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Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2018	Jul. 31, 2018
Document and Entity Information
Entity Registrant Name	Theravance Biopharma, Inc.
Entity Central Index Key	0001583107
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		55,104,127
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 103,854	$ 88,980
Short-term marketable securities	249,049	259,586
Accounts receivable, net of allowances of $1,299 and $992 at June 30, 2018 and December 31, 2017, respectively	3,434	2,253
Receivables from collaborative arrangements	3,865	7,109
Prepaid taxes	944	291
Other prepaid and current assets	7,641	3,700
Inventories	17,906	16,830
Total current assets	386,693	378,749
Property and equipment, net	10,677	10,157
Long-term marketable securities	18,252	41,587
Tax receivable	3,143	8,191
Restricted cash	833	833
Other assets	1,766	1,883
Total assets	421,364	441,400
Current liabilities:
Accounts payable	3,644	5,924
Accrued personnel-related expenses	12,150	24,136
Accrued clinical and development expenses	14,508	20,657
Other accrued liabilities	8,700	11,710
Deferred revenue	54,478	125
Total current liabilities	93,480	62,552
Convertible senior notes, net	224,282	223,746
Deferred rent	6,670	3,668
Long-term deferred revenue	34,220	1,436
Other long-term liabilities	28,325	34,820
Commitments and contingencies
Shareholders' equity
Preferred shares, $0.00001 par value: 230 shares authorized, no shares issued or outstanding
Ordinary shares, $0.00001 par value: 200,000 shares authorized; 55,104 and 54,381 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively	1	1
Additional paid-in capital	937,437	913,650
Accumulated other comprehensive loss	(525)	(733)
Accumulated deficit	(902,526)	(797,740)
Total shareholders' equity	34,387	115,178
Total liabilities and shareholders' equity	$ 421,364	$ 441,400

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
CONDENSED CONSOLIDATED BALANCE SHEETS
Account receivable, allowance	$ 1,299	$ 992
Preferred shares, par value (in dollars per share)	$ 0.00001	$ 0.00001
Preferred shares, shares authorized	230	230
Preferred shares, shares issued	0	0
Preferred shares, outstanding shares	0	0
Ordinary shares, par value (in dollars per share)	$ 0.00001	$ 0.00001
Ordinary shares, authorized shares	200,000	200,000
Ordinary shares, shares issued	55,104	54,381
Ordinary shares, outstanding shares	55,104	54,381

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Revenue:
Revenue	$ 23,476	$ 3,509	$ 31,795	$ 6,596
Costs and expenses:
Cost of goods sold (Note 7)	(1,448)	1,364	(622)	1,929
Research and development	48,621	42,927	96,386	83,492
Selling, general and administrative	25,007	24,339	49,711	45,125
Total costs and expenses	72,180	68,630	145,475	130,546
Loss from operations	(48,704)	(65,121)	(113,680)	(123,950)
Income from investment in TRC, LLC (Note 6)	1,949		2,635
Interest expense	(2,137)	(2,137)	(4,274)	(4,274)
Interest and other income, net	1,284	1,425	2,768	2,455
Loss before income taxes	(47,608)	(65,833)	(112,551)	(125,769)
Provision for income tax (benefit)	(6,790)	454	(6,646)	5,837
Net loss	(40,818)	(66,287)	(105,905)	(131,606)
Share-based compensation expense	$ 13,855	$ 10,398	$ 27,853	$ 20,667
Net loss per share:
Basic and diluted net loss per share (in dollars per share)	$ (0.76)	$ (1.27)	$ (1.98)	$ (2.53)
Shares used to compute basic and diluted net loss per share (in shares)	53,799	52,255	53,529	51,938
Net unrealized loss on available-for-sale investments	$ 329	$ 24	$ 208	$ 5
Total comprehensive loss	(40,489)	(66,263)	(105,697)	(131,601)
Research and development
Costs and expenses:
Share-based compensation expense	6,904	4,917	13,463	10,018
Selling, general and administrative
Costs and expenses:
Share-based compensation expense	6,951	5,481	14,390	10,649
Product
Revenue:
Revenue	5,361	3,474	9,040	6,524
Collaborative arrangements
Revenue:
Revenue	$ 18,115	$ 35	$ 22,755	$ 72

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Operating activities
Net loss	$ (105,905)	$ (131,606)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,690	2,059
Share-based compensation	27,853	20,667
Reversal of inventory purchase commitment liability	(2,250)
Inventory write-down		642
Undistributed earnings from investment in TRC, LLC	(1,633)
Other	(21)	262
Changes in operating assets and liabilities:
Accounts receivable	(1,181)	(700)
Receivables from collaborative arrangements	3,244	3,758
Other prepaid and current assets	(2,963)	(2,069)
Inventories	(351)	(497)
Tax receivable	5,092
Other assets	(41)	(128)
Accounts payable	(2,311)	4,798
Accrued personnel-related expenses, accrued clinical and development expenses, and other accrued liabilities	(19,049)	2,905
Deferred rent	3,002	(516)
Deferred revenue	88,256	15
Other long-term liabilities	(5,144)	5,859
Net cash used in operating activities	(11,712)	(94,551)
Investing activities
Purchases of property and equipment	(3,865)	(1,325)
Purchases of marketable securities	(101,912)	(231,991)
Maturities of marketable securities	136,428	120,970
Proceeds from the sales of fixed assets	17
Net cash provided by (used in) investing activities	30,668	(112,346)
Financing activities
Proceeds from ESPP purchases	2,742	2,657
Proceeds from option exercises	81	5,320
Repurchase of shares to satisfy tax withholding	(6,905)	(6,163)
Net cash (used in) provided by financing activities	(4,082)	1,814
Net increase (decrease) in cash, cash equivalents, and restricted cash	14,874	(205,083)
Cash, cash equivalents, and restricted cash at beginning of period	89,813	345,542
Cash, cash equivalents, and restricted cash at end of period	104,687	140,459
Supplemental disclosure of cash flow information
Cash paid for interest	3,738	3,717
Cash received from income taxes, net	$ (4,455)	$ (2,985)

Organization and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2018

Organization and Summary of Significant Accounting Policies

Description of Operations and Summary of Significant Accounting Policies

THERAVANCE BIOPHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Summary of Significant Accounting Policies

Theravance Biopharma, Inc. (“Theravance Biopharma”, the “Company”, or “we” and other similar pronouns) is a diversified biopharmaceutical company with the core purpose of creating medicines that help improve the lives of patients suffering from serious illness.

Basis of Presentation

Our condensed consolidated financial information as of June 30, 2018, and the three and six months ended June 30, 2018 and 2017 are unaudited but include all adjustments (consisting only of normal recurring adjustments), which we consider necessary for a fair presentation of the financial position at such date and of the operating results and cash flows for those periods, and have been prepared in accordance with US generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated December 31, 2017 financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission (“SEC”) on February 28, 2018.

Effective January 1, 2018, we adopted Accounting Standards Codification, Topic 606, Revenue from Contracts with Customers (“ASC 606”) using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018 and recognized the cumulative effect of ASC 606 at the date of initial application. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. We recorded a reduction to the opening balance of accumulated deficit of approximately $1.1 million and a corresponding reduction in deferred revenue as of January 1, 2018 due to ASC 606’s cumulative adoption impact on our collaborative arrangements. Our product sales revenue under ASC 606 would not have been materially different under the legacy Accounting Standards Codification, Topic 605, Revenue Recognition (“ASC 605”).

Effective January 1, 2018, we adopted Accounting Standards Update 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”) that changed the presentation of restricted cash and cash equivalents on the condensed consolidated statement of cash flows. Restricted cash balances are now included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the condensed consolidated statements of cash flows. To conform to the presentation under ASU 2016-18, we revised the amounts previously reported on the condensed consolidated statements of cash flows for the comparable prior year period.

Significant Accounting Policies

Other than the policies below, there have been no material revisions in our significant accounting policies described in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017.

Revenue Recognition

Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

At contract inception, once the contract is determined to be within the scope of ASC 606, we identify the performance obligations in the contract by assessing whether the goods or services promised within each contract are distinct. We then recognize revenue for the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Product Sales

We sell VIBATIV in the US market by making the drug product available through a limited number of distributors, who sell VIBATIV to healthcare providers. Title and risk of loss transfer upon receipt by these distributors. We recognize VIBATIV product sales and related cost of product sales when the distributors obtain control of the drug product, which is at the time title transfers to the distributors.

Product sales are recorded on a net sales basis which includes estimates of variable consideration. The variable consideration results from sales discounts, government‑mandated rebates and chargebacks, distribution fees, estimated product returns and other deductions. We reflect such reductions in revenue as either an allowance to the related account receivable from the distributor, or as an accrued liability, depending on the nature of the sales deduction. Sales deductions are based on management’s estimates that consider payor mix in target markets, industry benchmarks and experience to date. In general, these estimates take into consideration a range of possible outcomes which are probability-weighted in accordance with the expected value method in ASC 606. We monitor inventory levels in the distribution channel, as well as sales of VIBATIV by distributors to healthcare providers, using product‑specific data provided by the distributors. Product return allowances are based on amounts owed or to be claimed on related sales. These estimates take into consideration the terms of our agreements with customers, historical product returns of VIBATIV, rebates or discounts taken, estimated levels of inventory in the distribution channel, the shelf life of the product, and specific known market events, such as competitive pricing and new product introductions. We update our estimates and assumptions each quarter and if actual future results vary from our estimates, we may adjust these estimates, which could have an effect on product sales and earnings in the period of adjustment.

Sales Discounts: We offer cash discounts to certain customers as an incentive for prompt payment. We expect our customers to comply with the prompt payment terms to earn the cash discount. In addition, we offer contract discounts to certain direct customers. We estimate sales discounts based on contractual terms, historical utilization rates, as available, and our expectations regarding future utilization rates. We account for sales discounts by reducing accounts receivable by the expected discount and recognizing the discount as a reduction of revenue in the same period the related revenue is recognized.

Chargebacks and Government Rebates: For VIBATIV sales in the US, we estimate reductions to product sales for qualifying federal and state government programs including discounted pricing offered to Public Health Service (“PHS”), as well as government‑managed Medicaid programs. Our reduction for PHS is based on actual chargebacks that distributors have claimed for reduced pricing offered to such healthcare providers and our expectation about future utilization rates. Our accrual for Medicaid is based upon statutorily‑defined discounts, estimated payor mix, expected sales to qualified healthcare providers, and our expectation about future utilization. The Medicaid accrual and government rebates that are invoiced directly to us are recorded in other accrued liabilities on the condensed consolidated balance sheets. For qualified programs that can purchase our products through distributors at a lower contractual government price, the distributors charge back to us the difference between their acquisition cost and the lower contractual government price, which we record as an allowance against accounts receivable.

Distribution Fees: We have contracts with our distributors in the US that include terms for distribution‑related fees. We determine distribution‑related fees based on a percentage of the product sales price, and we record the distribution fees as an allowance against accounts receivable.

Product Returns: We offer our distributors a right to return product purchased directly from us, which is principally based upon the product’s expiration date. Our policy is to accept product returns during the six months prior to and twelve months after the product expiration date on product that has been sold to our distributors. Product return allowances are based on amounts owed or to be claimed on related sales. These estimates take into consideration the terms of our agreements with customers, historical product returns of VIBATIV, rebates or discounts taken, estimated levels of inventory in the distribution channel, the shelf life of the product, and specific known market events, such as competitive pricing and new product introductions. We record our product return reserves as accrued other liabilities.

Allowance for Doubtful Accounts: We record allowances for potentially doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. As of June 30, 2018, there was no allowance for doubtful accounts related to customer payments.

The following table summarizes activity in each of the product revenue allowance and reserve categories for the six months ended June 30, 2018.


	Chargebacks,		Government
	Discounts and		and Other
(In thousands)	Fees		Rebates		Returns		Total
Balance at December 31, 2017	$	992	$	352	$	947	$	2,291
Provision related to current period sales		3,571		393		249		4,213
Adjustment related to prior period sales		(80)		85		(449)		(444)
Credit or payments made during the period		(3,184)		(453)		(80)		(3,717)
Balance at June 30, 2018	$	1,299	$	377	$	667	$	2,343

We adopted ASC 606 on January 1, 2018 using the modified retrospective method. Our prior periods remain reported under ASC 605. Our revenue recognition policy under ASC 605 for the comparative 2017 periods is included in our Annual Report on Form 10-K for the year ended December 31, 2017.

Collaborative Arrangements

We enter into collaborative arrangements with partners that fall under the scope of Accounting Standards Codification, Topic 808, Collaborative Arrangements (“ASC 808”). While these arrangements are in the scope of ASC 808, we may analogize to ASC 606 for some aspects of the arrangements. We analogize to ASC 606 for certain activities within the collaborative arrangement for the delivery of a good or service (i.e., a unit of account) that is part of our ongoing major or central operations.

The terms of our collaborative arrangements typically include one or more of the following: (i) up-front fees; (ii) milestone payments related to the achievement of development, regulatory, or commercial goals; (iii) royalties on net sales of licensed products; (iv) reimbursements or cost sharing of R&D expenses; and (v) profit/loss sharing arising from co-promotion arrangements. Each of these payments results in collaboration revenues or an offset against R&D expenses. Where a portion of non‑refundable up-front fees or other payments received are allocated to continuing performance obligations under the terms of a collaborative arrangement, they are recorded as deferred revenue and recognized as collaboration revenue when (or as) the underlying performance obligation is satisfied.

As part of the accounting for these arrangements, we must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation which determines how the transaction price is allocated among the performance obligations. The estimation of the stand-alone selling price may include such estimates as, forecasted revenues or costs, development timelines, discount rates, and probabilities of technical and regulatory success. We evaluate each performance obligation to determine if they can be satisfied at a point in time or over time, and we measure the services delivered to our collaboration partner which are periodically reviewed based on the progress of the related program. The effect of any change made to an estimated input component and, therefore revenue or expense recognized, would be recorded as a change in estimate. In addition, variable consideration (e.g., milestone payments) must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.

Up-front Fees: If a license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize collaboration revenues from the transaction price allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing collaboration revenue from the allocated transaction price. For example, when we receive up-front fees for the performance of research and development services, or when research and development services are not considered to be distinct from a license, we recognize collaboration revenue for those units of account over time using a measure of progress. We evaluate the measure of progress each at reporting period and, if necessary, adjust the measure of performance and related revenue or expense recognition as a change in estimate.

Milestone Payments: At the inception of each arrangement that includes milestone payments (variable consideration), we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our or the collaboration partner’s control, such as non-operational developmental and regulatory approvals, are generally not considered probable of being achieved until those approvals are received. At the end of each reporting period, we re-evaluate the probability of achievement of milestones that are within our or the collaboration partner’s control, such as operational developmental milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenues and earnings in the period of adjustment. Revisions to our estimate of the transaction price may also result in negative collaboration revenues and earnings in the period of adjustment.

Royalties: For arrangements that include sales-based royalties, including commercial milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, we have not recognized any material royalty revenue resulting from any of our collaborative arrangements.

Reimbursement, cost-sharing and profit-sharing payments: Under certain collaborative arrangements, we have been reimbursed for a portion of our R&D expenses or participate in the cost sharing of such R&D expenses. Such reimbursements and cost sharing arrangements have been reflected as a reduction of R&D expense in our condensed consolidated statements of operations, as we do not consider performing research and development services for reimbursement to be a part of our ongoing major or central operations. Therefore, the reimbursement or cost sharing of research and development services are recorded as a reduction of R&D expense.

Under the terms of our collaboration agreement with Mylan Ireland Limited (“Mylan”) for revefenacin, including YUPELRITM inhalation solution, we are also entitled to a share of US profits and losses (65% Mylan/35% Theravance Biopharma) received in connection with commercialization of YUPELRI, and we are entitled to low double-digit royalties on ex-US net sales (excluding China). If and when YUPELRI is approved, we expect that Mylan will be the principal in the sales transaction and will record the product sales. For the periods presented, our share of the losses under a co-promote arrangement are recorded within R&D expense and selling, general and administrative expense on our condensed consolidated statements of operations. See “Note 3. Collaborative Arrangements” for additional information about our collaboration agreement with Mylan.

Income Taxes

On January 1, 2018, we adopted ASU 2016-16, Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”) using the modified retrospective approach. ASU 2016-16 requires immediate recognition of income tax consequences of intra-company asset transfers, other than inventory transfers. Legacy GAAP prohibited recognition of income tax consequences of intra-company asset transfers whereby the seller defers any net tax effect and the buyer is prohibited from recognizing a deferred tax asset on the difference between the newly created tax basis of the asset in its tax jurisdiction and its financial statement carrying amount as reported in the consolidated financial statements. An example of an inter-company asset transfers included in ASU 2016-16’s scope is intellectual property. The adoption of ASU 2016-16 did not have a material impact on our balance sheet or statement of operations as our deferred tax assets are fully offset by a valuation allowance.

Recently Issued Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016‑02, Leases (“ASU 2016‑02”). ASU 2016‑02 is aimed at making leasing activities more transparent and comparable, and requires substantially all leases be recognized by lessees on their balance sheet as a right‑of‑use asset and corresponding lease liability, including leases currently accounted for as operating leases. ASU 2016‑02 is effective for all interim and annual reporting periods beginning after December 15, 2018 with early adoption permitted. Based on our initial assessment of ASU 2016-02, we believe that the largest impact to our balance sheet will be from recognizing a right-of-use asset and corresponding lease liability related to our property leases in South San Francisco and Dublin, Ireland. We expect to adopt ASU 2016-02 in the first quarter of 2019, and we are continuing to evaluate the full impact that the adoption of ASU 2016‑02 will have on our consolidated financial statements and related disclosures.

We have evaluated other recently issued accounting pronouncements and do not believe that any of these pronouncements will have a material impact on our consolidated financial statements and related disclosures.

Net Loss per Share

6 Months Ended

Jun. 30, 2018

Net Loss per Share

Net Loss per Share

2. Net Loss per Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of outstanding, less ordinary shares subject to forfeiture. Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares outstanding, less ordinary shares subject to forfeiture, plus all additional ordinary shares that would have been outstanding, assuming dilutive potential ordinary shares had been issued for other dilutive securities.

For the three and six months ended June 30, 2018 and 2017, diluted and basic net loss per share was identical since potential ordinary shares were excluded from the calculation, as their effect was anti-dilutive.

Anti-dilutive Securities

The following ordinary equivalent shares were not included in the computation of diluted net loss per share because their effect was anti-dilutive:


	Three Months Ended		Six Months Ended
	June 30,		June 30,
(In thousands)	2018	2017	2018	2017
Share issuances under equity incentive plans and ESPP	5,383	2,674	4,622	2,958
Restricted shares	4	26	4	26
Share issuances upon the conversion of convertible senior notes	6,676	6,676	6,676	6,676
Total	12,063	9,376	11,302	9,660

In addition, there were 978,750 and 1,305,000 shares that are subject to performance‑based vesting criteria which have been excluded from the ordinary equivalent shares table above as of June 30, 2018 and 2017, respectively.

Collaborative Arrangements

6 Months Ended

Jun. 30, 2018

Collaborative Arrangements

Collaborative Arrangements

3. Collaborative Arrangements

Revenue from Collaborative Arrangements

We recognized revenues from our collaborative arrangements as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2018		2017		2018		2017
Janssen	$	7,566	$	—	$	12,179	$	—
Alfasigma		10,533		—		10,533		—
Other		16		35		43		72
Total revenue from collaborative arrangements	$	18,115	$	35	$	22,755	$	72

The change from our legacy revenue policy, under ASC 605, had no material impact on our collaboration revenue for the three and six months ended June 30, 2018, which would have been $18.1 million and $22.8 million, respectively.

Changes in Deferred Revenue Balances

We recognized the following revenue from collaborative arrangements as a result of changes in our deferred revenue balance during the periods below:


	Three Months Ended
	June 30,
(In thousands)	2018
Collaboration revenue recognized in the period from:
Amounts included in deferred revenue at the beginning of the period	$	16
Performance obligations satisfied in previous period		—

	Six Months Ended
	June 30,
(In thousands)	2018
Collaboration revenue recognized in the period from:
Amounts included in deferred revenue at the beginning of the period	$	32
Performance obligations satisfied in previous period		—

Mylan

Development and Commercialization Agreement

In January 2015, Mylan Ireland Limited (“Mylan”) and we established a strategic collaboration (the “Mylan Agreement”) for the development and, subject to regulatory approval, commercialization of revefenacin, our investigational LAMA in development under the proposed brand name YUPELRITM inhalation solution as a nebulized, once-daily single-agent for the treatment of COPD. We entered into this collaboration to expand the breadth of our revefenacin development program and extend our commercial reach beyond the acute care setting where we currently market VIBATIV.

Under the Mylan Agreement, Mylan paid us an up-front fee of $15.0 million for the delivery of the revefenacin license in 2015 and, in 2016, Mylan paid us a milestone payment $15.0 million for the achievement of 50% enrollment in the Phase 3 twelve-month safety study. Separately, pursuant to an ordinary share purchase agreement entered into on January 30, 2015, Mylan Inc., a subsidiary of Mylan N.V., made a $30.0 million equity investment in us, buying 1,585,790 ordinary shares from us in early February 2015 in a private placement transaction at a price of approximately $18.918 per share, which represented a 10% premium, equal to $4.2 million, over the volume weighted average price per share of our ordinary shares for the five trading days ending on January 30, 2015.

As of June 30, 2018, we are eligible to receive from Mylan additional potential development, regulatory and sales milestone payments totaling up to $205.0 million in the aggregate, with $160.0 million associated with YUPELRI, which is a monotherapy, and $45.0 million for future potential combination products. Of the $160.0 million associated with monotherapy, $150.0 million relates to sales milestones based on achieving certain levels of net sales and $10.0 million relates to regulatory actions in the European Union (“EU”).

The Mylan Agreement is considered to be within the scope of ASC 808, as the parties are active participants and exposed to the risks and rewards of the collaborative activity. Under the terms of the Mylan Agreement, Mylan is responsible for reimbursement of our costs related to the registrational program up until the approval of the first new drug application. Performing R&D services for reimbursement is considered to be a collaborative activity under the scope of ASC 808. Reimbursable program costs are recognized proportionately with the performance of the underlying services and accounted for as reductions to R&D expense. For this unit of account, we do not recognize revenue or analogize to ASC 606 and, as such, the reimbursable program costs are excluded from the transaction price.

We analogized to ASC 606 for the accounting for two performance obligations: (1) delivery of the license to develop and commercialize revefenacin; and (2) joint steering committee participation. We determined the license to be distinct from the joint steering committee participation. We further determined that the transaction price under the arrangement was comprised of the following: (1) $15.0 million up-front license fee received in 2015; (2) $4.2 million premium related to the ordinary share purchase agreement received in 2015; and (3) $15.0 million milestone for 50% enrollment in the Phase 3 twelve-month safety study received in 2016. The total transaction price of $34.2 million was allocated to the two performance obligations based on our best estimate of the relative stand-alone selling price. For the delivery of the license, we based the stand-alone selling price on a discounted cash flow approach and considered several factors including, but not limited to: discount rate, development timeline, regulatory risks, estimated market demand and future revenue potential. For the committee participation, we based the stand-alone selling price on the average compensation of our committee members estimated to be incurred over the performance period. We expect to recognize collaboration revenue from the committee participation ratably over the performance period of approximately seventeen years.

The future potential milestone amounts were not included in the transaction price, as they were all determined to be fully constrained following the concepts of ASC 606. As part of our evaluation of the development and regulatory milestones constraint, we determined that the achievement of such milestones are contingent upon success in future clinical trials and regulatory approvals which are not within our control and uncertain at this stage. We expect that the sales-based milestone payments and royalty arrangements will be recognized when the sales occur or the milestone is achieved. We will re-evaluate the transaction price each quarter and as uncertain events are resolved or other changes in circumstances occur.

We are also entitled to a share of US profits and losses (65% Mylan/35% Theravance Biopharma) received in connection with commercialization of YUPELRI, and we are entitled to low double-digit royalties on ex-US net sales (excluding China). We expect that Mylan will be the principal in the sales transaction and will record the product sales. Under a co-promote arrangement with Mylan, we record our 35% share of expenses based on collaboration activities to prepare for a potential product launch. Until YUPELRI is approved and we have recognized a profit under the agreement, collaboration expenses are recognized within R&D expense and selling, general and administrative expense on our condensed consolidated statements of operations. Our 35% share of profits related to the commercialization of YUPELRI will be recognized as collaboration revenue. For the cost-sharing and profit-sharing activities, we do not analogize to ASC 606. We consider these activities to be collaborative activities under the scope of ASC 808, and we will recognize the shared profits and losses in the periods that such profits and losses occur, following the implementation guidance in ASC 808. For the three and six months ended June 30, 2018, we recognized $1.3 million and $1.7 million, respectively, in collaboration loss under the YUPELRI co-promote arrangement with Mylan.

As of June 30, 2018, $0.3 million was recorded in deferred revenue on the condensed consolidated balance sheet under the Mylan Agreement. This amount reflects revenue allocated to joint steering committee participation and will be recognized as collaboration revenue over the course of the remaining performance period of approximately fourteen years. For the three and six months ended June 30, 2018, we recognized $6,000 and $12,000, respectively, in collaboration revenue from the recognition of previously deferred revenue under the Mylan collaborative arrangement.

Janssen Biotech

In February 2018, we entered into a global co-development and commercialization agreement with Janssen Biotech, Inc. (“Janssen”) for TD-1473 and related back-up compounds for inflammatory intestinal diseases, including ulcerative colitis and Crohn's disease (the “Janssen Agreement”). Under the terms of the Janssen Agreement, we received an upfront payment of $100.0 million. In 2018, we plan to initiate a large, Phase 2b/3 adaptive design induction and maintenance study in ulcerative colitis with TD-1473, as well as a Phase 2 study in Crohn’s disease. Following completion of the Phase 2 Crohn’s study and the Phase 2b induction portion of the ulcerative colitis study, Janssen can elect to obtain an exclusive license to develop and commercialize TD-1473 and certain related compounds by paying us a fee of $200.0 million. Upon such election, we and Janssen will jointly develop and commercialize TD-1473 in inflammatory intestinal diseases and share profits in the US and expenses related to a potential Phase 3 program (67% to Janssen; 33% to Theravance Biopharma). We would receive royalties on ex-US sales at double-digit tiered percentage royalty rates, and we would be eligible to receive up to an additional $700.0 million in development and commercialization milestone payments from Janssen.

The Janssen Agreement is considered to be within the scope of ASC 808, as the parties are active participants and exposed to the risks and rewards of the collaborative activity. We evaluated the terms of the Janssen Agreement and have analogized to ASC 606 for the research and development activities to be performed through the initial Phase 2 development period of the collaborative arrangement that are considered to be part of our ongoing major or central operations. Using the concepts of ASC 606, we have identified research and development activities as our only performance obligation. We further determined that the transaction price under the arrangement was the $100.0 million upfront payment which was allocated to the single performance obligation.

The $900.0 million in future potential payments is considered variable consideration if Janssen elects to remain in the collaboration arrangement following completion of certain Phase 2 activities, as described above and, as such, was not included in the transaction price, as the potential payments were all determined to be fully constrained under ASC 606. As part of our evaluation of this variable consideration constraint, we determined that the potential payments are contingent upon developmental and regulatory milestones that are uncertain and are highly susceptible to factors outside of our control. We expect that any consideration related to royalties and sales-based milestones will be recognized when the subsequent sales occur.

For the three and six months ended June 30, 2018, we recognized $7.6 million and $12.2 million, respectively, as revenue from collaboration agreements related to the Janssen Agreement. The remaining transaction price of $87.8 million was recorded in deferred revenue on the condensed consolidated balance sheet and is expected to be recognized as collaboration revenue as the research and development services are delivered over the Phase 2 period. Collaboration revenue is recognized for the research and development services based on a measure of our efforts toward satisfying a performance obligation relative to the total expected efforts or inputs to satisfy the performance obligation (e.g., costs incurred compared to total budget). In future reporting periods, we will reevaluate our estimates related to our efforts towards satisfying the performance obligation and may record a change in estimate if deemed necessary.

Alfasigma

Development and Collaboration Agreement

Under an October 2012 development and collaboration agreement for velusetrag, we and Alfasigma S.p.A (“Alfasigma”) agreed to collaborate in the execution of a two-part Phase 2 program to test the efficacy, safety and tolerability of velusetrag in the treatment of patients with gastroparesis (a medical condition consisting of a paresis (partial paralysis) of the stomach, resulting in food remaining in the stomach for a longer time than normal) (the “Alfasigma Agreement”). As part of the Alfasigma Agreement, Alfasigma funded the majority of the costs associated with the Phase 2 gastroparesis program, which consisted of a Phase 2 study focused on gastric emptying and a Phase 2 study focused on symptoms. Alfasigma had an exclusive option to develop and commercialize velusetrag in the EU, Russia, China, Mexico and certain other countries, while we retained full rights to velusetrag in the US, Canada, Japan and certain other countries.

In April 2018, Alfasigma exercised its exclusive option to develop and commercialize velusetrag, and we elected not to pursue further development of velusetrag. As a result, we will transfer global rights for velusetrag to Alfasigma under the terms of the existing collaboration agreement. We received a $10.0 million option exercise fee from Alfasigma, and we are eligible to receive future potential development, regulatory and sales milestone payments of up to $26.8 million, and tiered royalties on global net sales ranging from high single digits to the mid-teens.

The Alfasigma Agreement is considered to be within the scope of ASC 808, as the parties are active participants and exposed to the risks and rewards of the collaborative activity. We have historically received reimbursements related to R&D services performed under the Alfasigma Agreement. Performing R&D services for reimbursement is considered to be a collaborative activity under the scope of ASC 808. Reimbursable program costs are accounted for as reductions to R&D expense. For this unit of account, we do not recognize revenue or analogize to ASC 606 and, as such, the reimbursable program costs are excluded from the transaction price.

In April 2018, Alfasigma exercised its exclusive option to develop and commercialize velusetrag and paid us a total of $11.0 million, comprised of the $10.0 option exercise fee and a $1.0 million non-refundable reimbursement. We analogized to ASC 606 for the delivery of the following identified performance obligations: (i) delivery of the velusetrag license; (ii) transfer of technical know-how; (iii) delivery of clinical study reports (“CSRs”); (iv) delivery of registration batches, including drug substances; and (v) joint steering committee participation. We determined that all of the five performance obligations were distinct, and we allocated the transaction price based on the estimated stand-alone selling prices of each of the performance obligations. The stand-alone selling price of the license was based on a discounted cash flow approach and considered several factors including, but not limited to: discount rate, development timeline, regulatory risks, estimated market demand and future revenue potential.

We determined that as any potential development or regulatory milestones were determined to be fully constrained as prescribed under ASC 606. As part of our evaluation of this variable consideration constraint, we determined that the potential payments are contingent upon development and regulatory milestones that are uncertain and are highly susceptible to factors outside of our control. In addition, we expect that any consideration related to sales-based milestones would be recognized when the subsequent sales occur.

For the three and six months ended June 30, 2018, we recognized $10.5 million as revenue from collaboration agreements related to the Alfasigma collaborative arrangement. The remaining transaction price of $0.5 million was recorded in deferred revenue on the condensed consolidated balance sheet and is expected to be recognized as collaboration revenue over approximately the next four years.

Reimbursement of R&D Expense

Under certain collaborative arrangements, we are entitled to reimbursement of certain R&D expense. Activities under collaborative arrangements for which we are entitled to reimbursement are considered to be collaborative activities under the scope of ASC 808. For these units of account, we do not analogize to ASC 606 or recognize revenue. We record reimbursement payments received from our collaboration partners as reductions to R&D expense.

The following table summarizes the reductions to R&D expenses related to the reimbursement payments:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2018		2017		2018		2017
Mylan	$	1,395	$	4,768	$	3,245	$	11,857
Other		—		4		—		41
Total reduction to R&D expense	$	1,395	$	4,772	$	3,245	$	11,898

Cash, Cash Equivalents, and Restricted Cash

6 Months Ended

Jun. 30, 2018

Cash, Cash Equivalents, and Restricted Cash

Cash, Cash Equivalents, and Restricted Cash

4. Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amount shown on the condensed consolidated statements of cash flows.


	June 30,
(In thousands)	2018		2017
Cash and cash equivalents	$	103,854	$	139,626
Restricted cash		833		833
Total cash, cash equivalents, and restricted cash shown on the condensed consolidated statements of cash flows	$	104,687	$	140,459

Restricted cash pertained to certain lease agreements and letters of credit where we have pledged cash and cash equivalents as collateral. The cash-related amounts reported in the table above exclude our investments in short and long-term marketable securities that are reported separately on the condensed consolidated balance sheets.

Investments and Fair Value Measurements

6 Months Ended

Jun. 30, 2018

Available-for-Sale Securities and Fair Value Measurements

Investments and Fair Value Measurements

5. Investments and Fair Value Measurements

Available‑for‑Sale Securities

The estimated fair value of marketable securities is based on quoted market prices for these or similar investments that were based on prices obtained from a commercial pricing service. The fair value of our marketable securities classified within Level 2 is based upon observable inputs that may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two‑sided markets, benchmark securities, bids, offers and reference data including market research publications.

Available‑for‑sale securities are summarized below:


		June 30, 2018
				Gross		Gross
		Amortized		Unrealized		Unrealized		Estimated
(In thousands)		Cost		Gains		Losses		Fair Value
US government securities	Level 1	$	78,912	$	—	$	(263)	$	78,649
US government agency securities	Level 2		22,614		—		(35)		22,579
Corporate notes	Level 2		99,684		4		(232)		99,456
Commercial paper	Level 2		89,584		—		—		89,584
Marketable securities			290,794		4		(530)		290,268
Money market funds	Level 1		64,783		—		—		64,783
Total		$	355,577	$	4	$	(530)	$	355,051


		December 31, 2017
				Gross		Gross
		Amortized		Unrealized		Unrealized		Estimated
(In thousands)		Cost		Gains		Losses		Fair Value
US government securities	Level 1	$	89,896	$	—	$	(342)	$	89,554
US government agency securities	Level 2		50,891		—		(113)		50,778
Corporate notes	Level 2		141,226		2		(280)		140,948
Commercial paper	Level 2		19,893		—		—		19,893
Marketable securities			301,906		2		(735)		301,173
Money market funds	Level 1		69,055		—		—		69,055
Total		$	370,961	$	2	$	(735)	$	370,228

As of June 30, 2018, all of the marketable securities had contractual maturities within two years and the weighted average maturity of the marketable securities was approximately five months. There were no transfers between Level 1 and Level 2 during the periods presented and there have been no changes to our valuation techniques during the three and six months ended June 30, 2018.

In general, we invest in debt securities with the intent to hold such securities until maturity at par value. We do not intend to sell the investments that are currently in an unrealized loss position, and it is unlikely that we will be required to sell the investments before recovery of their amortized cost basis, which may be maturity. We have determined that the gross unrealized losses on our marketable securities, as of June 30, 2018, were temporary in nature and primarily due to increases in short-term borrowing rates in the capital markets. There were no material unrealized losses on investments which have been in a loss position for more than twelve months as of June 30, 2018.

As of June 30, 2018, our accumulated other comprehensive loss on our condensed consolidated balance sheets consisted of net unrealized losses on available-for-sale investments. During the three and six months ended June 30, 2018, we did not sell any of our marketable securities.

Long-term Debt Fair Value

We have $230.0 million of 3.250% convertible senior notes (“Notes”) outstanding as of June 30, 2018 with an estimated fair value of $225.8 million. The estimated fair value was primarily based upon the underlying price of Theravance Biopharma’s publicly traded shares and other observable inputs as of June 30, 2018. The inputs to determine fair value of the Notes are categorized as Level 2 inputs. Level 2 inputs include quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Theravance Respiratory Company, LLC	6 Months Ended
Theravance Respiratory Company, LLC	Jun. 30, 2018
Theravance Respiratory Company, LLC
Theravance Respiratory Company, LLC	6. Theravance Respiratory Company, LLC Prior to the spin-off from Innoviva (the “Spin-Off”), our former parent company, Innoviva, assigned to Theravance Respiratory Company, LLC (“TRC”), a Delaware limited liability company formed by Innoviva, its strategic alliance agreement with GSK and all of its rights and obligations under its collaboration agreement with GSK other than with respect to RELVAR® ELLIPTA®/BREO® ELLIPTA®, ANORO® ELLIPTA® and vilanterol monotherapy. Through our 85% equity interests in TRC, we are entitled to receive an 85% economic interest in any future payments made by GSK under the strategic alliance agreement and under the portion of the collaboration agreement assigned to TRC. The drug programs assigned to TRC include Trelegy Ellipta and the MABA program, as monotherapy and in combination with other therapeutically active components, such as an inhaled corticosteroid (“ICS”), and any other product or combination of products that may be discovered and developed in the future under the GSK agreements. On May 31, 2014, we entered into the TRC LLC Agreement with Innoviva that governs the operation of TRC. Under the TRC LLC Agreement, Innoviva is the manager of TRC, and the business and affairs of TRC are managed exclusively by the manager, including (i) day to day management of the drug programs in accordance with the existing GSK agreements, (ii) preparing an annual operating plan for TRC and (iii) taking all actions necessary to ensure that the formation, structure and operation of TRC complies with applicable law and partner agreements. We are responsible for our proportionate share of TRC’s administrative expenses incurred by Innoviva. We analyzed our ownership, contractual and other interests in TRC to determine if it is a variable‑interest entity (“VIE”), whether we have a variable interest in TRC and the nature and extent of that interest. We determined that TRC is a VIE. The party with the controlling financial interest, the primary beneficiary, is required to consolidate the entity determined to be a VIE. Therefore, we also assessed whether we are the primary beneficiary of TRC based on the power to direct its activities that most significantly impact its economic performance and our obligation to absorb its losses or the right to receive benefits from it that could potentially be significant to TRC. Based on our assessment, we determined that we are not the primary beneficiary of TRC, and, as a result, we do not consolidate TRC in our consolidated financial statements. TRC is recognized in our consolidated financial statements under the equity method of accounting, and the value of our equity investment in TRC was not material for the periods presented. For the three and six months ended June 30, 2018, we recognized $1.9 million and $2.6 million, respectively, in income from our investment in TRC which was generated by royalty payments from GSK to TRC arising from the net sales of Trelegy Ellipta. There was no income from TRC in the comparable prior year period.

Inventories

6 Months Ended

Jun. 30, 2018

Inventories

Inventories

7. Inventories

Inventory consists of the following:


	June 30,		December 31,
(In thousands)	2018		2017
Raw materials	$	10,579	$	11,729
Work-in-process		3,349		66
Finished goods		3,978		5,035
Total inventories	$	17,906	$	16,830

We assess our inventory levels each reporting period in consideration of the risk of product expiration. In evaluating the sufficiency of our inventory reserves or liabilities for firm purchase commitments, we also take into consideration our firm purchase commitments for future inventory production. In the fourth quarter of 2017, we accrued a $2.3 million liability related to excess inventory purchase commitments based on our expected purchase obligations at the time. For the three months ended June 30, 2018, we reversed the expense related to the $2.3 million purchase commitment liability due to the waiver of our minimum purchase commitment by our third-party manufacturer, and the $2.3 million adjustment is included within costs of goods sold on the condensed consolidated statements of operations.

Share-Based Compensation

6 Months Ended

Jun. 30, 2018

Share-Based Compensation

Share-Based Compensation

8. Share-Based Compensation

Share-Based Compensation Expense Allocation

The allocation of share-based compensation expense included in the condensed consolidated statements of operations was as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2018		2017		2018		2017
Research and development	$	6,904	$	4,917	$	13,463	$	10,018
Selling, general and administrative		6,951		5,481		14,390		10,649
Total share-based compensation expense	$	13,855	$	10,398	$	27,853	$	20,667

Performance-Contingent Awards

In the first quarter of 2016, the Compensation Committee of our Board of Directors (“Compensation Committee”) approved the grant of 1,575,000 performance-contingent restricted share awards (“RSAs”) and 135,000 performance-contingent restricted share units (“RSUs”) to senior management. The vesting of such awards is dependent on the Company meeting its critical operating goals and objectives during a five-year period from 2016 to December 31, 2020. The goals that must be met in order for the performance-contingent RSAs and RSUs to vest are strategically important for the Company, and the Compensation Committee believes the goals, if achieved, will increase shareholder value. The awards have dual triggers of vesting based upon the achievement of these goals and continued employment. As of June 30, 2018, there were 978,750 performance-contingent RSAs and 101,250 performance-contingent RSUs outstanding. As of June 30, 2017, there were 1,305,000 performance-contingent RSAs and 135,000 performance-contingent RSUs outstanding.

Expense associated with these awards is broken into three separate tranches and may be recognized during the years 2016 to 2020 depending on the probability of meeting the performance conditions. Compensation expense relating to awards subject to performance conditions is recognized if it is considered probable that the performance goals will be achieved. The probability of achievement is reassessed at each quarter-end reporting period.

As of June 30, 2018, the performance conditions associated with the first tranche of these awards were completed, and, as a result, we recognized $0.6 million and $1.8 million of share-based compensation expense for the three and six months ended June 30, 2018, respectively, associated with these awards. For the three and six month ended June 30, 2017, we recognized $0.5 million and $0.9 million, respectively, of share-based compensation expense related to the first tranche of these awards.

For the three and six months ended June 30, 2018, we recognized $0.9 million and $1.7 million, respectively, of share-based compensation expense related to our assessment of the probability that the performance conditions associated with the second tranche of these awards was considered to be probable of vesting. As of June 30, 2017, the second tranche was not considered probable of vesting, and as of June 30, 2018 and 2017, we determined that the remaining third tranche was not probable of vesting and, as a result, no compensation expense related to the third tranche has been recognized to date.

The maximum potential expense associated with the remaining second and third tranches could be up to $21.4 million (allocated as $8.0 million for research and development expense and $13.4 million for selling, general and administrative expense) if the performance conditions for the second and third tranches are achieved.

In the third quarter of 2017, the Compensation Committee approved the grant of 50,000 performance contingent RSUs to a newly appointed member of senior management. The RSUs have dual triggers of vesting based upon the achievement of certain corporate operating milestones in specified timelines, as well as a requirement for continued employment. Share-based compensation expense related to this grant is broken into two separate tranches and recognized when the associated performance goals are deemed to be probable of achievement. The maximum expense associated with the first tranche is $0.8 million. In 2017, we recognized $0.4 million in share-based compensation expense as we determined that the performance conditions associated with the first tranche was probable of vesting, and during the three months ended March 31, 2018, we recognized the remaining $0.4 million of share-based compensation expense as the performance conditions associated with the first tranche of this award were met. We have determined that the second tranche was not probable of vesting as of June 30, 2018 and, as a result, no compensation expense related to the second tranche has been recognized to date.

Income Taxes	6 Months Ended
Income Taxes	Jun. 30, 2018
Income Taxes
Income Taxes	9. Income Taxes The income tax provision was a $6.8 million benefit and $6.6 million benefit for the three and six months ended June 30, 2018, respectively. The benefit recorded in the income tax provision was primarily due to recording contingent tax liabilities pertaining primarily to uncertain tax positions taken with respect to transfer pricing and tax credits, offset by a tax benefit arising from an updated estimate of a tax filing position to be reported in our tax returns filed in 2018. No provision for income taxes has been recognized on undistributed earnings of our foreign subsidiaries because we consider such earnings to be indefinitely reinvested. We follow the accounting guidance related to accounting for income taxes which requires that a company reduce its deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of its deferred tax assets will not be realized. As of June 30, 2018, our deferred tax assets were offset in full by a valuation allowance. We record liabilities related to uncertain tax positions in accordance with the income tax guidance which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements by prescribing a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Resolution of one or more of these uncertain tax positions in any period may have a material impact on the results of operations for that period. We include any applicable interest and penalties within the provision for income taxes in the condensed consolidated statements of operations. The difference between the Irish statutory rate and our effective tax rate was primarily due to the valuation allowance on deferred tax assets and the liabilities recorded for the uncertain tax position related to transfer pricing and tax credits. Our future income tax expense may be affected by such factors as changes in tax laws, our business, regulations, tax rates, interpretation of existing laws or regulations, the impact of accounting for share-based compensation, the impact of accounting for business combinations, our international organization, shifts in the amount of income before tax earned in the US as compared with other regions in the world, and changes in overall levels of income before tax. US Tax Reform On December 22, 2017, the US government enacted the Tax Cuts and Jobs Acts (the "Tax Act"). The Tax Act significantly revises the US corporate income tax laws by, amongst other things, reducing the corporate income tax rate from 35% to 21% and implementing a modified territorial tax system that includes a one-time repatriation tax on accumulated undistributed foreign earnings. Based on provisions of the Tax Act, we remeasured the deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The estimated amount of the remeasurement of our federal deferred tax balance was $12.4 million. However, as we recognize a valuation allowance on deferred tax assets, if it is more likely than not that the assets will not be realized in future years, there is no impact to effective tax rate, as any change to deferred taxes would be offset by valuation allowances. The changes included in the Tax Act are broad and complex. The final transition impact of the Tax Act may differ from the above estimate, possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to estimates the Company has utilized to calculate the transition impact, including impact from changes to current year earnings estimates and foreign exchange rates of foreign subsidiaries. For example, one area where we are waiting on further guidance before finalizing our conclusion as to the impact of the Tax Act on our deferred tax assets and liabilities is the transition rules with respect to the tax deductibility of executive compensation. The Securities Exchange Commission has issued rules that would allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. For the three and six months ended June 30, 2018, we did not adjust or include any previously assessed Tax Act effect in our quarterly tax provision. We currently anticipate finalizing and recording any resulting adjustments by December 22, 2018.

Organization and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2018

Organization and Summary of Significant Accounting Policies

Basis of Presentation

Significant Accounting Policies

Revenue Recognition

Product Sales

The following table summarizes activity in each of the product revenue allowance and reserve categories for the six months ended June 30, 2018.


	Chargebacks,		Government
	Discounts and		and Other
(In thousands)	Fees		Rebates		Returns		Total
Balance at December 31, 2017	$	992	$	352	$	947	$	2,291
Provision related to current period sales		3,571		393		249		4,213
Adjustment related to prior period sales		(80)		85		(449)		(444)
Credit or payments made during the period		(3,184)		(453)		(80)		(3,717)
Balance at June 30, 2018	$	1,299	$	377	$	667	$	2,343

Income Taxes

Recently Issued Accounting Pronouncements Not Yet Adopted

- Definition

Disclosure of accounting policy for income taxes, which may include its accounting policies for recognizing and measuring deferred tax assets and liabilities and related valuation allowances, recognizing investment tax credits, operating loss carryforwards, tax credit carryforwards, and other carryforwards, methodologies for determining its effective income tax rate and the characterization of interest and penalties in the financial statements.

+ References + Details

Organization and Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2018

Organization and Summary of Significant Accounting Policies

Summary of product revenue allowance and reserve categories


	Chargebacks,		Government
	Discounts and		and Other
(In thousands)	Fees		Rebates		Returns		Total
Balance at December 31, 2017	$	992	$	352	$	947	$	2,291
Provision related to current period sales		3,571		393		249		4,213
Adjustment related to prior period sales		(80)		85		(449)		(444)
Credit or payments made during the period		(3,184)		(453)		(80)		(3,717)
Balance at June 30, 2018	$	1,299	$	377	$	667	$	2,343

Net Loss per Share (Tables)

6 Months Ended

Jun. 30, 2018

Net Loss per Share

Schedule of anti-dilutive securities


	Three Months Ended		Six Months Ended
	June 30,		June 30,
(In thousands)	2018	2017	2018	2017
Share issuances under equity incentive plans and ESPP	5,383	2,674	4,622	2,958
Restricted shares	4	26	4	26
Share issuances upon the conversion of convertible senior notes	6,676	6,676	6,676	6,676
Total	12,063	9,376	11,302	9,660

Collaborative Arrangements (Tables)

6 Months Ended

Jun. 30, 2018

Collaborative Arrangements

Schedule of revenue recognized from collaborative arrangements


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2018		2017		2018		2017
Janssen	$	7,566	$	—	$	12,179	$	—
Alfasigma		10,533		—		10,533		—
Other		16		35		43		72
Total revenue from collaborative arrangements	$	18,115	$	35	$	22,755	$	72

Summary of changes in deferred revenue


	Three Months Ended
	June 30,
(In thousands)	2018
Collaboration revenue recognized in the period from:
Amounts included in deferred revenue at the beginning of the period	$	16
Performance obligations satisfied in previous period		—

	Six Months Ended
	June 30,
(In thousands)	2018
Collaboration revenue recognized in the period from:
Amounts included in deferred revenue at the beginning of the period	$	32
Performance obligations satisfied in previous period		—

Summary of reductions to R and D costs related to the reimbursement payments


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2018		2017		2018		2017
Mylan	$	1,395	$	4,768	$	3,245	$	11,857
Other		—		4		—		41
Total reduction to R&D expense	$	1,395	$	4,772	$	3,245	$	11,898

Cash, Cash Equivalents, and Restricted Cash (Tables)

6 Months Ended

Jun. 30, 2018

Cash, Cash Equivalents, and Restricted Cash

Schedule of reconciliation of cash, cash equivalents, and restricted cash


	June 30,
(In thousands)	2018		2017
Cash and cash equivalents	$	103,854	$	139,626
Restricted cash		833		833
Total cash, cash equivalents, and restricted cash shown on the condensed consolidated statements of cash flows	$	104,687	$	140,459

Investments and Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2018

Available-for-Sale Securities and Fair Value Measurements

Schedule of available-for-sale securities


		June 30, 2018
				Gross		Gross
		Amortized		Unrealized		Unrealized		Estimated
(In thousands)		Cost		Gains		Losses		Fair Value
US government securities	Level 1	$	78,912	$	—	$	(263)	$	78,649
US government agency securities	Level 2		22,614		—		(35)		22,579
Corporate notes	Level 2		99,684		4		(232)		99,456
Commercial paper	Level 2		89,584		—		—		89,584
Marketable securities			290,794		4		(530)		290,268
Money market funds	Level 1		64,783		—		—		64,783
Total		$	355,577	$	4	$	(530)	$	355,051


		December 31, 2017
				Gross		Gross
		Amortized		Unrealized		Unrealized		Estimated
(In thousands)		Cost		Gains		Losses		Fair Value
US government securities	Level 1	$	89,896	$	—	$	(342)	$	89,554
US government agency securities	Level 2		50,891		—		(113)		50,778
Corporate notes	Level 2		141,226		2		(280)		140,948
Commercial paper	Level 2		19,893		—		—		19,893
Marketable securities			301,906		2		(735)		301,173
Money market funds	Level 1		69,055		—		—		69,055
Total		$	370,961	$	2	$	(735)	$	370,228

Inventories (Tables)

6 Months Ended

Jun. 30, 2018

Inventories

Schedule of inventories


	June 30,		December 31,
(In thousands)	2018		2017
Raw materials	$	10,579	$	11,729
Work-in-process		3,349		66
Finished goods		3,978		5,035
Total inventories	$	17,906	$	16,830

Share-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2018

Share-Based Compensation

Schedule of share-based compensation expense included in the consolidated statements of operations


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2018		2017		2018		2017
Research and development	$	6,904	$	4,917	$	13,463	$	10,018
Selling, general and administrative		6,951		5,481		14,390		10,649
Total share-based compensation expense	$	13,855	$	10,398	$	27,853	$	20,667

Organization and Summary of Significant Accounting Policies - Basis of Presentation (Details) $ in Millions	Jun. 30, 2018 USD ($)
Organization and Summary of Significant Accounting Policies
Excess tax benefits cumulative effect adjustment recorded to retained earnings	$ 1.1

Organization and Summary of Significant Accounting Policies - Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands	1 Months Ended		6 Months Ended
	Feb. 28, 2018	Jan. 31, 2015	Jun. 30, 2018	Mar. 31, 2018
Allowance for Doubtful Accounts
Allowance for doubtful accounts				$ 0
Movement in Valuation Allowances and Reserves [Roll Forward]
Balance at the beginning			$ 2,291
Provision related to current period sales			4,213
Adjustment related to prior period sales			(444)
Credit or payments made during the period			(3,717)
Balance at the end			$ 2,343
Profit Loss Percentage as per Collaboration Agreement	33.00%	35.00%	35.00%
Chargebacks, Discounts and Fees
Movement in Valuation Allowances and Reserves [Roll Forward]
Balance at the beginning			$ 992
Provision related to current period sales			3,571
Adjustment related to prior period sales			(80)
Credit or payments made during the period			(3,184)
Balance at the end			1,299
Government and Other Rebates
Movement in Valuation Allowances and Reserves [Roll Forward]
Balance at the beginning			352
Provision related to current period sales			393
Adjustment related to prior period sales			85
Credit or payments made during the period			(453)
Balance at the end			377
Returns
Movement in Valuation Allowances and Reserves [Roll Forward]
Balance at the beginning			947
Provision related to current period sales			249
Adjustment related to prior period sales			(449)
Credit or payments made during the period			(80)
Balance at the end			$ 667
Mylan
Movement in Valuation Allowances and Reserves [Roll Forward]
Profit Loss Percentage as per Collaboration Agreement		65.00%	65.00%

Net Loss per Share (Details) - shares	3 Months Ended		6 Months Ended
Net Loss per Share (Details) - shares	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Anti-Dilutive Securities
Anti-dilutive securities (in shares)	12,063,000	9,376,000	11,302,000	9,660,000
Share issuances under equity incentive plan and ESPP
Anti-Dilutive Securities
Anti-dilutive securities (in shares)	5,383,000	2,674,000	4,622,000	2,958,000
RSAs
Anti-Dilutive Securities
Anti-dilutive securities (in shares)	4,000	26,000	4,000	26,000
Shares issuances upon the conversion of convertible senior notes
Anti-Dilutive Securities
Anti-dilutive securities (in shares)	6,676,000	6,676,000	6,676,000	6,676,000
Performance-based vesting
Anti-Dilutive Securities
Anti-dilutive securities (in shares)			978,750	1,305,000

Collaborative Arrangements - Revenue from Collaborative Arrangements (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended
	Feb. 28, 2018	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Collaborative Arrangements
Revenue		$ 23,476	$ 3,509	$ 31,795	$ 6,596
Collaboration revenue recognized in the period from:
Amounts included in deferred revenue at the beginning of the period		16		32
Janssen
Collaborative Arrangements
Total revenue from collaborative arrangements		7,600		12,200
Collaboration revenue recognized in the period from:
Amounts included in deferred revenue at the beginning of the period	$ 87,800
Collaborative arrangements
Collaborative Arrangements
Revenue		18,115	35	22,755	72
Collaborative arrangements \| Janssen
Collaborative Arrangements
Revenue		7,566		12,179
Collaborative arrangements \| Alfasigma
Collaborative Arrangements
Revenue		10,533		10,533
Collaborative arrangements \| Other
Collaborative Arrangements
Revenue		16	$ 35	43	$ 72
Collaborative arrangements \| Calculated under Revenue Guidance in Effect before Topic 606 [Member]
Collaborative Arrangements
Revenue		$ 18,100		$ 22,800

Collaborative Arrangements - Development and Commercialization Agreement (Details)	1 Months Ended			3 Months Ended		6 Months Ended		12 Months Ended
	Feb. 28, 2018	Feb. 28, 2015 USD ($) $ / shares shares	Jan. 31, 2015 USD ($) plan	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Mar. 31, 2018 USD ($)
Collaborative Arrangements
Milestone paymnet				$ 23,476,000	$ 3,509,000	$ 31,795,000	$ 6,596,000
Percentage of profit share	33.00%		35.00%			35.00%
Revenue from the recognition of previously deferred revenue				$ 16,000		$ 32,000
Mylan
Collaborative Arrangements
Potential milestone or contingent payments										$ 205,000,000
Transaction price			$ 34,200,000
Number of performance obligations \| plan			2
Percentage of profit share			65.00%			65.00%
Performance period (n years)			17 years	14 years		14 years
Deferred revenue				$ 300,000		$ 300,000
Revenue from the recognition of previously deferred revenue				$ 6,000		$ 12,000,000,000
Mylan \| Purchase Agreement
Collaborative Arrangements
Equity investments made in the entity		$ 30,000,000
Number of shares purchased \| shares		1,585,790
Share Price \| $ / shares		$ 18.918
Price per share premium (as a percent)		10.00%
Premium proceeds from sale of ordinary shares									$ 4,200,000
Trading days		5 days
Mylan \| Development and Commercialization Agreement
Collaborative Arrangements
Initial cash payment									15,000,000
Mylan \| Revefenacin Monotherapy (TD-4208)
Collaborative Arrangements
Potential milestone or contingent payments									160,000,000
Mylan \| Future potential combination products
Collaborative Arrangements
Potential milestone or contingent payments										45,000,000
Mylan \| Milestone - 50% enrollment in Phase 3 twelve-month safety study \| Collaborative Arrangement
Collaborative Arrangements
Milestone paymnet								$ 15,000,000	$ 15,000,000
Mylan \| Sales milestones \| Revefenacin Monotherapy (TD-4208)
Collaborative Arrangements
Potential milestone or contingent payments										150,000,000
Mylan \| Regulatory actions \| Revefenacin Monotherapy (TD-4208) \| European Union
Collaborative Arrangements
Potential milestone or contingent payments										$ 10,000,000

Collaborative Arrangements - Janssen Biotech Agreement (Details) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended		6 Months Ended
	Feb. 28, 2018	Jan. 31, 2015	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Collaborative Arrangements
Revenue			$ 23,476	$ 3,509	$ 31,795	$ 6,596
Percentage of profit share	33.00%	35.00%			35.00%
Revenue from the recognition of previously deferred revenue			16		$ 32
Janssen
Collaborative Arrangements
Upfront payment receivable	$ 100,000
Percentage of profit share	67.00%
Maximum potential payments receivable	$ 900,000
Revenue from collaborative arrangements			$ 7,600		$ 12,200
Revenue from the recognition of previously deferred revenue	87,800
Janssen \| Collaborative Arrangement
Collaborative Arrangements
Revenue	700,000
Janssen \| Collaborative Arrangement \| TD-1473
Collaborative Arrangements
Revenue	$ 200,000

Collaborative Arrangements - Development and Collaboration Agreement (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended
	Apr. 30, 2018	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Development and Collaboration Agreement
Revenue		$ 23,476	$ 3,509	$ 31,795	$ 6,596
Alfasigma
Development and Collaboration Agreement
Revenue				10,500
Maximum potential payments receivable				26,800
Transaction price	$ 11,000
Option exercise fee	10,000
Non-refundable reimbursement fee	1,000
Deferred revenue		$ 500		$ 500
Development and Commercialization Agreement \| Alfasigma
Development and Collaboration Agreement
Revenue	$ 10,000

Collaborative Arrangements - Reimbursement of R and D Costs (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Research and Development Reimbursement
Total reduction to R and D expense	$ 1,395	$ 4,772	$ 3,245	$ 11,898
Mylan
Research and Development Reimbursement
Total reduction to R and D expense	$ 1,395	4,768	$ 3,245	11,857
Other
Research and Development Reimbursement
Total reduction to R and D expense		$ 4		$ 41

Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017	Dec. 31, 2016
Cash, Cash Equivalents, and Restricted Cash
Cash and cash equivalents	$ 103,854	$ 88,980	$ 139,626
Restricted cash	833	833	833
Total cash, cash equivalents, and restricted cash shown on the condensed consolidated statement of cash flows	$ 104,687	$ 89,813	$ 140,459	$ 345,542

Investments and Fair Value Measurements - Available for sale securities (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Available for sale securities:
Amortized Cost	$ 355,577	$ 370,961
Gross Unrealized Gains	4	2
Gross Unrealized Losses	(530)	(735)
Estimated Fair Value	355,051	370,228
Marketable securities
Available for sale securities:
Amortized Cost	290,794	301,906
Gross Unrealized Gains	4	2
Gross Unrealized Losses	(530)	(735)
Estimated Fair Value	290,268	301,173
U.S. government securities \| Level 1
Available for sale securities:
Amortized Cost	78,912	89,896
Gross Unrealized Losses	(263)	(342)
Estimated Fair Value	78,649	89,554
U.S. government agency securities \| Level 2
Available for sale securities:
Amortized Cost	22,614	50,891
Gross Unrealized Losses	(35)	(113)
Estimated Fair Value	22,579	50,778
Corporate notes \| Level 2
Available for sale securities:
Amortized Cost	99,684	141,226
Gross Unrealized Gains	4	2
Gross Unrealized Losses	(232)	(280)
Estimated Fair Value	99,456	140,948
Commercial paper \| Level 2
Available for sale securities:
Amortized Cost	89,584	19,893
Estimated Fair Value	89,584	19,893
Money market funds \| Level 1
Available for sale securities:
Amortized Cost	64,783	69,055
Estimated Fair Value	$ 64,783	$ 69,055

Investments and Fair Value Measurements - Convertible senior notes (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($)
Available for sale securities:
Available-for-sale securities sold	$ 0
Maturity period for marketable securities
Maximum contractual maturity period	2 years
Weighted average contractual maturity period	5 months
Fair value transfers
Fair value of assets transferred from Level 1 to Level 2	$ 0
Fair value of assets transferred from Level 2 to Level 1	0
Fair value of liabilities transferred from Level 1 to Level 2	0
Fair value of liabilities transferred from Level 2 to Level 1	0
Unrealized losses
Net unrealized losses	0
Convertible senior notes due 2023
Available for sale securities:
Proceeds from issuance of debt	$ 230,000
Interest rate (as a percent)	3.25%
Notes fair value	$ 225,800

Theravance Respiratory Company, LLC (Details) - TRC - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Theravance Respiratory Company, LLC
Equity interest	85.00%		85.00%
Royalty payments	$ 1.9	$ 0.0	$ 2.6	$ 0.0

Inventories (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
Inventories (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Inventories
Raw materials	$ 10,579	$ 10,579	$ 11,729
Work-in-process	3,349	3,349	66
Finished goods	3,978	3,978	5,035
Total inventories	17,906	17,906	16,830
Excess inventory purchase commitments			$ 2,300
Reversal of inventory purchase commitment liability	$ 2,300	$ 2,250

Share-Based Compensation - Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Share-Based Compensation
Share-based compensation expense	$ 13,855	$ 10,398	$ 27,853	$ 20,667
Research and development
Share-Based Compensation
Share-based compensation expense	6,904	4,917	13,463	10,018
Selling, general and administrative
Share-Based Compensation
Share-based compensation expense	$ 6,951	$ 5,481	$ 14,390	$ 10,649

Share-Based Compensation - Performance Contingent Awards (Details) $ in Thousands	3 Months Ended					6 Months Ended		12 Months Ended
	Jun. 30, 2018 USD ($) shares	Mar. 31, 2018 USD ($)	Sep. 30, 2017 USD ($) tranche shares	Jun. 30, 2017 USD ($) shares	Mar. 31, 2016 shares	Jun. 30, 2018 USD ($) tranche shares	Jun. 30, 2017 USD ($) shares	Dec. 31, 2017 USD ($)
Share-Based Compensation
Awards outstanding (in shares) \| shares	978,750					978,750
Number of tranches \| tranche						3
Share-based compensation expense	$ 13,855			$ 10,398		$ 27,853	$ 20,667
Research and development
Share-Based Compensation
Share-based compensation expense	6,904			4,917		13,463	10,018
Selling, general and administrative
Share-Based Compensation
Share-based compensation expense	$ 6,951			$ 5,481		$ 14,390	$ 10,649
Performance-Contingent Awards - RSAs
Share-Based Compensation
Awards outstanding (in shares) \| shares				1,305,000			1,305,000
Performance-Contingent Awards - RSUs
Share-Based Compensation
Shares approved for grant (in shares) \| shares			50,000
Awards outstanding (in shares) \| shares	101,250			135,000		101,250	135,000
Number of tranches \| tranche			2
Performance-based vesting
Share-Based Compensation
Shares approved for grant (in shares) \| shares					1,575,000
Vesting period					5 years
RSUs
Share-Based Compensation
Shares approved for grant (in shares) \| shares					135,000
Vesting period					5 years
Maximum potential expense
Share-Based Compensation
Share-based compensation expense						$ 21,400
Maximum potential expense \| Research and development
Share-Based Compensation
Share-based compensation expense						8,000
Maximum potential expense \| Selling, general and administrative
Share-Based Compensation
Share-based compensation expense						13,400
First tranche
Share-Based Compensation
Share-based compensation expense	$ 600			$ 500		1,800	$ 900
First tranche \| Performance-Contingent Awards - RSUs
Share-Based Compensation
Share-based compensation expense		$ 400						$ 400
First tranche \| Maximum potential expense \| Performance-Contingent Awards - RSUs
Share-Based Compensation
Share-based compensation expense			$ 800
Second tranche
Share-Based Compensation
Share-based compensation expense	900					1,700
Second tranche \| Performance-Contingent Awards - RSUs
Share-Based Compensation
Share-based compensation expense						0
Third tranche
Share-Based Compensation
Share-based compensation expense	$ 0			$ 0		$ 0	$ 0

Income Taxes - Components of provision for income taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Provision for income taxes
Income tax expense	$ (6,790)	$ 454	$ (6,646)	$ 5,837

Income Taxes - US Tax Reform (Details) - USD ($) $ in Millions	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Income Taxes
Provision at statutory income tax rate (as a percent)	21.00%	35.00%
Federal deferred tax	$ 12.4