Innoviva Reports Fourth Quarter 2018 Financial Results

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

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

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

• Net cash and cash equivalents, short-term investments and marketable
  securities totaled $114.9 million, and royalties receivable from GSK
  totaled $83.3 million, as of December 31, 2018.

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

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

Recent Highlights

• GSK Net Sales:
  • Fourth quarter 2018 net sales of RELVAR^®/BREO^®
    ELLIPTA^® by GSK were $431.6 million, up 7% from $405.3
    million in the fourth quarter of 2017, with $236.4 million in net
    sales from the U.S. market and $195.2 million from non-U.S.
    markets.
  • Fourth quarter 2018 net sales of ANORO^® ELLIPTA^® by
    GSK were $186.2 million, up 26% from $147.3 million in the fourth
    quarter of 2017, with $125.7 million net sales from the U.S.
    market and $60.5 million from non-U.S. markets.
  • Fourth quarter 2018 net sales of TRELEGY^® ELLIPTAby
    GSK were $99.0 million with $75.8 million in net sales from the
    U.S. market and $23.2 million in net sales from non-U.S. markets.
    TRELEGY^® ELLIPTA^® was approved in the U.S.
    in September 2017.
• Product Updates:
  • In November 2018, the European Commission authorized an expanded
    label of TRELEGY^® ELLIPTA^® (fluticasone
    furoate/umeclidinium/ vilanterol ‘FF/UMEC/VI’) for once daily use
    in patients with moderate to severe chronic obstructive pulmonary
    disease (COPD) not adequately treated with dual bronchodilators or
    with an inhaled corticosteroid (ICS) and a long-acting β2-agonist
    (LABA).

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

About Innoviva

Innoviva, Inc. (referred to as “Innoviva”, the “Company”, or “we” and
other similar pronouns) is focused on royalty management. Innoviva’s
portfolio includes the respiratory assets partnered with Glaxo Group
Limited (“GSK”), including RELVAR^®/BREO^® ELLIPTA^®
(fluticasone furoate/ vilanterol, “FF/VI”), ANORO^® ELLIPTA^®
(umeclidinium bromide/ vilanterol, “UMEC/VI”) and TRELEGY^®
ELLIPTA^® (the combination FF/UMEC/VI). Under the Long-Acting
Beta2 Agonist (“LABA”) Collaboration Agreement, Innoviva is entitled to
receive royalties from GSK on sales of RELVAR^®/BREO^®
ELLIPTA^® and ANORO^® ELLIPTA^®. Innoviva
is also entitled to 15% of royalty payments made by GSK under its
agreements originally entered into with us, and since assigned to
Theravance Respiratory Company, LLC (“TRC”), relating to TRELEGY^®
ELLIPTA^® and any other product or combination of products
that may be discovered and developed in the future under the LABA
Collaboration Agreement and the Strategic Alliance Agreement with GSK
(referred to herein as the “GSK Agreements”), which have been assigned
to TRC other than RELVAR^®/BREO^® ELLIPTA^®
and ANORO^® ELLIPTA^®.

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

Forward Looking Statements

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

Contacts

Investors & Media:
Dan Zacchei /
Alex Kovtun
Sloane & Company
212-446-9500
dzacchei@sloanepr.com
/ akovtun@sloanepr.com