Innoviva Swings to Loss as Armata Stake Slides
Innoviva reported a $83.4 million net loss for the quarter as a $161.0 million fair-value hit on its equity portfolio overwhelmed 19% revenue growth.
Innoviva (INVA) swung to a net loss of $83.4 million, or $1.14 a share, in the second quarter of 2026, reversing net income of $63.7 million a year earlier and $186.6 million in the first quarter of 2026. The specialty pharmaceutical and strategic investment company attributed the swing to a $161.0 million unfavorable fair-value change in its equity and long-term investments, driven mainly by a decline in the share price of Armata Pharmaceuticals, whose stake in Innoviva's portfolio fell to $457.7 million from $603.4 million over the quarter.
The loss came even as operating results improved. Total revenue rose 19% year-over-year to $119.6 million, an acceleration from 11% growth in the first quarter, when revenue reached $98.0 million. The divergence between operating performance and reported earnings underscored how much of Innoviva's bottom line now depends on the mark-to-market value of its strategic healthcare investment portfolio, which fell to $669.5 million as of June 30 from $773.3 million three months earlier, a roughly 13% sequential decline that reversed the prior two quarters' gains.
Inside the operating business, growth drivers shifted. Total net product sales from Innoviva Specialty Therapeutics grew 46% year-over-year to $51.8 million, up from 37% growth in the first quarter, but the U.S. portion of that business decelerated to 26% year-over-year growth, down from 29% in the first quarter and well below the 46% to 54% rates posted across 2025. Gross GSK royalty revenue declined for a fourth straight quarter, falling 11% year-over-year to $59.8 million, though it edged up 2% sequentially from $58.6 million.
A new revenue line offset some of the U.S. slowdown. License and other revenue jumped to $11.5 million from just $0.9 million a year earlier, tied to a licensing and distribution agreement with Dr. Reddy's Laboratories for XACDURO in emerging markets announced during the quarter. The deal marked a shift in how Innoviva frames its growth narrative, moving away from the ZEVTERA and NUZOLVENCE U.S. launch story that dominated commentary in the back half of 2025 and toward international licensing as core U.S. sales growth continued to slow.
Profitability on the operating line narrowed. Gross margin fell to roughly 76% of revenue from 83% a year earlier, as cost of products sold more than doubled to $22.3 million from $10.6 million, reflecting a mix shift toward lower-margin sales outside the U.S.. Selling, general and administrative expense rose 31% year-over-year to $34.6 million, a sharper increase than in prior quarters. Income from operations still rose modestly to $50.9 million from $48.8 million a year earlier, reversing sequential softness seen in the first quarter and in the third quarter of 2025.
Cash and cash equivalents declined to $570.4 million as of June 30 from $603.1 million at the end of March, reversing an increase in the prior quarter. Royalty and net product sales receivables grew 25% year-over-year to $110.6 million, accelerating from $92.6 million at the end of the first quarter.
Innoviva also disclosed a new wholly owned strategic healthcare asset, Nortiva Bio, built around the LYNX long-acting oral drug delivery platform, a business not mentioned in any of the prior four quarterly releases.