Net Income Per Share

9 Months Ended

Sep. 30, 2022

2. Net Income Per Share

Basic net income per share attributable to Innoviva stockholders is computed by dividing net income attributable to Innoviva stockholders by the weighted-average number of shares of common stock outstanding. Diluted net income per share attributable to Innoviva stockholders is computed by dividing net income attributable to Innoviva stockholders by the weighted-average number of shares of common stock and dilutive potential common stock equivalents then outstanding. Dilutive potential common stock equivalents include the assumed exercise, vesting and issuance of employee stock awards using the treasury stock method, as well as common stock issuable upon assumed conversion of our convertible subordinated notes due 2023 (the “2023 Notes”), our convertible senior notes due 2025 (the “2025 Notes”) and our convertible senior notes due 2028 (the “2028 Notes”) using the if-converted method.

The 2025 Notes are convertible, based on the applicable conversion rate, into cash, shares of our common stock or a combination thereof, at our election. Our current intent is to settle the principal amount of the 2025 Notes in cash upon conversion. The impact of the assumed conversion premium to diluted net income per share was historically computed using the treasury stock method until the adoption of ASU 2020-06. As the average market price per share of our common stock as reported on The Nasdaq Global Select Market was lower than the initial conversion price of $17.26 per share, there was no dilutive effect of the assumed conversion premium for the three and nine months ended September 30, 2021. The dilutive EPS of the notes was approximately $0.37 and $0.41 per share, respectively, using the if-converted method for the three and nine months ended September 30, 2022 as a result of the adoption of ASU 2020-06.

The following table shows the computation of basic and diluted net income per share for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands except per share data)	2022		2021		2022		2021
Numerator:
Net income attributable to Innoviva stockholders, basic	$	265,523	$	72,438	$	282,235	$	255,509
Add: interest expense on 2023 Notes		412		1,186		2,003		3,553
Add: interest expense on 2025 Notes		994		—		3,533		—
Add: interest expense on 2028 Notes		1,769		—		3,862		—
Net income attributable to Innoviva stockholders, diluted	$	268,698	$	73,624	$	291,633	$	259,062
Denominator:
Weighted-average shares used to compute basic net income per share attributable to Innoviva stockholders		69,731		69,458		69,640		86,298
Dilutive effect of 2023 Notes		4,866		12,189		6,629		12,189
Dilutive effect of 2025 Notes		11,150		—		11,150		—
Dilutive effect of 2028 Notes		9,955		—		7,559		—
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan		128		52		94		49
Weighted-average shares used to compute diluted net income per share attributable to Innoviva stockholders		95,830		81,699		95,072		98,536
Net income per share attributable to Innoviva stockholders
Basic	$	3.81	$	1.04	$	4.05	$	2.96
Diluted	$	2.80	$	0.90	$	3.07	$	2.63

Anti-Dilutive Securities

The following common stock equivalents were not included in the computation of diluted net income per share because their effect was anti-dilutive for the periods presented:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2022		2021		2022		2021
Outstanding options and awards granted under equity incentive plan and employee stock purchase plan		705		891		577		1,048
Outstanding stock warrant		526		—		177		—
Total		1,231		891		754		1,048