Innoviva: A Lot Of Transferring Elements (NASDAQ:INVA)

Our wretched species is so made that those that stroll on the well-trodden path at all times throw stones at those that are exhibiting a brand new street.”― Voltaire.

At the moment, we put Innoviva, Inc. (NASDAQ:INVA) within the highlight. As might be seen in the chart under, it has been considerably of a rollercoaster journey for the shareholder over the previous half-decade. The inventory seems low cost on a trailing earnings foundation, and a helpful added some vital shares to their stake within the second quarter of this yr. The corporate additionally named a brand new CFO late in August. This adopted the appointment of a brand new CEO in July. An evaluation follows under.

Firm Overview:

Innoviva, Inc. is a small biopharma concern headquartered simply outdoors of San Francisco in Burlingame, CA. The corporate is targeted on the event and commercialization of pharmaceutical merchandise. The inventory presently trades simply above $13.00 a share and sports activities an approximate market capitalization of $870 million.

Innoviva, Inc. acts as a diversified holding firm with a portfolio of royalties and different healthcare belongings. The primary asset Innoviva presently possesses is the royalty income from a number of merchandise it will get from drug big GSK plc (GSK). These embrace merchandise like RELVAR®/BREO® ELLIPTA® and ANORO® ELLIPTA®. The corporate offered its subsidiary Theravance Respiratory Firm in addition to its TRELEGY® ELLIPTA® royalty stream in July 2022. This asset was collectively owned by Theravance Biopharma (TBPH) on the time. This was offered to Royalty Pharma (RPRX) in the summertime of 2022 for $1.31 billion upfront, in addition to as much as $300 million in milestone funds. It ought to be famous that Theravance Respiratory Firm solely had a 15% stake on this three way partnership.

The corporate additionally will get internet product gross sales and license income from homegrown merchandise like XERAVA®, GIAPREZA® and lately permitted XACDURO®, which grew to become the primary pathogen-targeted remedy green-lighted to deal with hospital-acquired bacterial pneumonia and ventilator-associated bacterial pneumonia. The approval was garnered by Entasis Therapeutics, an affiliate of Innoviva Specialty Therapeutics, which is a unit of Innoviva.

Internet gross sales and license income for the corporate’s non-Glaxo related merchandise got here in at $18.7 million. This included a $3 million milestone payout from Innoviva’s associate for the FDA approval of XACDURO®. GIAPREZA® internet gross sales contributed $11.2 million in the course of the quarter, and XERAVA® internet gross sales have been $4.5 million.

Second Quarter Outcomes:

Innoviva, Inc. reported second quarter numbers on August 2nd. Innoviva had a GAAP revenue of two cents a share as revenues fell simply over 25% on a year-over-year foundation to $81 million. This was the results of the lack of the TRELEGY® ELLIPTA® royalty stream by the sale beforehand famous. Total gross sales have been additionally some $13 million over expectations for the quarter.

RELVAR®/BREO® ELLIPTA® contributed $54.4 million in royalties for the quarter, in comparison with $111.7 million in 2Q2022 when in addition they included TRELEGY®. ANORO® ELLIPTA® royalties rose $1.7 million to $11.3 million.

Analyst Commentary & Stability Sheet:

There has not been any new analyst agency commentary on the inventory since Could of this yr. In March by Could of this yr, Goldman Sachs ($13 value goal) reissued its Maintain score and Morgan Stanley ($10 value goal) maintained its Promote score. On Could tenth, EF Hutton ($22.50 value goal) reiterated the one Purchase score on the inventory presently.

Roughly one out of each six shares excellent is presently held brief. The CEO added simply over $32,000 to his stake within the agency in March of this yr, whereas a helpful proprietor bought over $9 million price of shares in complete in Could and June. That has been the one insider exercise within the inventory to this point in 2023.

The corporate ended the second quarter with simply over $170 million of money and marketable securities on its stability sheet. It additionally had $81 million price of gross sales and milestone receivables on its books on the finish of the primary half of the yr. Primarily based on perusing its stability sheet, the corporate has some $385 million in long-term debt. The corporate repurchased some $9.2 million of its personal inventory within the second quarter.

In July, after the quarter closed, Innoviva entered right into a credit score and safety settlement with Armata Prescribed drugs, Inc. (ARMP). The corporate additionally invested a complete of $25 million to advance Armata’s pipeline of therapeutic phage candidates. This may also assist the build-out of Armata’s state-of-the artwork cGMP manufacturing facility. These efforts are concentrating on infections brought on by the likes of Pseudomonas aeruginosa and Staphylococcus aureus. A director of Innoviva can be Armata’s new CEO as nicely.

Verdict:

The corporate made $2.37 a share in FY2022 on simply over $330 million. The one analyst agency that has provided up projections has revenues falling to only beneath $305 million in FY2023 and income dropping to $1.07 a share. They see flat earnings progress in FY2024 at the same time as gross sales rise 5 %.

To say Innoviva is a fancy set of shifting components appears an understatement. It has new C-Suite leaders, offered a serious a part of its income stream final summer time, has numerous subsidiaries, and a number of licensing agreements. The inventory additionally has a pretty big brief place, is generally disliked within the analyst neighborhood, and doesn’t pay a dividend.

Given down Innoviva, Inc. earnings progress this yr and flat subsequent, it’s onerous to justify getting concerned on this fairly complicated story for 13 occasions ahead earnings. Subsequently, I’m passing on making any funding advice round Innoviva.

In order for you one thing new, it’s important to cease doing one thing outdated“― Peter Drucker.

Editor’s Be aware: This text discusses a number of securities that don’t commerce on a serious U.S. change. Please concentrate on the dangers related to these shares.