Investment Thesis

Overview: Innoviva Inc. enjoyed a fairly successful year in 2020, it is our view that Innoviva willingness &
ability to partner with industry leaders such as GlaxoSmithKline PLC, Sarissa Capital Management LP will serve
to create new ways for the company to invest not only into R&D and Patent Acquisition, but to also diversify
investments & stakes across the broad biotech & healthcare industry. Our view holds that over-time INVA’s
investments & potential catalysts will help drive earnings & revenue growth. Thus helping Innoviva reach our
target valuation.

- On December 14th 2020, Innoviva Inc. entered into a pact with Sarissa Capital LP. Based out of Greenwich
Connecticut, Sarissa Capital Management LP is a hedge fund with 7 clients and discretionary (AUM) of
($1,289,695,317 Billion USD), Sarissa’s mandate is based on constructive shareholder activism, within the
healthcare & biotechnology space. Sarissa owns shares in giant biotech companies along the likes of Biogen
Inc. & Jazz Pharmaceuticals PLC.

 This partnership includes an agreement under which Sarissa will help Innoviva develop its
acquisition strategy and an investment by Innoviva into an investment fund managed by Sarissa
Capital (300m).

 It’s also Important to note, that the current CEO Pavel Raifeld used to work on the investment team
at Sarissa Capital Management. By partnering together Innoviva Inc. will be able to refine its
acquisition strategy whilst diversifying its holdings into Sarissa Capital Management. Overtime, we
believe that this partnership will help increase INVA’s earnings within the near future.

- The late stage FDA approval of the once-daily inhaler, Trelegy Ellipta in Q3 of 2020 has helped Innoviva Inc.
partner with the world renowned biotech company, GlaxoSmithKline PLC (Ticker: GSK). This approval will
allow Innoviva Inc. to take a 15% royalty off the sale of the medication.

 Clinical asthma as seen by the graph (Figure 1) points to an increase in clinical asthma in Europe,
South America & Australia. It is our view that with the growing number of pollutants and irritants
within the air system, clinical asthma will continue to be a problem in the coming decades. Thus
Innoviva & GlaxoSmithKline PLC are well positioned to supply the world’s first three-way
combination inhaled respiratory medicine. Helping increase INVA’s earnings over-time.
 Catalysts
- Innoviva Inc. has recently announced the acquisition of a minority stake in Armata Pharmaceuticals. This deal
will have a transaction value of 15.95 Million USD, and will also include warrants to purchase an additional 8.7
Million shares.

 Armata Pharmaceuticals, Inc. is a clinical-stage biotechnology firm, which focuses on the

development of natural and synthetic bacteriophage-based therapies, in order to treat multidrug &
antibiotic resistant bacteria.

 According to the 2019 CDC AR Threats Report: “more than 2.8 million antibiotic infections occur in
the U.S each year, and more than 35,000 people die as a result”. This acquisition, will help Innoviva
Inc. diversify its equity investments, into the resistance therapy business whilst potentially providing
Innoviva an additional stream of revenue going into the future.

- During the second quarter of 2020 Innoviva Inc. completed a $35-million-dollar investment into Entasis
Therapeutics Holdings. Innoviva currently owns a total of 14 million of Entasis shares, or roughly 55% of its
outstanding stock.

 Entasis plans to use the net proceeds of this investment to complete phase 3 testing of a fixed-does
combination of its Sulbactam and Durlobactam drug candidates. These drug candidates hope to deal
with Multidrug resistant Acinetobactar Infections.

 Multidrug resistant Acinetobactar Infections cause pneumonia, bloodstream and urinary tract
infections. These infections tend to occur in patients in intensive care units, thus patients often find
themselves dealing with other medical problem’s whilst battling the multidrug resistant Infection.
Risk

Company Specific:
- Innoviva currently owns roughly 55% of Entasis Therapeutics Holdings, which seeks to complete a phase 3
FDA testing of it a fixed-does combination of its Sulbactam and Durlobactam drug. INVA’s holdings in Entasis
Therapeutics serves to diversify INVA’s equity holdings into the multi-drug resistance space. In the event the
FDA denies the phase 3 testing, Innoviva investments in Entasis Therapeutics affected, potentially impacting
INVA’s stock price.

Credit:

- Credit Risk: Due to INVA’s in-depth acquisition strategy & business model, Innoviva depends on investors to
provide capital for ongoing financing needs. This takes hold in the form of long-term I.O. U’s, more specifically
433M in convertible corporate debt.

- Based on the debt repayment distribution, Innoviva has to pay back its face value (principle) by 2023 &
2025. With the help of the Bloomberg Risk Model, our team was able to get a theoretical probability of
default for Innoviva. The Model takes into account; volatility, debt distribution, market-cap, earnings,
short-term debt, long-term debt…etc.

- Our team then decided to rank our 5 Year Default Probability against other Comps that were compiled
via Bloomberg Intelligence, in order to better understand & quantify our credit risk. INVA’s 5 Year
 Default Probability is at 2%, based on our industry analysis, it was concluded that, Innoviva’s industry
as a whole depends on investors to provide capital for financing. This is illustrated in the Default
Probability rankings.

Risk Mitigation:
- This corporate debt pays a 2.5% coupon and operates as a convertible bond, meaning up to a certain date,
These bonds can be converted into shares of common stock. This gives INVA; lower interest payments, as generally,
investors are willing to accept lower interest payments on convertible bonds, Tax advantages & Deferral of Stock
Dilution.

- The Risk of Default is also mitigated by the fact that INVA only owes $19 Million (USD) In Interest and has also increased
its earnings potential after the partnerships, acquisition and Investment into GlaxoSmithKline PLC, Sarissa Capital
Management, Armata Pharmaceuticals (TBD) & Entasis Therapeutics.

- Innoviva also has the option to re-finance their debt, at the end of 2023 and 2025. This refinancing would be done
during a period where interest rates are at a 40-year low, thus potentially saving INVA millions of dollars in the future.