Theravance Biopharma(TBPH) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the company's financial information, including statements, notes, management's discussion, and market risk disclosures ITEM 1. FINANCIAL STATEMENTS Unaudited condensed consolidated financial statements, detailing financial position, performance, and cash flows for Q1 2022 Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and shareholders' deficit as of March 31, 2022, and December 31, 2021 | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Assets | | | | | | Total current assets | $204,636 | $249,870 | $(45,234) | -18.1% | | Total assets | $355,359 | $374,819 | $(19,460) | -5.2% | | Liabilities & Shareholders' Deficit | | | | | | Total current liabilities | $44,201 | $58,587 | $(14,386) | -24.6% | | Convertible senior notes due 2023, net | $228,303 | $228,035 | $268 | 0.1% | | Non-recourse notes due 2035, net | $384,161 | $371,359 | $12,802 | 3.4% | | Total shareholders' deficit | $(351,450) | $(338,573) | $(12,877) | 3.8% | - The company's total assets decreased by 5.2% from December 31, 2021, to March 31, 2022, primarily driven by a reduction in current assets, including short-term marketable securities and prepaid expenses. Total current liabilities also saw a significant decrease of 24.6%[7] Condensed Consolidated Statements of Operations and Comprehensive Loss Unaudited condensed consolidated statements of operations and comprehensive loss, detailing financial performance for Q1 2022 and 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Total revenue | $13,196 | $14,257 | $(1,061) | -7.4% | | Total expenses | $51,698 | $98,149 | $(46,451) | -47.3% | | Loss from operations | $(38,502) | $(83,892) | $45,390 | -54.1% | | Income from investment in TRC, LLC | $25,110 | $16,547 | $8,563 | 51.8% | | Net loss | $(25,946) | $(79,679) | $53,733 | -67.4% | | Basic and diluted net loss per share | $(0.34) | $(1.24) | $0.90 | -72.6% | - The company significantly reduced its net loss by 67.4% year-over-year, primarily due to a substantial decrease in total expenses, particularly in Research and Development and Selling, General and Administrative, following a corporate restructuring. Income from investment in TRC, LLC also saw a notable increase[9] Condensed Consolidated Statements of Shareholders' Deficit This section outlines changes in the company's shareholders' deficit, reflecting net loss and equity transactions for Q1 2022 | Metric | December 31, 2021 (in thousands) | March 31, 2022 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :---------------------------- | :-------------------- | | Additional Paid-In Capital | $1,387,469 | $1,400,566 | $13,097 | | Accumulated Deficit | $(1,726,043) | $(1,751,989) | $(25,946) | | Total Shareholders' Deficit | $(338,573) | $(351,450) | $(12,877) | - Shareholders' deficit increased by $12.9 million, primarily driven by the net loss incurred during the quarter, partially offset by an increase in Additional Paid-In Capital from employee share-based compensation[10] Condensed Consolidated Statements of Cash Flows Unaudited condensed consolidated statements of cash flows, detailing cash movements for Q1 2022 and 2021 | Cash Flow Activity | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | | Net cash used in operating activities | $(26,069) | $(69,865) | $43,796 | | Net cash provided by investing activities | $31,924 | $113,697 | $(81,773) | | Net cash used in financing activities | $(1,448) | $(11,288) | $9,840 | | Net increase in cash, cash equivalents, and restricted cash | $4,407 | $32,544 | $(28,137) | | Cash, cash equivalents, and restricted cash at end of period | $95,203 | $114,844 | $(19,641) | - Net cash used in operating activities significantly decreased by $43.8 million, reflecting the reduced net loss. However, Net cash provided by investing activities decreased substantially due to lower maturities of marketable securities, leading to an overall decrease in cash and cash equivalents at the end of the period[12] Notes to Condensed Consolidated Financial Statements Detailed explanations and disclosures supporting financial statements, covering accounting policies, revenue, debt, and other items 1. Organization and Summary of Significant Accounting Policies This note outlines the company's primary focus as a biopharmaceutical company specializing in respiratory medicines. It confirms that the condensed consolidated financial statements are unaudited, prepared in accordance with US GAAP for interim information, and include all necessary adjustments for fair presentation. The company's significant accounting policies remain consistent with its 2021 Annual Report on Form 10-K, and the adoption of ASU 2020-06 had no material impact - Theravance Biopharma is a biopharmaceutical company focused on the discovery, development, and commercialization of respiratory medicines[14][85] - The condensed consolidated financial statements are unaudited, prepared in accordance with US GAAP for interim financial information, and include all necessary recurring adjustments[15] - There have been no material revisions to the company's significant accounting policies described in its 2021 Annual Report on Form 10-K[18] - The adoption of ASU 2020-06, which simplifies accounting for certain convertible instruments, did not have an impact on the company's condensed consolidated financial statements[19] 2. Net Loss per Share This note details the calculation of basic and diluted net loss per share. For the three months ended March 31, 2022, and 2021, basic and diluted net loss per share were identical because potential ordinary shares were anti-dilutive and thus excluded from the diluted EPS calculation | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss (in thousands) | $(25,946) | $(79,679) | | Weighted-average ordinary shares outstanding (in thousands) | 75,247 | 64,493 | | Basic and diluted net loss per share | $(0.34) | $(1.24) | - Diluted and basic and diluted net loss per share were identical for both periods as potential ordinary shares (e.g., from equity incentive plans and Convertible Senior 2023 Notes) were anti-dilutive[22][23] 3. Revenue Total revenue decreased by 7% year-over-year to $13.2 million in Q1 2022, driven by collaboration changes and new licensing revenue | Revenue Source | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Viatris collaboration agreement | $10,687 | $10,385 | $302 | 2.9% | | Collaboration revenue (Other) | $9 | $3,872 | $(3,863) | -99.8% | | Licensing revenue | $2,500 | $0 | $2,500 | NM | | Total revenue | $13,196 | $14,257 | $(1,061) | -7.4% | - Viatris collaboration agreement revenue for YUPELRI® increased by 2.9%, with the company's implied 35% share of net sales increasing by 19% year-over-year, though reported revenue growth was lower due to reduced company costs post-restructuring[30][138][139] - Collaboration revenue from Janssen Biotech decreased to zero in Q1 2022 from $3.9 million in Q1 2021, following the termination of the Janssen Agreement effective January 16, 2022, due to unfavorable Phase 3 clinical trial results for izencitinib[31][33][140] - Licensing revenue of $2.5 million was recognized in Q1 2022 from Pfizer for a development milestone payment related to the skin-selective pan-JAK inhibitor program's Phase 1 clinical trial[37][141] Reduction to R&D Expense from Reimbursement Payments (in thousands): | Collaboration Partner | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Viatris | $1,536 | $94 | | Janssen | $0 | $1,332 | | Total | $1,536 | $1,426 | 4. Cash, Cash Equivalents, and Restricted Cash This note reconciles cash, cash equivalents, and restricted cash, showing a decrease in total from $114.8 million in March 2021 to $95.2 million in March 2022. Restricted cash is maintained for lease agreements, letters of credit, and debt servicing of the 9.5% non-recourse 2035 notes | Category | March 31, 2022 (in thousands) | March 31, 2021 (in thousands) | | :------------------------------------------------------------------------------------------------ | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $94,367 | $114,011 | | Restricted cash | $836 | $833 | | Total cash, cash equivalents, and restricted cash | $95,203 | $114,844 | - Restricted cash is held for certain lease agreements, letters of credit, and debt servicing of the 9.5% Non-recourse 2035 Notes[40] 5. Investments and Fair Value Measurements This note details the company's available-for-sale securities, primarily US government securities, corporate notes, commercial paper, and money market funds. As of March 31, 2022, the total estimated fair value of these investments was $106.4 million, with all securities having contractual maturities within five months. The company does not intend to sell investments with unrealized losses before maturity | Investment Type | Fair Value (March 31, 2022, in thousands) | Fair Value (December 31, 2021, in thousands) | | :---------------------- | :--------------------------------------- | :--------------------------------------- | | US government securities | $44,955 | $29,984 | | Corporate notes | $5,002 | $5,032 | | Commercial paper | $18,189 | $48,490 | | Money market funds | $38,250 | $50,228 | | Total | $106,396 | $133,734 | - As of March 31, 2022, all available-for-sale securities had contractual maturities within five months, with a weighted-average maturity of approximately one month[42] - The company invests primarily in high credit quality and short-term maturity debt securities and does not intend to sell investments in an unrealized loss position before recovery of their amortized cost basis[44] 6. Debt This note details the company's debt, consisting of $393.2 million (net) in 9.5% Non-Recourse 2035 Notes and $228.3 million (net) in 3.25% Convertible Senior Notes due 2023. The Non-Recourse 2035 Notes are secured by TRC royalties from TRELEGY sales, with no recourse against the company, and saw a $4.7 million interest shortfall added to principal in Q1 2022. The Convertible Senior 2023 Notes had an estimated fair value of $223.7 million as of March 31, 2022 | Debt Type | March 31, 2022 (in thousands) | | :-------------------------------- | :----------------------------- | | 9.5% Non-Recourse 2035 Notes (net) | $393,173 | | 3.25% Convertible Senior 2023 Notes (net) | $228,303 | | Total debt | $621,476 | - The Non-Recourse 2035 Notes are secured by 63.75% of the economic interests in TRC, which holds royalties on worldwide net sales of TRELEGY, and are non-recourse to Theravance Biopharma[48][49] - For the three months ended March 2022, $4.7 million of net interest shortfall was added to the principal of the Non-Recourse 2035 Notes, bringing the issuance-to-date net interest shortfall to $28.0 million[50] - The Convertible Senior 2023 Notes had a principal amount of $230.0 million outstanding as of March 31, 2022, with an estimated fair value of $223.7 million[53] 7. Theravance Respiratory Company, LLC This note details the company's 85% economic interest in TRC, which primarily derives royalties from GSK's worldwide net sales of TRELEGY. TRC is managed by Innoviva, and the company accounts for its interest using the equity method. An arbitration ruling in March 2021 affirmed Innoviva's investment activities at current levels but noted potential future consent rights for the company if investments materially adversely affect its economic interest. The company continues to object to proposed investments by TRC - The company holds an 85% economic interest in TRC, which receives royalties from GSK on worldwide net sales of TRELEGY[55][120] - TRC is a variable-interest entity (VIE) managed by Innoviva, and the company accounts for its interest using the equity method, not consolidating TRC[56][57] TRC Summarized Income Statement Information (in thousands): | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Royalty revenue and gross profit | $29,309 | $22,084 | | Net income | $29,541 | $18,320 | - In Q1 2022, the company recognized $25.1 million in net royalty income from TRC, an increase from $16.5 million in Q1 2021, partly due to lower TRC expenses related to arbitration in the prior year[58][59][151] - A March 2021 arbitration ruling found Innoviva and TRC had not breached the TRC LLC Agreement regarding investment activities at then-current levels, but noted the company might have future consent rights if investments materially adversely affect its economic interest[64][127] 8. Share-Based Compensation This note details share-based compensation, including $0.1 million recognized for performance-contingent awards in Q1 2022. A Type III modification of equity awards due to the September 2021 corporate restructuring resulted in a net incremental share-based compensation expense of $1.3 million for terminated employees - The company recognized $0.1 million in share-based compensation expense for performance-contingent awards in Q1 2022[67][177] - A Type III modification of equity awards for employees affected by the corporate restructuring resulted in a net incremental share-based compensation expense of $1.3 million in Q1 2022[68][70] 9. Income Taxes Provision for income tax expense increased to $(0.5) million in Q1 2022, due to uncertain tax positions despite operating losses | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Provision for income tax expense | $(524) | $(227) | $(297) | 130.8% | - The income tax expense in Q1 2022 was primarily attributed to the company's estimate of contingent liabilities for uncertain tax positions related to transfer pricing[71][157] - As of March 31, 2022, the company's deferred tax assets were fully offset by a valuation allowance[72] - The company is currently under IRS examination for the 2018 tax year[74][158] 10. Corporate Restructuring Company recognized $9.3 million in restructuring expenses in Q1 2022, with total expenses reaching $29.5 million since September 2021 - The company announced a corporate restructuring in September 2021 to focus on respiratory therapeutics, involving a 75% reduction in workforce, completed by February 2022[76][88] Restructuring and Related Expenses (in thousands): | Category | Three Months Ended March 31, 2022 | | :-------------------------------- | :----------------------------- | | Cash-related expenses | $4,807 | | Non-cash (share-based compensation) | $4,517 | | Total | $9,324 | - Total restructuring and related expenses incurred since September 2021 reached $29.5 million through Q1 2022, with an estimated $3.5 million remaining to be recognized by Q3 2022[78][79][89][149] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's perspective on financial condition and results for Q1 2022, covering strategy, pipeline, performance, liquidity, and restructuring Forward-Looking Statements This section highlights forward-looking statements subject to risks and uncertainties, where actual results may differ materially - The report contains forward-looking statements regarding strategy, future operations, financial position, revenues, costs, and objectives, which involve risks, uncertainties, and assumptions[82] - Actual results may differ materially from forward-looking statements due to factors discussed in 'Risk Factors' and the ongoing impact of COVID-19[82][84] Management Overview Executive summary of the company's strategic focus on respiratory medicines, corporate restructuring, and financial outlook - Theravance Biopharma is a biopharmaceutical company focused on respiratory medicines, with an FDA-approved product YUPELRI® (revefenacin) for COPD[85][86] - The company has an economic interest in potential future payments from GSK related to TRELEGY through its agreements with Innoviva, Inc[87] - A corporate restructuring in September 2021 reduced headcount by approximately 75% to focus resources on promising respiratory programs and maximize shareholder value[88] - The company plans to become sustainably cash-flow positive starting in the second half of 2022 on an annual basis, following the restructuring[90][164] - The COVID-19 pandemic continues to adversely impact business operations and financial results, with the full extent depending on future developments[91] Respiratory Program Highlights Key developments in the company's respiratory pipeline, including YUPELRI, nezulcitinib, and TD-8236, and their clinical progress - YUPELRI® (revefenacin) inhalation solution is a once-daily, nebulized LAMA approved for maintenance treatment of COPD in the US, co-promoted with Viatris[95][96] - The company is eligible for up to $257.5 million in global development, regulatory, and sales milestone payments from Viatris for YUPELRI monotherapy and future combination products[97] - YUPELRI sales growth was impacted by COVID-19 but showed a return to growth in late 2021, with year-over-year demand increasing by 23.4% in Q1 2022[98][138] - A Phase 4 study comparing YUPELRI to tiotropium in severe COPD patients with suboptimal inspiratory flow rate was initiated in January 2022 to support a possible label update[99] - Nezulcitinib (lung-selective, nebulized JAK inhibitor) completed Phase 2 for Acute Lung Injury (ALI) caused by COVID-19, showing a favorable trend in 28-day all-cause mortality and improvements in inflammatory biomarkers, particularly in patients with CRP <150 mg/L, despite not meeting primary or secondary endpoints[100][104][105] - The clinical program for TD-8236, an inhaled lung-selective pan-JAK inhibitor for asthma, has been paused after Phase 2a results showed no impact on lung function decline following allergen inhalation, despite evidence of target engagement[106][109][110] Other Pipeline Asset Highlights Status of other pipeline assets, including ampreloxetine for nOH and TD-1058 for IPF, and their clinical trial outcomes - Ampreloxetine (TD-9855), a wholly-owned norepinephrine reuptake inhibitor for symptomatic neurogenic orthostatic hypotension (nOH), did not meet its primary endpoint in the SEQUOIA Phase 3 study[111][113] - The REDWOOD Phase 3 study for ampreloxetine also did not meet its primary endpoint for the overall nOH population, but pre-specified subgroup analysis suggested a benefit for Multiple System Atrophy (MSA) patients, leading the company to explore a path forward for this subgroup[114] - TD-1058, an inhaled ALK5 inhibitor for idiopathic pulmonary fibrosis (IPF), has completed single and multiple ascending dose studies in healthy subjects, targeting the TGFβ pathway locally in the lung[115][117] Economic Interest in GSK-Partnered Respiratory Programs Company's economic interest in TRC, deriving royalties from GSK's TRELEGY sales, and related agreements and arbitration - The company holds an 85% economic interest in future payments from GSK to TRC related to GSK-Partnered Respiratory Programs, primarily TRELEGY, with royalties upward-tiering from 6.5% to 10%[118][120] - TRELEGY (fluticasone furoate/umeclidinium bromide/vilanterol) is approved for COPD and asthma in the US, EU, and other countries, with global net sales growing from $663 million in 2019 to $1.7 billion in 2021[120][121] - 75% of the income from the company's investment in TRC is available only for payment of the Non-Recourse 2035 Notes and not for other obligations[123][152] - The company initiated arbitration against Innoviva and TRC in October 2020, challenging the use of TRELEGY royalties for private company investments rather than distributions, with a March 2021 arbitration ruling not finding a breach at current investment levels but acknowledging potential future consent rights[126][127] Other Economic Interests Company's other collaboration and licensing agreements, including Takeda for TD-8954 and Pfizer for a pan-JAK inhibitor program - TD-8954, a selective 5-HT4 agonist, is in Phase 2 development with Takeda for gastrointestinal motility disorders, with the company eligible for development, regulatory, sales milestones, and tiered royalties[130][132] - The company has a global license agreement with Pfizer for its preclinical skin-selective pan-JAK inhibitor program, receiving a $2.5 million development milestone payment in March 2022 for a Phase 1 clinical trial[133][134] - The company is eligible for up to an additional $237.5 million in development and sales milestone payments from Pfizer, plus tiered royalties on worldwide net sales[135] Research Projects Streamlined R&D focus on high-value core respiratory opportunities, including YUPELRI PIFR study and inhaled JAK inhibitor portfolio - Following the strategic corporate restructuring, the company intends to streamline its R&D focus on high-value core respiratory opportunities, including the YUPELRI PIFR clinical study and continued investment in its inhaled Janus kinase inhibitor portfolio, particularly nezulcitinib for Acute Lung Injury (ALI)[136] Critical Accounting Policies and Estimates No material changes to critical accounting policies and estimates from the prior annual report - 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, 2021[137] Results of Operations Detailed analysis of the company's financial performance, including revenue, expenses, and investment income for Q1 2022 Revenue Total revenue decreased by 7% year-over-year to $13.2 million in Q1 2022, driven by collaboration changes and new licensing revenue | Revenue Source | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Viatris collaboration agreement | $10,687 | $10,385 | $302 | 3% | | Collaboration revenue | $9 | $3,872 | $(3,863) | -100% | | Licensing revenue | $2,500 | $0 | $2,500 | NM | | Total revenue | $13,196 | $14,257 | $(1,061) | -7% | - Viatris collaboration agreement revenue for YUPELRI® increased by 3% to $10.7 million, with YUPELRI®'s market share increasing and demand growing by 23.4% year-over-year in Q1 2022[138] - Other collaboration revenue decreased by $3.9 million due to the recognition of remaining non-cash Janssen collaboration revenue in Q4 2021 following the close-out of the izencitinib program[140] - Licensing revenue increased by $2.5 million due to a development milestone payment from Pfizer for the skin-selective pan-JAK inhibitor program's Phase 1 clinical trial[141] Research and Development R&D expenses decreased significantly by 66% to $23.3 million in Q1 2022, primarily due to program completion and restructuring | R&D Category | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | % Change | | :--------------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Employee-related | $6,264 | $17,576 | $(11,312) | -64% | | Share-based compensation | $4,530 | $7,921 | $(3,391) | -43% | | External-related | $7,245 | $33,532 | $(26,287) | -78% | | Facilities, depreciation and other allocated expenses | $5,214 | $8,570 | $(3,356) | -39% | | Total research & development | $23,253 | $67,599 | $(44,346) | -66% | - The largest contributor to the R&D expense decrease was a $26.3 million reduction in external-related expenses, mainly due to the completion or near completion of the izencitinib and ampreloxetine programs[143] - Employee-related expenses decreased by $11.3 million, and share-based compensation by $3.4 million, primarily due to the corporate restructuring announced in September 2021[143] Selling, General and Administrative SG&A expenses decreased by 37% to $19.1 million in Q1 2022, driven by restructuring and reduced legal expenses | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Selling, general and administrative | $19,121 | $30,550 | $(11,429) | -37% | - The decrease in SG&A was primarily attributed to a $7.5 million reduction in employee-related expenses and a $2.4 million reduction in share-based compensation expenses resulting from the corporate restructuring[145] - External-related services also decreased by $2.1 million, mainly due to a reduction in legal expenses related to the TRC arbitration in 2021[145] Restructuring and Related Expenses Company recognized $9.3 million in restructuring expenses in Q1 2022, with total expenses reaching $29.5 million since September 2021 Restructuring and Related Expenses (in thousands): | Category | Three Months Ended March 31, 2022 | | :-------------------------------- | :----------------------------- | | Cash-related expenses | $4,807 | | Share-based compensation expense (Non-cash) | $4,517 | | Total | $9,324 | - Of the $9.3 million in Q1 2022, $4.7 million was related to R&D expenses and $4.6 million to selling, general and administrative expenses[148] - Total restructuring and related expenses since the September 2021 announcement amounted to $29.5 million through Q1 2022, with an estimated $3.5 million remaining to be recognized by Q3 2022[78][149] Income from Investment in TRC, LLC Income from investment in TRC, LLC increased by 52% to $25.1 million in Q1 2022, due to higher royalties and lower TRC expenses | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Income from investment in TRC, LLC | $25,110 | $16,547 | $8,563 | 52% | - The increase in TRC income was due to higher royalty payments from GSK on TRELEGY net sales and lower TRC expenses ($0.2 million in Q1 2022 vs. $2.8 million in Q1 2021, which included arbitration legal fees)[151] Interest Expense Total interest expense remained relatively unchanged at $11.7 million in Q1 2022, primarily from notes and amortization costs | Debt Type | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | 9.5% Non-recourse notes due 2035 | $(9,518) | $(9,736) | $218 | -2% | | 3.25% Convertible senior notes due 2023 | $(2,137) | $(2,137) | $0 | 0% | | Total interest expense | $(11,655) | $(11,873) | $218 | -2% | - Interest expense was relatively unchanged year-over-year, primarily comprising interest on the Convertible Senior 2023 Notes and Non-Recourse 2035 Notes, plus amortization of debt issuance costs[154][155] Interest Income and Other Income (Expense), net Net interest income and other income (expense) was a net expense of $(0.4) million in Q1 2022, primarily due to foreign currency losses | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Interest income and other income (expense), net | $(375) | $(234) | $(141) | 60% | - The net expense was primarily related to foreign currency losses, offset by interest income from investment balances[156] Provision for Income Tax Expense Provision for income tax expense increased to $(0.5) million in Q1 2022, due to uncertain tax positions despite operating losses | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Provision for income tax expense | $(524) | $(227) | $(297) | 131% | - The increase in income tax expense was due to an uncertain tax position taken with respect to transfer pricing, despite the company incurring operating losses[157] Liquidity and Capital Resources Company's financial position, including cash, marketable securities, debt, and future funding needs, emphasizing restructuring impact - As of March 31, 2022, the company had $147.5 million in cash, cash equivalents, and marketable securities (excluding restricted cash)[159] - Outstanding debt included $230.0 million in principal Convertible Senior 2023 Notes and $397.3 million in principal Non-Recourse 2035 Notes[159] - The Non-Recourse 2035 Notes are secured by TRC's economic interest in GSK's TRELEGY payments and are non-recourse to Theravance Biopharma[160] - The company expects to become sustainably cash-flow positive beginning in the second half of 2022 on an annual basis, primarily due to reduced cash expenditures from the corporate restructuring[164] - Existing cash, cash equivalents, and marketable securities are expected to fund operations for at least the next twelve months[167] - Future capital needs may require additional financing through equity offerings, debt, or collaborations, which may not be available on acceptable terms[168][169] Cash Flows Analysis of the company's cash movements from operating, investing, and financing activities for Q1 2022 and 2021 | Cash Flow Activity | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | | Net cash used in operating activities | $(26,069) | $(69,865) | $43,796 | | Net cash provided by investing activities | $31,924 | $113,697 | $(81,773) | | Net cash used in financing activities | $(1,448) | $(11,288) | $9,840 | - Net cash used in operating activities decreased by $43.8 million, primarily due to a lower net loss[171] - Net cash provided by investing activities decreased by $81.8 million, mainly due to lower maturities of marketable securities in Q1 2022 compared to Q1 2021[173][174] - Net cash used in financing activities decreased by $9.8 million, primarily due to lower principal payments on the 2035 notes and reduced share repurchases for tax withholding[175] Commitments and Contingencies Company's indemnification obligations and remaining expenses for share-based and cash awards - The company indemnifies its officers and directors, with insurance policies limiting exposure, and believes the fair value of these agreements is minimal[176] - As of March 31, 2022, the maximum remaining expense for outstanding performance-contingent share-based awards