Income tax expense, net $ 14,376 $ 66,687 $ 76,439 $ (52,311 ) (78 )% $ (9,752 ) (13 )% As of December 31, 2023, 2022 and 2021, we had net operating loss carryforwards for federal income taxes of $543.5 million, $411.5 million and $92.9 million, respectively.
Following the acquisitions, our commercial and marketed products include GIAPREZA ® (angiotensin II), approved to increase blood pressure in adults with septic or other distributive shock, and XERAVA ® (eravacycline) for the treatment of complicated intra-abdominal infections in adults, and our development pipeline includes medicines for the treatment of bacterial infections, such as our lead asset sulbactam-durlobactam (“SUL-DUR”).
Following the acquisitions, our commercial and marketed products include GIAPREZA ® (angiotensin II), approved to increase blood pressure in adults with septic or other distributive shock, and XERAVA ® (eravacycline) approved for the treatment of complicated intra-abdominal infections in adults.
Net income attributable to noncontrolling interests for the year ended December 31, 2022 was $6.3 million compared to $103.0 million, a decrease of $96.6 million, which was mainly due to lower net income attributable to the sale of our ownership interest in TRC, offset with net loss attributable to Entasis’ noncontrolling interest. 81 Table of Contents Net income attributable to noncontrolling interests during the years ended December 31, 2021 and 2020 represents the 85% share of net income in Theravance Respiratory Company, LLC for Theravance Biopharma.
Net income attributable to noncontrolling interests for the year ended December 31, 2022 was $6.3 million compared to $103.0 million for the year ended December 31, 2021, or a decrease of $96.6 million, which was mainly due to lower net income attributable to the sale of our ownership interest in TRC, offset with net loss attributable to Entasis’ noncontrolling interest.
As of December 31, 2022, we had state research and development tax credits of $33.3 million. For the year ended December 31, 2022, 2021 and 2020, we recognized $66.7 million, $76.4 million and $60.4 million of income tax expense, respectively, mainly based on the taxable income generated during those years.
For the year ended December 31, 2023, 2022 and 2021, we recognized $14.4 million, $66.7 million and $76.4 million of income tax expense, respectively, mainly based on the taxable income generated during those years. We had total unrecognized tax benefits of $19.4 million as of December 31, 2023.
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. Our other Level 3 financial instruments include the Gate Neurosciences Inc.
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 a result of the acquisition of La Jolla, we also performed a preliminary analysis of its ownership changes and estimated that we will be able to utilize $254.0 million of its federal net operating losses, which are subject to annual limitations.
As a result of the acquisition of Entasis, we conducted a study of Entasis’ ownership changes and estimated that we will be able to utilize $155.6 million of its federal net operating losses, which are subject to annual limitations. 87 Table of Contents As a result of the acquisition of La Jolla, we also performed an analysis of its ownership changes and estimated that we will be able to utilize $309.5 million of its federal net operating losses, which are subject to annual limitations.
We no longer receive royalties on sales of TRELEGY ® ELLIPTA ® after we sold our royalty rights along with the sale of our ownership in TRC in July 2022.
We no longer receive royalties on sales of TRELEGY ® ELLIPTA ® after we sold our royalty rights along with the sale of our ownership in TRC in July 2022. As mentioned above, on July 20, 2022, we sold our ownership interest in TRC, which received royalty payments from GSK stemming from sales of TRELEGY ® ELLIPTA ® .
For the treatment of COPD, the collaboration has developed three combination products: • RELVAR ® /BREO ® ELLIPTA ® (“FF/VI”) (BREO ® ELLIPTA ® is the proprietary name in the U.S. and Canada and RELVAR ® ELLIPTA ® is the proprietary name outside the U.S. and Canada), a once‑daily combination medicine consisting of a LABA, vilanterol (VI), and an inhaled corticosteroid (“ICS”), fluticasone furoate (“FF”), • ANORO ® ELLIPTA ® (“UMEC/VI”), a once‑daily medicine combining a long‑acting muscarinic antagonist (“LAMA”), umeclidinium bromide (“UMEC”), with a LABA, vilanterol (VI), and • TRELEGY ® ELLIPTA ® (the combination FF/UMEC/VI), a once‑daily combination medicine consisting of an ICS, LAMA and LABA. 73 Table of Contents As a result of the launch and approval of RELVAR ® /BREO ® ELLIPTA ® and ANORO ® ELLIPTA ® in the U.S., Japan and Europe, in accordance with the LABA Collaboration Agreement, we paid milestone fees to GSK totaling $220.0 million during the year ended December 31, 2014.
For the treatment of COPD, the collaboration has developed three combination products: • RELVAR ® /BREO ® ELLIPTA ® (“FF/VI”) (BREO ® ELLIPTA ® is the proprietary name in the U.S. and Canada and RELVAR ® ELLIPTA ® is the proprietary name outside the U.S. and Canada), a once‑daily combination medicine consisting of a LABA, vilanterol (VI), and an inhaled corticosteroid (“ICS”), fluticasone furoate (“FF”), • ANORO ® ELLIPTA ® (“UMEC/VI”), a once‑daily medicine combining a long‑acting muscarinic antagonist (“LAMA”), umeclidinium bromide (“UMEC”), with a LABA, vilanterol (VI), and • TRELEGY ® ELLIPTA ® (the combination FF/UMEC/VI), a once‑daily combination medicine consisting of an ICS, LAMA and LABA.
As such, we have a wholly owned robust infectious disease and hospital operating platform as well as other assets in these therapeutic areas, such as a large equity stake in Armata Pharmaceuticals, a leader in bacteriophage development with potential use across a range of infectious and other serious diseases. We also have economic interests in other healthcare companies.
In addition, we own other strategic healthcare assets, such as a large equity stake in Armata Pharmaceuticals (“Armata”), a leader in development of bacteriophage with potential use across a range of infectious and other serious diseases. We also have economic interests in other healthcare companies.
The Monte Carlo simulation model also incorporates assumptions made based on transaction details such as the security's stock price, the expected term, maturity, risk-free interest rates and dividend yield, as well as volatility.
The Monte Carlo simulation model also incorporates assumptions made based on transaction details such as the security’s stock price, the expected term, maturity, risk-free interest rates and dividend yield, as well as volatility. We also hold preferred stock warrants in InCarda Therapeutics Inc. (“InCarda”), a privately held, clinical-stage biopharmaceutical company.
As of December 31, 2022, our notes payable obligation also included $96.2 million related to our 2023 Notes, which matured and was fully paid in January 2023 and $192.5 million related to our 2025 Notes which are due in 2025. Under the term of the 2025 Notes, we will make interest payments of 2.5% of outstanding principal.
Contractual Obligations As of December 31, 2023, our notes payable obligation included $192.5 million related to our 2025 Notes and $261.0 million related to our 2028 Notes, which are due in 2025 and 2028, respectively. Under the terms of the 2025 Notes and 2028 Notes, we will make interest payments of 2.5% and 2.125%, respectively, of outstanding principal.
Adequacy of Cash Resources to Meet Future Needs We believe that our cash and cash equivalents will be sufficient to meet our anticipated debt service and operating needs, as well our ongoing share repurchase program, for at least the next 12 months based upon current operating plans and financial forecasts.
Strategic Partners did not elect to make a withdrawal in 2023, thereby extending the lock-up period and withdrawal elections into subsequent years. 88 Table of Contents Adequacy of Cash Resources to Meet Future Needs We believe that our cash and cash equivalents will be sufficient to meet our anticipated debt service and operating needs, as well our ongoing share repurchase program, for at least the next 12 months based upon current operating plans and financial forecasts.
The changes in fair values of equity method investments are attributed mainly to changes in the fair value of our investments in Armata and Entasis. We recorded $152.5 million in unrealized losses, $78.7 million in unrealized gains and $19.0 million in unrealized gains associated with our Armata investments for the years ended December 31, 2022, 2021 and 2020, respectively.
We recorded $77.4 million in unrealized gains, $152.5 million in unrealized losses and $78.7 million in unrealized gains associated with our equity method investments in Armata for the years ended December 31, 2023, 2022 and 2021, respectively.
Quarterly payments to HCR under the Royalty Agreement start at a maximum royalty rate, with step-downs based on the achievement of annual net product sales thresholds. The current maximum royalty rate is 14%. Starting January 1, 2024, the maximum royalty rate may increase by an additional 4%, if an agreed-upon, cumulative net product sales threshold has not been met.
Quarterly payments to HCR under the Royalty Agreement start at a maximum royalty rate, with step-downs based on the achievement of annual net product sales thresholds. The current maximum royalty rate is 14%. Starting January 1, 2024, the maximum royalty rate was increased to 18% based on the terms of the Agreement.
Cash Flows Cash flows, as compared to the prior years, were as follows: Year Ended December 31, Change (In thousands) 2022 2021 2020 2022 2021 Net cash provided by operating activities $ 201,726 $ 363,813 $ 313,113 $ (162,087 ) $ 50,700 Net cash provided by (used in) investing activities (56,634 ) 43,722 (314,937 ) (100,356 ) 358,659 Net cash used in financing activities (55,568 ) (452,497 ) (29,785 ) 396,929 (422,712 ) 82 Table of Contents Cash Flows from Operating Activities Cash provided by operating activities for the year ended December 31, 2022 was $201.7 million, consisting primarily of our net income of $220.3 million and net changes in operating assets and liabilities of $6.9 million, partially offset by net non-cash items of $25.4 million.
Cash Flows Cash flows, as compared to the prior years, were as follows: Year Ended December 31, Change (In thousands) 2023 2022 2021 2023 2022 Net cash provided by operating activities $ 141,064 $ 201,726 $ 363,813 $ (60,662 ) $ (162,087 ) Net cash provided by (used in) investing activities (66,761 ) (56,634 ) 43,722 (10,127 ) (100,356 ) Net cash used in financing activities (171,839 ) (55,568 ) (452,497 ) (116,271 ) 396,929 Cash Flows from Operating Activities Cash provided by operating activities for the year ended December 31, 2023 was $141.1 million, consisting primarily of our net income of $179.7 million, partially offset by net non-cash items of $13.9 million and net changes in operating assets and liabilities of $24.8 million.
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.
The preferred stock warrants are classified as Level 3 financial instruments and recorded at fair value subject to remeasurement at each balance sheet date. 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.
Refer to Note 6, “Equity and Long-Term Investments and Fair Value Measurements”, to the Consolidated Financial Statements for more information. 80 Table of Contents The changes in fair values of other equity and long-term investments year over year reflect the realized gains and losses and net unrealized gains and losses in our strategic investments in InCarda, Gate, and those investments managed by ISP Fund LP.
The changes in fair values of equity and long-term investments year over year reflect the realized gains and losses and net unrealized gains and losses in our strategic investments in Armata, InCarda, and Gate, and those investments managed by ISP Fund LP.
On October 31, 2022, our Board of Directors authorized a new share repurchase program under which we may repurchase up to $100.0 million of Innoviva's outstanding shares of common stock.
On October 31, 2022, our Board of Directors authorized a share repurchase program under which we may repurchase up to $100.0 million of Innoviva’s outstanding shares of common stock. As of December 31, 2023, we have repurchased Innoviva common stock in the open market for total price of approximately $84.2 million.
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.
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. 80 Table of Contents 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 Innoviva common shares held by GSK.
Research & Development Research and development expenses, as compared to the prior year period, were as follows: Change Year Ended December 31, 2022 2021 (In thousands) 2022 2021 2020 $ % $ % Research and development $ 41,432 $ 576 $ 1,788 $ 40,856 * $ (1,212 ) (68 )% * Not Meaningful 78 Table of Contents Research and development expenses consisted of the following: Change Year Ended December 31, 2022 2021 (In thousands) 2022 2021 2020 $ % $ % External services $ 24,666 $ 576 $ 1,788 $ 24,090 * $ (1,212 ) (68 )% Compensation and related personnel costs 13,863 — — 13,863 * — * Facilities related 2,255 — — 2,255 * — * Other 648 — — 648 * — * Total research and development expense $ 41,432 $ 576 $ 1,788 $ 40,856 * $ (1,212 ) (68 )% * Not Meaningful Research and development expenses for the year ended December 31, 2022 were mainly attributable to Entasis’ product development efforts for our lead product candidate, SUL-DUR.
Research & Development Research and development expenses, as compared to the prior year period, were as follows: Change Year Ended December 31, 2023 2022 (In thousands) 2023 2022 2021 $ % $ % Research and development $ 33,922 $ 41,432 $ 576 $ (7,510 ) (18 )% $ 40,856 * * Not Meaningful Research and development expenses consisted of the following: Change Year Ended December 31, 2023 2022 (In thousands) 2023 2022 2021 $ % $ % External services $ 20,051 $ 24,666 $ 576 $ (4,615 ) (19 )% $ 24,090 * Compensation and related personnel costs 10,081 13,863 — (3,782 ) (27 )% 13,863 * Facilities related 2,483 2,255 — 228 10 % 2,255 * Other 1,307 648 — 659 102 % 648 * Total research and development expenses $ 33,922 $ 41,432 $ 576 $ (7,510 ) (18 )% $ 40,856 * * Not Meaningful Research and development expenses for the year ended December 31, 2023 were mainly attributable to our product development efforts for XACDURO ® .
Interest and Dividend Income and Other Expense, Net Interest and dividend income and other expense, net, as compared to the prior years, were as follows: Change Year Ended December 31, 2022 2021 (In thousands) 2022 2021 2020 $ % $ % Interest and dividend income $ (6,369 ) $ (1,839 ) $ (1,524 ) $ (4,530 ) 246 % $ (315 ) 21 % Other expense, net 3,373 3,626 348 (253 ) (7 )% 3,278 * * Not Meaningful Interest and dividend income increased for the year ended December 31, 2022, compared to the year ended December 31, 2021, due to higher interest rates and higher average balances of our cash equivalents, money market funds and other interest-bearing investments.
Selling, general and administrative expenses increased by $47.4 million for the year ended December 31, 2022, compared to the year ended December 31, 2021, mainly attributable to the consolidation of Entasis’ operating expenses and La Jolla’s operating expenses as previously mentioned. 85 Table of Contents Interest and Dividend Income and Other Expense, Net Interest and dividend income and other expense, net, as compared to the prior years, were as follows: Change Year Ended December 31, 2023 2022 (In thousands) 2023 2022 2021 $ % $ % Interest and dividend income $ (15,818 ) $ (6,369 ) $ (1,839 ) $ (9,449 ) 148 % $ (4,530 ) 246 % Other expense, net 4,969 3,373 3,626 1,596 47 % (253 ) * * Not Meaningful Interest and dividend income increased for the year ended December 31, 2023, compared to the year ended December 31, 2022, due to higher interest rates and higher average balances of our cash equivalents, money market funds and other interest-bearing investments.
As of December 31, 2022, we had three outstanding convertible notes, the 2023 Notes, the 2025 Notes and the 2028 Notes, in an aggregate principal amount of $549.7 million, of which $96.2 million matured and was fully paid in January 2023. The remainder amounts of $192.5 million and $261.0 million will become due in August 2025 and March 2028, respectively.
As of December 31, 2023, we had two outstanding convertible notes, the 2025 Notes and the 2028 Notes, in an aggregate principal amount of $453.5 million, of which $192.5 million and $261.0 million will become due in August 2025 and March 2028, respectively. Future interest payments associated with these notes total $34.6 million.
Utilization of net operating loss and tax credit carryforwards is subject to rules, provided by the Internal Revenue Code and similar state provisions, governing annual limitations tied to ownership changes. We conducted an analysis of the Company through December 31, 2022 to determine whether an ownership change had occurred since inception.
Our total unrecognized tax benefits as of December 31, 2022 and December 31, 2021 were $16.3 million and $14.9 million, respectively. Utilization of net operating loss and tax credit carryforwards is subject to rules, provided by the Internal Revenue Code and similar state provisions, governing annual limitations tied to ownership changes.
Collaborative Arrangements with GSK LABA Collaboration In November 2002, we entered into the LABA Collaboration Agreement with GSK to develop and commercialize once‑daily LABA products for the treatment of chronic obstructive pulmonary disorder (“COPD”) and asthma (the “LABA Collaboration Agreement”).
In fourth quarter 2023, Innoviva invested an additional $5.0 million in one of our assets, Gate Neurosciences, to support its strategy of developing next generation targeted CNS therapies. 79 Table of Contents Collaborative Arrangements with GSK LABA Collaboration In November 2002, we entered into the LABA Collaboration Agreement with GSK to develop and commercialize once‑daily LABA products for the treatment of chronic obstructive pulmonary disorder (“COPD”) and asthma (the “LABA Collaboration Agreement”).
As a result of the adoption, the debt discount associated with the cash settlement feature of our convertible senior notes due 2025 (the “2025 Notes”) was adjusted to zero as of January 1, 2022.
As a result of the adoption, the debt discount associated with the cash settlement feature of the 2025 Notes was adjusted to zero as of January 1, 2022. Interest expense for the year ended December 31, 2022 included the contractual interest expense and the amortization of debt issuance costs for our 2023 Notes, the 2025 Notes and 2028 Notes.
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 Innoviva common shares held by GSK.
This program has no termination date, may be suspended or discontinued at any time at our discretion and does not obligate us to acquire any amount of common stock. 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 Innoviva common shares held by GSK.
Selling, General & Administrative Selling, general and administrative expenses, as compared to the prior years, were as follows: Change Year Ended December 31, 2022 2021 (In thousands) 2022 2021 2020 $ % $ % Selling, general and administrative $ 63,538 $ 16,187 $ 13,883 $ 47,351 293 % $ 2,304 17 % Selling, general and administrative expenses increased by $47.4 million for the year ended December 31, 2022, compared to the year ended December 31, 2021, mainly attributable to the consolidation of Entasis' operating expenses starting February 17, 2022 and the consolidation of La Jolla’s operating expenses starting August 22, 2022.
Selling, General & Administrative Selling, general and administrative expenses, as compared to the prior years, were as follows: Change Year Ended December 31, 2023 2022 (In thousands) 2023 2022 2021 $ % $ % Selling, general and administrative $ 98,232 $ 63,538 $ 16,187 $ 34,694 55 % $ 47,351 293 % Selling, general and administrative expenses increased by $34.7 million for the year ended December 31, 2023, compared to the year ended December 31, 2022, mainly attributable to the resource reallocation from the research development function to general and administrative function after the FDA approval of XACDURO ® .
Interest expense for the year ended December 31, 2022 included the contractual interest expense and the amortization of debt issuance costs for our convertible subordinated notes due 2023 (the “2023 Notes”), the 2025 Notes and our convertible senior notes due 2028 (the “2028 Notes”).
Interest Expense Interest expense, as compared to the prior years, was as follows: Change Year Ended December 31, 2023 2022 (In thousands) 2023 2022 2021 $ % $ % Interest expense $ 19,157 $ 15,789 $ 19,070 $ 3,368 21 % $ (3,281 ) (17 )% The interest expense included the contractual interest expense and the amortization of debt issuance costs for our convertible subordinated notes due 2023 (the “2023 Notes”), our convertible senior notes due 2025 (the “2025 Notes”) and our convertible senior notes due 2028 (the “2028 Notes”), as well as effective interest expense on our deferred royalty obligation.
The year over year increase from 2020 to 2021 was primarily due to the growth in prescriptions and market share for TRELEGY ® ELLIPTA ® . Liquidity and Capital Resources Liquidity Since our inception, we have financed our operations primarily through private placements and public offerings of equity and debt securities and payments received under collaborative arrangements.
Liquidity and Capital Resources Liquidity Since our inception, we have financed our operations primarily through private placements and public offerings of equity and debt securities and payments received under collaborative arrangements. For the year ended December 31, 2023, we generated gross royalty revenues of $252.7 million and net product sales revenues of $60.6 million.
For the year ended December 31, 2022, we generated gross royalty revenues of $325.5 million and net product sales revenues of $19.7 million. Cash and cash equivalents totaled $291.0 million, royalties receivable from GSK totaled $54.7 million and accounts receivable associated with our product sales totaled $9.4 million, as of December 31, 2022.
Cash and cash equivalents totaled $193.5 million, royalties receivable from GSK totaled $69.6 million and accounts receivable associated with our product sales totaled $14.5 million, as of December 31, 2023.
Interest and dividend income increased for the year ended December 31, 2021, compared to the year ended December 31, 2020, primarily due to higher returns on investments, including those managed by ISP Fund LP. 79 Table of Contents Interest Expense Interest expense, as compared to the prior years, was as follows: Change Year Ended December 31, 2022 2021 (In thousands) 2022 2021 2020 $ % $ % Interest expense $ 15,789 $ 19,070 $ 18,331 $ (3,281 ) (17 )% $ 739 4 % The change in interest expense for the year ended December 31, 2022, compared to the year ended December 31, 2021, was primarily due to the adoption of ASU 2020-06, which simplifies the accounting for convertible debt instruments.
The change in interest expense for the year ended December 31, 2022, compared to the year ended December 31, 2021, was primarily due to the adoption of ASU 2020-06, which simplifies the accounting for convertible debt instruments.
Cash provided by operating activities for the year ended December 31, 2020 was $313.1 million, consisting primarily of our net income of $293.8 million, adjusted for non-cash items such as $60.4 million of deferred income taxes, $13.8 million of depreciation and amortization, $8.4 million amortization of debt discount and issuance costs, $1.7 million of stock-based compensation expense, partially offset by a $50.3 million increase in fair values of equity method investments and other equity and long-term investments and an increase in receivables from collaborative arrangements of $14.5 million.
Non-cash items included a $88.5 million net increase in fair values of equity method investments and equity and long-term investments, partially offset by $27.2 million in inventory fair value adjustments included in cost of products sold, $21.8 million in amortization of acquired intangible assets, $13.9 million of amortization of capitalized fees and depreciation of property and equipment, $5.8 million in stock-based compensation expense, $4.4 million of deferred income taxes and $2.1 million in amortization of debt discount and issuance costs.
Refer to Note 1, “Description of Operations and Summary of Significant Accounting Policies”, to the Consolidated Financial Statements for more information related to the adoption of ASU 2020-06.
Refer to Note 12, “Debt”, to the Consolidated Financial Statements for more information related to the adoption of ASU 2020-06. Refer to Note 5, “Consolidated Entities and Acquisitions”, to the Consolidated Financial Statements for more information related to our acquisitions of Entasis and La Jolla and the sale of our ownership interest in TRC.
This assessment requires us to apply judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Equity and Long-Term Investments We hold Series C preferred stock and preferred stock warrants in InCarda Therapeutics Inc. (“InCarda”), a privately held, clinical-stage biopharmaceutical company.
This assessment requires us to apply judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Equity and Long-Term Investments Our investments in Armata include a convertible note (the “Armata Convertible Note”) and a term loan (the “Armata Term Loan”), both of which are classified as Level 3 financial instruments.
Changes in Fair Values of Equity Method Investments and Other Equity and Long-Term Investments Changes in fair values of equity method investments, net, and other equity and long-term investments, net, as compared to the prior years, were as follows: Change Year Ended December 31, 2022 2021 (In thousands) 2022 2021 2020 $ % $ % Changes in fair values of equity method investments, net $ 161,749 $ (84,392 ) $ (49,511 ) $ 246,141 (292 )% $ (34,881 ) 70 % Changes in fair values of other equity and long-term investments, net $ (8,462 ) $ (6,638 ) $ (766 ) $ (1,824 ) 27 % $ (5,872 ) 767 % The changes in fair values of equity method investments and other equity and long-term investments year over year reflect the realized gains and losses and net unrealized gains and losses in our strategic investments in Armata, InCarda, and Gate, and those investments managed by ISP Fund LP.
Gain on Sale of TRC We recognized a net gain of $266.7 million for the year ended December 31, 2022 due to the sale of our ownership interest in TRC to Royalty Pharma, consummated on July 20, 2022. 86 Table of Contents Changes in Fair Values of Equity Method Investments and Equity and Long-Term Investments Changes in fair values of equity method investments and equity and long-term investments, net, as compared to the prior years, were as follows: Change Year Ended December 31, 2023 2022 (In thousands) 2023 2022 2021 $ % $ % Changes in fair values of equity method investments, net $ (77,392 ) $ 161,749 $ (84,392 ) $ (239,141 ) (148 )% $ 246,141 (292 )% Changes in fair values of equity and long-term investments, net $ (11,129 ) $ (8,462 ) $ (6,638 ) $ (2,667 ) 32 % $ (1,824 ) 27 % The changes in fair values of equity method investments for the year ended December 31, 2023 were favorable mainly due to Armata’s higher stock prices during this period.
The 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, we estimate that no portion of our net operating loss or credit carryforwards will expire before becoming available to reduce federal and state income tax liabilities.
We conducted an analysis of the Company through December 31, 2023 to determine whether an ownership change had occurred since inception. The study concluded that it is more likely than not that the Company did not experience an ownership change during the testing period.
Removed
Financial Highlights In the year ended December 31, 2022, the net income attributable to Innoviva stockholders was $213.9 million, a decrease of $52.0 million from net income attributable to Innoviva stockholders of $265.9 million in the year ended December 31, 2021.
Added
We currently have three primary sets of assets: a royalty portfolio, operating assets in critical care and infectious disease, and other strategic healthcare assets.
Removed
The lower net income was mainly driven by the decrease in fair values of equity and long-term investments, including $153.2 million in unrealized loss, and the decrease in our royalty revenues. These decreases were partially offset by a gain of $266.7 million recognized from the sale of TRC.
Added
Our new commercial and marketed product, XACDURO ® (formerly known as sulbactam-durlobactam or SUL-DUR), was approved by the United States Food and Drug Administration (“FDA”) on May 23, 2023 for the treatment of hospital-acquired and ventilator-associated pneumonias caused by Acinetobacter in adults. We commenced commercial sales of XACDURO ® in the third quarter of 2023.
Removed
Cash and cash equivalents totaled $291.0 million, and royalty and product sales receivable was $64.1 million as of December 31, 2022. Corporate Updates On July 11, 2022, we completed the purchase of all of the issued and outstanding equity securities of Entasis not already owned by Innoviva for $42.4 million in cash consideration.
Added
Our development pipeline includes zoliflodacin, an investigational treatment for uncomplicated gonorrhea that reported positive data in a pivotal Phase 3 clinical trial on November 1, 2023. As such, we have a wholly owned robust critical care and infectious disease operating platform with hospital focus.
Removed
Entasis brings to Innoviva an infectious disease focused research and development platform anchored by its lead asset SUL-DUR.
Added
Our focus on capital allocation and shareholder value maximization has led our company to a meaningful transformation, and 2023 was a significant transition year. In 2022 our financials contained royalty revenues from TRELEGY ® ELLIPTA ® which was divested mid-year in an economically accretive transaction.
Removed
On July 20, 2022, we completed the sale of our 15% ownership interest in TRC to Royalty Pharma Investments 2019 ICAV (“Royalty Pharma”) for $282.0 million, including payment for our portion of TRC’s cash balance of $4.4 million, and a potential $50.0 million sales-based milestone payments.
Added
Additionally, our acquisition and integration of operating companies further changed the structure of our financials compared to prior years. Through these changes, we believe we are well-positioned to create significant long-term shareholder value.
Removed
We also received full ownership of equity and other investments that TRC owned prior to the transaction. 72 Table of Contents On August 22, 2022, we completed the acquisition of La Jolla for a net cash price of $150.5 million.
Added
Financial Highlights • Royalty revenue: Fourth quarter 2023 gross royalty revenue from GSK was $69.6 million and full year was $252.7 million, compared to $54.7 million for the fourth quarter of 2022 and $253.4 million for the full year 2022. 78 Table of Contents • Net Product Sales: Fourth quarter 2023 net product sales and license revenue were $19.7 million, which included $13.1 million from GIAPREZA ® , $5.2 million from XERAVA ® , and $1.4 million from XACDURO ® , compared to $14.6 million for the fourth quarter of 2022.
Removed
La Jolla brings to Innoviva an established product portfolio, including GIAPREZA ® (angiotensin II), approved to increase blood pressure in adults with septic or other distributive shock and XERAVA ® (eravacycline) for the treatment of complicated intra-abdominal infections in adults.
Added
Full year 2023 net product sales and license revenue was $71.6 million, which included $41.3 million from GIAPREZA ® , $17.3 million from XERAVA ® , $2.0 million from XACDURO ® , and $11.0 million in milestone payments from our partners. • Equity and long-term investments: Fourth quarter and full year 2023 change in fair values of equity and long-term investments of $25.5 million and $88.5 million, respectively, was primarily attributable to Armata share price appreciation. • Net income: Fourth quarter 2023 net income was $61.5 million, or $0.97 basic per share, compared to a net loss of $68.3 million, or $(0.98) basic per share, for the fourth quarter 2022, driven primarily by higher revenue and positive impact of change in fair values of equity.
Removed
The timing and amount of any share repurchases under the share repurchase program will be determined by our management in its discretion based on ongoing assessments of the capital needs of the business, the market price of Innoviva’s common stock, prevailing stock prices, general market conditions and other considerations.
Added
Full year 2023 net income was $179.7 million, or $2.75 basic per share, compared to net income of $213.9 million, or $3.07 basic per share, for the full year 2022. • Share repurchase: During the fourth quarter 2023, Innoviva repurchased 1,121,835 shares of its outstanding common stock for $15.4 million.
Removed
Share repurchases under the program may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, in block trades, accelerated share repurchase transactions, exchange transactions, or any combination thereof or by other means in accordance with federal securities laws.
Added
During the year 2023, Innoviva repurchased 6,173,565 shares of its outstanding common stock for $76.5 million. Approximately $15 million of the authorized program remains outstanding as of year-end. • Cash and cash equivalents: Totaled $193.5 million. Royalty and net product sales receivables totaled $84.1 million as of December 31, 2023.
Removed
This program has no termination date, may be suspended or discontinued at any time at our discretion and does not obligate us to acquire any amount of common stock. As of December 31, 2022, we have repurchased and retired 647,394 shares in the open market for total price of approximately $8.5 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As of December 31, 2022, our debt bears fixed interest rates and we had no outstanding debt with variable interest rates. Our cash flows on these debt obligations are not subject to variability as a result of changes in interest rates.
Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As of December 31, 2023, our debt bears fixed interest rates and we had no outstanding debt with variable interest rates. Our cash flows on these debt obligations are not subject to variability as a result of changes in interest rates.
Therefore, we do not believe that the risk of a significant impact on our operating income from foreign currency fluctuations is substantial. 84 Table of Contents
Therefore, we do not believe that the risk of a significant impact on our operating income from foreign currency fluctuations is substantial. 91 Table of Contents

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