5. Consolidated Entity

ISP Fund LP

In 2020 and 2021, Innoviva Strategic Partners LLC, our wholly owned subsidiary (“Strategic Partners”), contributed a total of $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 capital contribution was subject to a 36-month lock up period from the contribution date.

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. 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 and we expect to receive distributions of our capital accounts through April 2026. Accordingly, a portion of our investments, which consist of cash and money market funds that we expect to be distributed within 12 months from the balance sheet date, were classified as “Current portion of ISP Fund investments” in the condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024, and the remaining equity investments managed by ISP Fund LP are expected to be distributed through April 2026. The first distribution, in the amount of $28.0 million, was received in April 2025. 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 March 31, 2025, we continued to hold approximately 100% of the economic interest of the Partnership. As of March 31, 2025 and December 31, 2024, total assets of the Partnership were $174.8 million and $255.7 million, respectively, of which the majority was attributable to equity and long-term investments. As of March 31, 2025 and December 31, 2024, total liabilities were $0.2 million. The partnership’s assets can only be used to settle its own obligations.

During the three months ended March 31, 2025, we recorded $0.8 million in investment-related expense incurred by the Partnership, generated $1.2 million interest income, recorded $2.5 million in net realized gains and $83.7 million in net unrealized losses as changes in fair values of equity and long-term investments, net, in the unaudited condensed consolidated statements of income and comprehensive income. During the three months ended March 31, 2024, we recorded $0.2 million of net investment-related expense incurred by the Partnership and $26.2 million of net negative changes in fair values of equity and long-term investments in the unaudited condensed consolidated statements of income and comprehensive income.