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Consolidated Entities | 9 Months Ended
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Sep. 30, 2024
Consolidated Entities |
Consolidated Entity | 5. Consolidated Entity ISP Fund LP In December 2020, Innoviva Strategic Partners LLC, our wholly owned subsidiary (“Strategic Partners”), contributed $300.0 million to ISP Fund LP (the “Partnership”) for investing in “long” positions in the healthcare, pharmaceutical and biotechnology sectors and became a limited partner. The general partner of the Partnership (“General Partner”) is an affiliate of Sarissa Capital. The Partnership Agreement provides for Sarissa Capital to receive management fees from the Partnership, payable quarterly in advance, measured based on the Net Asset Value of Strategic Partners’ capital account in the Partnership. In addition, General Partner is entitled to an annual performance fee based on the Net Profits of the Partnership during the annual measurement period. 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 lock-up period for the initial contribution of $190.0 million, which excludes the $110.0 million amount discussed below, expired in December 2023. Strategic Partners did not elect to make a withdrawal in 2023, thereby extending the lock-up period and withdrawal elections into subsequent years. In October 2024, Strategic Partners made an election to unwind its capital accounts in the Partnership in accordance with the terms of the Partnership Agreement. 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 shares held by GSK. 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, which will expire in March 2025. We consolidate ISP Fund LP under the VIE model as we have determined that ISP Fund LP is a VIE and we are the primary beneficiary of the entity via our related party relationships with Sarissa Capital entities. Our maximum exposure to loss is equal to the amount we invested in the entity. ISP Fund LP is determined to be an investment company under ASC 946, Financial Services – Investment Companies, as it meets all fundamental characteristics of an investment company, and its activities are consistent with those of an investment company. Since ISP Fund LP is subject to investment company industry specific guidance, we have retained the industry-specific guidance applied by the Partnership. In addition, as our investment in the Partnership is a passive investment for the Company and is not part of our main operations, the investments are presented as part of “Equity and long-term investments” in our condensed consolidated balance sheets. We report in our condensed consolidated statements of income and comprehensive income any investment gains and losses by the Partnership as part of “Changes in fair value of equity and long-term investments, net”, any interest and dividend income as part of “Interest and dividend income” and any investment expenses as part of “Other expense, net”. As of September 30, 2024, we continued to hold approximately 100% of the economic interest of the Partnership. As of September 30, 2024 and December 31, 2023, total assets of the Part nership were $252.4 million and $311.8 million, respectively, of which the majority was attributable to equity and long-term investments. As of September 30, 2024 and December 31, 2023, total liabilities were $0.8 million and $0.1 million, respectively. The partnership’s assets can only be used to settle its own obligations. During the three and nine months ended September 30, 2024, we recorded an immaterial amount and $0.3 million, respectively, of net investment-related expense incurred by the Partnership and $17.8 million and $59.8 million, respectively, of net negative changes in fair values of equity and long-term investments in the unaudited condensed consolidated statements of income and comprehensive income. During the three and nine months ended September 30, 2023, we recorded $1.1 million and $1.2 million, respectively, of net investment-related income earned by the Partnership, and $22.4 million and $22.7 million of net negative changes, respectively, in fair values of equity and long-term investments in the unaudited condensed consolidated statements of income and comprehensive income. The following is a summary of individual investments held by ISP Fund at each balance sheet date:
|  | September 30, |  |  | December 31, |
In thousands |  | 2024 |  |  | 2023 |
Common stock - Publicly traded healthcare companies |  |  |  |  |  |
United States |  | $ | 103,942 |  |  | $ | 184,926 |
United Kingdom |  |  | 2,583 |  |  |  | 2,942 |
Total common stock |  |  | 106,525 |  |  |  | 187,868 |
Preferred stock - Privately held healthcare companies |  |  |  |  |  |
United States |  |  | 53,658 |  |  |  | 52,530 |
Warrants - Privately held healthcare companies |  |  | 7,926 |  |  |  | 8,075 |
Money market fund and cash |  |  | 84,198 |  |  |  | 63,339 |
Total investments held by ISP Fund LP |  | $ | 252,307 |  |  | $ | 311,812 |

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