Theravance Biopharma(TBPH) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements 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 | 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 | 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 | 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 | 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 1. Organization and Summary of Significant Accounting Policies - Theravance Biopharma is a biopharmaceutical company focused on the development and commercialization of medicines[12] - 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] - 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] 2. Net Loss per Share | 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 - 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][26] | 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] - 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] - 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] 4. Cash, Cash Equivalents, and Restricted Cash | 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] 5. Investments and Fair Value Measurements | 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] - 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] 6. Subleases - 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] - 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] 7. Discontinued Operations - 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][51] - 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] - Net income from discontinued operations was $0 in Q1 2023, compared to $14.313 million in Q1 2022, due to the TRC Transaction[55] 8. Share-Based Compensation - 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] - 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] 9. Income Taxes - 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] - A full valuation allowance is maintained on US state, California, and foreign deferred tax assets[61] 10. Strategic Actions - 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] - 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] - 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] 11. Commitments and Contingencies - 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 - The report contains forward-looking statements regarding strategy, future operations, financial position, and projected costs, which involve risks, uncertainties, and assumptions[73] - 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] Management Overview - 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][75] 2023 Strategic Actions - 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] - 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] - 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] Impact of COVID-19 Pandemic - 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] - The company is implementing measures to identify and mitigate adverse impacts and risks caused by the pandemic[79] Core Program Updates YUPELRI (revefenacin) Inhalation Solution - 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][83] - 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] - 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] Ampreloxetine (TD-9855) - 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] - 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][91] - 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] - 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] Out-Licensed Programs Skin-selective Pan-JAK inhibitor Program - The company has a global license agreement with Pfizer for its preclinical skin-selective, locally-acting pan-JAK inhibitor program[96] - 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] - Eligible to receive up to an additional $237.5 million in development and sales milestone payments from Pfizer, plus tiered royalties[98] Selective 5-HT4 Agonist (TD-8954) - 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] Economic Interests and Other Assets Mid- and Long-Term Economic Interest in GSK-Partnered Respiratory Programs - 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][101][102] TRELEGY (the combination of fluticasone furoate/umeclidinium bromide/vilanterol) - 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][105] - 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] Development Projects - 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] - Research activities, including the inhaled JAK program (nezulcitinib), were discontinued on February 27, 2023[107] Critical Accounting Policies and Estimates - 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] Results of Operations 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][112] - No licensing revenue was recognized in Q1 2023, compared to $2.5 million in Q1 2022 from a Pfizer development milestone[113] Research and Development | 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][118] - Reimbursement of R&D expenses from collaboration partners increased to $1.8 million in Q1 2023 from $1.5 million in Q1 2022[119] Selling, General and Administrative | 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] - Share-based compensation expense related to SG&A decreased from $5.5 million in Q1 2022 to $4.2 million in Q1 2023[121] Restructuring and Related Expenses | 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] - 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] Interest Expense | 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] Interest Income and Other Income (Expense), net | 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] Provision for Income Tax Benefit (Expense) – Continuing Operations | 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] Net Income from Discontinued Operations | 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] Liquidity and Capital Resources 2023 Strategic Actions - 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] Adequacy of cash resources to meet future needs - 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] Cash Flows | 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][141] - 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][143] Commitments and Contingencies - The company indemnifies its officers and directors for certain events, with the fair value of these agreements considered minimal[145] Market and Performance-Contingent Awards - 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][147] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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 - 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] Limitations on the Effectiveness of Controls - 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] Changes in Internal Control over Financial Reporting - 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] PART II. OTHER INFORMATION Item 1. Legal Proceedings 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] - 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] - As a result of these lawsuits, a stay of FDA approval through May 2026 will be imposed on the generic companies' ANDAs[152] Item 1A. Risk Factors 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 - The company may never achieve or sustain profitability[156] - YUPELRI's acceptance by physicians, patients, and payors may not continue to grow[157] - 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 We may never achieve or sustain profitability. - 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][159] - 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] 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. - 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] - 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] In collaboration with Viatris, we are responsible for marketing and sales of YUPELRI in the US, which subjects us to certain risks. - 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. - 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][166] - 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] If our product candidates are not approved by regulatory authorities, including the FDA, we will be unable to commercialize them. - 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] - Approval procedures vary by country, and approval in one jurisdiction does not guarantee approval in others, with potential for delays or non-approval[173] 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. - 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][175] - Disputes with partners could lead to delays, litigation, and adverse effects on the business and stock price[175] Our ongoing drug development efforts might not generate additional approvable drugs. - 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][177][178] - Previous late-stage clinical programs, such as izencitinib and ampreloxetine, have failed to meet primary endpoints[178][179] 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. - The company faces substantial competition from larger pharmaceutical companies with greater financial, technical, and personnel resources[182] - Success depends on developing superior medicines, attracting talent, protecting intellectual property, conducting effective clinical trials, and implementing commercialization strategies[183] - 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][185] 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. - The company relies on single-source third-party manufacturers for its Active Pharmaceutical Ingredient (API) and YUPELRI drug product[186] - 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. - 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][188] - 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][193] Our business and operations would suffer in the event of significant disruptions of information technology systems or security breaches. - 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] - 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] 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. - 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][218][219] - Challenges include site closures, staffing shortages, supply chain interruptions for investigational products, and potential impact on demand for future products[218] Global economic, political, and social conditions may harm our ability to do business, increase our costs and negatively affect our stock price. - 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][222][223][225] - 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] 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. - 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] - The unique nature of research activities and equipment could make recovery difficult and costly, and inadequate insurance coverage could seriously impair financial condition[226] 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. - 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] - 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] 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. - 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][234] - Failure to obtain needed funding could require reducing or delaying research, development, and commercialization activities, or licensing rights on less attractive terms[231] We may be treated as a US corporation for US federal income tax purposes. - 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] - 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] Future tax reform, including changes in tax rates and imposition of new taxes, could impact our results of operations and financial condition. - 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] Taxing authorities may challenge our structure and transfer pricing arrangements. - 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] - Such challenges could be expensive, consume time and resources, and result in increased taxes in the future, adversely affecting cash flows and business[242] 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. - 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] - PFIC status depends on annual assets and income and cannot be predicted with certainty until after the end of each taxable year[243] If we are unable to maintain effective internal controls, our business, financial position and results of operations could be adversely affected. - 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] - 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] RISKS RELATED TO LEGAL AND REGULATORY UNCERTAINTY 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. - The company relies on patents, patent applications, trade secret protection, and confidentiality agreements to protect its intellectual property[247] - Patents may be challenged, invalidated, or too narrow, and trade secrets could be misappropriated or independently developed, eroding the company's competitive position[247][248] 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. - 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][251][252] - The company has initiated patent infringement lawsuits against generic companies for YUPELRI, which involve substantial expenses and may not result in adequate remedies[253] 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. - The effectiveness of intellectual property protection efforts by partners (e.g., GSK for TRELEGY) is crucial for the commercialization of collaboration assets[254] - 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] Product liability and other lawsuits could divert our resources, result in substantial liabilities and reduce the commercial potential of our medicines. - 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] - 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][258][259] 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. - 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][261][262][265] - 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][268][270] 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. - 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][278] - 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][279] - 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] 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. - 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][286][288] - 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] 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. - 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][292][295] - Non-compliance could lead to significant civil, criminal, and administrative penalties, exclusion from government healthcare programs, contractual damages, and reputational harm[294] Our business and operations, including the use of hazardous and biological materials may result in liabilities with respect to environmental, health and safety matters. - 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] - 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] RISKS RELATING TO OUR ORDINARY SHARES 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. - The market price for the company's ordinary shares has been highly volatile (e.g., **$8.33