Innoviva (INVA) Q4 2017 Earnings Call Summary

1Key Financial Results and Metrics

Q4 2017 Performance::

Net sales for RELVAR/BREO: $405.3 million (up 48% YoY)

U.S. net sales for BREO: $241.6 million (up 53% YoY)

ANORO Q4 net sales: $147.3 million (up 62% YoY)

Total royalties earned in Q4: $70.5 million (up 51% YoY)

Income from operations: $66.4 million (up 76% YoY)

Adjusted EBITDA: $72.3 million (up 65% YoY)

Net income attributable to stockholders: $58.4 million ($0.50 EPS, up 129% YoY)

Full Year 2017 Performance::

Total royalties: $227.9 million

Income from operations: $183.6 million (up 68% YoY)

Adjusted EBITDA: $207.5 million (91% margin)

Basic EPS: $1.25 (up 131% YoY)

Total cash and equivalents: $129.1 million

2Strategic Updates and Business Highlights

Innoviva reported record high TRx market share for RELVAR/BREO and ANORO in the U.S., with significant year-over-year growth in prescription volumes (BREO: 77%, ANORO: 69%).

The launch of TRELEGY ELLIPTA in November 2017 contributed to the portfolio, with over 3,000 TRxs recorded by year-end.

The company is focused on maximizing market share through its collaboration with GSK and is optimistic about the potential of its products.

Positive data from a study comparing ANORO to STIOLTO RESPIMAT was highlighted as a support for ANORO's commercialization.

3Forward Guidance and Outlook

Innoviva remains optimistic about continued profitability and cash generation in 2018, driven by strong underlying demand trends and favorable reimbursement status.

The company anticipates a positive impact from the U.S. tax reform, mainly due to a reduced corporate tax rate, which could lower cash taxes once NOLs are fully utilized.

The primary focus for 2018 will be on optimizing the commercial success and global rollout of its products.

4Bad News, Challenges, or Points of Concern

There were competitive pressures noted, particularly affecting the new-to-brand market share for BREO, which remained flat at 23.2% during Q4.

The company incurred costs related to a proxy contest, which impacted basic EPS by approximately $0.08 per share in 2017.

Despite strong overall performance, there is a need to monitor the competitive landscape and market dynamics closely.

5Notable Q&A Insights

The D&O insurance recovery of $2.7 million was for litigation costs incurred in prior quarters, not just Q4.

Couponing levels for BREO and ANORO are expected to decrease as coverage improves, although couponing remains an essential tool in a competitive market.

Initial feedback on TRELEGY from physicians is still early, with 3,000 scripts noted, but the company sees a market opportunity in the triple therapy segment for COPD. Overall, Innoviva's Q4 2017 results reflect strong growth and a positive outlook, although the company must navigate competitive pressures and the implications of ongoing litigation costs.