Theravance Biopharma(TBPH) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents unaudited condensed consolidated financial statements and accompanying notes Condensed Consolidated Balance Sheets 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) 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] Condensed Consolidated Statements of Shareholders' Equity 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 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 These notes provide essential context for the financial statements, covering accounting policies and key transactions 1. Organization and Summary of Significant Accounting Policies 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] - The TRC Transaction (monetization of equity interest) in July 2022 is classified as discontinued operations[17] - Cash, cash equivalents, and marketable securities are expected to fund operations and the capital return program for at least the next twelve months[19] 2. Net Income (Loss) per Share 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] 3. Revenue 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] - The Pfizer Agreement for the skin-selective pan-JAK inhibitor program was terminated in June 2023, with the program returned to the company[38] 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 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] 5. Investments and Fair Value Measurements 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] - 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] 6. Subleases 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] 7. Discontinued Operations 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] - 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] - 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][56] 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 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] - 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] - 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] 9. Income Taxes 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] - The company maintains a full valuation allowance on its California, other states, and foreign deferred tax assets[70] 10. Strategic Actions 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] - Research activities, including the inhaled JAK inhibitor program, were discontinued, resulting in a 17% headcount reduction in March 2023[74] 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] 11. Commitments and Contingencies 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][82] - 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition, results of operations, and key strategic actions Management Overview 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] 2023 Strategic Actions 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][91] - 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] - A 17% headcount reduction occurred in March 2023 as a result of halting research investments[91] - Restructuring and related expenses of $2.7 million were incurred for the nine months ended September 30, 2023, primarily related to R&D expenses[91] Core Program Updates YUPELRI continues to grow in the COPD market while ampreloxetine advances into a new Phase 3 study - YUPELRI (revefenacin) inhalation solution is an FDA-approved, once-daily nebulized LAMA for COPD maintenance treatment in the US[92] - A Phase 4 study for YUPELRI (PIFR-2) comparing lung function improvements in severe COPD patients completed enrollment, with top-line results expected in January 2024[98] YUPELRI Net Sales | YUPELRI Net Sales (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Change ($) | 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] - 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] - Ampreloxetine received Orphan Drug Designation status from the FDA for the treatment of symptomatic nOH in MSA patients in May 2023[105] - 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] - 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] Economic Interests and Other Assets 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] - 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] - 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] - TRELEGY global net sales grew from $661.4 million in 2019 to $2.1 billion in 2022, with consensus estimates projecting peak sales of $3.6 billion annually[113] Development Projects The company's development focus is on the YUPELRI Phase 4 and ampreloxetine Phase 3 studies - Current development focus is on the YUPELRI Peak Inspiratory Flow Rate (PIFR-2) Phase 4 study and the ampreloxetine Phase 3 study (CYPRESS)[115] - Research activities, including the inhaled JAK program (nezulcitinib), have been discontinued as part of the 2023 Strategic Actions[115] Critical Accounting Policies and Estimates The company's financial statements are prepared using US GAAP, requiring management estimates and assumptions - Preparation of financial statements requires management to make estimates and assumptions that affect reported amounts[117] - No material changes to critical accounting policies and estimates since the Annual Report on Form 10-K for the year ended December 31, 2022[117] Results of Operations Results show increased revenue from the Viatris collaboration and decreased R&D and restructuring expenses Revenue Total revenue increased due to higher YUPELRI sales and lower Viatris costs Revenue by Source (Q3) | Revenue Source (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Change ($) | 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 $160.3 million for the nine months ended September 30, 2023[118] Research and Development R&D expenses decreased due to the discontinuation of research activities as part of the 2023 Strategic Actions R&D Expenses (Q3) | R&D Expense Category (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Change ($) | 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 | $(15,736) | (33)% | - R&D expenses were reduced due to the 2023 Strategic Actions, including the discontinuation of research activities[122] Selling, General and Administrative SG&A expenses were relatively flat for Q3 but increased for the nine-month period due to higher external expenses SG&A Expenses (Q3) | SG&A Expense (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Change ($) | 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 | $4,262 | 8% | - The increase in SG&A for the nine-month period was primarily due to higher external-related expenses (professional/financial advisory services, intellectual property protection) and increased allocated overhead from reduced research activities[129] Restructuring and Related Expenses Restructuring expenses decreased significantly, reflecting a smaller workforce reduction in 2023 compared to 2021 Restructuring Expenses (Q3) | Restructuring Expenses (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Change ($) | 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 | $(10,095) | (79)% | - The decrease in restructuring expenses was primarily due to a smaller reduction in workforce related to the 2023 Strategic Actions compared to the 2021 Restructuring[133] Interest Expense Interest expense decreased significantly due to the retirement of convertible senior notes in August 2022 Interest Expense (Q3) | Interest Expense (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Change ($) | 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] Loss on Extinguishment of Debt 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 $3.0 million loss in the prior year was due to the extinguishment of 3.25% convertible senior notes, comprising transaction costs and the write-off of debt issuance costs[138] Interest Income and Other Income (Expense), net Interest and other income decreased in Q3 due to lower cash balances but increased year-to-date from higher yields Interest and Other Income (Q3) | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Change ($) | 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] Provision for Income Tax Expense – Continuing Operations 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] Net Income from Discontinued Operations 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] Liquidity and Capital Resources 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] - 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] - 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] 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 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] - 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][160] - 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] - No material changes in internal control over financial reporting occurred during the third quarter of 2023[165] PART II. OTHER INFORMATION Item 1. Legal Proceedings 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] - 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] Item 1A. Risk Factors 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] - Commercial success of YUPELRI depends on continued acceptance by physicians, patients, and payors, facing competition from other nebulized LAMAs[178] - Delays or adverse results in clinical studies for product candidates, such as ampreloxetine, or regulatory obstacles could harm the business[184][189] - The company faces substantial competition from companies with greater resources and experience, potentially leading to others developing or commercializing products more successfully[200] - The company's ongoing economic interest in TRELEGY is subject to risks related to GSK's commercialization efforts and potential adverse developments[223][224] - 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][324] - The company relies on patents, trade secrets, and confidentiality agreements to protect intellectual property, but these may be challenged or insufficient against infringement[272][273] - 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][287][314] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company executed share repurchases under its $325.0 million capital return program - The capital return program was increased to $325.0 million[352] - As of September 30, 2023, $294.6 million of shares had been repurchased under the program[352] - Approximately $30.4 million remained in the capital return program as of September 30, 2023, expected to be completed by year-end[352] 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 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] - Exhibit 32 contains Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350[358] - Exhibit 101 includes the financial statements formatted in iXBRL, and Exhibit 104 is the Cover Page Interactive Data File[358] 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]