View Filing Data

Print Document View Excel Document

Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2019	Jul. 26, 2019
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2019
Document Transition Report	false
Entity File Number	001-36033
Entity Registrant Name	THERAVANCE BIOPHARMA, INC.
Entity Incorporation, State or Country Code	KY
Entity Tax Identification Number	98-1226628
Entity Address, Address Line One	PO Box 309
Entity Address, Address Line Two	Ugland House, South Church Street
Entity Address, City or Town	George Town, Grand Cayman
Entity Address, Country	KY
Entity Address, Postal Zip Code	KY1-1104
City Area Code	650
Local Phone Number	808-6000
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Title of 12(b) Security	Ordinary Share $0.00001 Par Value
Trading Symbol	TBPH
Security Exchange Name	NASDAQ
Entity Common Stock, Shares Outstanding		56,637,038
Entity Central Index Key	0001583107
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Amendment Flag	false

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 178,311	$ 378,021
Short-term marketable securities	217,761	127,255
Accounts receivable, net of allowances of $0 at June 30, 2019 and December 31, 2018	111	620
Receivables from collaborative arrangements	979	10,053
Amounts due from TRC, LLC	20,019	5,422
Other prepaid and current assets	8,857	11,452
Total current assets	426,038	532,823
Property and equipment, net	12,662	13,176
Long-term marketable securities		11,869
Operating lease assets	47,831
Income tax receivable	3,695
Restricted cash	833	833
Other assets	1,388	1,534
Total assets	492,447	560,235
Current liabilities:
Accounts payable	3,501	9,028
Accrued personnel-related expenses	23,495	23,803
Accrued clinical and development expenses	7,404	11,876
Accrued interest payable	5,758	3,086
Non-recourse notes due 2033, net	12,348
Operating lease liabilities	7,887
Deferred revenue	43,311	43,402
Other accrued liabilities	6,432	7,359
Total current liabilities	110,136	98,554
Convertible senior notes due 2023, net	225,354	224,818
Non-recourse notes due 2033, net	217,715	229,535
Deferred rent		7,976
Long-term operating lease liabilities	48,565
Long-term deferred revenue	13,444	26,179
Other long-term liabilities	14,457	24,762
Commitments and contingencies
Shareholders' Deficit
Preferred shares, $0.00001 par value: 230 shares authorized, no shares issued or outstanding	0	0
Ordinary shares, $0.00001 par value: 200,000 shares authorized; 56,637 and 55,681 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively	1	1
Additional paid-in capital	987,209	960,721
Accumulated other comprehensive income (loss)	129	(166)
Accumulated deficit	(1,124,563)	(1,012,145)
Total shareholders' deficit	(137,224)	(51,589)
Total liabilities and shareholders' deficit	$ 492,447	$ 560,235

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
CONDENSED CONSOLIDATED BALANCE SHEETS
Accounts receivable, allowances	$ 0	$ 0
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	56,637	55,681
Ordinary shares, outstanding shares	56,637	55,681

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenue:
Revenue	$ 26,150,000	$ 23,476,000	$ 31,488,000	$ 31,795,000
Costs and expenses:
Cost of goods sold		(1,448,000)		(622,000)
Research and development	46,399,000	48,621,000	100,217,000	96,386,000
Selling, general and administrative	22,227,000	25,007,000	47,413,000	49,711,000
Total costs and expenses	68,626,000	72,180,000	147,630,000	145,475,000
Loss from operations	(42,476,000)	(48,704,000)	(116,142,000)	(113,680,000)
Income from investment in TRC, LLC	8,366,000	1,949,000	14,595,000	2,635,000
Interest expense	(7,901,000)	(2,137,000)	(15,759,000)	(4,274,000)
Interest and other income, net	2,374,000	1,284,000	5,169,000	2,768,000
Loss before income taxes	(39,637,000)	(47,608,000)	(112,137,000)	(112,551,000)
Provision for income tax (expense) benefit	(201,000)	6,790,000	(281,000)	6,646,000
Net loss	(39,838,000)	(40,818,000)	(112,418,000)	(105,905,000)
Net unrealized gain (loss) on available-for-sale investments	165,000	329,000	295,000	208,000
Total comprehensive loss	$ (39,673,000)	$ (40,489,000)	$ (112,123,000)	$ (105,697,000)
Net loss per share:
Basic and diluted net loss per share (in dollars per share)	$ (0.72)	$ (0.76)	$ (2.04)	$ (1.98)
Shares used to compute basic and diluted net loss per share (in shares)	55,529	53,799	55,235	53,529
Share-based compensation expense	$ 11,298,000	$ 13,855,000	$ 23,519,000	$ 27,853,000
Research and development
Net loss per share:
Share-based compensation expense	5,720,000	6,904,000	11,880,000	13,463,000
Selling, general and administrative
Net loss per share:
Share-based compensation expense	5,578,000	6,951,000	11,639,000	14,390,000
Product
Revenue:
Revenue		5,361,000		9,040,000
Collaborative revenue
Revenue:
Revenue	7,650,000	$ 18,115,000	12,988,000	$ 22,755,000
Licensing revenue
Revenue:
Revenue	$ 18,500,000		$ 18,500,000

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) - USD ($) shares in Thousands, $ in Thousands	Ordinary Shares	Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit	Total
Balances at Dec. 31, 2017	$ 1	$ 913,650	$ (733)	$ (797,740)	$ 115,178
Balances (in shares) at Dec. 31, 2017	54,381
Increase (Decrease) in Stockholders' Equity
Proceeds from ESPP purchases		2,742			2,742
Proceeds from ESPP purchases (in shares)	135
Employee share-based compensation expense		27,869			27,869
Issuance of restricted shares (in shares)	729
Option exercises		81			81
Option exercises (in shares)	5
Cumulative effect upon the adoption of ASC 606				1,119	1,119
Repurchase of shares to satisfy tax withholding		(6,905)			(6,905)
Repurchase of shares to satisfy tax withholding (in shares)	(146)
Net unrealized gain on marketable securities			208		208
Net loss				(105,905)	(105,905)
Balances at Jun. 30, 2018	$ 1	937,437	(525)	(902,526)	34,387
Balances (in shares) at Jun. 30, 2018	55,104
Balances at Mar. 31, 2018	$ 1	925,968	(854)	(861,708)	63,407
Balances (in shares) at Mar. 31, 2018	54,798
Increase (Decrease) in Stockholders' Equity
Proceeds from ESPP purchases		2,742			2,742
Proceeds from ESPP purchases (in shares)	135
Employee share-based compensation expense		13,871			13,871
Issuance of restricted shares (in shares)	314
Option exercises		46			46
Option exercises (in shares)	3
Repurchase of shares to satisfy tax withholding		(5,190)			(5,190)
Repurchase of shares to satisfy tax withholding (in shares)	(146)
Net unrealized gain on marketable securities			329		329
Net loss				(40,818)	(40,818)
Balances at Jun. 30, 2018	$ 1	937,437	(525)	(902,526)	34,387
Balances (in shares) at Jun. 30, 2018	55,104
Balances at Dec. 31, 2018	$ 1	960,721	(166)	(1,012,145)	$ (51,589)
Balances (in shares) at Dec. 31, 2018	55,681				55,681
Increase (Decrease) in Stockholders' Equity
Proceeds from ESPP purchases		2,605			$ 2,605
Proceeds from ESPP purchases (in shares)	145
Employee share-based compensation expense		23,519			23,519
Issuance of restricted shares (in shares)	689
Option exercises		2,545			2,545
Option exercises (in shares)	122
Repurchase of shares to satisfy tax withholding		(2,181)			(2,181)
Net unrealized gain on marketable securities			295		295
Net loss				(112,418)	(112,418)
Balances at Jun. 30, 2019	$ 1	987,209	129	(1,124,563)	$ (137,224)
Balances (in shares) at Jun. 30, 2019	56,637				56,637
Balances at Mar. 31, 2019	$ 1	971,508	(36)	(1,084,725)	$ (113,252)
Balances (in shares) at Mar. 31, 2019	56,122
Increase (Decrease) in Stockholders' Equity
Proceeds from ESPP purchases		2,605			2,605
Proceeds from ESPP purchases (in shares)	145
Employee share-based compensation expense		11,298			11,298
Issuance of restricted shares (in shares)	263
Option exercises		2,292			2,292
Option exercises (in shares)	107
Repurchase of shares to satisfy tax withholding		(494)			(494)
Net unrealized gain on marketable securities			165		165
Net loss				(39,838)	(39,838)
Balances at Jun. 30, 2019	$ 1	$ 987,209	$ 129	$ (1,124,563)	$ (137,224)
Balances (in shares) at Jun. 30, 2019	56,637				56,637

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Operating activities
Net loss	$ (112,418)	$ (105,905)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,867	2,126
Amortization and accretion income, net	(1,696)	(436)
Share-based compensation	23,519	27,853
Reversal of inventory purchase commitment liability		(2,250)
Amortization of right-of-use assets	2,016
Undistributed earnings from investment in TRC, LLC	(14,595)	(1,633)
Other	53	(21)
Changes in operating assets and liabilities:
Accounts receivable	389	(1,181)
Receivables from collaborative arrangements	9,074	3,244
Other prepaid and current assets	(2,407)	(2,963)
Inventories		(351)
Tax receivable	(3,700)	5,092
Other assets	2	(41)
Accounts payable	(5,491)	(2,311)
Accrued personnel-related expenses, accrued clinical and development expenses, and other accrued liabilities	(15,580)	(19,049)
Accrued interest payable	2,672
Deferred rent		3,002
Deferred revenue	(12,826)	88,256
Long-term portion of lease liabilities	(1,371)
Other long-term liabilities	269	(5,144)
Net cash used in operating activities	(129,223)	(11,712)
Investing activities
Purchases of property and equipment	(1,796)	(3,865)
Purchases of marketable securities	(208,028)	(101,912)
Maturities of marketable securities	131,368	136,428
Proceeds from the sale of VIBATIV business, net	5,000
Proceeds from the sale of fixed assets		17
Net cash (used in) provided by investing activities	(73,456)	30,668
Financing activities
Proceeds from ESPP purchases	2,605	2,742
Proceeds from option exercises	2,545	81
Repurchase of shares to satisfy tax withholding	(2,181)	(6,905)
Net cash provided by (used in) financing activities	2,969	(4,082)
Net (decrease) increase in cash, cash equivalents, and restricted cash	(199,710)	14,874
Cash, cash equivalents, and restricted cash at beginning of period	378,854	89,813
Cash, cash equivalents, and restricted cash at end of period	179,144	104,687
Supplemental disclosure of cash flow information
Cash paid for interest	11,753	3,738
Cash paid (received) for income taxes, net	21	$ (4,455)
Right-of-use assets obtained in exchange for lease obligations (1)	$ 49,847

Organization and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2019

Organization and Summary of Significant Accounting Policies

Organization and Summary of Significant Accounting Policies

1. Organization and Summary of Significant Accounting Policies

Theravance Biopharma, Inc. (“Theravance Biopharma” or the “Company”) is a diversified biopharmaceutical company primarily focused on the discovery, development and commercialization of organ-selective medicines. Our purpose is to create transformational medicines to improve the lives of patients suffering from serious illnesses. Our research is focused in the areas of inflammation and immunology.

Basis of Presentation

The Company’s condensed consolidated financial information as of June 30, 2019, and the three and six months ended June 30, 2019 and 2018 is unaudited but includes all adjustments (consisting only of normal recurring adjustments), which are considered 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, 2018 financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission (“SEC”) on February 28, 2019.

The results for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019, or for any other interim period or for any future period. These condensed consolidated financial statements include the accounts of the Company and its subsidiaries, and intercompany transactions and balances have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures in the condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. Actual results could differ materially from those estimates.

Significant Accounting Policies

Other than the recently adopted accounting pronouncements below, there have been no material revisions in the Company’s significant accounting policies described in Note 1 to the consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2018.

Recently Adopted Accounting Pronouncements

Effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASU 2016-02”) under the required modified retrospective approach. ASU 2016-02 was aimed at making leasing activities more transparent and comparable, and requires leases with terms greater than one year to be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability.

The Company elected the optional transition method to initially account for the impact of the adoption with a cumulative adjustment to accumulated deficit, if any, on the effective date of ASU 2016-02 of January 1, 2019, rather than applying the transition provisions in the earliest period presented, and the Company elected a package of practical expedients that allowed entities to not: (i) reassess whether any expired or existing contracts are considered or contain leases; (ii) reassess the lease classification for any expired or existing leases; and (iii) reassess initial direct costs for any existing leases. In addition, the Company elected other practical expedients that allowed entities to: (i) use hindsight in determining the term of a lease when the lease includes an option to extend the lease term; (ii) exclude all leases, on a go forward basis, that have a

lease term of 12-months or less; and (iii) combine lease and non-lease components (e.g., office common area maintenance expenses) when recognizing a lease on an entity’s balance sheet on a go forward basis.

As a result of the adoption of ASU 2016-02, on January 1, 2019, the Company recorded a right-of-use operating lease asset of $48.3 million and an operating lease liability of $56.3 million related to its office leases in South San Francisco, California and Dublin, Ireland. The lease liability included $8.0 million related to deferred rent liabilities. The adoption of ASU 2016-02 did not have an impact on the Company’s consolidated results of operations, lease expense, or cash flows.

Effective January 1, 2019, the Company adopted ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). ASU 2017-09 was issued to provide clarity and reduce both (i) diversity in practice and (ii) cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in ASU 2017-09 provided guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Essentially, an entity will not have to account for the effects of a modification if: (i) the fair value of the modified award is the same immediately before and after the modification; (ii) the vesting conditions of the modified award are the same immediately before and after the modification; and (iii) the classification of the modified award as either an equity instrument or liability instrument is the same immediately before and after the modification. The adoption of ASU 2017-09 did not have a material impact upon the Company’s condensed consolidated financial statements and related disclosures as of January 1, 2019.

Effective January 1, 2019, the Company adopted the new final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. The Company has included condensed consolidated statements of shareholders’ equity (deficit) in this Form 10-Q for the three and six months ended June 30, 2019 and 2018.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13"). This guidance requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect collectability. ASU 2016-13 also eliminates the concept of “other-than-temporary” impairment when evaluating available-for-sale debt securities and instead focuses on determining whether any impairment is a result of a credit loss or other factors. An entity will recognize an allowance for credit losses on available-for-sale debt securities rather than an other-than-temporary impairment that reduces the cost basis of the investment. ASU 2016-13 is effective for annual reporting periods and interim periods within those years beginning after December 15, 2019. The Company does not currently expect ASU 2016-13 to have a material impact on its consolidated financial statements and related disclosures based on the historically high credit quality of the Company’s financial instruments.

In November 2018, the FASB issued ASU 2018-18, Collaboration Arrangements: Clarifying the Interaction between Topic 808 and Topic 606. The issuance of Topic 606 raised questions about the interaction between the guidance on collaborative arrangements and revenue recognition. ASU 2018-18 addresses this uncertainty by (i) clarifying that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606 when the collaboration arrangement participant is a customer; (ii) adding unit of account guidance to assess whether the collaboration arrangement or a part of the arrangement is with a customer; and (iii) precluding a company from presenting transactions with collaboration arrangement participants that are not directly related to sales to third parties together with revenue from contracts with customers. ASU 2018-18 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2018-18 on its consolidated financial statements and related disclosures.

The Company is currently evaluating other recently issued accounting pronouncements and does not currently believe that any of those pronouncements will have a material impact on its consolidated financial statements and related disclosures.

Net Loss per Share

6 Months Ended

Jun. 30, 2019

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.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2019		2018		2019		2018
Numerator:
Net loss	$	(39,838)	$	(40,818)	$	(112,418)	$	(105,905)
Denominator:
Weighted-average common shares outstanding		56,407		54,958		56,114		54,763
Less: weighted-average common shares subject to forfeiture		(878)		(1,159)		(879)		(1,234)
Weighted-average common shares used to compute basic and diluted net loss per share		55,529		53,799		55,235		53,529
Basic and diluted net loss per share	$	(0.72)	$	(0.76)	$	(2.04)	$	(1.98)

For the three and six months ended June 30, 2019 and 2018, 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)	2019	2018	2019	2018
Share issuances under equity incentive plans and ESPP	7,468	5,383	6,227	4,622
Restricted shares	—	4	—	4
Share issuances upon the conversion of convertible senior notes	6,676	6,676	6,676	6,676
Total	14,144	12,063	12,903	11,302

As of June 30, 2019 and 2018, there were 468,000 and 978,750 shares, respectively, subject to performance-based vesting criteria which have been excluded from the anti-dilutive securities table above.

Revenue

6 Months Ended

Jun. 30, 2019

Revenue

Revenue

3. Revenue

Revenue from Collaborative Arrangements

The Company recognized revenues from its collaborative arrangements as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2019		2018		2019		2018
Janssen	$	7,392	$	7,566	$	12,715	$	12,179
Alfasigma		95		10,533		98		10,533
Other		163		16		175		43
Total collaboration revenue	$	7,650	$	18,115	$	12,988	$	22,755

Changes in Deferred Revenue Balances

The changes in the deferred revenue balances arose as a result of the Company recognizing the following revenue from collaborative arrangements during the periods below:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2019		2018		2019		2018
Collaboration revenue recognized in the period from:
Amounts included in deferred revenue at the beginning of the period	$	7,492	$	16	$	12,825	$	32
Performance obligations satisfied in previous period		—		—		—		—

Janssen Biotech

In February 2018, the Company 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, the Company received an upfront payment of $100.0 million. The Company is conducting a Phase 2 (DIONE) study of TD-1473 in Crohn’s disease and a Phase 2b/3 (RHEA) induction and maintenance study of TD-1473 in ulcerative colitis. Following the initial Phase 2 development period, including the 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 back-up compounds by paying us a fee of $200.0 million. Upon any such election, the Company and Janssen will jointly develop and commercialize TD-1473 in inflammatory intestinal diseases and share profits in the US and expenses related to Phase 3 development and registration activities (67% to Janssen; 33% to Theravance Biopharma). The Company would receive royalties on ex-US sales at double-digit tiered percentage royalty rates, and the Company 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 Accounting Standards Codification, Topic 808, Collaborative Arrangements (“ASC 808”), as the parties are active participants and exposed to the risks and rewards of the collaborative activity. The Company evaluated the terms of the Janssen Agreement and have analogized to Accounting Standards Codification, Topic 606, Revenue from Contracts with Customers (“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 the Company’s ongoing major or central operations. Using the concepts of ASC 606, the Company has identified research and development activities as its only performance obligation. The Company 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, inclusive of $200.0 million opt-in fee and $700.0 million future development and commercialization milestones, is considered variable consideration if Janssen elects to remain in the collaboration arrangement following completion of the initial Phase 2 development period, 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 the Company’s evaluation of this variable consideration constraint, it determined that the potential payments are contingent upon developmental and regulatory milestones that are uncertain and are highly susceptible to factors outside of its control. The Company expects 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, 2019, the Company recognized $7.4 million and $12.7 million, respectively, as revenue from collaboration arrangements related to the Janssen Agreement. The remaining transaction price of $56.2 million was recorded in deferred revenue on the condensed consolidated balance sheets and is expected to be recognized as collaboration revenue as the research and development services are delivered over the initial Phase 2 development period. Collaboration revenue is recognized for the research and development services based on a measure of the Company’s efforts toward satisfying the performance obligation relative to the total expected efforts or inputs to satisfy the performance obligation (e.g., costs incurred compared to total budget). For the three and six months ended June 30, 2019, the Company incurred $9.0 million and $17.7 million, respectively, in research and development costs related to the Janssen Agreement, and for the three and six months ended June 30, 2018, the Company incurred $11.1 million and $17.6 million,

respectively, in research and development costs related to the Janssen Agreement. In future reporting periods, the Company will reevaluate the Company’s estimates related to its efforts towards satisfying the performance obligation and may record a change in estimate if deemed necessary.

Mylan

In January 2015, the Company and Mylan Ireland Limited (“Mylan”) established a strategic collaboration (the “Mylan Agreement”) for the development and commercialization of revefenacin, including YUPELRI^® (revefenacin) inhalation solution. The Company entered into the collaboration to expand the breadth of its revefenacin development program and extend its commercial reach beyond the hospital setting.

Under the Mylan Agreement, Mylan paid the Company an upfront fee of $15.0 million for the delivery of the revefenacin license in 2015 and, in 2016, Mylan paid the Company a milestone payment $15.0 million for the achievement of 50% enrollment in the Phase 3 twelve-month safety study. Separately, pursuant to an agreement to purchase ordinary shares entered into on January 30, 2015, Mylan Inc., a subsidiary of Mylan N.V., made a $30.0 million equity investment in the Company, buying 1,585,790 ordinary shares from the Company in 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 the Company’s ordinary shares for the five trading days ending on January 30, 2015.

Under the Mylan Agreement, as of June 30, 2019, the Company is eligible to receive from Mylan potential global (ex-China and adjacent territories) development, regulatory and sales milestone payments totaling up to $205.0 million in the aggregate, with $160.0 million associated with YUPELRI monotherapy, and $45.0 million associated with 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 EU. The $45.0 million associated with future potential combination products relates solely to development and regulatory actions.

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 was responsible for reimbursement of the Company’s costs related to the registrational program up until the approval of the first new drug application in November 2018, thereafter, R&D expenses are shared. 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, the Company did not recognize revenue or analogize to ASC 606 and, as such, the reimbursable program costs are excluded from the transaction price.

The Company 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. The Company determined the license to be distinct from the joint steering committee participation. The Company further determined that the transaction price under the arrangement was comprised of the following: (1) $15.0 million upfront 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 the Company’s best estimate of the relative stand-alone selling price. For the delivery of the license, the Company 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, the Company based the stand-alone selling price on the average compensation of its committee members estimated to be incurred over the performance period. The Company expects to recognize collaboration revenue from the committee participation ratably over the performance period of approximately seventeen years.

The future potential milestone amounts for the Mylan Agreement 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 the Company’s evaluation of the development and regulatory milestones constraint, the Company determined that the achievement of such milestones are contingent upon success in future clinical trials and regulatory approvals which are not within its control and uncertain at this stage. The Company expects that the sales-based milestone payments and royalty arrangements will be recognized when the

sales occur or the milestone is achieved. The Company will re-evaluate the transaction price each quarter and as uncertain events are resolved or other changes in circumstances occur.

As of June 30, 2019, $0.3 million was recorded in deferred revenue on the condensed consolidated balance sheets under the Mylan Agreement. This amount reflects revenue allocated to joint steering committee participation which will be recognized as collaboration revenue over the course of the remaining performance period of approximately thirteen years.

The Company is also entitled to a share of US profits and losses (65% to Mylan; 35% to Theravance Biopharma) received in connection with commercialization of YUPELRI, and the Company is entitled to low double-digit tiered royalties on ex-US net sales. Mylan is the principal in the sales transactions, and as a result, the Company does not reflect the product sales in its financial statements.

Following the US Food and Drug Administration (“FDA”) approval of YUPELRI in November 2018, net amounts payable to or receivable from Mylan each quarter under the profit sharing structure are disaggregated according to their individual components. Any reimbursement received from Mylan for the Company’s R&D expense is characterized as a reduction of R&D expense, as the Company does not consider performing research and development services for reimbursement to be a part of its ongoing major or central operations. If in any reporting period, the arrangement results in a receivable from Mylan after the Company’s R&D expenses have been reimbursed, then such a receivable is recognized as profit sharing revenue. If in any reporting period, the arrangement results in a payable to Mylan after the Company’s R&D expenses have been reimbursed, then such payments are recognized as collaboration expenses within operating expenses. The following amounts were recorded in the Company’s condensed consolidated statements of operations.

Prior to the FDA approval of YUPELRI, the Company recorded its 35% share of expenses within R&D expense and selling, general and administrative expense on its condensed consolidated statements of operations. For the three and six months ended June 30, 2018, the arrangement resulted in total collaboration expense of $1.3 million and $1.7 million, respectively.

Reimbursement of R&D Expense

Under certain collaborative arrangements, the Company is entitled to reimbursement of certain R&D expenses. Activities under collaborative arrangements for which the Company is entitled to reimbursement are considered to be collaborative activities under the scope of ASC 808. For these units of account, the Company does not analogize to ASC 606 or recognize revenue. The Company records reimbursement payments received from its collaboration partners as reductions to R&D expense.

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


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2019		2018		2019		2018
Janssen	$	784	$	—	$	2,195	$	—
Mylan		31		1,395		234		3,245
Total reduction to R&D expense	$	815	$	1,395	$	2,429	$	3,245

Revenue from Licensing Arrangements

In June 2019, the Company announced the expansion of the Mylan Agreement (the “Mylan Amendment”) to grant Mylan exclusive development and commercialization rights to nebulized revefenacin in China and adjacent territories. In exchange, the Company received an upfront payment of $18.5 million (before a required tax withholding) and will be eligible to receive potential development and sales milestones totaling $54.0 million together with low double-digit tiered royalties on net sales of nebulized revefenacin, if approved. Of the $54.0 million in potential milestones, $9.0 million is associated with the development of YUPELRI monotherapy, $7.5 million associated with the development of future potential combination products, and $37.5 million is associated with sales milestones. Mylan will be responsible for all aspects of development and commercialization in the partnered regions, including pre- and post-launch activities and product registration and all associated costs.

The Mylan Amendment is accounted for under ASC 606 as a separate contract from the original Mylan Agreement. The Company identified a single performance obligation comprising of the delivery of the license to develop and commercialize revefenacin in China and adjacent territories. The transaction price was determined to be the upfront payable of $18.5 million which the Company recognized as licensing revenue following the completion of the performance obligation in June 2019.

The future potential milestone amounts for the Mylan Amendment 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 the Company’s evaluation of the development milestones constraint, the Company determined that the achievement of such milestones is contingent upon success in future clinical trials and regulatory approvals which are not within its control and uncertain at this stage. The Company expects that the sales-based milestone payments and royalty arrangements will be recognized when the sales occur, or the milestone is achieved. The Company will re-evaluate the transaction price each quarter and as uncertain events are resolved or other changes in circumstances occur.

Cash, Cash Equivalents, and Restricted Cash

6 Months Ended

Jun. 30, 2019

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)	2019		2018
Cash and cash equivalents	$	178,311	$	103,854
Restricted cash		833		833
Total cash, cash equivalents, and restricted cash shown on the condensed consolidated statements of cash flows	$	179,144	$	104,687

Investments and Fair Value Measurements

6 Months Ended

Jun. 30, 2019

Investments 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 obtained from a commercial pricing service. The fair market value of marketable securities classified within Level 1 is based on quoted prices for identical instruments in active markets. The fair value of marketable securities classified within Level 2 is based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; or model-driven valuations whose inputs are observable or whose significant value drivers are observable. 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, 2019
				Gross		Gross
		Amortized		Unrealized		Unrealized		Estimated
(In thousands)		Cost		Gains		Losses		Fair Value
US government securities	Level 1	$	78,583	$	79	$	(12)	$	78,650
US government agency securities	Level 2		9,978		3		—		9,981
Corporate notes	Level 2		41,633		58		(2)		41,689
Commercial paper	Level 2		170,049		22		(19)		170,052
Marketable securities			300,243		162		(33)		300,372
Money market funds	Level 1		66,935		—		—		66,935
Total		$	367,178	$	162	$	(33)	$	367,307


		December 31, 2018
				Gross		Gross
		Amortized		Unrealized		Unrealized		Estimated
(In thousands)		Cost		Gains		Losses		Fair Value
US government securities	Level 1	$	48,807	$	—	$	(86)	$	48,721
US government agency securities	Level 2		9,852		2		—		9,854
Corporate notes	Level 2		57,508		6		(88)		57,426
Commercial paper	Level 2		90,919		—		—		90,919
Marketable securities			207,086		8		(174)		206,920
Money market funds	Level 1		294,751		—		—		294,751
Total		$	501,837	$	8	$	(174)	$	501,671

As of June 30, 2019, all of the available-for-sale securities had contractual maturities within one year and the weighted-average maturity of marketable securities was approximately three months. There were no transfers between Level 1 and Level 2 during the periods presented, and there have been no changes to the Company’s valuation techniques during the three and six months ended June 30, 2019.

In general, the Company invests in debt securities with the intent to hold such securities until maturity at par value. The Company does not intend to sell the investments that are currently in an unrealized loss position, and it is unlikely that it will be required to sell the investments before recovery of their amortized cost basis, which may be maturity. The Company has determined that the gross unrealized losses on its marketable securities, as of June 30, 2019, were temporary in nature, and there were no material unrealized losses on investments which have been in a loss position for more than twelve months as of June 30, 2019.

As of June 30, 2019, the Company’s accumulated other comprehensive income on its condensed consolidated balance sheets consisted of net unrealized gains on available-for-sale investments. During the three and six months ended June 30, 2019 and 2018, the Company did not sell any of its marketable securities.

Long-Term Debt

6 Months Ended

Jun. 30, 2019

Long-Term Debt

Long-Term Debt

6. Long-Term Debt

9.0% Non-Recourse Notes Due 2033

In November 2018, the Company entered into note purchase agreements relating to the private placement of $250.0 million aggregate principal amount of 9.0% non-recourse notes, due on or before 2033 (the "Non-Recourse 2033 Notes") issued by the Company’s wholly-owned subsidiary, Triple Royalty Sub LLC (the “Issuer”).

The Non-Recourse 2033 Notes are secured by all of the Issuer’s rights, title and interest as a holder of certain membership interests (the “Issuer Class C Units”) in Theravance Respiratory Company, LLC (“TRC”). The primary source of funds to make payments on the Non-Recourse 2033 Notes will be the 63.75% economic interest of the Issuer (evidenced by the Issuer Class C Units) in any future payments made by the Glaxo Group or one of its affiliates (“GSK”) under the collaboration agreement, dated as of November 14, 2002, by and between Innoviva, Inc. (“Innoviva”) and GSK, as amended from time to time (net of the amount of cash, if any, expected to be used in TRC pursuant to the TRC LLC Agreement over the next four fiscal quarters) relating to the TRELEGY ELLIPTA program. The sole source of principal and interest payments for the Non-Recourse 2033 Notes are the future royalty payments generated from the TRELEGY ELLIPTA program, and as a result, the holders of the Non-Recourse 2033 Notes have no recourse against the Company even if the TRELEGY ELLIPTA payments are insufficient to cover the principal and interest payments for the Non-Recourse 2033 Notes.

The Non-Recourse 2033 Notes are not convertible into Company equity and have no security interest in nor rights under any agreement with GSK. The Non-Recourse 2033 Notes may be redeemed at any time prior to maturity, in whole or in part, at specified redemption premiums. The Non-Recourse 2033 Notes bear an annual interest rate of 9.0%, with interest and principal paid quarterly beginning April 15, 2019. Prior to October 15, 2020, in the event that the distributions received by the Issuer from TRC in a quarter are less than the interest accrued for the quarter, the principal amount of the Non-Recourse 2033 Notes will increase by the interest shortfall amount for that period without a default or event of default occurring. The terms of the Notes also provide that the Company, at its option, may satisfy the quarterly interest payment

obligations by making a capital contribution to the Issuer, but not for more than four (4) consecutive quarterly interest payment dates or for more than six (6) quarterly interest payment dates during the term of the Notes. Since the principal and interest payments on the Non-Recourse 2033 Notes are ultimately based on royalties from TRELEGY ELLIPTA product sales, which will vary from quarter to quarter, the Non-Recourse 2033 Notes may be repaid prior to the final maturity date in 2033. The portion of the Non-Recourse 2033 Notes classified as a current liability is based on the amount of royalties received, or receivable, as of June 30, 2019, that are expected to be used to make a principal repayment on the Non-Recourse 2033 Notes.

In order to comply with Regulation RR – Credit Risk Retention (17 C.F.R. Part 246), 5.0% of the principal amount of the Non-Recourse 2033 Notes were retained by Theravance Biopharma R&D, Inc. and eliminated in the Company’s condensed consolidated financial statements.

In May 2019, the Company announced that it had initiated an arbitration against Innoviva and TRC because Innoviva has caused TRC to not make certain distributions owed to us with respect to our 85% economic interest in TRC since the quarter ended December 31, 2018, and Innoviva’s previous statement to us that it intends to cause TRC to withhold making further cash distributions through calendar year 2019. The arbitration hearing commenced on July 23, 2019. Resolution of the arbitration should occur in the third quarter of 2019.

As of June 30, 2019, the net principal and estimated fair market value of the Non-Recourse 2033 Notes were $237.5 million and $220.9 million, respectively. The inputs to determine fair value of the Non-Recourse 2033 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.

3.25% Convertible Senior Notes Due 2023

The Company has $230.0 million of 3.250% convertible senior notes due in 2023 (“Convertible Senior 2023 Notes”) outstanding as of June 30, 2019 with an estimated fair value of $198.5 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, 2019. The inputs to determine fair value of the Convertible Senior 2023 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.

Leases

6 Months Ended

Jun. 30, 2019

Leases

Leases

7. Leases

The Company leases approximately 170,000 square feet of office and laboratory space in two buildings in South San Francisco, California, under a non-cancelable operating lease that ends in May 2030 (“SSF Lease”) and includes a tenant improvement allowance with a remaining balance of $15.8 million, as of June 30, 2019, that expires in May 2022. The Company’s Irish subsidiary leases approximately 6,100 square feet of office space in Dublin, Ireland under a lease that expires in April 2027 (“Dublin Lease”). In addition, the Company leases equipment for clinical research studies with an estimated duration of approximately 21 months ending in September 2020.

The SSF Lease contains two options to extend the term of the lease for successive periods of five years each, and the Dublin Lease contains a lease termination option in April 2024 at the Company’s discretion. The two options to extend the SSF Lease and the option to terminate the Dublin Lease were not recognized in the determination of the Company’s right-of-use assets and lease liabilities below.

The Company has evaluated its leases and determined that they were all operating leases. The present values of the remaining lease payments and corresponding right-of-use assets were as follows, and the difference between the right-of-use assets and lease liabilities amounts was due to deferred rent payments that are payable in future periods.


(In thousands)	Classification	June 30, 2019
Assets
Operating lease assets	Operating lease assets	$	47,831

Liabilities
Current:
Operating lease liabilities	Operating lease liabilities	$	7,887
Non-current:
Operating lease liabilities	Long-term operating lease liabilities		48,565
Total operating lease liabilities		$	56,452

Lease expense was included within operating expenses in the condensed consolidated statements of operations as follows:


		Three Months		Six Months
		Ended		Ended
(In thousands)	Classification	June 30, 2019		June 30, 2019
Operating lease expense	Selling, general and administrative expenses	$	2,376	$	4,919
Operating lease expense	Research and development expenses		238		477
Total operating lease expense ⁽¹⁾		$	2,614	$	5,396

(1)	Includes short-term leases which were immaterial.

As of June 30, 2019, the maturities of our lease liabilities were as follows:


(In thousands)
Six months ending December 31, 2019	$	4,408
Years ending December 31:
2020		7,253
2021		9,492
2022		9,757
2023		10,035
Thereafter		70,208
Total operating lease payments	$	111,153
Less: Estimated tenant improvement allowance		(15,774)
Less: Imputed interest		(38,927)
Present value of operating lease liabilities	$	56,452

Cash paid for amounts included in the measurement of lease liabilities for the three and six months ended June 30, 2019 was $1.7 million and $3.8 million, respectively, and is included in net cash used in operating activities in the condensed consolidated statements of cash flows. As of June 30, 2019, the weighted-average remaining lease term was 10.7 years, and the weighted-average discount rate used to determine the lease liabilities was 8.65%. The Company’s discount rate was primarily derived from the 9.0% interest rate on its Non-Recourse 2033 Notes issued in November 2018 and did not involve any significant assumptions.

Theravance Respiratory Company, LLC

6 Months Ended

Jun. 30, 2019

Theravance Respiratory Company, LLC

Theravance Respiratory Company, LLC

8. Theravance Respiratory Company, LLC (“TRC”)

Prior to the June 2014 spin-off from Innoviva, the Company’s former parent company, Innoviva assigned to 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 the Company’s 85% equity interests in TRC, the Company is 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 (net of TRC expenses paid and the amount of cash, if any, expected to be used by TRC pursuant to the TRC LLC Agreement over the next four fiscal quarters). 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.

In May 2014, the Company 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. The Company is responsible for its proportionate share of TRC’s administrative expenses incurred, and communicated to the Company, by Innoviva.

The Company analyzed its ownership, contractual and other interests in TRC to determine if it is a variable-interest entity (“VIE”), whether the Company has a variable interest in TRC and the nature and extent of that interest. The Company 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, the Company also assessed whether it is the primary beneficiary of TRC based on the power to direct TRC’s activities that most significantly impact TRC’s economic performance and its obligation to absorb TRC’s losses or the right to receive benefits from TRC that could potentially be significant to TRC. Based on the Company’s assessment, the Company determined that it is not the primary beneficiary of TRC, and, as a result, the Company does not consolidate TRC in its condensed consolidated financial statements. TRC is recognized in the Company’s condensed consolidated financial statements under the equity method of accounting, and the value of the Company’s equity investment in TRC was $20.0 million and $5.4 million as of June 30, 2019 and December 31, 2018, respectively. This amount includes undistributed earnings from the Company’s investment in TRC which are recorded on the condensed consolidated balance sheets, net of the Company’s proportionate share of TRC’s administrative expenses incurred, and communicated to the Company, by Innoviva. Pursuant to the TRC operating agreement, the cash from the TRELEGY ELLIPTA royalties, net of any expenses, is distributed to the equity holders quarterly.

For the three and six months ended June 30, 2019, the Company recognized $8.4 million and $14.6 million, respectively, and for the three and six months ended June 30, 2018, the Company recognized $1.9 million and $2.6 million, respectively, in income from its investment in TRC which was generated by royalty payments from GSK to TRC arising from the net sales of Trelegy Ellipta.

Share-Based Compensation

6 Months Ended

Jun. 30, 2019

Share-Based Compensation

Share-Based Compensation

9. 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)	2019		2018		2019		2018
Research and development	$	5,720	$	6,904	$	11,880	$	13,463
Selling, general and administrative		5,578		6,951		11,639		14,390
Total share-based compensation expense	$	11,298	$	13,855	$	23,519	$	27,853

Performance-Contingent Awards

In the first quarter of 2016, the Compensation Committee of the Company’s 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 the five-year period from 2016 to December 31, 2020,

as well as, continued employment. 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, 2019, there were 877,500 of these performance-contingent RSAs and 101,250 of these performance-contingent RSUs outstanding, and as of June 30, 2018, there were 978,750 of these performance-contingent RSAs and 101,250 of these 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. Previously recognized expense is reversed in the period in which it becomes probable that the requisite service period will not be rendered.

The performance conditions associated with the first tranche of these awards were completed in the second quarter of 2018, and the Company recognized $0.6 million and $1.8 million of share-based compensation expense for the three and six months ended June 30, 2018 associated with the first tranche of these awards.

The performance conditions associated with the second tranche of these awards were completed in the first quarter of 2019. For the three and six months ended June 30, 2019, the Company recognized ($0.3) million and $0.5 million, respectively, of share-based compensation (credit) expense related to the second tranche of these awards. The maximum remaining expense associated with the second tranche is $1.8 million (allocated as $0.6 million for research and development expense and $1.2 million for selling, general and administrative expense). For the three and six months ended June 30, 2018, the Company recognized $0.9 million and $1.7 million, respectively, of share-based compensation expense related to the second tranche of these awards.

As of June 30, 2019, the Company 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 third tranche could be up to $12.8 million (allocated as $4.4 million for research and development expense and $8.3 million for selling, general and administrative expense) if the performance conditions are achieved.

In the fourth quarter of 2018, the Compensation Committee approved a grant of 3,000 performance-contingent RSUs to an employee. These RSUs have a maximum compensation expense of $75,000 which will be recognized when its single performance milestone is deemed to be probable of achievement. These 3,000 performance-contingent RSUs expire by December 31, 2020.

In the first quarter of 2019, the Compensation Committee approved a grant of 60,000 performance-contingent RSUs and incentive cash bonus awards to certain employees. These awards have dual triggers of vesting based upon the achievement of certain performance milestones in specified timeframes, as well as a requirement for continued employment. The compensation expense related to these awards is broken into two separate performance milestones and recognized when the associated performance milestones are deemed to be probable of achievement. The maximum share-based compensation expense associated with 60,000 performance-contingent RSUs’ first and second performance milestones are $0.8 million each for a total of $1.6 million. The maximum compensation expense associated with the cash bonus’ first and second performance milestones are $75,000 and $225,000, respectively, for a total of $300,000. The 60,000 performance-contingent RSUs and cash bonus milestones expire by December 31, 2021, and December 31, 2020, respectively.

As of June 30, 2019, the Company has determined that the performance milestones for the awards granted in the fourth quarter of 2018 and the first quarter of 2019 were not probable of achievement and, as a result, no compensation expense related to these awards has been recognized to date.

Income Taxes

6 Months Ended

Jun. 30, 2019

Income Taxes

Income Taxes

10. Income Taxes

The income tax provision was a $0.2 million expense and $0.3 million expense for the three and six months ended June 30, 2019, respectively. The income tax expense was primarily attributed to recording contingent tax liabilities for uncertain tax positions taken with respect to transfer pricing and tax credits. No provision for income taxes has been

recognized on undistributed earnings of the Company’s foreign subsidiaries because it considers such earnings to be indefinitely reinvested.

The Company follows 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, 2019, the Company’s deferred tax assets were offset in full by a valuation allowance.

The Company records 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. The Company includes any applicable interest and penalties within the provision for income taxes in the condensed consolidated statements of operations.

The Company’s future income tax expense may be affected by such factors as changes in tax laws, its 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, its 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.

New UK tax legislation was introduced by the Finance Act 2019 (“FA 2019”) and came into effect on April 6, 2019 that subjects UK-derived income earned by offshore recipients with respect to intangible property (“ORIP”) to UK income tax at 20% on the gross receipts, where the intangible property is held offshore in a jurisdiction with which the UK does not have a double taxation treaty. FA 2019 also included a power for amendments to the ORIP legislation to be made by regulation by December 31, 2019.

On May 24, 2019, the UK published further draft guidance and regulations intended to facilitate the administration of the ORIP regime, however a number of issues and areas of uncertainty remain. The Company has reviewed the original legislation in conjunction with the draft guidance and believes that the ORIP regime may apply to certain cash receipts. Based on this analysis, the Company believes that the ORIP charge on UK-derived cash receipts through the second quarter of 2019 is not material, but the Company will continue to refine its ORIP conclusions as final guidance and regulations are issued later in 2019.

Cost of Goods Sold

6 Months Ended

Jun. 30, 2019

Cost of Goods Sold

Cost of Goods Sold

11. Cost of Goods Sold

In November 2018, the Company completed the sale of its assets related to the manufacture, marketing and sale of VIBATIV^® to Cumberland Pharmaceutical Inc. As a result of the sale, the Company did not recognize any product sales revenue or cost of goods sold for the three and six months ended June 30, 2019. The negative cost of goods sold recognized on the Company’s condensed consolidated statements of operations for the three and six months ended June 30, 2018 was primarily due to a reversal of a $2.3 million charge originally taken in the fourth quarter of 2017 related to VIBATIV inventory purchase commitments that was subsequently waived by our third-party manufacturer.

Reduction in Workforce

6 Months Ended

Jun. 30, 2019

Reduction in Workforce

Reduction in Workforce

12. Reduction in Workforce

In January 2019, the Company announced a reduction in workforce to align with its focus on continued execution of key strategic programs and advancement of selected late-stage research programs toward clinical development. The Company reduced its overall headcount by 51 individuals, with the affected employees primarily focused on early research or the infrastructure in support of VIBATIV which was sold by the Company to Cumberland Pharmaceuticals Inc. in November 2018.

The workforce reduction was substantially completed in the first quarter of 2019, and the Company recorded severance related charges totaling approximately $3.6 million for the six months ended June 30, 2019, including compensation expense made to affected employees through any minimum statutory notice periods. As of June 30, 2019, the Company had paid total severance of $3.4 million. The severance related charges are presented on the condensed

consolidated statements of operations within research and development expenses and selling, general and administrative expenses.

Organization and Summary of Significant Accounting Policies (Policies)	6 Months Ended
	Jun. 30, 2019
Organization and Summary of Significant Accounting Policies
Basis of Presentation	Basis of Presentation The Company’s condensed consolidated financial information as of June 30, 2019, and the three and six months ended June 30, 2019 and 2018 is unaudited but includes all adjustments (consisting only of normal recurring adjustments), which are considered 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, 2018 financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission (“SEC”) on February 28, 2019. The results for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019, or for any other interim period or for any future period. These condensed consolidated financial statements include the accounts of the Company and its subsidiaries, and intercompany transactions and balances have been eliminated.
Use of Estimates	Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures in the condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. Actual results could differ materially from those estimates.
Significant Accounting Policies	Significant Accounting Policies Other than the recently adopted accounting pronouncements below, there have been no material revisions in the Company’s significant accounting policies described in Note 1 to the consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2018.
Recently Issued Accounting Pronouncements	Recently Adopted Accounting Pronouncements Effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASU 2016-02”) under the required modified retrospective approach. ASU 2016-02 was aimed at making leasing activities more transparent and comparable, and requires leases with terms greater than one year to be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability. The Company elected the optional transition method to initially account for the impact of the adoption with a cumulative adjustment to accumulated deficit, if any, on the effective date of ASU 2016-02 of January 1, 2019, rather than applying the transition provisions in the earliest period presented, and the Company elected a package of practical expedients that allowed entities to not: (i) reassess whether any expired or existing contracts are considered or contain leases; (ii) reassess the lease classification for any expired or existing leases; and (iii) reassess initial direct costs for any existing leases. In addition, the Company elected other practical expedients that allowed entities to: (i) use hindsight in determining the term of a lease when the lease includes an option to extend the lease term; (ii) exclude all leases, on a go forward basis, that have a lease term of 12-months or less; and (iii) combine lease and non-lease components (e.g., office common area maintenance expenses) when recognizing a lease on an entity’s balance sheet on a go forward basis. As a result of the adoption of ASU 2016-02, on January 1, 2019, the Company recorded a right-of-use operating lease asset of $48.3 million and an operating lease liability of $56.3 million related to its office leases in South San Francisco, California and Dublin, Ireland. The lease liability included $8.0 million related to deferred rent liabilities. The adoption of ASU 2016-02 did not have an impact on the Company’s consolidated results of operations, lease expense, or cash flows. Effective January 1, 2019, the Company adopted ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). ASU 2017-09 was issued to provide clarity and reduce both (i) diversity in practice and (ii) cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in ASU 2017-09 provided guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Essentially, an entity will not have to account for the effects of a modification if: (i) the fair value of the modified award is the same immediately before and after the modification; (ii) the vesting conditions of the modified award are the same immediately before and after the modification; and (iii) the classification of the modified award as either an equity instrument or liability instrument is the same immediately before and after the modification. The adoption of ASU 2017-09 did not have a material impact upon the Company’s condensed consolidated financial statements and related disclosures as of January 1, 2019. Effective January 1, 2019, the Company adopted the new final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. The Company has included condensed consolidated statements of shareholders’ equity (deficit) in this Form 10-Q for the three and six months ended June 30, 2019 and 2018. Recently Issued Accounting Pronouncements Not Yet Adopted In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13"). This guidance requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect collectability. ASU 2016-13 also eliminates the concept of “other-than-temporary” impairment when evaluating available-for-sale debt securities and instead focuses on determining whether any impairment is a result of a credit loss or other factors. An entity will recognize an allowance for credit losses on available-for-sale debt securities rather than an other-than-temporary impairment that reduces the cost basis of the investment. ASU 2016-13 is effective for annual reporting periods and interim periods within those years beginning after December 15, 2019. The Company does not currently expect ASU 2016-13 to have a material impact on its consolidated financial statements and related disclosures based on the historically high credit quality of the Company’s financial instruments. In November 2018, the FASB issued ASU 2018-18, Collaboration Arrangements: Clarifying the Interaction between Topic 808 and Topic 606. The issuance of Topic 606 raised questions about the interaction between the guidance on collaborative arrangements and revenue recognition. ASU 2018-18 addresses this uncertainty by (i) clarifying that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606 when the collaboration arrangement participant is a customer; (ii) adding unit of account guidance to assess whether the collaboration arrangement or a part of the arrangement is with a customer; and (iii) precluding a company from presenting transactions with collaboration arrangement participants that are not directly related to sales to third parties together with revenue from contracts with customers. ASU 2018-18 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2018-18 on its consolidated financial statements and related disclosures. The Company is currently evaluating other recently issued accounting pronouncements and does not currently believe that any of those pronouncements will have a material impact on its consolidated financial statements and related disclosures.

Net Loss per Share (Tables)

6 Months Ended

Jun. 30, 2019

Net Loss per Share

Schedule of basic and diluted net loss per share


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2019		2018		2019		2018
Numerator:
Net loss	$	(39,838)	$	(40,818)	$	(112,418)	$	(105,905)
Denominator:
Weighted-average common shares outstanding		56,407		54,958		56,114		54,763
Less: weighted-average common shares subject to forfeiture		(878)		(1,159)		(879)		(1,234)
Weighted-average common shares used to compute basic and diluted net loss per share		55,529		53,799		55,235		53,529
Basic and diluted net loss per share	$	(0.72)	$	(0.76)	$	(2.04)	$	(1.98)

Schedule of anti-dilutive securities


	Three Months Ended		Six Months Ended
	June 30,		June 30,
(In thousands)	2019	2018	2019	2018
Share issuances under equity incentive plans and ESPP	7,468	5,383	6,227	4,622
Restricted shares	—	4	—	4
Share issuances upon the conversion of convertible senior notes	6,676	6,676	6,676	6,676
Total	14,144	12,063	12,903	11,302

Revenue (Tables)

6 Months Ended

Jun. 30, 2019

Revenue

Schedule of revenue recognized from collaborative arrangements


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2019		2018		2019		2018
Janssen	$	7,392	$	7,566	$	12,715	$	12,179
Alfasigma		95		10,533		98		10,533
Other		163		16		175		43
Total collaboration revenue	$	7,650	$	18,115	$	12,988	$	22,755

Summary of changes in deferred revenue


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2019		2018		2019		2018
Collaboration revenue recognized in the period from:
Amounts included in deferred revenue at the beginning of the period	$	7,492	$	16	$	12,825	$	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)	2019		2018		2019		2018
Janssen	$	784	$	—	$	2,195	$	—
Mylan		31		1,395		234		3,245
Total reduction to R&D expense	$	815	$	1,395	$	2,429	$	3,245

Cash, Cash Equivalents, and Restricted Cash (Tables)

6 Months Ended

Jun. 30, 2019

Cash, Cash Equivalents, and Restricted Cash

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


	June 30,
(In thousands)	2019		2018
Cash and cash equivalents	$	178,311	$	103,854
Restricted cash		833		833
Total cash, cash equivalents, and restricted cash shown on the condensed consolidated statements of cash flows	$	179,144	$	104,687

Investments and Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2019

Investments and Fair Value Measurements

Schedule of available-for-sale securities


		June 30, 2019
				Gross		Gross
		Amortized		Unrealized		Unrealized		Estimated
(In thousands)		Cost		Gains		Losses		Fair Value
US government securities	Level 1	$	78,583	$	79	$	(12)	$	78,650
US government agency securities	Level 2		9,978		3		—		9,981
Corporate notes	Level 2		41,633		58		(2)		41,689
Commercial paper	Level 2		170,049		22		(19)		170,052
Marketable securities			300,243		162		(33)		300,372
Money market funds	Level 1		66,935		—		—		66,935
Total		$	367,178	$	162	$	(33)	$	367,307


		December 31, 2018
				Gross		Gross
		Amortized		Unrealized		Unrealized		Estimated
(In thousands)		Cost		Gains		Losses		Fair Value
US government securities	Level 1	$	48,807	$	—	$	(86)	$	48,721
US government agency securities	Level 2		9,852		2		—		9,854
Corporate notes	Level 2		57,508		6		(88)		57,426
Commercial paper	Level 2		90,919		—		—		90,919
Marketable securities			207,086		8		(174)		206,920
Money market funds	Level 1		294,751		—		—		294,751
Total		$	501,837	$	8	$	(174)	$	501,671

Leases (Tables)

6 Months Ended

Jun. 30, 2019

Leases

Summary of supplemental balance sheet information related to leases


(In thousands)	Classification	June 30, 2019
Assets
Operating lease assets	Operating lease assets	$	47,831

Liabilities
Current:
Operating lease liabilities	Operating lease liabilities	$	7,887
Non-current:
Operating lease liabilities	Long-term operating lease liabilities		48,565
Total operating lease liabilities		$	56,452

Summary of components of lease expense


		Three Months		Six Months
		Ended		Ended
(In thousands)	Classification	June 30, 2019		June 30, 2019
Operating lease expense	Selling, general and administrative expenses	$	2,376	$	4,919
Operating lease expense	Research and development expenses		238		477
Total operating lease expense ⁽¹⁾		$	2,614	$	5,396

(1)	Includes short-term leases which were immaterial.

Summary of maturities of lease liabilities


(In thousands)
Six months ending December 31, 2019	$	4,408
Years ending December 31:
2020		7,253
2021		9,492
2022		9,757
2023		10,035
Thereafter		70,208
Total operating lease payments	$	111,153
Less: Estimated tenant improvement allowance		(15,774)
Less: Imputed interest		(38,927)
Present value of operating lease liabilities	$	56,452

Share-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2019

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)	2019		2018		2019		2018
Research and development	$	5,720	$	6,904	$	11,880	$	13,463
Selling, general and administrative		5,578		6,951		11,639		14,390
Total share-based compensation expense	$	11,298	$	13,855	$	23,519	$	27,853

Organization and Summary of Significant Accounting Policies - Recently Issued Accounting Pronouncements (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Lease, Practical Expedients, Package	true
Lease, Practical Expedient, Use of Hindsight	true
Operating lease asset	$ 47,831
Operating lease liability	56,452
Restatement Adjustment \| ASU 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease asset	48,300
Operating lease liability	56,300
Deferred rent liabilities	$ 8,000

Net Loss per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Numerator:
Net loss	$ (39,838)	$ (40,818)	$ (112,418)	$ (105,905)
Denominator:
Weighted-average common shares outstanding	56,407	54,958	56,114	54,763
Less: weighted-average common shares subject to forfeiture	(878)	(1,159)	(879)	(1,234)
Weighted-average common shares used to compute basic and diluted net loss per share	55,529	53,799	55,235	53,529
Basic and diluted net loss per share	$ (0.72)	$ (0.76)	$ (2.04)	$ (1.98)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Net Loss per Share - Anti-dilutive Securities (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Anti-Dilutive Securities
Anti-dilutive securities (in shares)	14,144,000	12,063,000	12,903,000	11,302,000
Share issuances under equity incentive plans and ESPP
Anti-Dilutive Securities
Anti-dilutive securities (in shares)	7,468,000	5,383,000	6,227,000	4,622,000
Resrticted shares
Anti-Dilutive Securities
Anti-dilutive securities (in shares)		4,000		4,000
Share 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)			468,000	978,750

Revenue - Revenue from Collaborative Arrangements (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Collaborative Arrangements and Co-Promote Agreement
Revenue	$ 26,150	$ 23,476	$ 31,488	$ 31,795
Collaboration revenue recognized in the period from:
Amounts included in deferred revenue at the beginning of the period	7,492	16	12,825	32
Janssen
Collaborative Arrangements and Co-Promote Agreement
Revenue	7,392	7,566	12,715	12,179
Alfasigma
Collaborative Arrangements and Co-Promote Agreement
Revenue	95	10,533	98	10,533
Other
Collaborative Arrangements and Co-Promote Agreement
Revenue	163	16	175	43
Collaborative revenue
Collaborative Arrangements and Co-Promote Agreement
Revenue	$ 7,650	$ 18,115	$ 12,988	$ 22,755

Revenue - Janssen Biotech Agreement (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended
	Feb. 28, 2018	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Collaborative Arrangements and Co-Promote Agreement
Revenue		$ 26,150	$ 23,476	$ 31,488	$ 31,795
Percentage of profit share	67.00%			65.00%
Revenue from the recognition of previously deferred revenue		7,492	16	$ 12,825	32
Research and development		46,399	48,621	100,217	96,386
Janssen
Collaborative Arrangements and Co-Promote Agreement
Upfront payment receivable	$ 100,000
Revenue		7,392	7,566	12,715	12,179
Percentage of profit share	33.00%
Maximum potential payments receivable	$ 900,000
Collaborative arrangement, opt in fee	200,000
Collaborative arrangement, future development and commercialization milestones	$ 700,000
Revenue from collaborative arrangements		7,400		12,700
Research and development		9,000	$ 11,100	17,700	$ 17,600
Deferred revenue		$ 56,200		$ 56,200

Revenue - Development and Commercialization Agreement (Details) - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
	Jan. 30, 2015	Feb. 28, 2018	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2016	Dec. 31, 2015	Jan. 31, 2015
Collaborative Arrangements and Co-Promote Agreement
Milestone payment			$ 26,150	$ 23,476	$ 31,488	$ 31,795
Percentage of profit share		67.00%			65.00%
Revenue from the recognition of previously deferred revenue			7,492	16	$ 12,825	32
Mylan
Collaborative Arrangements and Co-Promote Agreement
Initial cash payment								$ 15,000
Number of shares purchased	1,585,790
Potential milestone or contingent payments									$ 205,000
Transaction price								$ 34,200
Percentage of profit share					35.00%
Performance period (in years)					13 years			17 years
Deferred revenue			300		$ 300
Mylan \| Purchase Agreement
Collaborative Arrangements and Co-Promote Agreement
Equity investments made in the entity	$ 30,000
Share Price	$ 18.918
Price per share premium (as a percent)	10.00%
Premium proceeds from sale of ordinary shares	$ 4,200							$ 4,200
Mylan \| Future potential combination products
Collaborative Arrangements and Co-Promote Agreement
Initial cash payment								15,000
Potential milestone or contingent payments			7,500		7,500				$ 45,000
Mylan \| Milestone - 50% enrollment in Phase 3 twelve-month safety study
Collaborative Arrangements and Co-Promote Agreement
Milestone payment							$ 15,000
Mylan \| Milestone - 50% enrollment in Phase 3 twelve-month safety study \| Development and Commercialization Agreement
Collaborative Arrangements and Co-Promote Agreement
Initial cash payment								$ 15,000
Alfasigma
Collaborative Arrangements and Co-Promote Agreement
Milestone payment			$ 95	$ 10,533	$ 98	$ 10,533

Revenue - Revenue from Licensing Arrangements (Details) - Mylan - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Jan. 31, 2015
Collaborative Arrangements and Co-Promote Agreement
Potential milestone or contingent payments		$ 205.0
Upfront payment receivable	$ 18.5
YUPELRI Monotherapy
Collaborative Arrangements and Co-Promote Agreement
Potential milestone or contingent payments	9.0	160.0
YUPELRI Monotherapy \| Sales milestones
Collaborative Arrangements and Co-Promote Agreement
Potential milestone or contingent payments	37.5	150.0
YUPELRI Monotherapy \| European Union Regulatory Issues [Member]
Collaborative Arrangements and Co-Promote Agreement
Potential milestone or contingent payments		10.0
Future potential combination products
Collaborative Arrangements and Co-Promote Agreement
Potential milestone or contingent payments	7.5	$ 45.0
Future potential combination products \| Development and Sales Milestones
Collaborative Arrangements and Co-Promote Agreement
Potential milestone or contingent payments	$ 54.0

Revenue - Reimbursement of R and D Costs (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended
	Feb. 28, 2018	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Research and Development Reimbursement
Total reduction to R and D expense		$ 815	$ 1,395	$ 2,429	$ 3,245
Percentage of profit share	67.00%			65.00%
Operating expenses
Research and Development Reimbursement
Percentage of profit share					35.00%
Payable after the Company's R&D expenses had been reimbursed			1,300		$ 1,700
Mylan
Research and Development Reimbursement
Total reduction to R and D expense		31	$ 1,395	$ 234	$ 3,245
Percentage of profit share				35.00%
Janssen
Research and Development Reimbursement
Total reduction to R and D expense		$ 784		$ 2,195
Percentage of profit share	33.00%

Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Dec. 31, 2017
Cash, Cash Equivalents, and Restricted Cash
Cash and cash equivalents	$ 178,311	$ 378,021	$ 103,854
Restricted cash	833	833	833
Total cash, cash equivalents, and restricted cash shown on the condensed consolidated statements of cash flows	$ 179,144	$ 378,854	$ 104,687	$ 89,813

Investments and Fair Value Measurements - Available for sale securities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Available for sale securities:
Amortized Cost	$ 367,178	$ 501,837
Gross Unrealized Gains	162	8
Gross Unrealized Losses	(33)	(174)
Estimated Fair Value	367,307	501,671
Marketable securities
Available for sale securities:
Amortized Cost	300,243	207,086
Gross Unrealized Gains	162	8
Gross Unrealized Losses	(33)	(174)
Estimated Fair Value	300,372	206,920
US government securities \| Level 1
Available for sale securities:
Amortized Cost	78,583	48,807
Gross Unrealized Gains	79
Gross Unrealized Losses	(12)	(86)
Estimated Fair Value	78,650	48,721
US government agency securities \| Level 2
Available for sale securities:
Amortized Cost	9,978	9,852
Gross Unrealized Gains	3	2
Estimated Fair Value	9,981	9,854
Corporate notes \| Level 2
Available for sale securities:
Amortized Cost	41,633	57,508
Gross Unrealized Gains	58	6
Gross Unrealized Losses	(2)	(88)
Estimated Fair Value	41,689	57,426
Commercial paper \| Level 2
Available for sale securities:
Amortized Cost	170,049	90,919
Gross Unrealized Gains	22
Gross Unrealized Losses	(19)
Estimated Fair Value	170,052	90,919
Money market funds \| Level 1
Available for sale securities:
Amortized Cost	66,935	294,751
Estimated Fair Value	$ 66,935	$ 294,751

Investments and Fair Value Measurements - Convertible senior notes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Maturity period for marketable securities
Maximum contractual maturity period			1 year
Weighted average contractual maturity period			3 months
Fair value transfers
Fair value of assets transferred from Level 1 to Level 2	$ 0		$ 0
Fair value of assets transferred from Level 2 to Level 1	0		0
Fair value of liabilities transferred from Level 1 to Level 2	0		0
Fair value of liabilities transferred from Level 2 to Level 1	0		0
Unrealized losses
Net unrealized losses	0		0
Available-for-sale securities sold	$ 0	$ 0	$ 0	$ 0

Long-Term Debt (Details) - USD ($) $ in Millions	1 Months Ended	6 Months Ended
Long-Term Debt (Details) - USD ($) $ in Millions	Nov. 30, 2018	Jun. 30, 2019	May 31, 2019
Long-Term Debt
Equity interest		85.00%
9.0% non-recourse notes due 2033
Long-Term Debt
Proceeds from issuance of debt	$ 250.0
Interest rate (as a percent)	9.00%	9.00%
Notes net principal amount		$ 237.5
Equity interest	63.75%
9.0% non-recourse notes due 2033 \| Level 2
Long-Term Debt
Notes fair value		220.9
3.25% Convertible Senior Notes Due 2023
Long-Term Debt
Proceeds from issuance of debt		$ 230.0
Interest rate (as a percent)		3.25%
Notes fair value		$ 198.5
TRC
Long-Term Debt
Equity interest		85.00%	85.00%
Theravance Biopharma R&D, Inc. \| 9.0% non-recourse notes due 2033
Long-Term Debt
Interest rate (as a percent)	5.00%

Leases - General (Details) $ in Thousands	6 Months Ended
Leases - General (Details) $ in Thousands	Jun. 30, 2019 USD ($) ft² Option
Lessee, Lease, Description [Line Items]
Area of leased space	170,000
Number of building leased	2
Tenant improvement allowance \| $	$ 15,774
Number of options to extend \| Option	2
Option to extend	true
Renewal term	5 years
Ireland
Lessee, Lease, Description [Line Items]
Area of leased space	6,100
Option to terminate	true
Lease term	21 months

Leases - Assets and Liabilities (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Assets and liabilities
Operating lease assets	$ 47,831
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	Operating lease assets
Operating lease liabilities, current	$ 7,887
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List]	Other Accrued Liabilities, Current
Operating lease liabilities	$ 48,565
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	Operating lease liabilities
Total operating lease liabilities	$ 56,452

Leases - Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
Leases - Lease Cost (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jun. 30, 2019
Lessee, Lease, Description [Line Items]
Operating lease expense	$ 2,614	$ 5,396
Selling, general and administrative
Lessee, Lease, Description [Line Items]
Operating lease expense	2,376	4,919
Research and development
Lessee, Lease, Description [Line Items]
Operating lease expense	$ 238	$ 477

Leases - Maturity of Lease Liabilities and Other Information (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Nov. 30, 2018
Maturity of Lease Liabilities
Nine months ending December 31, 2019	$ 4,408	$ 4,408
2020	7,253	7,253
2021	9,492	9,492
2022	9,757	9,757
2023	10,035	10,035
Thereafter	70,208	70,208
Total operating lease payments	111,153	111,153
Less: Estimated tenant improvement allowance	(15,774)	(15,774)
Less: Imputed interest	(38,927)	(38,927)
Present value of operating lease liabilities	56,452	56,452
Operating cash flows from operating leases	$ 1,700	$ 3,800
Weighted-average remaining lease term (years)	10 years 8 months 12 days	10 years 8 months 12 days
Weighted-average discount rate	8.65%	8.65%
9.0% non-recourse notes due 2033
Maturity of Lease Liabilities
Interest rate (as a percent)	9.00%	9.00%	9.00%

Theravance Respiratory Company, LLC (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	May 31, 2019	Dec. 31, 2018
Theravance Respiratory Company, LLC
Equity interest	85.00%		85.00%
TRC
Theravance Respiratory Company, LLC
Equity interest	85.00%		85.00%		85.00%
Value of investment	$ 20.0		$ 20.0			$ 5.4
Royalty payments	$ 8.4	$ 1.9	$ 14.6	$ 2.6

Share-Based Compensation - Expense (Details) - USD ($)	3 Months Ended		6 Months Ended
Share-Based Compensation - Expense (Details) - USD ($)	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Share-Based Compensation
Share-based compensation expense	$ 11,298,000	$ 13,855,000	$ 23,519,000	$ 27,853,000
Research and development
Share-Based Compensation
Share-based compensation expense	5,720,000	6,904,000	11,880,000	13,463,000
Selling, general and administrative
Share-Based Compensation
Share-based compensation expense	$ 5,578,000	$ 6,951,000	$ 11,639,000	$ 14,390,000

Share-Based Compensation - Performance Contingent Awards (Details)	3 Months Ended			6 Months Ended
	Jun. 30, 2019 USD ($) shares	Jun. 30, 2018 USD ($) shares	Mar. 31, 2016 shares	Jun. 30, 2019 USD ($) Milestone tranche shares	Jun. 30, 2018 USD ($) shares	Mar. 31, 2019 shares	Dec. 31, 2018 USD ($) shares
Share-Based Compensation
Number of tranches \| tranche				3
Number of performance milestones \| Milestone				2
Share-based compensation expense	$ 11,298,000	$ 13,855,000		$ 23,519,000	$ 27,853,000
Research and development
Share-Based Compensation
Share-based compensation expense	5,720,000	6,904,000		11,880,000	13,463,000
Selling, general and administrative
Share-Based Compensation
Share-based compensation expense	$ 5,578,000	$ 6,951,000		$ 11,639,000	$ 14,390,000
Performance-Contingent Awards - RSAs
Share-Based Compensation
Shares approved for grant (in shares) \| shares			1,575,000
Vesting period			5 years
Awards outstanding (in shares) \| shares	877,500	978,750		877,500	978,750
Performance-Contingent Awards - RSUs
Share-Based Compensation
Shares approved for grant (in shares) \| shares	60,000		135,000	60,000		60,000
Awards outstanding (in shares) \| shares	101,250	101,250		101,250	101,250
Maximum potential expense \| Employee
Share-Based Compensation
Shares approved for grant (in shares) \| shares							3,000
Maximum potential expense \| Performance-Contingent Awards - RSUs
Share-Based Compensation
Share-based compensation expense				$ 1,600,000
Maximum potential expense \| RSUs \| Employee
Share-Based Compensation
Shares approved for grant (in shares) \| shares							3,000
Maximum potential expense \| RSUs \| Employee \| Maximum
Share-Based Compensation
Compensation expense							$ 75,000
First tranche
Share-Based Compensation
Share-based compensation expense		$ 600,000			$ 1,800,000
Second tranche
Share-Based Compensation
Share-based compensation expense	$ (300,000)	$ 900,000		500,000	$ 1,700,000
Second tranche \| Maximum potential expense
Share-Based Compensation
Share-based compensation expense				1,800,000
Second tranche \| Maximum potential expense \| Research and development
Share-Based Compensation
Share-based compensation expense				600,000
Second tranche \| Maximum potential expense \| Selling, general and administrative
Share-Based Compensation
Share-based compensation expense				1,200,000
Third tranche
Share-Based Compensation
Share-based compensation expense				0
Third tranche \| Maximum potential expense
Share-Based Compensation
Share-based compensation expense				12,800,000
Third tranche \| Maximum potential expense \| Research and development
Share-Based Compensation
Share-based compensation expense				4,400,000
Third tranche \| Maximum potential expense \| Selling, general and administrative
Share-Based Compensation
Share-based compensation expense				8,300,000
First performance milestone \| Maximum potential expense \| Cash bonus award
Share-Based Compensation
Share-based compensation expense				75,000
Second performance milestone \| Maximum potential expense \| Cash bonus award
Share-Based Compensation
Share-based compensation expense				$ 225,000
First and second performance milestones \| Performance-Contingent Awards - RSUs
Share-Based Compensation
Shares approved for grant (in shares) \| shares	60,000			60,000
First and second performance milestones \| Performance-Contingent Awards - RSUs and cash bonus milestones
Share-Based Compensation
Share-based compensation expense				$ 0
First and second performance milestones \| Maximum potential expense \| Performance-Contingent Awards - RSUs
Share-Based Compensation
Share-based compensation expense				800,000
First and second performance milestones \| Maximum potential expense \| Cash bonus award
Share-Based Compensation
Share-based compensation expense				$ 300,000

Income Taxes - Components of provision for income taxes (Details) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)
Provision for income tax benefit (expense)
Income tax expense	$ 0.2	$ 0.3
Provision for income taxes on undistributed earnings of foreign subsidiaries	$ 0.0	$ 0.0
UK income tax (as a percent)		20.00%

Cost of Goods Sold (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
Cost of Goods Sold (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2018
Cost of Goods Sold
Cost of goods sold reversed	$ (1,448)	$ 2,300	$ (622)

Reduction in Workforce (Details) $ in Millions	1 Months Ended	6 Months Ended
Reduction in Workforce (Details) $ in Millions	Jan. 31, 2019 individual	Jun. 30, 2019 USD ($)
Reduction in Workforce
Number of headcount reduced by Company on sale of VIBATIV \| individual	51
Severance related charges		$ 3.6
Total severance paid		$ 3.4