PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents unaudited condensed consolidated financial statements and accompanying notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20September%2030%2C%202023%20and%20December%2031%2C%202022) The balance sheets show a significant decrease in total assets and shareholders' equity from year-end 2022 Key Financial Position Metrics | Metric | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $71,685 | $298,172 | $(226,487) | -76.0% | | Short-term marketable securities | $62,318 | $29,312 | $32,006 | 109.2% | | Total current assets | $161,690 | $353,464 | $(191,774) | -54.3% | | Total assets | $413,590 | $607,400 | $(193,810) | -31.9% | | Total current liabilities | $25,368 | $28,715 | $(3,347) | -11.7% | | Total shareholders' equity | $246,130 | $441,800 | $(195,670) | -44.3% | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)%20for%20the%20three%20and%20nine%20months%20ended%20September%2030%2C%202023%20and%202022) The company reported a net loss in 2023, a significant shift from the net income in 2022 influenced by discontinued operations Key Operational Metrics | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $15,693 | $12,451 | $39,859 | $36,697 | | Total expenses | $24,453 | $26,653 | $89,654 | $111,223 | | Loss from operations | $(8,760) | $(14,202) | $(49,795) | $(74,526) | | Net income (loss) | $(8,950) | $916,631 | $(46,683) | $882,494 | | Net income (loss) per share - basic and diluted | $(0.17) | $12.14 | $(0.81) | $11.66 | - Net income from discontinued operations was **$0 for the three and nine months ended September 30, 2023**, compared to $932,654 thousand and $961,062 thousand for the same periods in 2022, respectively, reflecting the completion of the TRC Transaction[9](index=9&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity%20for%20the%20three%20and%20nine%20months%20ended%20September%2030%2C%202023%20and%202022) Shareholders' equity decreased significantly due to substantial share repurchases and the net loss incurred Changes in Shareholders' Equity | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | | Total Shareholders' Equity (Start of Period) | $280,161 | $441,800 | $480,578 | | Repurchase of ordinary shares, net of transaction costs | $(30,891) | $(166,787) | $(94,037) | | Employee share-based compensation expense | $6,262 | $19,547 | $32,784 | | Net loss | $(8,950) | $(46,683) | $882,494 | | Total Shareholders' Equity (End of Period) | $246,130 | $246,130 | $480,578 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20nine%20months%20ended%20September%2030%2C%202023%20and%202022) Cash flows were significantly impacted by share repurchases and a shift in investing activities from 2022 Cash Flow Summary | Cash Flow Activity (in thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(26,143) | $(62,936) | | Net cash (used in) provided by investing activities | $(32,020) | $1,114,848 | | Net cash used in financing activities | $(168,324) | $(723,334) | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(226,487) | $328,578 | | Cash, cash equivalents, and restricted cash at end of period | $72,521 | $419,374 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide essential context for the financial statements, covering accounting policies and key transactions [1. Organization and Summary of Significant Accounting Policies](index=7&type=section&id=1.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) The company is a biopharmaceutical firm whose financial statements are prepared under US GAAP for interim reporting - The company's primary focus is the development and commercialization of medicines[14](index=14&type=chunk) - The TRC Transaction (monetization of equity interest) in July 2022 is classified as **discontinued operations**[17](index=17&type=chunk) - Cash, cash equivalents, and marketable securities are expected to fund operations and the capital return program for **at least the next twelve months**[19](index=19&type=chunk) [2. Net Income (Loss) per Share](index=12&type=section&id=2.%20Net%20Income%20(Loss)%20per%20Share) The company reported a net loss per share from continuing operations for the three and nine months ended September 30, 2023 Net Income (Loss) per Share Calculation | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net loss from continuing operations | $(8,950) | $(16,023) | $(46,683) | $(78,568) | | Net income from discontinued operations | — | $932,654 | — | $961,062 | | Net income (loss) | $(8,950) | $916,631 | $(46,683) | $882,494 | | Weighted-average ordinary shares outstanding | 52,361 | 75,515 | 57,287 | 75,678 | | Net income (loss) per share - basic and diluted | $(0.17) | $12.14 | $(0.81) | $11.66 | - For periods with losses from continuing operations, potential ordinary shares (e.g., from equity incentive plans) are considered **anti-dilutive** and are not included in diluted net loss per share calculations[25](index=25&type=chunk) [3. Revenue](index=13&type=section&id=3.%20Revenue) Revenue from the Viatris collaboration increased, driven by higher YUPELRI net sales and lower Viatris costs Revenue by Source | Revenue Source (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Viatris collaboration agreement | $15,687 | $12,445 | $39,841 | $34,010 | | Collaboration revenue | $6 | $6 | $18 | $187 | | Licensing revenue | — | — | — | $2,500 | | Total revenue | $15,693 | $12,451 | $39,859 | $36,697 | - YUPELRI net sales (Theravance Biopharma implied 35% share) **increased by 9% to $20.4 million** for the three months and **10% to $56.1 million** for the nine months ended September 30, 2023, compared to the prior year periods[33](index=33&type=chunk) - The Pfizer Agreement for the skin-selective pan-JAK inhibitor program was **terminated in June 2023**, with the program returned to the company[38](index=38&type=chunk) R&D Reimbursement | R&D Reimbursement (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Viatris | $1,340 | $1,657 | $5,041 | $4,736 | [4. Cash, Cash Equivalents, and Restricted Cash](index=17&type=section&id=4.%20Cash%2C%20Cash%20Equivalents%2C%20and%20Restricted%20Cash) Total cash, cash equivalents, and restricted cash decreased significantly due to the company's capital return program Cash Position | Metric (in thousands) | September 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $71,685 | $418,538 | | Restricted cash | $836 | $836 | | Total cash, cash equivalents, and restricted cash | $72,521 | $419,374 | - The decrease in cash and cash equivalents is primarily attributed to the **capital return program** initiated in September 2022[41](index=41&type=chunk) [5. Investments and Fair Value Measurements](index=17&type=section&id=5.%20Investments%20and%20Fair%20Value%20Measurements) The company's available-for-sale securities totaled $62.3 million, consisting primarily of US government and corporate debt Investment Portfolio | Investment Type (in thousands) | September 30, 2023 Fair Value | December 31, 2022 Fair Value | | :--- | :--- | :--- | | US government securities | $29,510 | $24,881 | | US government agency securities | $4,363 | $20,873 | | Corporate notes | $28,445 | — | | Commercial paper | — | $37,280 | | Money market funds | $58,575 | $220,508 | | Total marketable securities | $120,893 | $303,542 | - As of September 30, 2023, all available-for-sale securities had contractual maturities **within nine months**, with a weighted-average maturity of approximately three months[45](index=45&type=chunk) - The company recorded accumulated other comprehensive loss of **$225 thousand** as of September 30, 2023, primarily from net unrealized losses on available-for-sale investments[47](index=47&type=chunk) [6. Subleases](index=21&type=section&id=6.%20Subleases) Sublease income increased significantly from the prior year, reflecting the subleasing of office and laboratory space Sublease Income | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Sublease income | $2,090 | $2,090 | $6,270 | $3,330 | - The company recognized increases of approximately **$6.5 million** to other assets and other long-term liabilities for lessor tenant improvement allowances assigned to sublessees[51](index=51&type=chunk) [7. Discontinued Operations](index=21&type=section&id=7.%20Discontinued%20Operations) The TRC Transaction, completed in July 2022, involved the sale of equity interests for $1.1 billion in cash - The TRC Transaction in July 2022 generated approximately **$1.1 billion in cash**[53](index=53&type=chunk) - The company is eligible for up to **$250.0 million in aggregate Milestone Payments** and 85% of certain outer-year royalty payments on Assigned Collaboration Products (primarily TRELEGY)[53](index=53&type=chunk) - The Contingent Consideration was initially fair valued at **$194.2 million** using a Monte Carlo simulation model, with no impairment indicators identified as of September 30, 2023[54](index=54&type=chunk)[56](index=56&type=chunk) Income from Discontinued Operations | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net income from discontinued operations | — | $932,654 | — | $961,062 | [8. Share-Based Compensation](index=25&type=section&id=8.%20Share-Based%20Compensation) The company granted market-based and performance-contingent RSUs and amended its 2013 Equity Incentive Plan - **165,000 market-based RSUs** with a fair value of $1.4 million were granted in the nine months ended September 30, 2023, vesting through February 2027[62](index=62&type=chunk) - **367,000 performance-contingent RSUs** with a fair value of $3.7 million were granted in the nine months ended September 30, 2023, with vesting dates through February 2026[63](index=63&type=chunk) - The 2013 Equity Incentive Plan was amended to extend its term by ten years and **reduce the number of shares reserved for issuance by 3,808,287 shares**[64](index=64&type=chunk) [9. Income Taxes](index=25&type=section&id=9.%20Income%20Taxes) The company recognized income tax expenses primarily due to uncertain tax positions related to transfer pricing Income Tax Expense | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Income tax expense | $1,367 | $2,430 | - Income tax expense for 2023 was primarily due to **uncertain tax positions related to transfer pricing**, despite consolidated net operating losses[65](index=65&type=chunk) - The company maintains a **full valuation allowance** on its California, other states, and foreign deferred tax assets[70](index=70&type=chunk) [10. Strategic Actions](index=27&type=section&id=10.%20Strategic%20Actions) The company announced strategic actions including an increased capital return program and discontinuation of research activities - The capital return program was increased to **$325.0 million**, with $294.6 million repurchased as of September 30, 2023, and $30.4 million remaining[73](index=73&type=chunk) - Research activities, including the inhaled JAK inhibitor program, were discontinued, resulting in a **17% headcount reduction** in March 2023[74](index=74&type=chunk) Restructuring Expenses | Restructuring Expenses (in thousands) | 9 Months Ended Sep 30, 2023 | | :--- | :--- | | Total restructuring and related expenses | $2,743 | | Cash-related expenses | $1,200 | | Non-cash expenses | $1,500 | - The company evaluated its sublease assets for impairment but **did not recognize a charge** as of September 30, 2023, as estimated undiscounted future sublease income exceeded carrying value[80](index=80&type=chunk) [11. Commitments and Contingencies](index=29&type=section&id=11.%20Commitments%20and%20Contingencies) The company is involved in patent infringement lawsuits against generic companies regarding YUPELRI - Patent infringement suits were filed against seven generic companies for YUPELRI, resulting in an **FDA stay of approval until May 2026**[81](index=81&type=chunk)[82](index=82&type=chunk) - A settlement agreement with Teva Pharmaceuticals, Inc. grants a royalty-free license to manufacture and market a generic YUPELRI version on or after **April 23, 2039**[84](index=84&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial condition, results of operations, and key strategic actions [Management Overview](index=32&type=section&id=Management%20Overview) Theravance Biopharma is a biopharmaceutical company focused on developing and commercializing medicines - The company's core products include **YUPELRI® (revefenacin)** inhalation solution for COPD and investigational **ampreloxetine** for symptomatic nOH in MSA patients[88](index=88&type=chunk) [2023 Strategic Actions](index=32&type=section&id=2023%20Strategic%20Actions) The company implemented strategic actions to increase its capital return program and discontinue research activities - The capital return program was increased to **$325.0 million**, with $294.6 million in shares repurchased as of September 30, 2023[89](index=89&type=chunk)[91](index=91&type=chunk) - Discontinued investment in research activities, including the inhaled Janus kinase (JAK) inhibitor program, and prioritized R&D resources towards **ampreloxetine Phase 3 and YUPELRI Phase 4 studies**[91](index=91&type=chunk) - A **17% headcount reduction** occurred in March 2023 as a result of halting research investments[91](index=91&type=chunk) - Restructuring and related expenses of **$2.7 million** were incurred for the nine months ended September 30, 2023, primarily related to R&D expenses[91](index=91&type=chunk) [Core Program Updates](index=34&type=section&id=Core%20Program%20Updates) YUPELRI continues to grow in the COPD market while ampreloxetine advances into a new Phase 3 study - YUPELRI (revefenacin) inhalation solution is an FDA-approved, once-daily nebulized LAMA for **COPD maintenance treatment** in the US[92](index=92&type=chunk) - A Phase 4 study for YUPELRI (PIFR-2) comparing lung function improvements in severe COPD patients completed enrollment, with top-line results expected in **January 2024**[98](index=98&type=chunk) YUPELRI Net Sales | YUPELRI Net Sales (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | 100% recorded by Viatris | $58,325 | $53,423 | $4,902 | 9% | | Theravance Biopharma implied 35% | $20,414 | $18,698 | $1,716 | 9% | - Ampreloxetine is an investigational, wholly-owned norepinephrine reuptake inhibitor (NRI) for **Multiple System Atrophy (MSA) patients** with symptomatic neurogenic orthostatic hypotension (nOH)[100](index=100&type=chunk) - A new Phase 3 clinical study (CYPRESS) for ampreloxetine in MSA patients with symptomatic nOH was initiated in Q1 2023, with the **OHSA composite score** as the primary endpoint[105](index=105&type=chunk) - Ampreloxetine received **Orphan Drug Designation** status from the FDA for the treatment of symptomatic nOH in MSA patients in May 2023[105](index=105&type=chunk) - Royalty Pharma agreed to invest up to **$40.0 million** in ampreloxetine development in exchange for low single-digit royalties, including a $25.0 million upfront payment received in July 2022[106](index=106&type=chunk) - The global license agreement with Pfizer for the skin-selective pan-JAK inhibitor program was **terminated in June 2023**, and the program was returned to the company[107](index=107&type=chunk) [Economic Interests and Other Assets](index=38&type=section&id=Economic%20Interests%20and%20Other%20Assets) The company retains economic interests in GSK-partnered respiratory programs, specifically TRELEGY ELLIPTA - The company sold its 85% economic interest in TRELEGY royalty rights to Royalty Pharma for approximately **$1.1 billion upfront cash** in July 2022[108](index=108&type=chunk) - The company is eligible to receive up to **$250.0 million in aggregate Milestone Payments** from Royalty Pharma based on TRELEGY global net sales thresholds from 2023 to 2026[109](index=109&type=chunk) - The company will receive **85% of TRELEGY royalty payments** for sales in the US on or after January 1, 2031, and outside the US on or after July 1, 2029[110](index=110&type=chunk) - TRELEGY global net sales grew from $661.4 million in 2019 to **$2.1 billion in 2022**, with consensus estimates projecting peak sales of $3.6 billion annually[113](index=113&type=chunk) [Development Projects](index=40&type=section&id=Development%20Projects) The company's development focus is on the YUPELRI Phase 4 and ampreloxetine Phase 3 studies - Current development focus is on the **YUPELRI Peak Inspiratory Flow Rate (PIFR-2) Phase 4 study** and the **ampreloxetine Phase 3 study (CYPRESS)**[115](index=115&type=chunk) - Research activities, including the inhaled JAK program (nezulcitinib), have been **discontinued** as part of the 2023 Strategic Actions[115](index=115&type=chunk) [Critical Accounting Policies and Estimates](index=40&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's financial statements are prepared using US GAAP, requiring management estimates and assumptions - Preparation of financial statements requires management to make **estimates and assumptions** that affect reported amounts[117](index=117&type=chunk) - **No material changes** to critical accounting policies and estimates since the Annual Report on Form 10-K for the year ended December 31, 2022[117](index=117&type=chunk) [Results of Operations](index=42&type=section&id=Results%20of%20Operations) Results show increased revenue from the Viatris collaboration and decreased R&D and restructuring expenses [Revenue](index=42&type=section&id=Revenue) Total revenue increased due to higher YUPELRI sales and lower Viatris costs Revenue by Source (Q3) | Revenue Source (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Viatris collaboration agreement | $15,687 | $12,445 | $3,242 | 26% | | Collaboration revenue | $6 | $6 | — | — | | Licensing revenue | — | — | — | — | | Total revenue | $15,693 | $12,451 | $3,242 | 26% | Revenue by Source (YTD) | Revenue Source (in thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Viatris collaboration agreement | $39,841 | $34,010 | $5,831 | 17% | | Collaboration revenue | $18 | $187 | $(169) | (90)% | | Licensing revenue | — | $2,500 | $(2,500) | NM | | Total revenue | $39,859 | $36,697 | $3,162 | 9% | - YUPELRI net sales (100% recorded by Viatris) **increased by 9% to $58.3 million** for the three months and **10% to $160.3 million** for the nine months ended September 30, 2023[118](index=118&type=chunk) [Research and Development](index=44&type=section&id=Research%20and%20Development) R&D expenses decreased due to the discontinuation of research activities as part of the 2023 Strategic Actions R&D Expenses (Q3) | R&D Expense Category (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Employee-related | $2,859 | $3,615 | $(756) | (21)% | | Share-based compensation | $2,004 | $2,623 | $(619) | (24)% | | External-related | $2,572 | $739 | $1,833 | 248% | | Facilities, depreciation, and other allocated expenses | $876 | $2,890 | $(2,014) | (70)% | | Total research & development | $8,311 | $9,867 | $(1,556) | (16)% | R&D Expenses (YTD) | R&D Expense Category (in thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Employee-related | $9,995 | $13,846 | $(3,851) | (28)% | | Share-based compensation | $6,301 | $10,062 | $(3,761) | (37)% | | External-related | $11,555 | $12,768 | $(1,213) | (10)% | | Facilities, depreciation, and other allocated expenses | $4,457 | $11,368 | $(6,911) | (61)% | | Total research & development | $32,308 | $48,044 | $(15,736) | (33)% | - R&D expenses were reduced due to the **2023 Strategic Actions**, including the discontinuation of research activities[122](index=122&type=chunk) [Selling, General and Administrative](index=44&type=section&id=Selling%2C%20General%20and%20Administrative) SG&A expenses were relatively flat for Q3 but increased for the nine-month period due to higher external expenses SG&A Expenses (Q3) | SG&A Expense (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Selling, general and administrative | $16,142 | $16,277 | $(135) | (1)% | SG&A Expenses (YTD) | SG&A Expense (in thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Selling, general and administrative | $54,603 | $50,341 | $4,262 | 8% | - The increase in SG&A for the nine-month period was primarily due to higher external-related expenses (**professional/financial advisory services, intellectual property protection**) and increased allocated overhead from reduced research activities[129](index=129&type=chunk) [Restructuring and Related Expenses](index=46&type=section&id=Restructuring%20and%20Related%20Expenses) Restructuring expenses decreased significantly, reflecting a smaller workforce reduction in 2023 compared to 2021 Restructuring Expenses (Q3) | Restructuring Expenses (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total restructuring and related expenses | — | $509 | $(509) | (100)% | Restructuring Expenses (YTD) | Restructuring Expenses (in thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total restructuring and related expenses | $2,743 | $12,838 | $(10,095) | (79)% | - The decrease in restructuring expenses was primarily due to a **smaller reduction in workforce** related to the 2023 Strategic Actions compared to the 2021 Restructuring[133](index=133&type=chunk) [Interest Expense](index=48&type=section&id=Interest%20Expense) Interest expense decreased significantly due to the retirement of convertible senior notes in August 2022 Interest Expense (Q3) | Interest Expense (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Ampreloxetine royalty contingency (non-cash) | $(609) | $(424) | $(185) | 44% | | 3.25% Convertible senior notes due 2023 | — | $(1,121) | $1,121 | NM | | Total interest expense | $(609) | $(1,545) | $936 | (61)% | Interest Expense (YTD) | Interest Expense (in thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Ampreloxetine royalty contingency (non-cash) | $(1,727) | $(424) | $(1,303) | 307% | | 3.25% Convertible senior notes due 2023 | — | $(5,395) | $5,395 | NM | | Total interest expense | $(1,727) | $(5,819) | $4,092 | (70)% | - The decrease in interest expense was primarily due to the **retirement of the 3.25% convertible senior notes** in August 2022[136](index=136&type=chunk) [Loss on Extinguishment of Debt](index=48&type=section&id=Loss%20on%20Extinguishment%20of%20Debt) No loss on extinguishment of debt was recognized in 2023, unlike the prior year Loss on Extinguishment of Debt | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Loss on extinguishment of debt | — | $(3,034) | — | $(3,034) | - The **$3.0 million loss** in the prior year was due to the extinguishment of 3.25% convertible senior notes, comprising transaction costs and the write-off of debt issuance costs[138](index=138&type=chunk) [Interest Income and Other Income (Expense), net](index=48&type=section&id=Interest%20Income%20and%20Other%20Income%20(Expense)%2C%20net) Interest and other income decreased in Q3 due to lower cash balances but increased year-to-date from higher yields Interest and Other Income (Q3) | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Interest income and other income (expense), net | $1,786 | $2,758 | $(972) | (35)% | Interest and Other Income (YTD) | Metric (in thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Interest income and other income (expense), net | $7,269 | $4,823 | $2,446 | 51% | - The nine-month increase was primarily due to higher interest income from **increased investment yields** and higher investment balances resulting from cash proceeds from the TRELEGY Royalty Transaction[140](index=140&type=chunk) [Provision for Income Tax Expense – Continuing Operations](index=50&type=section&id=Provision%20for%20Income%20Tax%20Expense%20%E2%80%93%20Continuing%20Operations) The provision for income tax expense was primarily due to uncertain tax positions related to transfer pricing Income Tax Expense | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Provision for income tax expense - Continuing operations | $(1,367) | — | $(2,430) | $(12) | - The income tax expense is primarily due to **uncertain tax positions** taken with respect to transfer pricing in 2022 and 2023[142](index=142&type=chunk) [Net Income from Discontinued Operations](index=50&type=section&id=Net%20Income%20from%20Discontinued%20Operations) No net income from discontinued operations was recognized in 2023 as the TRELEGY Royalty Transaction was completed in 2022 Income from Discontinued Operations | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net income from discontinued operations | — | $932,654 | — | $961,062 | - The prior year's net income from discontinued operations was primarily due to the **TRELEGY Royalty Transaction**[144](index=144&type=chunk) [Liquidity and Capital Resources](index=50&type=section&id=Liquidity%20and%20Capital%20Resources) The company had $134.0 million in cash and marketable securities with no long-term debt as of September 30, 2023 - As of September 30, 2023, the company had approximately **$134.0 million in cash, cash equivalents, and marketable securities** and no long-term debt[145](index=145&type=chunk) - The capital return program, increased to $325.0 million, resulted in **$166.4 million of share repurchases** for the nine months ended September 30, 2023, with $30.4 million remaining[146](index=146&type=chunk) - The company expects its cash, cash equivalents, and marketable securities to be **sufficient to fund its capital return program and operations** for at least the next twelve months[149](index=149&type=chunk) Cash Flow Summary | Cash Flow Activity (in thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(26,143) | $(62,936) | | Net cash (used in) provided by investing activities | $(32,020) | $1,114,848 | | Net cash used in financing activities | $(168,324) | $(723,334) | [Commitments and Contingencies](index=54&type=section&id=Commitments%20and%20Contingencies) The company indemnifies its officers and directors and has granted various share-based compensation awards - The company indemnifies officers and directors, believing the fair value of these agreements is minimal due to **insurance policies**[158](index=158&type=chunk) - For the nine months ended September 30, 2023, **165,000 market-based RSUs** ($1.4 million fair value) and **367,000 performance-contingent RSUs** ($3.7 million fair value) were granted[159](index=159&type=chunk)[160](index=160&type=chunk) - Share-based compensation expense of **$0.2 million and $0.5 million** was recognized for market-based RSUs for the three and nine months ended September 30, 2023, respectively[159](index=159&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risks have not materially changed from those disclosed in its 2022 Annual Report on Form 10-K - **No material changes** in market risks were identified as of September 30, 2023, compared to the previous Annual Report on Form 10-K[161](index=161&type=chunk) [Item 4. Controls and Procedures](index=54&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2023 - Disclosure controls and procedures were deemed **effective at the reasonable assurance level** as of September 30, 2023[162](index=162&type=chunk) - **No material changes** in internal control over financial reporting occurred during the third quarter of 2023[165](index=165&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) The company is engaged in patent infringement lawsuits regarding YUPELRI against multiple generic companies - Patent infringement suits were filed against seven generic companies for YUPELRI, leading to an **FDA stay of approval until May 2026**[166](index=166&type=chunk) - A settlement agreement with Teva Pharmaceuticals, Inc. grants a royalty-free license for a generic YUPELRI version to launch on or after **April 23, 2039**[167](index=167&type=chunk) [Item 1A. Risk Factors](index=56&type=section&id=Item%201A.%20Risk%20Factors) The company faces various risks spanning operations, market competition, regulations, and legal issues - The company may never achieve or sustain profitability from its operations, having recognized **net losses of $9.0 million and $46.7 million** for the three and nine months ended September 30, 2023, respectively[172](index=172&type=chunk) - Commercial success of YUPELRI depends on continued acceptance by physicians, patients, and payors, facing **competition from other nebulized LAMAs**[178](index=178&type=chunk) - **Delays or adverse results** in clinical studies for product candidates, such as ampreloxetine, or regulatory obstacles could harm the business[184](index=184&type=chunk)[189](index=189&type=chunk) - The company faces **substantial competition** from companies with greater resources and experience, potentially leading to others developing or commercializing products more successfully[200](index=200&type=chunk) - The company's ongoing economic interest in TRELEGY is subject to risks related to **GSK's commercialization efforts** and potential adverse developments[223](index=223&type=chunk)[224](index=224&type=chunk) - The **market price for the company's shares has fluctuated widely** and may continue to do so, influenced by clinical trial results, regulatory announcements, and market conditions[323](index=323&type=chunk)[324](index=324&type=chunk) - The company relies on patents, trade secrets, and confidentiality agreements to protect intellectual property, but these may be **challenged or insufficient** against infringement[272](index=272&type=chunk)[273](index=273&type=chunk) - Compliance with extensive and evolving data protection laws (e.g., CCPA, GDPR) and healthcare laws (e.g., Anti-Kickback Statute, False Claims Act) poses **significant obligations and potential liabilities**[284](index=284&type=chunk)[287](index=287&type=chunk)[314](index=314&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=119&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company executed share repurchases under its $325.0 million capital return program - The capital return program was increased to **$325.0 million**[352](index=352&type=chunk) - As of September 30, 2023, **$294.6 million of shares** had been repurchased under the program[352](index=352&type=chunk) - Approximately **$30.4 million remained** in the capital return program as of September 30, 2023, expected to be completed by year-end[352](index=352&type=chunk) Share Repurchases (Q3 2023) | Period | Total Number of Shares Purchased | Weighted Average Price Per Share | | :--- | :--- | :--- | | July 1, 2023 to July 31, 2023 | 1,039,000 | $9.88 | | August 1, 2023 to August 31, 2023 | 960,900 | $9.82 | | September 1, 2023 to September 30, 2023 | 1,178,000 | $9.43 | | Total | 3,177,900 | $9.70 | [Item 6. Exhibits](index=120&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including officer certifications and iXBRL data - Exhibit 31.1 and 31.2 are **Certifications of the Chief Executive Officer and Chief Financial Officer**, respectively, pursuant to Rules 13a-14(a) and 15d-14(a)[358](index=358&type=chunk) - Exhibit 32 contains **Certifications of the Chief Executive Officer and Chief Financial Officer** pursuant to 18 U.S.C. Section 1350[358](index=358&type=chunk) - Exhibit 101 includes the financial statements formatted in **iXBRL**, and Exhibit 104 is the Cover Page Interactive Data File[358](index=358&type=chunk) [Signatures](index=121&type=section&id=Signatures) The report is duly signed on behalf of the company by its Chief Executive Officer and Chief Financial Officer - The report was signed by Rick E Winningham, Chairman of the Board and Chief Executive Officer, and Aziz Sawaf, Senior Vice President and Chief Financial Officer, on **November 9, 2023**[362](index=362&type=chunk)

Financial Data and Key Metrics Changes - The company reported quarterly net sales of $675 million and year-to-date net sales of $2 billion, representing a 22% and 25% increase year-on-year respectively [1] - A non-GAAP loss of approximately $700,000 was reported for the quarter, nearing the objective of achieving non-GAAP profitability [16] - The company ended the period with $134 million in cash and equivalents, having bought back approximately $31 million worth of shares [59] Business Line Data and Key Metrics Changes - YUPELRI achieved total third-quarter net sales of $58.3 million, reflecting a 9% year-on-year growth and the highest quarterly net sales since launch [14] - The hospital-based commercial organization contributed significantly to YUPELRI's performance, with a market share improvement to 16.1% in the hospital-based long-acting NEB market [30] - The retail channel also showed solid performance, with a 9% quarter-on-quarter growth in prescriptions filled [82] Market Data and Key Metrics Changes - The company anticipates continued strong results in the fourth quarter based on recent commercial initiatives and internal performance indicators [32] - The market share for YUPELRI in the community setting reached an all-time high of 30.2%, improving over a percentage point sequentially [55] Company Strategy and Development Direction - The company is focused on maximizing the value of YUPELRI and progressing ampreloxetine towards significant value inflection points [85] - The strategic initiatives include educating on concomitant use of YUPELRI with LAMA therapy and enhancing transition of care coordination [29] - The company plans to file for approval in China in mid-2024, with potential milestone payments and royalties from YUPELRI sales [53] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future success of Theravance Biopharma, highlighting the importance of the PIFR-2 study results expected in January [27] - The company remains committed to maintaining a disciplined approach to expense management while focusing on growth opportunities [34] - Management noted that the current operating environment remains challenging, but the company is well-positioned to achieve milestone payments in 2024 and beyond [61] Other Important Information - The company is currently debt-free and has no need to access capital markets to realize the full potential of its assets [17] - The transition in R&D leadership was announced, with Rick Graham leaving the company and Ãine Miller taking over as head of development [43] Q&A Session Summary Question: Could you provide details on the ampreloxetine CYPRESS study process and expected results? - The study design includes a randomized withdrawal phase after an eight-week open-label period, with top-line results expected after data cleaning [65] Question: Can you discuss YUPELRI's hospital market share and sales dynamics? - The hospital market share increased to 16.1%, but overall sales in terms of doses were relatively flat compared to the first quarter due to seasonal factors [70][111] Question: What are the growth trends in the DME segment versus retail for YUPELRI? - The company continues to focus on ensuring that patients receive the best possible support in both DME and retail channels, although DME fulfillment trends lag due to the Medicare adjudication process [82][106]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Exact Name of Registrant as Specified in its Charter) Cayman Islands 98-1226628 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identificat ...

Theravance Biopharma, Inc. (NASDAQ:TBPH) Q2 2023 Earnings Conference Call August 7, 2023 5:00 PM ET Company Participants Rick Winningham - Chief Executive Officer Rhonda Farnum - Chief Business Officer Rick Graham - Head of Research and Development Aziz Sawaf - Chief Financial Officer Conference Call Participants David Risinger - Leerink Douglas Tsao - H.C. Wainwright Eva Xia Privitera - Cowen Operator Ladies and gentlemen, good afternoon. I'd like to welcome everyone to Theravance Biopharma's Second Quarte ...

20 $325 Million Capital Return Program On Track to Complete Program by Year-End ~$264M completed overall; ~$61M remaining in capital return program Up to $250M of Sales-based milestones12 between 2023-2026: Long-Term Value • US royalties return after Jan. 1, 2031 MSA, multiple system atrophy; nOH, neurogenic orthostatic hypotension. | --- | --- | --- | --- | |-------|----------------------------------------------------------------|-------------------------------------------------------------------|-------| ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, statements of shareholders' equity, and statements of cash flows, along with their accompanying notes, for the three months ended March 31, 2023, and 2022 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20March%2031%2C%202023%20and%20December%2031%2C%202022%20%28unaudited%29) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | | Total assets | $538,550 | $607,400 | $(68,850) | | Cash and cash equivalents | $187,665 | $298,172 | $(110,507) | | Total current assets | $261,338 | $353,464 | $(92,126) | | Total liabilities | $167,994 | $165,599 | $2,395 | | Total shareholders' equity | $370,559 | $441,800 | $(71,241) | | Ordinary shares issued and outstanding | 60,542 | 65,227 | (4,685) | | Accumulated deficit | $(875,999) | $(853,911) | $(22,088) | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20for%20the%20three%20months%20ended%20March%2031%2C%202023%20and%202022%20%28unaudited%29) | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | YoY Change (%) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------------- | | Total revenue | $10,417 | $13,196 | $(2,779) | (21)% | | Viatris collaboration agreement revenue | $10,411 | $10,687 | $(276) | (3)% | | Licensing revenue | $0 | $2,500 | $(2,500) | NM | | Total expenses | $35,329 | $50,419 | $(15,090) | (30)% | | Research and development | $14,572 | $23,253 | $(8,681) | (37)% | | Selling, general and administrative | $19,183 | $17,842 | $1,341 | 8% | | Restructuring and related expenses | $1,574 | $9,324 | $(7,750) | (83)% | | Net loss from continuing operations | $(22,088) | $(40,259) | $18,171 | 45% | | Net income from discontinued operations | $0 | $14,313 | $(14,313) | NM | | Net loss | $(22,088) | $(25,946) | $3,858 | 15% | | Net loss per share (continuing operations) | $(0.35) | $(0.53) | $0.18 | 34% | | Shares used to compute net loss per share | 62,934 | 75,247 | (12,313) | (16)% | | Share-based Compensation Expense (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Research and development | $2,441 | $4,530 | | Selling, general and administrative | $4,223 | $5,498 | | Restructuring and related expenses | $357 | $4,517 | | **Total share-based compensation expense** | **$7,021** | **$14,545** | [Condensed Consolidated Statements of Shareholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity%20for%20the%20three%20months%20ended%20March%2031%2C%202023%20and%202022%20%28unaudited%29) | Shareholder's Equity (in thousands) | December 31, 2022 | March 31, 2023 | | :---------------------------------- | :---------------- | :------------- | | Balances | $441,800 | $370,559 | | Repurchase of ordinary shares, net | — | $(55,353) | | Employee share-based compensation expense | $14,545 | $7,021 | | Net unrealized gain (loss) on marketable securities | $(28) | $66 | | Net loss | $(25,946) | $(22,088) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20three%20months%20ended%20March%2031%2C%202023%20and%202022%20%28unaudited%29) | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Net cash used in operating activities | $(11,221) | $(26,069) | $14,848 | | Net cash (used in) provided by investing activities | $(43,046) | $31,924 | $(74,970) | | Net cash used in financing activities | $(56,240) | $(1,448) | $(54,792) | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(110,507) | $4,407 | $(114,914) | | Cash, cash equivalents, and restricted cash at end of period | $188,501 | $95,203 | $93,298 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%28unaudited%29) [1. Organization and Summary of Significant Accounting Policies](index=7&type=section&id=1.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) - Theravance Biopharma is a biopharmaceutical company focused on the development and commercialization of medicines[12](index=12&type=chunk) - The condensed consolidated financial statements are unaudited, prepared in accordance with US GAAP for interim financial information, and include all necessary normal recurring adjustments[13](index=13&type=chunk) - The company expects its cash, cash equivalents, and marketable securities to be sufficient to fund its capital return program and operations for at least the next twelve months[17](index=17&type=chunk) [2. Net Loss per Share](index=8&type=section&id=2.%20Net%20Loss%20per%20Share) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss from continuing operations | $(22,088) | $(40,259) | | Net income from discontinued operations | $0 | $14,313 | | Net loss | $(22,088) | $(25,946) | | Weighted-average ordinary shares outstanding | 62,934 | 75,247 | | Net loss per share (continuing operations) | $(0.35) | $(0.53) | | Net loss per share (discontinued operations) | $0 | $0.19 | | Net loss per share | $(0.35) | $(0.34) | | Anti-dilutive Securities (in thousands) | March 31, 2023 | March 31, 2022 | | :-------------------------------------- | :------------- | :------------- | | Share issuances under equity incentive plans and employee share purchase plans | 4,289 | 6,831 | | Share issuances upon conversion of convertible senior notes | — | 6,676 | | **Total** | **4,289** | **13,507** | [3. Revenue](index=8&type=section&id=3.%20Revenue) - The company co-promotes YUPELRI® (revefenacin) inhalation solution in the US with Viatris under a **35% profit and loss sharing arrangement** and is eligible for up to **$205.0 million** in global development, regulatory, and sales milestone payments (excluding China and adjacent territories)[25](index=25&type=chunk)[26](index=26&type=chunk) | Revenue Source (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | YoY Change (%) | | :------------------------------ | :-------------------------------- | :-------------------------------- | :----- | :------------- | | Viatris collaboration agreement | $10,411 | $10,687 | $(276) | (3)% | | Other collaboration revenue | $6 | $9 | $(3) | (33)% | | Licensing revenue | $0 | $2,500 | $(2,500) | NM | | **Total revenue** | **$10,417** | **$13,196** | **$(2,779)** | **(21)%** | - The company's implied **35% share of YUPELRI net sales increased by 8% year-over-year**, from **$15.3 million** in Q1 2022 to **$16.4 million** in Q1 2023[32](index=32&type=chunk) - Reimbursement of R&D expenses from collaboration partners, primarily Viatris, was **$1.8 million** in Q1 2023, up from **$1.5 million** in Q1 2022[35](index=35&type=chunk) - In Q1 2022, the company recognized **$2.5 million** in licensing revenue from Pfizer for a development milestone related to its skin-selective pan-JAK inhibitor program; no licensing revenue was recognized in Q1 2023[37](index=37&type=chunk) [4. Cash, Cash Equivalents, and Restricted Cash](index=10&type=section&id=4.%20Cash%2C%20Cash%20Equivalents%2C%20and%20Restricted%20Cash) | Cash Category (in thousands) | March 31, 2023 | March 31, 2022 | | :--------------------------- | :------------- | :------------- | | Cash and cash equivalents | $187,665 | $94,367 | | Restricted cash | $836 | $836 | | **Total** | **$188,501** | **$95,203** | - The company recognized net realized and unrealized foreign currency gains of **$0.1 million** in Q1 2023, compared to losses of **$(0.4) million** in Q1 2022[41](index=41&type=chunk) [5. Investments and Fair Value Measurements](index=11&type=section&id=5.%20Investments%20and%20Fair%20Value%20Measurements) | Available-for-Sale Securities (in thousands) | March 31, 2023 (Fair Value) | December 31, 2022 (Fair Value) | | :------------------------------------------- | :-------------------------- | :----------------------------- | | US government securities | $29,119 | $24,881 | | US government agency securities | $9,269 | $20,873 | | Corporate notes | $38,949 | $0 | | Commercial paper | $14,925 | $37,280 | | Marketable securities (subtotal) | $92,262 | $83,034 | | Money market funds | $149,116 | $220,508 | | **Total** | **$241,378** | **$303,542** | - All available-for-sale securities had contractual maturities within **15 months** as of March 31, 2023, with a weighted-average maturity of approximately **three months**[44](index=44&type=chunk) - The company sold marketable securities for **$62.9 million** in Q1 2023, recognizing a realized gain of **$0.2 million**; no marketable securities were sold in Q1 2022[46](index=46&type=chunk) [6. Subleases](index=11&type=section&id=6.%20Subleases) - Sublease income from South San Francisco office and laboratory space was **$2.1 million** in Q1 2023, up from **$0.5 million** in Q1 2022[47](index=47&type=chunk) - In Q1 2023, the company recognized approximately **$6.5 million** in increases to other assets and other long-term liabilities for lessor tenant improvement allowances assigned to sublessees[49](index=49&type=chunk) [7. Discontinued Operations](index=13&type=section&id=7.%20Discontinued%20Operations) - In July 2022, the company completed the sale of its **85% economic interest** in TRC (TRELEGY royalty rights) to Royalty Pharma for approximately **$1.1 billion** in cash[50](index=50&type=chunk)[51](index=51&type=chunk) - The company is eligible to receive up to **$250.0 million** in aggregate Milestone Payments from Royalty Pharma (2023-2026) and **85% of outer-year royalties** on TRELEGY sales (US from Jan 1, 2031; ex-US from July 1, 2029)[51](index=51&type=chunk) - Net income from discontinued operations was **$0** in Q1 2023, compared to **$14.313 million** in Q1 2022, due to the TRC Transaction[55](index=55&type=chunk) [8. Share-Based Compensation](index=14&type=section&id=8.%20Share-Based%20Compensation) - In Q1 2023, the company granted **165,000 market-contingent restricted share units (RSUs)** with a fair value of **$1.4 million**, recognizing **$0.1 million** in share-based compensation expense[58](index=58&type=chunk) - Also granted **367,000 performance-contingent RSUs** with a fair value of **$3.7 million** in Q1 2023, but no expense was recognized as the achievement of performance vesting criteria was not probable[59](index=59&type=chunk) [9. Income Taxes](index=14&type=section&id=9.%20Income%20Taxes) - The company recognized an income tax benefit of **$0.4 million** in Q1 2023, primarily due to R&D tax credits and realizable US losses[60](index=60&type=chunk) - A full valuation allowance is maintained on US state, California, and foreign deferred tax assets[61](index=61&type=chunk) [10. Strategic Actions](index=14&type=section&id=10.%20Strategic%20Actions) - The capital return program was increased by **$75.0 million** to a total of **$325.0 million** As of March 31, 2023, **$183.3 million** of shares had been repurchased, with **$141.7 million** remaining[64](index=64&type=chunk) - The company discontinued its research activities, including the inhaled Janus kinase (JAK) inhibitor program, resulting in a **17% reduction in headcount** by the end of March 2023[65](index=65&type=chunk) - Restructuring and related expenses of **$1.6 million** were incurred in Q1 2023, primarily related to R&D expenses, with **$1.2 million cash** and **$0.4 million non-cash**[66](index=66&type=chunk) [11. Commitments and Contingencies](index=16&type=section&id=11.%20Commitments%20and%20Contingencies) - In January 2023, the company received ANDA notices from generic companies for YUPELRI and subsequently filed patent infringement suits, resulting in a stay of FDA approval for generic ANDAs through May 2026[72](index=72&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and future outlook, detailing strategic actions, program updates, and liquidity. It includes a discussion of revenue, expenses, and cash flows, highlighting the impact of recent strategic shifts and the COVID-19 pandemic [Forward-Looking Statements](index=17&type=section&id=Forward-Looking%20Statements) - The report contains forward-looking statements regarding strategy, future operations, financial position, and projected costs, which involve risks, uncertainties, and assumptions[73](index=73&type=chunk) - Actual results may differ materially from forward-looking statements due to various factors, including those discussed in 'Risk Factors' and the ongoing impact of COVID-19[73](index=73&type=chunk) [Management Overview](index=17&type=section&id=Management%20Overview) - Theravance Biopharma is a biopharmaceutical company focused on developing and commercializing medicines, including the FDA-approved YUPELRI® (revefenacin) for COPD and investigational ampreloxetine for symptomatic neurogenic orthostatic hypotension (nOH) in Multiple System Atrophy (MSA) patients[74](index=74&type=chunk)[75](index=75&type=chunk) [2023 Strategic Actions](index=18&type=section&id=2023%20Strategic%20Actions) - The capital return program was increased to **$325.0 million** As of March 31, 2023, **$183.3 million** of shares had been repurchased, with approximately **$109.7 million** remaining as of April 30, 2023, expected to be completed by year-end[80](index=80&type=chunk) - The company discontinued its research activities, including the inhaled Janus kinase (JAK) inhibitor program, and reduced headcount by approximately **17%** by the end of March 2023, prioritizing R&D resources for ampreloxetine Phase 3 and YUPELRI Phase 4 studies[80](index=80&type=chunk) - Restructuring and related expenses of **$1.6 million** were incurred in Q1 2023, primarily related to R&D, with **$1.2 million cash** and **$0.4 million non-cash**[77](index=77&type=chunk) [Impact of COVID-19 Pandemic](index=18&type=section&id=Impact%20of%20COVID-19%20Pandemic) - The COVID-19 pandemic continues to pose public health and economic challenges, with uncertain direct and indirect impacts on the company's business, operations, and financial condition[78](index=78&type=chunk) - The company is implementing measures to identify and mitigate adverse impacts and risks caused by the pandemic[79](index=79&type=chunk) [Core Program Updates](index=18&type=section&id=Core%20Program%20Updates) [YUPELRI (revefenacin) Inhalation Solution](index=18&type=section&id=YUPELRI%28revefenacin%29%20Inhalation%20Solution) - YUPELRI is an FDA-approved, once-daily nebulized long-acting muscarinic antagonist (LAMA) for the maintenance treatment of COPD in the US, co-promoted with Viatris (**35% profit/loss share** to the company)[80](index=80&type=chunk)[83](index=83&type=chunk) - The company is eligible for up to **$205.0 million** in global development, regulatory, and sales milestone payments from Viatris (excluding China and adjacent territories)[85](index=85&type=chunk) - The company's implied **35% share of YUPELRI net sales increased by 8% year-over-year**, from **$15.283 million** in Q1 2022 to **$16.434 million** in Q1 2023[87](index=87&type=chunk) [Ampreloxetine (TD-9855)](index=20&type=section&id=Ampreloxetine%20%28TD-9855%29) - Ampreloxetine is a wholly-owned investigational norepinephrine reuptake inhibitor (NRI) being developed for symptomatic neurogenic orthostatic hypotension (nOH) in Multiple System Atrophy (MSA) patients[88](index=88&type=chunk) - Previous Phase 3 studies (SEQUOIA and REDWOOD) did not meet primary endpoints for the overall patient population, but subgroup analysis suggested a benefit for MSA patients[90](index=90&type=chunk)[91](index=91&type=chunk) - A new Phase 3 clinical study in MSA patients with symptomatic nOH was initiated in Q1 2023, and the FDA granted Orphan Drug Designation status to ampreloxetine for this indication on May 9, 2023[92](index=92&type=chunk) - Royalty Pharma invested up to **$40.0 million** (**$25.0 million upfront** in July 2022) to advance ampreloxetine development in MSA, in exchange for unsecured low single-digit royalties on global net sales[93](index=93&type=chunk) [Out-Licensed Programs](index=20&type=section&id=Out-Licensed%20Programs) [Skin-selective Pan-JAK inhibitor Program](index=20&type=section&id=Skin-selective%20Pan-JAK%20inhibitor%20Program) - The company has a global license agreement with Pfizer for its preclinical skin-selective, locally-acting pan-JAK inhibitor program[96](index=96&type=chunk) - Received a **$2.5 million** development milestone payment from Pfizer in March 2022 for the first patient dosed in a Phase 1 clinical trial[97](index=97&type=chunk) - Eligible to receive up to an additional **$237.5 million** in development and sales milestone payments from Pfizer, plus tiered royalties[98](index=98&type=chunk) [Selective 5-HT4 Agonist (TD-8954)](index=20&type=section&id=Selective%205-HT4%20Agonist%20%28TD-8954%29) - The collaboration agreement with Takeda for TD-8954, a selective 5-HT4 receptor agonist for gastrointestinal motility disorders, was mutually discontinued in February 2023 after a Phase 2 study did not meet its endpoints[99](index=99&type=chunk) [Economic Interests and Other Assets](index=21&type=section&id=Economic%20Interests%20and%20Other%20Assets) [Mid- and Long-Term Economic Interest in GSK-Partnered Respiratory Programs](index=21&type=section&id=Mid-%20and%20Long-Term%20Economic%20Interest%20in%20GSK-Partnered%20Respiratory%20Programs) - Following the sale of TRC in July 2022, the company retains future value through contingent milestone payments (up to **$250.0 million** aggregate, 2023-2026) and **85% of outer-year royalties** on TRELEGY sales (US from Jan 1, 2031; ex-US from July 1, 2029)[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) [TRELEGY (the combination of fluticasone furoate/umeclidinium bromide/vilanterol)](index=21&type=section&id=TRELEGY%20%28the%20combination%20of%20fluticasone%20furoate%2Fumeclidinium%20bromide%2Fvilanterol%29) - TRELEGY is approved for once-daily maintenance treatment of COPD in the US, EU, and other countries, and for asthma in adults in the US since September 2020[104](index=104&type=chunk)[105](index=105&type=chunk) - Global net sales of TRELEGY increased from **$661.4 million** in 2019 to **$2.1 billion** in 2022, with consensus estimates projecting global peak sales of **$3.6 billion** annually[105](index=105&type=chunk) [Development Projects](index=22&type=section&id=Development%20Projects) - The company's development projects are prioritized on near-term value opportunities, focusing on the YUPELRI Peak Inspiratory Flow Rate (PIFR-2) Phase 4 study and the ampreloxetine Phase 3 study[107](index=107&type=chunk) - Research activities, including the inhaled JAK program (nezulcitinib), were discontinued on February 27, 2023[107](index=107&type=chunk) [Critical Accounting Policies and Estimates](index=22&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - There have been no material changes to the critical accounting policies and estimates discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2022[108](index=108&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) [Revenue](index=22&type=section&id=Revenue) | Revenue Source (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | YoY Change (%) | | :------------------------------ | :-------------------------------- | :-------------------------------- | :----- | :------------- | | Viatris collaboration agreement | $10,411 | $10,687 | $(276) | (3)% | | Collaboration revenue | $6 | $9 | $(3) | (33)% | | Licensing revenue | $0 | $2,500 | $(2,500) | NM | | **Total revenue** | **$10,417** | **$13,196** | **$(2,779)** | **(21)%** | - The company's implied **35% YUPELRI net sales increased by 8% year-over-year** to **$16.434 million** in Q1 2023, but Viatris collaboration agreement revenue decreased by **3%** due to higher costs incurred by Viatris[109](index=109&type=chunk)[112](index=112&type=chunk) - No licensing revenue was recognized in Q1 2023, compared to **$2.5 million** in Q1 2022 from a Pfizer development milestone[113](index=113&type=chunk) [Research and Development](index=23&type=section&id=Research%20and%20Development) | R&D Expense Category (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | YoY Change (%) | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :----- | :------------- | | Employee-related | $4,377 | $6,264 | $(1,887) | (30)% | | Share-based compensation | $2,441 | $4,530 | $(2,089) | (46)% | | External-related | $5,328 | $7,245 | $(1,917) | (26)% | | Facilities, depreciation, and other | $2,426 | $5,214 | $(2,788) | (53)% | | **Total research & development** | **$14,572** | **$23,253** | **$(8,681)** | **(37)%** | - The **37% decrease in R&D expenses** was primarily driven by the 2021 Restructuring (**75% workforce reduction**) and the 2023 Strategic Actions (**17% R&D headcount reduction**), partially offset by expenses for the new ampreloxetine Phase 3 clinical study[117](index=117&type=chunk)[118](index=118&type=chunk) - Reimbursement of R&D expenses from collaboration partners increased to **$1.8 million** in Q1 2023 from **$1.5 million** in Q1 2022[119](index=119&type=chunk) [Selling, General and Administrative](index=24&type=section&id=Selling%2C%20General%20and%20Administrative) | SG&A Expense (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | YoY Change (%) | | :---------------------------- | :-------------------------------- | :-------------------------------- | :----- | :------------- | | Selling, general and administrative | $19,183 | $17,842 | $1,341 | 8% | - The **$1.3 million increase in SG&A expenses** was due to increases in external-related expenses (**$2.3 million**) and facilities, depreciation, and other allocable expenses (**$0.6 million**), offsetting decreases in employee-related and share-based compensation expenses (**$1.6 million**) from the 2021 Restructuring[120](index=120&type=chunk) - Share-based compensation expense related to SG&A decreased from **$5.5 million** in Q1 2022 to **$4.2 million** in Q1 2023[121](index=121&type=chunk) [Restructuring and Related Expenses](index=24&type=section&id=Restructuring%20and%20Related%20Expenses) | Restructuring Expense (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | YoY Change (%) | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :----- | :------------- | | Restructuring and related expenses | $1,217 | $4,807 | $(3,590) | (75)% | | Share-based compensation expense (non-cash) | $357 | $4,517 | $(4,160) | (92)% | | **Total restructuring and related expenses** | **$1,574** | **$9,324** | **$(7,750)** | **(83)%** | - The **83% decrease in restructuring expenses** was due to a smaller workforce reduction in the 2023 Strategic Actions compared to the larger 2021 Restructuring[122](index=122&type=chunk) - All **$1.6 million** in Q1 2023 restructuring expenses were attributed to the 2023 Strategic Actions, primarily R&D, with **$1.2 million cash** and **$0.4 million non-cash**[124](index=124&type=chunk) [Interest Expense](index=25&type=section&id=Interest%20Expense) | Interest Expense (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | YoY Change (%) | | :------------------------------ | :-------------------------------- | :-------------------------------- | :----- | :------------- | | Ampreloxetine royalty contingency (non-cash) | $(550) | $0 | $(550) | NM | | 3.25% Convertible senior notes due 2023 | $0 | $(2,137) | $2,137 | NM | | **Total interest expense** | **$(550)** | **$(2,137)** | **$1,587** | **(74)%** | - The **74% decrease in interest expense** was primarily due to the retirement of the 3.25% convertible senior notes in August 2022, partially offset by non-cash interest expense from the ampreloxetine funding by Royalty Pharma[126](index=126&type=chunk) [Interest Income and Other Income (Expense), net](index=25&type=section&id=Interest%20Income%20and%20Other%20Income%20%28Expense%29%2C%20net) | Income (Expense) (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | YoY Change (%) | | :------------------------------ | :-------------------------------- | :-------------------------------- | :----- | :------------- | | Interest income and other income (expense), net | $2,979 | $(375) | $3,354 | (894)% | - The significant increase in net interest and other income was primarily due to higher interest income from increased investment yields and higher investment balances resulting from the TRELEGY Royalty Transaction in July 2022[127](index=127&type=chunk) [Provision for Income Tax Benefit (Expense) – Continuing Operations](index=25&type=section&id=Provision%20for%20Income%20Tax%20Benefit%20%28Expense%29%20%E2%80%93%20Continuing%20Operations) | Income Tax (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | YoY Change (%) | | :------------------------ | :-------------------------------- | :-------------------------------- | :----- | :------------- | | Provision for income tax benefit (expense) | $395 | $(524) | $919 | (175)% | - The company recognized an income tax benefit of **$0.4 million** in Q1 2023, primarily due to R&D tax credits and realizable US losses, compared to an income tax expense of **$0.5 million** in Q1 2022[128](index=128&type=chunk) [Net Income from Discontinued Operations](index=26&type=section&id=Net%20Income%20from%20Discontinued%20Operations) | Discontinued Operations (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | YoY Change (%) | | :------------------------------------- | :-------------------------------- | :-------------------------------- | :----- | :------------- | | Net income from discontinued operations | $0 | $14,313 | $(14,313) | NM | - No net income from discontinued operations was recorded in Q1 2023, following the completion of the TRELEGY Royalty Transaction in July 2022, compared to **$14.313 million** in Q1 2022[132](index=132&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) [2023 Strategic Actions](index=26&type=section&id=2023%20Strategic%20Actions) - The capital return program was increased to **$325.0 million** As of March 31, 2023, **$183.3 million** of shares had been repurchased, with **$109.7 million** remaining as of April 30, 2023, expected to be completed by year-end[134](index=134&type=chunk) [Adequacy of cash resources to meet future needs](index=26&type=section&id=Adequacy%20of%20cash%20resources%20to%20meet%20future%20needs) - The company expects its existing cash, cash equivalents, and marketable securities to be sufficient to fund its capital return program and operations for at least the next twelve months[136](index=136&type=chunk) [Cash Flows](index=26&type=section&id=Cash%20Flows) | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Net cash used in operating activities | $(11,221) | $(26,069) | $14,848 | | Net cash (used in) provided by investing activities | $(43,046) | $31,924 | $(74,970) | | Net cash used in financing activities | $(56,240) | $(1,448) | $(54,792) | - Net cash used in operating activities decreased by **$14.8 million**, while net cash used in investing activities increased by **$75.0 million**, primarily due to increased purchases of marketable securities[137](index=137&type=chunk)[141](index=141&type=chunk) - Net cash used in financing activities increased significantly by **$54.8 million**, driven by **$55.3 million** in ordinary share repurchases as part of the capital return program[137](index=137&type=chunk)[143](index=143&type=chunk) [Commitments and Contingencies](index=27&type=section&id=Commitments%20and%20Contingencies) - The company indemnifies its officers and directors for certain events, with the fair value of these agreements considered minimal[145](index=145&type=chunk) [Market and Performance-Contingent Awards](index=27&type=section&id=Market%20and%20Performance-Contingent%20Awards) - In Q1 2023, the company granted **165,000 market-contingent RSUs** (fair value **$1.4 million**) and **367,000 performance-contingent RSUs** (fair value **$3.7 million**); **$0.1 million** expense was recognized for market-based awards, but none for performance-based awards as achievement was not probable[146](index=146&type=chunk)[147](index=147&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no material changes to the company's market risks as of March 31, 2023, compared to those discussed in its Annual Report on Form 10-K for the year ended December 31, 2022 - Market risks as of March 31, 2023, have not materially changed from those discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2022[148](index=148&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on the effectiveness of the company's disclosure controls and procedures and internal control over financial reporting, concluding that they were effective with no material changes during the quarter [Evaluation of Disclosure Controls and Procedures](index=28&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2023[149](index=149&type=chunk) [Limitations on the Effectiveness of Controls](index=28&type=section&id=Limitations%20on%20the%20Effectiveness%20of%20Controls) - Management acknowledges that control systems provide only reasonable, not absolute, assurance and have inherent limitations, meaning not all error and fraud may be prevented or detected[150](index=150&type=chunk) [Changes in Internal Control over Financial Reporting](index=28&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - No change in internal control over financial reporting was identified during Q1 2023 that materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting[151](index=151&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) This section details the patent infringement lawsuits filed by the company against several generic drug manufacturers in February 2023, following their abbreviated new drug application (ANDA) submissions for a generic version of YUPELRI. The litigation has resulted in a stay of FDA approval for the generic ANDAs through May 2026 - In January 2023, the company received ANDA notices from generic companies for a generic version of YUPELRI, each including a Paragraph IV certification against five of the company's Orange Book listed patents[152](index=152&type=chunk) - The company filed patent infringement suits against these generic companies in February 2023, which have been consolidated in the U.S. District Court for the District of New Jersey[152](index=152&type=chunk) - As a result of these lawsuits, a stay of FDA approval through May 2026 will be imposed on the generic companies' ANDAs[152](index=152&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) This section outlines a comprehensive set of risks that could materially and adversely affect the company's business, financial condition, and operating results. These risks span financial performance, product development and commercialization, regulatory compliance, intellectual property, competition, and external factors such as global economic conditions and legal uncertainties [Summary of Principal Risks Associated with Theravance Biopharma's Business](index=29&type=section&id=Summary%20of%20Principal%20Risks%20Associated%20with%20Theravance%20Biopharma%27s%20Business) - The company may never achieve or sustain profitability[156](index=156&type=chunk) - YUPELRI's acceptance by physicians, patients, and payors may not continue to grow[157](index=157&type=chunk) - Delays or adverse results from clinical studies or regulatory obstacles could harm the business - Failure to obtain regulatory approval for product candidates - Dependence on partners to satisfy obligations or potential termination of partnerships - Substantial competition from companies with more resources and experience - Extensive and ongoing regulation and oversight by the FDA and other authorities - Risk of competition from generic versions of approved products, such as YUPELRI [RISKS RELATING TO THE COMPANY](index=29&type=section&id=RISKS%20RELATING%20TO%20THE%20COMPANY) [We may never achieve or sustain profitability.](index=29&type=section&id=We%20may%20never%20achieve%20or%20sustain%20profitability.) - The company recognized net losses of **$22.1 million** in Q1 2023 and **$92.8 million** from continuing operations for the year ended December 31, 2022, with an accumulated deficit of **$876.0 million** as of March 31, 2023[156](index=156&type=chunk)[159](index=159&type=chunk) - Despite YUPELRI operations being profitable on a brand basis since Q3 2020, the company expects to incur net losses due to ongoing clinical development and commercialization costs[159](index=159&type=chunk) [If YUPELRI's acceptance by physicians, patients, third party payors, or the medical community in general does not continue to grow, we may not receive significant additional revenues from sales of this product.](index=30&type=section&id=If%20YUPELRI%27s%20acceptance%20by%20physicians%2C%20patients%2C%20third%20party%20payors%2C%20or%20the%20medical%20community%20in%20general%20does%20not%20continue%20to%20grow%2C%20we%20may%20not%20receive%20significant%20additional%20revenues%20from%20sales%20of%20this%20product.) - The commercial success of YUPELRI depends on its continued acceptance by physicians, patients, third-party payors, and the medical community, which may not grow as planned[162](index=162&type=chunk) - YUPELRI competes with other nebulized LAMAs and short-acting bronchodilators, and sales have experienced volatility due to factors like reduced in-person sales calls and concerns related to COVID-19[162](index=162&type=chunk) [In collaboration with Viatris, we are responsible for marketing and sales of YUPELRI in the US, which subjects us to certain risks.](index=31&type=section&id=In%20collaboration%20with%20Viatris%2C%20we%20are%20responsible%20for%20marketing%20and%20sales%20of%20YUPELRI%20in%20the%20US%2C%20which%20subjects%20us%20to%20certain%20risks.) - Costs and expenses associated with maintaining an independent sales and marketing organization - Ability to retain effective sales and marketing personnel and medical science liaisons - Ability of sales and marketing personnel to access and educate prescribers - Lack of complementary products, potentially creating a competitive disadvantage [Any delay in commencing or completing clinical studies for product candidates or product and any adverse results from clinical or non-clinical studies or regulatory obstacles product candidates or product may face, would harm our business and the price of our securities could fall.](index=31&type=section&id=Any%20delay%20in%20commencing%20or%20completing%20clinical%20studies%20for%20product%20candidates%20or%20product%20and%20any%20adverse%20results%20from%20clinical%20or%20non-clinical%20studies%20or%20regulatory%20obstacles%20product%20candidates%20or%20product%20may%20face%2C%20would%20harm%20our%20business%20and%20the%20price%20of%20our%20securities%20could%20fall.) - Clinical studies are expensive, lengthy, and subject to delays or termination due to factors such as lack of effectiveness, adverse events, insufficient capital, and regulatory hurdles[164](index=164&type=chunk)[166](index=166&type=chunk) - Previous Phase 3 studies for ampreloxetine (SEQUOIA) and Phase 2b study for izencitinib did not meet primary endpoints, highlighting the inherent risks in drug development[169](index=169&type=chunk) [If our product candidates are not approved by regulatory authorities, including the FDA, we will be unable to commercialize them.](index=32&type=section&id=If%20our%20product%20candidates%20are%20not%20approved%20by%20regulatory%20authorities%2C%20including%20the%20FDA%2C%20we%20will%20be%20unable%20to%20commercialize%20them.) - Regulatory approval requires extensive preclinical and clinical data demonstrating safety and efficacy, and the FDA has substantial discretion, potentially requiring additional testing or imposing restrictions[170](index=170&type=chunk) - Approval procedures vary by country, and approval in one jurisdiction does not guarantee approval in others, with potential for delays or non-approval[173](index=173&type=chunk) [If our partners do not satisfy their obligations under our agreements with them, or if they terminate our partnerships with them, we may not be able to develop or commercialize our partnered product candidates as planned.](index=32&type=section&id=If%20our%20partners%20do%20not%20satisfy%20their%20obligations%20under%20our%20agreements%20with%20them%2C%20or%20if%20they%20terminate%20our%20partnerships%20with%20them%2C%20we%20may%20not%20be%20able%20to%20develop%20or%20commercialize%20our%20partnered%20product%20candidates%20as%20planned.) - The company relies on collaboration partners (e.g., Viatris, Pfizer) who may not fulfill their obligations, terminate agreements, or prioritize alternative products, which could delay or terminate development and commercialization[174](index=174&type=chunk)[175](index=175&type=chunk) - Disputes with partners could lead to delays, litigation, and adverse effects on the business and stock price[175](index=175&type=chunk) [Our ongoing drug development efforts might not generate additional approvable drugs.](index=33&type=section&id=Our%20ongoing%20drug%20development%20efforts%20might%20not%20generate%20additional%20approvable%20drugs.) - Drug development is inherently risky, with clinical trials potentially revealing ineffectiveness, toxicity, or other unacceptable side effects, and early promising results do not guarantee later success[176](index=176&type=chunk)[177](index=177&type=chunk)[178](index=178&type=chunk) - Previous late-stage clinical programs, such as izencitinib and ampreloxetine, have failed to meet primary endpoints[178](index=178&type=chunk)[179](index=179&type=chunk) [We face substantial competition from companies with more resources and experience than we have, which may result in others discovering, developing, receiving approval for or commercializing products before or more successfully than we do.](index=34&type=section&id=We%20face%20substantial%20competition%20from%20companies%20with%20more%20resources%20and%20experience%20than%20we%20have%2C%20which%20may%20result%20in%20others%20discovering%2C%20developing%2C%20receiving%20approval%20for%20or%20commercializing%20products%20before%20or%20more%20successfully%20than%20we%20do.) - The company faces substantial competition from larger pharmaceutical companies with greater financial, technical, and personnel resources[182](index=182&type=chunk) - Success depends on developing superior medicines, attracting talent, protecting intellectual property, conducting effective clinical trials, and implementing commercialization strategies[183](index=183&type=chunk) - New medicines must demonstrate compelling advantages in efficacy, convenience, tolerability, or safety to overcome severe price competition, as YUPELRI competes with other nebulized LAMAs[183](index=183&type=chunk)[185](index=185&type=chunk) [There is a single source of supply our product candidates and for YUPELRI, and our business will be harmed if any of these single-source manufacturers are not able to satisfy demand and alternative sources are not available.](index=34&type=section&id=There%20is%20a%20single%20source%20of%20supply%20our%20product%20candidates%20and%20for%20YUPELRI%2C%20and%20our%20business%20will%20be%20harmed%20if%20any%20of%20these%20single-source%20manufacturers%20are%20not%20able%20to%20satisfy%20demand%20and%20alternative%20sources%20are%20not%20available.) - The company relies on single-source third-party manufacturers for its Active Pharmaceutical Ingredient (API) and YUPELRI drug product[186](index=186&type=chunk) - Manufacturers may not successfully produce APIs/drug products cost-effectively or timely - Changing manufacturers involves lengthy technology transfer, validation, and regulatory qualification - Manufacturing processes for some APIs/drug products are specialized and available from limited third parties - Delays in scaling up production could delay clinical studies, regulatory submissions, and commercialization - Difficulties in importing APIs/drug products or components due to FDA inspections or defective packaging [We are subject to extensive and ongoing regulation, oversight and other requirements by the FDA and failure to comply with these regulations and requirements may subject us to penalties that may adversely affect our financial condition or our ability to commercialize any approved products.](index=34&type=section&id=We%20are%20subject%20to%20extensive%20and%20ongoing%20regulation%2C%20oversight%20and%20other%20requirements%20by%20the%20FDA%20and%20failure%20to%20comply%20with%20these%20regulations%20and%20requirements%20may%20subject%20us%20to%20penalties%20that%20may%20adversely%20affect%20our%20financial%20condition%20or%20our%20ability%20to%20commercialize%20any%20approved%20products.) - The company is subject to strict FDA scrutiny on prescription drug advertising and promotion, prohibiting off-label uses, and extensive ongoing regulatory requirements for manufacturing, labeling, and post-market activities[187](index=187&type=chunk)[188](index=188&type=chunk) - Failure to comply can lead to regulatory actions such as product restrictions, withdrawal from the market, injunctions, civil monetary penalties, and adverse effects on financial condition and commercialization ability[190](index=190&type=chunk)[193](index=193&type=chunk) [Our business and operations would suffer in the event of significant disruptions of information technology systems or security breaches.](index=39&type=section&id=Our%20business%20and%20operations%20would%20suffe%20in%20the%20event%20of%20significant%20disruptions%20of%20information%20technology%20systems%20or%20security%20breaches.) - The company relies extensively on computer systems for information and financial management, making it vulnerable to service interruptions and security breaches from cyber-attacks, natural disasters, and other events[212](index=212&type=chunk) - Significant disruptions or breaches could result in financial, legal, business, and reputational harm, including liability, delays in product development, and a decline in stock price[215](index=215&type=chunk) [We face risks related to widespread illnesses, including the recent COVID-19 pandemic, which could have a material adverse effect on our business and results of operations.](index=39&type=section&id=We%20face%20risks%20related%20to%20widespread%20illnesses%2C%20including%20the%20recent%20COVID-19%20pandemic%2C%20which%20could%20have%20a%20material%20adverse%20effect%20on%20our%20business%20and%20results%20of%20operations.) - The COVID-19 pandemic has adversely affected YUPELRI sales momentum, clinical trial conduct, and workforce effectiveness, with continued uncertainty regarding its future impact on business and financial results[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk) - Challenges include site closures, staffing shortages, supply chain interruptions for investigational products, and potential impact on demand for future products[218](index=218&type=chunk) [Global economic, political, and social conditions may harm our ability to do business, increase our costs and negatively affect our stock price.](index=40&type=section&id=Global%20economic%2C%20political%2C%20and%20social%20conditions%20may%20harm%20our%20ability%20to%20do%20business%2C%20increase%20our%20costs%20and%20negatively%20affect%20our%20stock%20price.) - Uncertain global economic conditions, geopolitical events (e.g., hostilities in Ukraine), and trade policies can delay product development, impact regulatory approvals, and increase operational costs[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk)[225](index=225&type=chunk) - US federal government shutdowns or budget sequestrations could significantly reduce the FDA's budget and operations, leading to slower review times and affecting capital access[222](index=222&type=chunk) [Our US operating subsidiary's facility is located near known earthquake fault zones, and the occurrence of an earthquake, extremist attack or other catastrophic disaster could cause damage to our facilities and equipment, which could require us to cease or curtail operations.](index=40&type=section&id=Our%20US%20operating%20subsidiary%27s%20facility%20is%20located%20near%20known%20earthquake%20fault%20zones%2C%20and%20the%20occurrence%20of%20an%20earthquake%2C%20extremist%20attack%20or%20other%20catastrophic%20disaster%20could%20cause%20damage%20to%20our%20facilities%20and%20equipment%2C%20which%20could%20require%20us%20to%20cease%20or%20curtail%20operations.) - The company's US operating facility in the San Francisco Bay Area is vulnerable to earthquakes and other disasters, which could seriously impair business operations and recovery[226](index=226&type=chunk) - The unique nature of research activities and equipment could make recovery difficult and costly, and inadequate insurance coverage could seriously impair financial condition[226](index=226&type=chunk) [If sufficient capital is not available, we may have to further curtail operations or we could be forced to share our rights to commercialize our product candidates with third parties on terms that may not be favorable to us.](index=40&type=section&id=If%20sufficient%20capital%20is%20not%20available%2C%20we%20may%20have%20to%20further%20curtail%20operations%20or%20we%20could%20be%20forced%20to%20share%20our%20rights%20to%20commercialize%20our%20product%20candidates%20with%20third%20parties%20on%20terms%20that%20may%20not%20be%20favorable%20to%20us.) - While current cash, cash equivalents, and marketable securities are expected to fund anticipated operating needs for at least the next twelve months, future capital needs are uncertain[227](index=227&type=chunk) - Inability to obtain additional financing could force the company to relinquish rights, delay or reduce programs, or make further workforce reductions, harming business and stock price[230](index=230&type=chunk) [We may seek to obtain future financing through the issuance of debt or equity, which may have an adverse effect on our shareholders or may otherwise adversely affect our business.](index=41&type=section&id=We%20may%20seek%20to%20obtain%20future%20financing%20through%20the%20issuance%20of%20debt%20or%20equity%2C%20which%20may%20have%20an%20adverse%20effect%20on%20our%20shareholders%20or%20may%20otherwise%20adversely%20affect%20our%20business.) - Future debt or equity financing could dilute current shareholders, and debt securities may impose restrictions on operations, such as limiting additional indebtedness or dividends[231](index=231&type=chunk)[234](index=234&type=chunk) - Failure to obtain needed funding could require reducing or delaying research, development, and commercialization activities, or licensing rights on less attractive terms[231](index=231&type=chunk) [We may be treated as a US corporation for US federal income tax purposes.](index=42&type=section&id=We%20may%20be%20treated%20as%20a%20US%20corporation%20for%20US%20federal%20income%20tax%20purposes.) - Despite being incorporated in the Cayman Islands and having tax residency in Ireland, the company could be treated as a US corporation for US federal income tax purposes under Section 7874 of the Internal Revenue Code[235](index=235&type=chunk) - Such treatment could result in substantial additional US federal income tax on post-Spin-Off taxable income and potential US withholding tax on dividends to non-US holders[238](index=238&type=chunk) [Future tax reform, including changes in tax rates and imposition of new taxes, could impact our results of operations and financial condition.](index=42&type=section&id=Future%20tax%20reform%2C%20including%20changes%20in%20tax%20rates%20and%20imposition%20of%20new%20taxes%2C%20could%20impact%20our%20results%20of%20operations%20and%20financial%20condition.) - The company is subject to new, evolving, or revised tax laws and regulations in various jurisdictions (Cayman Islands, US, UK, Ireland), and changes in tax rates or their interpretation could materially affect its income tax expense and deferred tax balances[239](index=239&type=chunk) [Taxing authorities may challenge our structure and transfer pricing arrangements.](index=43&type=section&id=Taxing%20authorities%20may%20challenge%20our%20structure%20and%20transfer%20pricing%20arrangements.) - Taxing authorities may challenge the company's international structure and transfer pricing arrangements, leading to audits, lawsuits, and potential liabilities for prior periods, interest, fines, or penalties[242](index=242&type=chunk) - Such challenges could be expensive, consume time and resources, and result in increased taxes in the future, adversely affecting cash flows and business[242](index=242&type=chunk) [We were a passive foreign investment company, or "PFIC," for 2014, but we were not a PFIC from 2015 through 2021, and we do not expect to be a PFIC for the foreseeable future.](index=43&type=section&id=We%20were%20a%20passive%20foreign%20investment%20company%2C%20or%20%22PFIC%2C%22%20for%202014%2C%20but%20we%20were%20not%20a%20PFIC%20from%202015%20through%202021%2C%20and%20we%20do%20not%20expect%20to%20be%20a%20PFIC%20for%20the%20foreseeable%20future.) - The company was classified as a PFIC for 2014 but has not been since 2015 and does not expect to be a PFIC for the foreseeable future, based on current business plans[244](index=244&type=chunk) - PFIC status depends on annual assets and income and cannot be predicted with certainty until after the end of each taxable year[243](index=243&type=chunk) [If we are unable to maintain effective internal controls, our business, financial position and results of operations could be adversely affected.](index=44&type=section&id=If%20we%20are%20unable%20to%20maintain%20effective%20internal%20controls%2C%20our%20business%2C%20financial%20position%20and%20results%20of%20operations%20could%20be%20adversely%20affected.) - Failure to establish and maintain effective internal controls over financial reporting could adversely affect the company's business, financial position, and results of operations[246](index=246&type=chunk) - Inability of the independent registered public accounting firm to attest to the effectiveness of internal controls would harm investor confidence and potentially cause the stock price to fall[246](index=246&type=chunk) [RISKS RELATED TO LEGAL AND REGULATORY UNCERTAINTY](index=44&type=section&id=RISKS%20RELATED%20TO%20LEGAL%20AND%20REGULATORY%20UNCERTAINTY) [If our efforts to protect the proprietary nature of the intellectual property related to our technologies are not adequate, we may not be able to compete effectively in our current or future markets.](index=44&type=section&id=If%20our%20efforts%20to%20protect%20the%20proprietary%20nature%20of%20the%20intellectual%20property%20related%20to%20our%20technologies%20are%20not%20adequate%2C%20we%20may%20not%20be%20able%20to%20compete%20effectively%20in%20our%20current%20or%20future%20markets.) - The company relies on patents, patent applications, trade secret protection, and confidentiality agreements to protect its intellectual property[247](index=247&type=chunk) - Patents may be challenged, invalidated, or too narrow, and trade secrets could be misappropriated or independently developed, eroding the company's competitive position[247](index=247&type=chunk)[248](index=248&type=chunk) [Litigation to protect or defend our intellectual property or third-party claims of intellectual property infringement will require us to divert resources and may prevent or delay our drug discovery and development efforts.](index=45&type=section&id=Litigation%20to%20protect%20or%20defend%20our%20intellectual%20property%20or%20third-party%20claims%20of%20intellectual%20property%20infringement%20will%20require%20us%20to%20divert%20resources%20and%20may%20prevent%20or%20delay%20our%20drug%20discovery%20and%20development%20efforts.) - Commercial success depends on not infringing third-party patents; defense against such claims is costly and diverts resources, potentially leading to substantial damages or the need for unfavorable licenses[250](index=250&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk) - The company has initiated patent infringement lawsuits against generic companies for YUPELRI, which involve substantial expenses and may not result in adequate remedies[253](index=253&type=chunk) [If the efforts of our partners or future partners to protect the proprietary nature of the intellectual property related to collaboration assets are not adequate, the future commercialization of any medicines resulting from collaborations could be negatively impacted, which would materially harm our business and could cause the price of our securities to fall.](index=45&type=section&id=If%20the%20efforts%20of%20our%20partners%20or%20future%20partners%20to%20protect%20the%20proprietary%20nature%20of%20the%20intellectual%20property%20related%20to%20collaboration%20assets%20are%20not%20adequate%2C%20the%20future%20commercialization%20of%20any%20medicines%20resulting%20from%20collaborations%20could%20be%20negatively%20impacted%2C%20which%20would%20materially%20harm%20our%20business%20and%20could%20cause%20the%20price%20of%20our%20securities%20to%20fall.) - The effectiveness of intellectual property protection efforts by partners (e.g., GSK for TRELEGY) is crucial for the commercialization of collaboration assets[254](index=254&type=chunk) - Challenges to the intellectual property protection of late-stage development or commercial-stage assets could make commercialization economically unfeasible and materially harm the business[254](index=254&type=chunk) [Product liability and other lawsuits could divert our resources, result in substantial liabilities and reduce the commercial potential of our medicines.](index=46&type=section&id=Product%20liability%20and%20other%20lawsuits%20could%20divert%20our%20resources%2C%20result%20in%20substantial%20liabilities%20and%20reduce%20the%20commercial%20potential%20of%20our%20medicines.) - The development and commercialization of pharmaceutical products inherently carry the risk of product liability claims, which can arise from side effects or manufacturing defects, leading to patient injury or death[255](index=255&type=chunk) - Such lawsuits can harm the company's reputation, divert management resources, be costly to defend, and potentially result in substantial liabilities not fully covered by insurance[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk) [If we fail to comply with data protection laws and regulations, we could be subject to government enforcement actions (which could include civil or criminal penalties), private litigation and/or adverse publicity, which could negatively affect our operating results and business.](index=46&type=section&id=If%20we%20fail%20to%20comply%20with%20data%20protection%20laws%20and%20regulations%2C%20we%20could%20be%20subject%20to%20government%20enforcement%20actions%20%28which%20could%20include%20civil%20or%20criminal%20penalties%29%2C%20private%20litigation%20and%2For%20adverse%20publicity%2C%20which%20could%20negatively%20affect%20our%20operating%20results%20and%20business.) - The company is subject to numerous evolving federal and state data protection laws (e.g., CCPA, CPRA, HIPAA, FTC Act) in the US, and strict regulations like GDPR in the EU/UK[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk)[265](index=265&type=chunk) - Non-compliance or issues with legal mechanisms for data transfer (e.g., from EEA/UK to US) could lead to significant government enforcement actions, penalties (up to **4% of annual global turnover** under GDPR), private litigation, and reputational harm[265](index=265&type=chunk)[268](index=268&type=chunk)[270](index=270&type=chunk) [Changes in healthcare law and implementing regulations, including government restrictions on pricing and reimbursement, as well as healthcare policy and other healthcare payor cost-containment initiatives, may negatively impact us, our collaboration partners, or those commercializing products with respect to which we have an economic interest or right to receive royalties.](index=48&type=section&id=Changes%20in%20healthcare%20law%20and%20implementing%20regulations%2C%20including%20government%20restrictions%20on%20pricing%20and%20reimbursement%2C%20as%20well%20as%20healthcare%20policy%20and%20other%20healthcare%20payor%20cost-containment%20initiatives%2C%20may%20negatively%20impact%20us%2C%20our%20collaboration%20partners%2C%20or%20those%20commercializing%20products%20with%20respect%20to%20which%20we%20have%20an%20economic%20interest%20or%20right%20to%20receive%20royalties.) - Evolving healthcare laws and regulations, including the Healthcare Reform Act and the Inflation Reduction Act (IRA), can significantly impact drug pricing, reimbursement, and market conditions[272](index=272&type=chunk)[278](index=278&type=chunk) - The IRA establishes a Drug Price Negotiation Program and inflation rebates, potentially capping prices for certain Medicare drugs, and individual states are also implementing drug pricing control legislation[278](index=278&type=chunk)[279](index=279&type=chunk) - These changes could limit federal and state payments for healthcare products, resulting in reduced demand or additional pricing pressures for the company and its partners[280](index=280&type=chunk) [If we failed to comply with our reporting and payment obligations under the Medicaid Drug Rebate program or other governmental pricing programs, we could be subject to additional reimbursement requirements, penalties, sanctions and fines, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.](index=49&type=section&id=If%20we%20failed%20to%20comply%20with%20our%20reporting%20and%20payment%20obligations%20under%20the%20Medicaid%20Drug%20Rebate%20program%20or%20other%20governmental%20pricing%20programs%2C%20we%20could%20be%20subject%20to%20additional%20reimbursement%20requirements%2C%20penalties%2C%20sanctions%20and%20fines%2C%20which%20could%20have%20a%20material%20adverse%20effect%20on%20our%20business%2C%20financial%20condition%2C%20results%20of%20operations%20and%20growth%20prospects.) - The company is subject to price reporting obligations under various governmental pricing programs, including the Medicaid Drug Rebate program, 340B Program, Medicare Part B, and VA Federal Supply Schedule (FSS)[281](index=281&type=chunk)[286](index=286&type=chunk)[288](index=288&type=chunk) - Failure to comply with these obligations or submitting false information can lead to significant civil monetary penalties, program termination, and adverse effects on business, financial condition, and growth prospects[285](index=285&type=chunk) [Our relationships with customers and third-party payors are subject to applicable anti-kickback, fraud and abuse, transparency and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, exclusion, contractual damages, reputational harm and diminished profits and future earnings.](index=50&type=section&id=Our%20relationships%20with%20customers%20and%20third-party%20payors%20are%20subject%20to%20applicable%20anti-kickback%2C%20fraud%20and%20abuse%2C%20transparency%20and%20other%20healthcare%20laws%20and%20regulations%2C%20which%20could%20expose%20us%20to%20criminal%20sanctions%2C%20civil%20penalties%2C%20exclusion%2C%20contractual%20damages%2C%20reputational%20harm%20and%20diminished%20profits%20and%20future%20earnings.) - The company's arrangements with healthcare providers and payors are subject to complex federal and state anti-kickback, false claims (e.g., False Claims Act, HIPAA), and transparency laws (e.g., Physician Payment Sunshine Act)[291](index=291&type=chunk)[292](index=292&type=chunk)[295](index=295&type=chunk) - Non-compliance could lead to significant civil, criminal, and administrative penalties, exclusion from government healthcare programs, contractual damages, and reputational harm[294](index=294&type=chunk) [Our business and operations, including the use of hazardous and biological materials may result in liabilities with respect to environmental, health and safety matters.](index=53&type=section&id=Our%20business%20and%20operations%2C%20including%20the%20use%20of%20hazardous%20and%20biological%20materials%20may%20result%20in%20liabilities%20with%20respect%20to%20environmental%2C%20health%20and%20safety%20matters.) - Research and development activities involve the controlled use of potentially hazardous substances and produce hazardous waste, subjecting the company to federal, state, and local environmental laws[297](index=297&type=chunk) - The company may incur significant costs or liabilities for compliance or violations, and cannot eliminate the risk of contamination or injury, potentially leading to cleanup costs or damages not covered by insurance[297](index=297&type=chunk) [RISKS RELATING TO OUR ORDINARY SHARES](index=53&type=section&id=RISKS%20RELATING%20TO%20OUR%20ORDINARY%20SHARES) [The market price for our shares has and may continue to fluctuate widely and may result in substantial losses for purchasers of our ordinary shares.](index=53&type=section&id=The%20market%20price%20for%20our%20shares%20has%20and%20may%20continue%20to%20fluctuate%20widely%20and%20may%20result%20in%20substantial%20losses%20for%20purchasers%20of%20our%20ordinary%20shares.) - The market price for the company's ordinary shares has been highly volatile (e.g., **$8.33

Progress Against 2023 Financial Targets Substantial Progress Made on Buyback Program ‣ Expanded Capital Return Program to $325M, and expect to complete by end of 2023 Co-promotion agreement with VIATRISTM (35% / 65% Profit Share) 60 $43.7 $49.1 $53.4 $55.7 $47.0 0 10 20 30 40 50 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Total YUPELRI Net Sales ($M) 1. In the US, Viatris is leading the commercialization of YUPELRI, and Theravance Biopharma co-promotes the product under a profit and loss sharing arrangement (65% to Viatr ...

Theravance Biopharma, Inc. (NASDAQ:TBPH) Q1 2023 Earnings Conference Call May 8, 2023 5:00 PM ET Company Participants Rick Winningham - Chief Executive Officer Rhonda Farnum - Chief Business Officer Rick Graham - Senior Vice President of Research and Development Aziz Sawaf - Chief Financial Officer Conference Call Participants David Risinger - SVB Securities Jingming Chen - Evercore Divya Rao - TD Cowen Operator Ladies and gentlemen, good afternoon. I’d like to welcome everyone to the Theravance Biopharma F ...

Approved incremental $75M to existing $250M program initiated Sept'22, with goal to complete program by end of 2023 Prioritize resource allocation toward ampreloxetine Phase 3 study and YUPELRI® (revefenacin) PIFR-2 study PIFR, peak inspiratory flow rate. AGM, Annual General Meeting – May 2, 2023 ‣ Submit orphan drug designation request in early 2023 ‣ $50M potential milestone for TRELEGY Net Sales of ~$2.86B2 Co-promotion agreement with VIATRISTM (35% / 65% Profit Share) Net sales increased 27% Q4'22 vs. Q ...

Financial Performance - YUPELRI net sales increased by 25% in 2022, reaching $70.7 million compared to $56.7 million in 2021[15] - Theravance Biopharma recognized $872.1 million in net income for the year ended December 31, 2022, primarily due to a one-time TRELEGY Royalty Transaction, but incurred $92.8 million in net losses from continuing operations during the same period[120] - The cumulative net loss since the spin-off from Innoviva, Inc. was $853.9 million as of December 31, 2022[123] - The company reported net losses of $199.4 million and $278.0 million for the years ended December 31, 2021, and 2020, respectively[123] Debt and Capital Management - All outstanding debt was retired, including $420 million in TRELEGY notes and $230 million in convertible senior notes, followed by a $250 million capital return program[17] - The capital return program was increased to $325 million, with $155.3 million repurchased as of February 27, 2023[22] - The company has cash, cash equivalents, and short-term marketable securities of $327.5 million as of December 31, 2022, which is expected to meet operating needs for at least the next twelve months[192] - Future capital needs may require the company to seek additional funding through public or private equity, debt financings, or collaborations, which could dilute current shareholders' ownership[193] Clinical Development and Regulatory Affairs - The REDWOOD Phase 3 clinical study for ampreloxetine did not meet its primary endpoint, but benefits were observed in MSA patients[34] - The additional Phase 3 study for ampreloxetine is expected to begin enrolling in the first quarter of 2023[36] - Regulatory approval is critical for product candidates, and any delays or adverse results in clinical studies could materially harm the business[134] - The company must obtain separate regulatory approvals in each country for marketing its medicines, which can vary significantly and may lead to delays[136] Intellectual Property and Competition - The company owns a total of 235 issued US patents and 1,491 granted foreign patents as of December 31, 2022[82] - The last to expire patent for YUPELRI (revefenacin) inhalation solution is set to expire on October 23, 2039[82] - The company’s patent rights for ampreloxetine include an issued US composition of matter patent expiring in 2030 and a method of treatment patent expiring in 2037[84] - The company has multiple patents for YUPELRI, with expiration dates ranging from 2025 to 2039, but faces potential challenges from generic competition[158] Workforce and Corporate Culture - A 17% workforce reduction is planned to prioritize resources for the ampreloxetine Phase 3 study and YUPELRI Phase 4 study[22] - The company has 111 employees as of December 31, 2022, with 93% based in the US[98] - The employee PULSE survey achieved participation rates between 85% to 100%, with an average score of 4.1 out of 5 in 2022[101] - The company emphasizes a culture of diversity, equity, and inclusion, aiming to eliminate discrimination in all forms[104] Strategic Partnerships and Collaborations - The company retains a 35% share of YUPELRI profits under a co-promotion agreement with Viatris[15] - The collaboration agreement with Viatris for the development of nebulized revefenacin, including YUPELRI, was established in January 2015[137] - A License Agreement with Pfizer was entered into in December 2019, granting Pfizer exclusive global rights for skin-targeted pan-JAK inhibitors[137] - The company may need additional collaborations to fund the development of certain programs that have not been licensed, which could adversely affect its business if unsuccessful[163] Market and Operational Risks - The ongoing impact of the COVID-19 pandemic continues to affect business operations and market demand for YUPELRI[21] - The company faces significant risks related to the acceptance of YUPELRI by physicians and patients, which could affect future revenue growth[126] - The commercial success of YUPELRI is challenged by competition from other nebulized therapies and the impact of the COVID-19 pandemic on sales[126] - The company may incur substantial expenses as it advances product candidates into later-stage clinical studies without a partner[123] Compliance and Regulatory Challenges - The company is subject to various laws and regulations regarding laboratory practices and the use of hazardous substances, which could materially affect its business[71] - The FDA ensures the quality of approved medicines through regular inspections and compliance checks with current Good Manufacturing Practice (cGMP) regulations[70] - The company may face enforcement actions from the FDA for non-compliance with applicable regulations, which could include fines and withdrawal of FDA approval[69] - The company is responsible for compliance with Medicaid Drug Rebate and other pricing programs, which could lead to penalties if not adhered to[74] Cybersecurity and Operational Resilience - The company is exposed to risks from cybersecurity threats, which could disrupt operations and result in financial and reputational harm[178] - The company may experience supply chain disruptions and operational impacts due to health emergencies, including the COVID-19 pandemic[183] - The company has implemented mitigation plans to ensure continued access to drug supply for clinical trials, but challenges remain due to potential site closures and staffing shortages[182] Tax and Financial Reporting - The company has migrated its tax residency from the Cayman Islands to Ireland, which subjects it to evolving tax laws that may impact its tax position[204] - The company is subject to reporting obligations under the Exchange Act, including annual management assessments of internal control effectiveness[211] - Any failure to maintain effective internal controls could adversely affect the company's business, financial position, and results of operations[211] - Changes in tax laws and regulations in various jurisdictions could adversely affect the company's results of operations and financial condition[203]