Theravance Biopharma(TBPH) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements and notes for the periods ended June 30, 2025, and 2024 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | | Cash and cash equivalents | $281,927 | $37,797 | +$244,130 | | Total current assets | $366,294 | $161,067 | +$205,227 | | Total assets | $426,035 | $354,161 | +$71,874 | | Total current liabilities | $54,633 | $32,085 | +$22,548 | | Total shareholders' equity | $224,848 | $175,545 | +$49,303 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :-------------------- | :---------------------------------------- | :---------------------------------------- | :-------------------- | | Total revenues | $26,195 | $14,256 | +$11,939 | $41,583 | $28,759 | +$12,824 | | Research and development | $10,490 | $9,954 | +$536 | $21,942 | $18,922 | +$3,020 | | Selling, general and administrative | $18,430 | $17,056 | +$1,374 | $36,800 | $33,798 | +$3,002 | | Loss from operations | $(2,725) | $(15,705) | +$12,980 | $(17,159) | $(26,912) | +$9,753 | | Net gain on realized contingent milestone and royalty assets | $75,137 | $0 | +$75,137 | $75,137 | $0 | +$75,137 | | Net income (loss) | $54,835 | $(16,529) | +$71,364 | $41,256 | $(28,193) | +$69,449 | | Net income (loss) per share - basic | $1.09 | $(0.34) | +$1.43 | $0.83 | $(0.58) | +$1.41 | Condensed Consolidated Statements of Shareholders' Equity Condensed Consolidated Statements of Shareholders' Equity | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | | Total shareholders' equity | $224,848 | $175,545 | +$49,303 | | Additional paid-in capital | $1,149,123 | $1,141,060 | +$8,063 | | Accumulated deficit | $(924,266) | $(965,522) | +$41,256 | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :-------------------- | | Net cash provided by (used in) operating activities | $251,113 | $(5,437) | +$256,550 | | Net cash provided by (used in) investing activities | $(5,626) | $13,997 | $(19,623) | | Net cash used in financing activities | $(1,357) | $(1,760) | +$403 | | Net increase in cash, cash equivalents, and restricted cash | $244,130 | $6,800 | +$237,330 | | Cash, cash equivalents, and restricted cash at end of period | $282,763 | $47,181 | +$235,582 | Notes to Condensed Consolidated Financial Statements Details significant accounting policies, revenue recognition, segment information, and key financial events impacting the statements - The company is a biopharmaceutical company focused on developing and commercializing medicines[12] - The accounting policy for "Future Contingent Milestone and Royalty Assets" was revised, now accounted for under ASC Topic 450, Contingencies, with subsequent gains recognized using gain contingency guidance and impairments using loss contingency guidance[17][20] - The Contingent Consideration asset was fully settled through the Royalty Sales Agreement, assigning TRELEGY royalties to GSK, and recognized under the gain contingency model[21] - The company expects its cash, cash equivalents, and marketable securities to be sufficient to fund operations for at least the next twelve months[16] - YUPELRI received regulatory approval by China's NMPA in June 2025, triggering a $7.5 million licensing revenue milestone from Viatris[29] - The company co-promotes YUPELRI in the US under a 35% profit and loss sharing arrangement with Viatris[30] - The company operates in a single segment: development and commercialization of human therapeutics[39] - Increase in cash and cash equivalents primarily due to $225.0 million from TRELEGY royalties sale (June 2025) and $50.0 million milestone payment from Royalty Pharma (February 2025)[43] - Contingent liability for ampreloxetine funding from Royalty Pharma was $31.640 million as of June 30, 2025, with an imputed effective interest rate of approximately 8.3%[51][54] - A contract derivative, recognized within non-current other assets, increased in fair value to $2.365 million as of June 30, 2025, driven by a decrease in the estimated discount rate to 5.0%[57] - The company retained the right to receive remaining potential $150.0 million in Milestone Payments from Royalty Pharma for TRELEGY global net sales in 2025 and 2026[62] - Sublease income is recognized as a reduction to rent expense within selling, general and administrative expenses[64] - Income tax expense of $17.8 million for the six months ended June 30, 2025, primarily due to the net gain on realized contingent milestone and royalty assets from the TRELEGY royalties sale[72][136] - The company did not accrue any estimated losses related to its ongoing legal proceedings as of June 30, 2025[78] Key Financial Metrics from Notes | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income (loss) per share - basic | $1.09 | $(0.34) | $0.83 | $(0.58) | | Net income (loss) per share - diluted | $1.08 | $(0.34) | $0.81 | $(0.58) | | Viatris collaboration agreement revenue | $18,695 | $14,256 | $34,083 | $28,759 | | Licensing revenue | $7,500 | $0 | $7,500 | $0 | | Total share-based compensation expense | $4,543 | $5,376 | $9,420 | $10,604 | | Sublease income | $2,447 | $2,204 | $4,751 | $4,294 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's perspective on financial performance, operational updates, liquidity, and future outlook Forward-Looking Statements - Forward-looking statements involve risks, uncertainties, and assumptions, and actual results may differ materially from expectations[84] - The company does not assume any obligation to update forward-looking statements[84] Management Overview - Theravance Biopharma is a biopharmaceutical company focused on developing and commercializing medicines[85] - Key programs include YUPELRI® (revefenacin) inhalation solution for COPD and ampreloxetine for symptomatic neurogenic orthostatic hypotension (nOH) in Multiple System Atrophy (MSA) patients[86] Core Program Updates Updates on YUPELRI's China approval, ampreloxetine's Phase 3 study, and the sale of TRELEGY royalties to GSK - YUPELRI (revefenacin) inhalation solution is a once-daily, nebulized LAMA approved for maintenance treatment of COPD in the US[87] - China's NMPA approved YUPELRI on June 26, 2025, triggering a $7.5 million milestone payment from Viatris[90][91] - Ampreloxetine is an investigational, wholly-owned NRI for symptomatic nOH in MSA patients, currently in a Phase 3 CYPRESS study[94][100] - Previous Phase 3 studies (SEQUOIA and REDWOOD) for ampreloxetine did not meet primary endpoints for the overall population but showed benefit in MSA patients[98][99] - FDA granted Orphan Drug Designation status to ampreloxetine for symptomatic nOH in MSA in May 2023[100] - The company sold its remaining royalty interest in TRELEGY to GSK for a one-time upfront payment of $225.0 million on June 2, 2025[109] - Retained the right to receive potential remaining $150.0 million in Milestone Payments from Royalty Pharma based on TRELEGY global net sales in 2025 and 2026[109] - Received a $50.0 million Milestone Payment from Royalty Pharma in February 2025 for achieving 2024 TRELEGY global net sales thresholds ($3.46 billion)[103] YUPELRI US Net Sales Milestones | YUPELRI US Net Sales (in a Calendar Year) | Sales Milestones Due from Viatris | | :---------------------------------------- | :-------------------------------- | | $250.0 million | $25.0 million | | $500.0 million | $50.0 million | | $750.0 million | $75.0 million | YUPELRI China Region Net Sales Milestones | YUPELRI China Region Net Sales (Cumulative) | Sales Milestones Due from Viatris | | :---------------------------------------- | :-------------------------------- | | $100.0 million | $2.5 million | | $200.0 million | $5.0 million | | $400.0 million | $10.0 million | | $800.0 million | $20.0 million | YUPELRI China Region Royalty Rates | YUPELRI China Region Net Sales Thresholds (Annual) | Royalty Rate Due from Viatris | | :---------------------------------------- | :---------------------------- | | ≤ $75.0 million | 14% | | > $75.0 million to ≤ $150.0 million | 17% | | > $150.0 million | 20% | TRELEGY Global Net Sales Royalty Rates | TRELEGY Global Net Sales Thresholds (Annual) | Royalty Rate Due from GSK to Royalty Pharma | | :---------------------------------------- | :---------------------------------------- | | ≤ $750.0 million | 6.5% | | > $750.0 million to ≤ $1,250.0 million | 8.0% | | > $1,250.0 million to ≤ $2,250.0 million | 9.0% | | > $2,250.0 million | 10.0% | Critical Accounting Policies and Estimates - Financial statements are prepared in accordance with US GAAP, requiring management estimates and assumptions[115] - No material changes to critical accounting policies and estimates since the Annual Report on Form 10-K for the year ended December 31, 2024[116] Results of Operations Analyzes revenue growth and a shift to net income driven by the TRELEGY royalty sale and increased YUPELRI sales Results of Operations Summary | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change ($) | Change (%) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change ($) | Change (%) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :--------- | :--------- | :---------------------------------------- | :---------------------------------------- | :--------- | :--------- | | Total revenues | $26,195 | $14,256 | $11,939 | 84% | $41,583 | $28,759 | $12,824 | 45% | | Total research & development | $10,490 | $9,954 | $536 | 5% | $21,942 | $18,922 | $3,020 | 16% | | Selling, general and administrative | $18,430 | $17,056 | $1,374 | 8% | $36,800 | $33,798 | $3,002 | 9% | | Impairment of long-lived assets (non-cash) | $0 | $2,951 | $(2,951) | NM | $0 | $2,951 | $(2,951) | NM | | Net gain on realized contingent milestone and royalty assets | $75,137 | $0 | $75,137 | NM | $75,137 | $0 | $75,137 | NM | | Interest expense (non-cash) | $(663) | $(644) | $(19) | 3% | $(1,306) | $(1,273) | $(33) | 3% | | Interest and other income, net | $1,457 | $1,128 | $329 | 29% | $2,396 | $2,562 | $(166) | (6)% | | Provision for income tax expense | $(18,371) | $(1,308) | $(17,063) | 1,305% | $(17,812) | $(2,570) | $(15,242) | 593% | - Total revenues increased due to higher YUPELRI net sales and a $7.5 million licensing revenue from China's NMPA approval[118][120][121] - R&D expenses increased due to the CYPRESS study and ampreloxetine regulatory activities, partially offset by decreased share-based compensation[122][123] - SG&A expenses increased due to one-time legal costs and pre-launch medical affairs and commercialization expenses for ampreloxetine[127][128] - The $75.1 million net gain on contingent milestone and royalty assets resulted from the sale of TRELEGY royalties to GSK[131] Liquidity and Capital Resources Details the company's strong liquidity position, cash flow changes, and capital resources as of June 30, 2025 - As of June 30, 2025, the company had approximately $338.8 million in cash, cash equivalents, and marketable securities (excluding restricted cash) and no long-term debt[137] - Cash resources are expected to be sufficient to fund operations for at least the next twelve months[139] - Liquidity was significantly boosted by a $50.0 million milestone from Royalty Pharma (February 2025) and $225.0 million from GSK for the Royalty Sales Agreement (June 2025)[137] - The company indemnifies officers and directors and maintains insurance, believing the fair value of these indemnification agreements is minimal, and no liabilities were recognized as of June 30, 2025[147] Cash Flow Summary | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :-------------------- | | Net cash provided by (used in) operating activities | $251,113 | $(5,437) | +$256,550 | | Net cash provided by (used in) investing activities | $(5,626) | $13,997 | $(19,623) | | Net cash used in financing activities | $(1,357) | $(1,760) | +$403 | Item 3. Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," Theravance Biopharma is not required to provide quantitative and qualitative disclosures about market risk - The company is a "smaller reporting company" and is not required to provide this information[148] Item 4. Controls and Procedures This section details the company's evaluation of disclosure controls and procedures, concluding their effectiveness, while also acknowledging the inherent limitations of control systems Evaluation of Disclosure Controls and Procedures - CEO and CFO concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[149] Limitations on the Effectiveness of Controls - Control systems provide only reasonable, not absolute, assurance that objectives are met[150] - Inherent limitations mean not all control issues or fraud instances may be detected[150] Changes in Internal Control over Financial Reporting - No material changes in internal control over financial reporting were identified during Q2 2025[151] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section details the company's ongoing patent infringement lawsuits related to YUPELRI against generic drug manufacturers Litigation – Patent Infringement - In January 2023, generic companies filed ANDAs for YUPELRI, leading to patent infringement suits by the company[152] - A stay of approval through May 2026 was imposed by the FDA on generic ANDAs[152] - As of July 31, 2025, litigation with several generic companies settled, granting royalty-free licenses to launch generic YUPELRI in the US on or after April 23, 2039[154] - Patent litigation against two remaining generic companies and affiliates is pending[154] Item 1A. Risk Factors This section outlines various risks that could materially and adversely affect the company's business, financial condition, and operating results Summary of Principal Risks Associated with Theravance Biopharma's Business - Risks include inability to achieve or sustain profitability, YUPELRI market acceptance issues, delays in clinical studies, failure to obtain regulatory approvals, partner non-compliance, substantial competition, extensive regulation, and generic competition for YUPELRI[158] RISKS RELATING TO THE COMPANY - The company may never achieve or sustain profitability from operations, despite recent net income driven by a one-time gain from TRELEGY royalties sale[159] - Commercial success of YUPELRI depends on continued acceptance by physicians, patients, and payors, and faces competition from short-acting nebulized bronchodilators and new therapies[162][165][188] - Clinical studies for product candidates are expensive, lengthy, and may face delays or adverse results, as seen with izencitinib and previous ampreloxetine studies[167][171] - Regulatory approval for product candidates like ampreloxetine is complex and uncertain, requiring extensive data and potentially additional testing[172][175] - Dependence on partners like Viatris for YUPELRI commercialization and potential future partners for other candidates carries risks of non-fulfillment or termination of agreements[177][178] - The sale of TRELEGY royalties means future Milestone Payments depend on GSK's commercialization ability and TRELEGY sales, with no control over the program[211][212] - The ongoing Strategic Review Committee process may be time-consuming, disruptive, and may not result in additional transactions or value for shareholders[184] - Reliance on single-source third-party manufacturers for API and drug products for YUPELRI and product candidates poses supply chain risks[189][192] RISKS RELATED TO LEGAL AND REGULATORY UNCERTAINTY - Reliance on patents, trade secrets, and confidentiality agreements to protect intellectual property, with risks of challenges, invalidation, or misappropriation[252][253] - Ongoing patent infringement litigation for YUPELRI against generic companies, with settlements granting licenses for generic launch in April 2039 for some, but litigation pending for others[256] - Product liability lawsuits are inherent in pharmaceutical development and commercialization, potentially leading to substantial liabilities, reputational harm, and diversion of resources[258][262] - Subject to complex and evolving data protection laws (e.g., CCPA, GDPR), with risks of government enforcement actions, private litigation, and significant compliance costs for non-compliance or data breaches[263][267][268][269] - Healthcare law changes, government restrictions on pricing and reimbursement (e.g., IRA, state laws), and cost-containment initiatives may negatively impact revenues and profitability[272][280][281] - Compliance with anti-kickback, fraud and abuse, and transparency laws (e.g., Anti-Kickback Statute, False Claims Act, Physician Payment Sunshine Act) is critical, with potential for significant penalties, fines, and exclusion from government programs for violations[296][298][299] RISKS RELATING TO OUR ORDINARY SHARES - Market price for ordinary shares has fluctuated widely and may continue to do so, influenced by low trading volumes and concentrated ownership[303][305][306] - Activist shareholders could negatively impact business by diverting management attention and resources, causing operational disruptions, and increasing share price volatility[308][310] - Concentration of ownership (three largest shareholders collectively owned 43.1% as of June 30, 2025) limits other shareholders' ability to influence corporate matters[312] - Certain constitutional provisions and a potential shareholder rights plan may discourage third-party acquisition, limiting opportunities to sell shares at a premium[313][314] - Shareholders may face difficulties protecting their interests due to Cayman Islands incorporation, which has different shareholder rights and fiduciary responsibilities compared to US jurisdictions[315][316] - The company is a "smaller reporting company," which allows for reduced reporting and disclosure requirements, potentially making ordinary shares less attractive to some investors[326][328] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including key agreements, certifications, and financial statements in iXBRL format - Exhibit 2.1: Assignment Agreement, dated May 30, 2025, between Theravance Biopharma, Inc. and GlaxoSmithKline Intellectual Property Development Limited[330] - Exhibit 31.1 and 31.2: Certifications of Chief Executive Officer and Chief Financial Officer[330] - Exhibit 32: Certifications of CEO and CFO pursuant to 18 U.S.C. Section 1350[330] - Exhibit 101: Financial statements in iXBRL format[330] Signatures This section contains the official signatures of the company's Chief Executive Officer and Chief Financial Officer, certifying the report's submission - Report signed by Rick E Winningham, CEO, and Aziz Sawaf, SVP & CFO, on August 13, 2025[334]