0001558370-20-013233 | 10-Q | XBRL Viewer

Investments and Fair Value Measurements - Convertible senior notes (Details) $ in Millions	9 Months Ended
	Sep. 30, 2020 USD ($)
Maturity period for marketable securities
Maximum contractual maturity period	11 months
Weighted average contractual maturity period	3 months
Available-for-sale securities sold	$ 19.9

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 93,282	$ 58,064
Short-term marketable securities	265,065	222,767
Receivables from collaborative arrangements	12,399	11,996
Receivables from licensing arrangements		10,000
Amounts due from TRC, LLC	48,909	28,574
Prepaid clinical and development services	20,761	2,736
Other prepaid and current assets	10,308	4,351
Total current assets	450,724	338,488
Property and equipment, net	15,430	12,644
Long-term marketable securities		4,985
Operating lease assets	44,391	46,604
Tax receivable		3,682
Restricted cash	833	833
Other assets	810	1,590
Total assets	512,188	408,826
Current liabilities:
Accounts payable	6,442	4,758
Accrued personnel-related expenses	30,472	28,180
Accrued clinical and development expenses	26,944	17,587
Accrued interest payable	5,791	5,659
Non-recourse notes due 2033, net		9,851
Operating lease liabilities	9,685	7,762
Deferred revenue	18,204	31,575
Other accrued liabilities	6,732	6,331
Total current liabilities	104,270	111,703
Convertible senior notes due 2023, net	226,695	225,890
Non-recourse notes due 2035, net	384,482
Non-recourse notes due 2033, net		219,300
Long-term operating lease liabilities	47,823	47,725
Long-term deferred revenue	750	6,761
Other long-term liabilities	9,704	21,287
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; 63,956 and 57,015 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively	1	1
Additional paid-in capital	1,206,524	1,024,614
Accumulated other comprehensive income	122	145
Accumulated deficit	(1,468,183)	(1,248,600)
Total shareholders' deficit	(261,536)	(223,840)
Total liabilities and shareholders' deficit	$ 512,188	$ 408,826

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT - USD ($) shares in Thousands, $ in Thousands	Ordinary Shares	Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit	Total
Balances at Dec. 31, 2018	$ 1	$ 960,721	$ (166)	$ (1,012,145)	$ (51,589)
Balances (in shares) at Dec. 31, 2018	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		36,538			36,538
Issuance of restricted shares (in shares)	898
Option exercises		2,973			2,973
Option exercises (in shares)	151
Repurchase of shares to satisfy tax withholding		(2,743)			(2,743)
Repurchase of shares to satisfy tax withholding (in shares)	(113)
Net unrealized gain/loss on marketable securities			260		260
Net loss				(170,849)	(170,849)
Balances at Sep. 30, 2019	$ 1	1,000,094	94	(1,182,994)	(182,805)
Balances (in shares) at Sep. 30, 2019	56,762
Balances at Jun. 30, 2019	$ 1	987,209	129	(1,124,563)	(137,224)
Balances (in shares) at Jun. 30, 2019	56,637
Increase (Decrease) in Stockholders' Equity
Employee share-based compensation expense		13,019			13,019
Issuance of restricted shares (in shares)	209
Option exercises		428			428
Option exercises (in shares)	29
Repurchase of shares to satisfy tax withholding		(562)			(562)
Repurchase of shares to satisfy tax withholding (in shares)	(113)
Net unrealized gain/loss on marketable securities			(35)		(35)
Net loss				(58,431)	(58,431)
Balances at Sep. 30, 2019	$ 1	1,000,094	94	(1,182,994)	(182,805)
Balances (in shares) at Sep. 30, 2019	56,762
Balances at Dec. 31, 2019	$ 1	1,024,614	145	(1,248,600)	$ (223,840)
Balances (in shares) at Dec. 31, 2019	57,015				57,015
Increase (Decrease) in Stockholders' Equity
Net proceeds from sale of ordinary shares		139,915			$ 139,915
Net proceeds from sale of ordinary shares (in shares)	5,500
Proceeds from ESPP purchases		2,545			2,545
Proceeds from ESPP purchases (in shares)	168
Employee share-based compensation expense		47,425			47,425
Issuance of restricted shares (in shares)	1,590
Option exercises		960			960
Option exercises (in shares)	43
Repurchase of shares to satisfy tax withholding		(8,935)			(8,935)
Repurchase of shares to satisfy tax withholding (in shares)	(360)
Net unrealized gain/loss on marketable securities			(23)		(23)
Net loss				(219,583)	(219,583)
Balances at Sep. 30, 2020	$ 1	1,206,524	122	(1,468,183)	$ (261,536)
Balances (in shares) at Sep. 30, 2020	63,956				63,956
Balances at Jun. 30, 2020	$ 1	1,191,923	280	(1,394,540)	$ (202,336)
Balances (in shares) at Jun. 30, 2020	63,515
Increase (Decrease) in Stockholders' Equity
Employee share-based compensation expense		15,564			15,564
Issuance of restricted shares (in shares)	493
Option exercises		24			24
Option exercises (in shares)	2
Repurchase of shares to satisfy tax withholding		(987)			(987)
Repurchase of shares to satisfy tax withholding (in shares)	(54)
Net unrealized gain/loss on marketable securities			(158)		(158)
Net loss				(73,643)	(73,643)
Balances at Sep. 30, 2020	$ 1	$ 1,206,524	$ 122	$ (1,468,183)	$ (261,536)
Balances (in shares) at Sep. 30, 2020	63,956				63,956

Net Loss per Share

9 Months Ended

Sep. 30, 2020

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 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				Nine Months Ended
	September 30,				September 30,
(In thousands)	2020		2019		2020		2019
Numerator:
Net loss	$	(73,643)	$	(58,431)	$	(219,583)	$	(170,849)
Denominator:
Weighted-average common shares outstanding		63,717		56,690		62,361		56,308
Less: weighted-average common shares subject to forfeiture		(414)		(832)		(480)		(863)
Weighted-average common shares used to compute basic and diluted net loss per share		63,303		55,858		61,881		55,445
Basic and diluted net loss per share	$	(1.16)	$	(1.05)	$	(3.55)	$	(3.08)

For the three and nine months ended September 30, 2020 and 2019, 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		Nine Months Ended
	September 30,		September 30,
(In thousands)	2020	2019	2020	2019
Share issuances under equity incentive plans and ESPP	8,063	7,340	6,566	6,491
Share issuances upon the conversion of convertible senior notes	6,676	6,676	6,676	6,676
Total	14,739	14,016	13,242	13,167

As of September 30, 2019, there were 414,000 shares subject to performance-based vesting criteria which have been excluded from the ordinary equivalent shares table above, and there were no such shares excluded as of September 30, 2020.

GlaxoSmithKline plc Senior Notes Offering

On June 22, 2020, GSK Finance (No.3) plc (“GSK Finance”), a wholly-owned subsidiary of GlaxoSmithKline plc (“GSK”), issued $280,336,000 of exchangeable senior notes due 2023 (“the GSK Notes”), initially exchangeable into 9,644,792 ordinary shares of Theravance Biopharma currently held by GSK and its affiliates. The GSK Notes are guaranteed by GSK and will be exchangeable at the option of noteholders on any business day on or after September 1, 2020. The GSK Notes will mature on June 22, 2023 and do not bear interest. The GSK Notes were offered at an issue price 108.5% of their principal amount. The initial exchange rate is 34.4044 shares of Theravance Biopharma ordinary shares per $1,000 principal amount of GSK Notes, which is equivalent to an initial exchange price of approximately $29.066 per share, representing a premium of 35% over the volume weighted average price of Theravance Biopharma’s ordinary shares on June 17, 2020.

Upon exchange of the GSK Notes, GSK Finance is expected to deliver its ordinary shares of Theravance Biopharma, but may at its option under certain circumstances, deliver cash or a combination of Theravance Biopharma ordinary shares and cash to noteholders. The GSK Offering involves the expected exchange of substantially all of the existing 9,644,807 ordinary shares of Theravance Biopharma held by GSK and its affiliates. Theravance Biopharma will not be

issuing any new ordinary shares in connection with the GSK Offering, and Theravance Biopharma did not receive any proceeds from the GSK Offering.

Income Taxes

9 Months Ended

Sep. 30, 2020

Income Taxes

Income Taxes

9. Income Taxes

The income tax expense was $0.1 million and $0.3 million for the three and nine months ended September 30, 2020, respectively. The expense was primarily attributed to recording contingent 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 September 30, 2020, 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 is currently under Internal Revenue Service (“IRS”) examination for the tax year ended December 31, 2017. The Company believes that an adequate provision has been made for any adjustments that may result from the tax examination.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), that features significant tax provision and other measures to assist individuals and businesses impacted by the economic effects of the COVID-19 pandemic, was signed into law. Tax relief measures for businesses include a five-year net operating loss carryback (including a related technical correction to the 2017 Tax Reform Act), a change in Section 163(j) interest deduction limitations, accelerated alternative minimum tax refunds, payroll tax relief, a temporary suspension of certain aviation excise taxes, a tax credit for employers who retain employees, and a ‘qualified improvement property’ technical correction to the 2017 Tax Reform Act. The Company has considered the corporate income tax provisions of the CARES Act and related initial guidance as part of its income tax expense forecast for the three and nine months ended September 30, 2020, and these provisions are expected to have an immaterial impact on the Company’s 2020 income tax expense.

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.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

Net Loss per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Numerator:
Net loss	$ (73,643)	$ (58,431)	$ (219,583)	$ (170,849)
Denominator:
Weighted-average common shares outstanding	63,717	56,690	62,361	56,308
Less: weighted-average common shares subject to forfeiture	(414)	(832)	(480)	(863)
Weighted-average common shares used to compute basic and diluted net loss per share	63,303	55,858	61,881	55,445
Basic and diluted net loss per share	$ (1.16)	$ (1.05)	$ (3.55)	$ (3.08)

- Definition

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

+ References

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+ Details

Share-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2020

Share-Based Compensation

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2020		2019		2020		2019
Research and development	$	7,761	$	6,458	$	23,724	$	18,338
Selling, general and administrative		7,803		6,561		23,701		18,200
Total share-based compensation expense	$	15,564	$	13,019	$	47,425	$	36,538

Net Loss per Share (Tables)

9 Months Ended

Sep. 30, 2020

Net Loss per Share

Schedule of basic and diluted net loss per share


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2020		2019		2020		2019
Numerator:
Net loss	$	(73,643)	$	(58,431)	$	(219,583)	$	(170,849)
Denominator:
Weighted-average common shares outstanding		63,717		56,690		62,361		56,308
Less: weighted-average common shares subject to forfeiture		(414)		(832)		(480)		(863)
Weighted-average common shares used to compute basic and diluted net loss per share		63,303		55,858		61,881		55,445
Basic and diluted net loss per share	$	(1.16)	$	(1.05)	$	(3.55)	$	(3.08)

Schedule of anti-dilutive securities


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
(In thousands)	2020	2019	2020	2019
Share issuances under equity incentive plans and ESPP	8,063	7,340	6,566	6,491
Share issuances upon the conversion of convertible senior notes	6,676	6,676	6,676	6,676
Total	14,739	14,016	13,242	13,167

Theravance Respiratory Company, LLC

9 Months Ended

Sep. 30, 2020

Theravance Respiratory Company, LLC

Theravance Respiratory Company, LLC

7. Theravance Respiratory Company, LLC

Through the Company’s 85% equity interest 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 primary drug program assigned to TRC is Trelegy.

In May 2014, the Company entered into the TRC LLC Agreement with Innoviva, Inc. (“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 $48.9 million and $28.6 million as of September 30, 2020 and December 31, 2019, respectively. This amount includes undistributed earnings from the Company’s investment in TRC which are recorded on the condensed consolidated balance sheets as “Amounts due from TRC, LLC” and are 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 royalties, net of any expenses, is distributed to the equity holders quarterly.

For the three and nine months ended September 30, 2020, the Company recognized net royalty income of $13.4 million and $48.3 million, respectively, within the condensed consolidated statements of operations within “Income from investment in TRC, LLC”. These amounts were recorded net of the Company’s share of TRC’s expenses of $0.5 million and $1.2 million for the three and nine months ended September 30, 2020, respectively. For the three and nine months ended September 30, 2019, the Company recognized net royalty income of $7.2 million and $21.8 million, respectively. For the three and nine months ended September 30, 2019, the Company’s share of TRC expenses was $2.3 million and was primarily comprised of TRC legal and related fees associated with the 2019 arbitration between Innoviva and TRC and the Company.

As of September 30, 2020, the amounts due from TRC, LLC were $48.9 million which were primarily comprised of (i) net royalty income payments for the period from the first quarter of 2020 through the third quarter of 2020 and (ii) $8.5 million representing the Company’s share of the one-time fee that GSK paid to TRC upon termination of the MABA program in June 2020. On June 10, 2020, the Company disclosed in a Form 8-K that it had formally objected to TRC and Innoviva, as the manager of TRC, regarding their proposed plan to use of TRELEGY royalties to invest in certain privately-held companies, funds that would otherwise be available for distribution to the Company under the terms of the TRC LLC Agreement. The Company intends to continue to seek to protect its interests in this matter consistent with the dispute resolution procedures of the TRC LLC Agreement. In this regard, the Company initiated an arbitration proceeding against Innoviva and TRC in October 2020 challenging the authority of Innoviva and TRC to pursue such a business plan rather than distribute such funds to the Company in a manner consistent with the TRC LLC Agreement and the Company’s 85% economic interest in TRC. An arbitration hearing is scheduled for the first quarter of 2021.

Investments and Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2020

Investments and Fair Value Measurements

Schedule of available-for-sale securities


		September 30, 2020
				Gross		Gross
		Amortized		Unrealized		Unrealized		Estimated
(In thousands)		Cost		Gains		Losses		Fair Value
US government securities	Level 1	$	130,024	$	81	$	(1)	$	130,104
US government agency securities	Level 2		99,928		41		—		99,969
Corporate notes	Level 2		—		—		—		—
Commercial paper	Level 2		41,986		4		—		41,990
Marketable securities			271,938		126		(1)		272,063
Money market funds	Level 1		35,615		—		—		35,615
Total		$	307,553	$	126	$	(1)	$	307,678


		December 31, 2019
				Gross		Gross
		Amortized		Unrealized		Unrealized		Estimated
(In thousands)		Cost		Gains		Losses		Fair Value
US government securities	Level 1	$	100,746	$	108	$	—	$	100,854
Corporate notes	Level 2		25,466		9		(1)		25,474
Commercial paper	Level 2		112,066		31		(2)		112,095
Marketable securities			238,278		148		(3)		238,423
Money market funds	Level 1		35,736		—		—		35,736
Total		$	274,014	$	148	$	(3)	$	274,159

Schedule of Available for sale debt securities with unrealized losses


	September 30, 2020
	Less than 12 Months				Greater than 12 Months				Total
			Gross				Gross				Gross
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
(In thousands)	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
US government securities	$	10,090	$	(1)	$	—	$	—	$	10,090	$	(1)
Commercial paper		4,998		—		—		—		4,998		—
Total	$	15,088	$	(1)	$	—	$	—	$	15,088	$	(1)


	December 31, 2019
	Less than 12 Months				Greater than 12 Months				Total
			Gross				Gross				Gross
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
(In thousands)	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Corporate notes	$	5,507	$	(1)	$	—	$	—	$	5,507	$	(1)
Commercial paper		28,137		(2)		—		—		28,137		(2)
Total	$	33,644	$	(3)	$	—	$	—	$	33,644	$	(3)

Share-Based Compensation

9 Months Ended

Sep. 30, 2020

Share-Based Compensation

Share-Based Compensation

8. Share-Based Compensation

Share-Based Compensation Expense Allocation

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2020		2019		2020		2019
Research and development	$	7,761	$	6,458	$	23,724	$	18,338
Selling, general and administrative		7,803		6,561		23,701		18,200
Total share-based compensation expense	$	15,564	$	13,019	$	47,425	$	36,538

Performance-Contingent Awards

In 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 should increase shareholder value. The awards have dual triggers of vesting based upon the achievement of these goals and continued employment.

Expense associated with these awards may be recognized during the years 2016 to 2020 depending on the probability of meeting certain 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 awards are broken into three separate tranches.

As of September 30, 2020, there were 414,000 of these performance-contingent RSAs and 54,000 of these performance-contingent RSUs outstanding, and as of September 30, 2019, there were 776,250 of these performance-contingent RSAs and 101,250 of these performance-contingent RSUs outstanding. The performance conditions associated with the first tranche of these awards were completed in the second quarter of 2018, and the expense associated with the first tranche was fully recognized in 2018.

The performance conditions associated with the second tranche of these awards were completed in the first quarter of 2019, and as of March 31, 2020, the expense associated with this second tranche was fully recognized. For the nine months ended September 30, 2020, the Company recognized $0.4 million of share-based compensation expense related to the second tranche of these awards. For three and nine months ended September 30, 2019, the Company recognized $0.7 million and $1.2 million, respectively, of share-based compensation expense related to the second tranche of these awards.

In the first quarter of 2020, the performance conditions associated with the remaining third tranche were completed and, as a result, the Company recognized $0.6 million and $1.9 million of share-based compensation expense related to these awards for the three and nine months ended September 30, 2020, respectively. As of September 30, 2020, the maximum remaining expense associated with the third tranche is $1.0 million (allocated as $0.3 million for research and development expense and $0.7 million for selling, general and administrative expense) and will be amortized through the first quarter of 2021.

Separate from the performance-contingent awards described above, the Company periodically grants performance-contingent RSUs to individual employees. For the three and nine months ended September 30, 2020, the Company recognized $0.1 million and $0.8 million, respectively, of share-based compensation expense related to such awards. As of September 30, 2020, there were 120,000 shares of these performance-contingent RSUs outstanding that have a maximum remaining share-based compensation expense of $1.7 million with performance expiration dates ranging from December 2020 to June 2022.

Share-Based Compensation - Performance Contingent Awards (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2016
Share-Based Compensation
Total share-based compensation expense	$ 15,564	$ 13,019	$ 47,425	$ 36,538
Research and development
Share-Based Compensation
Total share-based compensation expense	7,761	6,458	23,724	18,338
Selling, general and administrative
Share-Based Compensation
Total share-based compensation expense	$ 7,803	$ 6,561	$ 23,701	$ 18,200
Performance-Contingent Awards - RSAs
Share-Based Compensation
Shares approved for grant (in shares)					1,575,000
Vesting period					5 years
Awards outstanding (in shares)	414,000	776,250	414,000	776,250
Performance-Contingent Awards - RSUs
Share-Based Compensation
Awards outstanding (in shares)	54,000	101,250	54,000	101,250
Total share-based compensation expense			$ 800
Performance-Contingent Awards - RSUs \| Senior management
Share-Based Compensation
Shares approved for grant (in shares)					135,000
Performance-Contingent Awards - RSUs
Share-Based Compensation
Awards outstanding (in shares)	120,000		120,000
Total share-based compensation expense	$ 100
Maximum potential expense \| Performance-Contingent Awards - RSUs
Share-Based Compensation
Total share-based compensation expense			$ 1,700
Second tranche
Share-Based Compensation
Total share-based compensation expense		$ 700	400	$ 1,200
Third tranche
Share-Based Compensation
Total share-based compensation expense	$ 600		1,900
Third tranche \| Maximum potential expense
Share-Based Compensation
Total share-based compensation expense			1,000
Third tranche \| Maximum potential expense \| Research and development
Share-Based Compensation
Total share-based compensation expense			300
Third tranche \| Maximum potential expense \| Selling, general and administrative
Share-Based Compensation
Total share-based compensation expense			$ 700

Investments and Fair Value Measurements - Available-for-sale securities (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Available for sale securities:
Amortized Cost	$ 307,553	$ 274,014
Gross Unrealized Gains	126	148
Gross Unrealized Losses	(1)	(3)
Estimated Fair Value	307,678	274,159
Debt Securities, Available-for-sale, Unrealized Gain (Loss) [Abstract]
Estimated Fair Value lesser than 12 months	15,088	33,644
Estimated Fair Value Total	15,088	33,644
Gross unrealized lesser than 12 months	(1)	(3)
Gross unrealized loss, Total	(1)	(3)
Marketable securities
Available for sale securities:
Amortized Cost	271,938	238,278
Gross Unrealized Gains	126	148
Gross Unrealized Losses	(1)	(3)
Estimated Fair Value	272,063	238,423
US government securities
Debt Securities, Available-for-sale, Unrealized Gain (Loss) [Abstract]
Estimated Fair Value lesser than 12 months	10,090
Estimated Fair Value Total	10,090
Gross unrealized lesser than 12 months	(1)
Gross unrealized loss, Total	(1)
US government securities \| Level 1
Available for sale securities:
Amortized Cost	130,024	100,746
Gross Unrealized Gains	81	108
Gross Unrealized Losses	(1)
Estimated Fair Value	130,104	100,854
US government agency securities \| Level 2
Available for sale securities:
Amortized Cost	99,928
Gross Unrealized Gains	41
Estimated Fair Value	99,969
Corporate notes
Debt Securities, Available-for-sale, Unrealized Gain (Loss) [Abstract]
Estimated Fair Value lesser than 12 months		5,507
Estimated Fair Value Total		5,507
Gross unrealized lesser than 12 months		(1)
Gross unrealized loss, Total		(1)
Corporate notes \| Level 2
Available for sale securities:
Amortized Cost		25,466
Gross Unrealized Gains		9
Gross Unrealized Losses		(1)
Estimated Fair Value		25,474
Commercial paper
Debt Securities, Available-for-sale, Unrealized Gain (Loss) [Abstract]
Estimated Fair Value lesser than 12 months	4,998	28,137
Estimated Fair Value Total	4,998	28,137
Gross unrealized lesser than 12 months		(2)
Gross unrealized loss, Total		(2)
Commercial paper \| Level 2
Available for sale securities:
Amortized Cost	41,986	112,066
Gross Unrealized Gains	4	31
Gross Unrealized Losses		(2)
Estimated Fair Value	41,990	112,095
Money market funds \| Level 1
Available for sale securities:
Amortized Cost	35,615	35,736
Estimated Fair Value	$ 35,615	$ 35,736

Public Offering of Ordinary Shares - (Details) - USD ($) $ / shares in Units, $ in Thousands		9 Months Ended
	Feb. 14, 2020	Sep. 30, 2020
Public Offering of Ordinary Shares
Net proceeds from sale of ordinary shares (in shares)	5,500,000
Share price (in dollars per share)	$ 27.00
Proceeds from sale of ordinary shares	$ 148,500	$ 139,915

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2020	Oct. 30, 2020
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2020
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		63,981,317
Entity Central Index Key	0001583107
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Amendment Flag	false

Revenue - Reimbursement of R and D Costs (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Research and Development Reimbursement
Total reduction to R and D expense	$ 1,404	$ 983	$ 5,796	$ 3,412
Janssen
Research and Development Reimbursement
Total reduction to R and D expense	1,461	930	4,231	3,125
Mylan
Research and Development Reimbursement
Total reduction to R and D expense	$ (57)	$ 53	$ 1,565	$ 287

Cash, Cash Equivalents, and Restricted Cash (Tables)

9 Months Ended

Sep. 30, 2020

Cash, Cash Equivalents, and Restricted Cash

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


	September 30,
(In thousands)	2020		2019
Cash and cash equivalents	$	93,282	$	102,403
Restricted cash		833		8,329
Total cash, cash equivalents, and restricted cash shown on the condensed consolidated statements of cash flows	$	94,115	$	110,732

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Thousands	Sep. 30, 2020	Dec. 31, 2019
CONSOLIDATED BALANCE SHEETS
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	63,956	57,015
Ordinary shares, outstanding shares	63,956	57,015

Organization and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

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. The Company’s purpose is to create transformational medicines to improve the lives of patients suffering from serious illnesses. The Company’s research is focused in the areas of inflammation and immunology.

Basis of Presentation

The Company’s condensed consolidated financial information as of September 30, 2020, and the three and nine months ended September 30, 2020 and 2019 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 United States (“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, 2019 financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission (“SEC”) on February 27, 2020.

The results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020, 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.

Furthermore, the estimates used in the preparation of the Company’s condensed consolidated financial statements may change due to the uncertainty and disruption in the global economy and financial markets related to the novel coronavirus (“COVID-19”) pandemic. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including revenue, expenses, clinical trials, and research and development costs, will depend on future developments that are highly uncertain and may be impacted by the emergence of new information concerning the COVID-19 pandemic and the actions taken to contain or treat the disease.

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, 2019.

Recently Adopted Accounting Pronouncements

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 became effective on January 1, 2020, and the adoption did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures primarily due to the high credit quality and short-term maturities of the Company’s marketable securities.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Accordingly, ASU 2018-15 requires a customer in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. ASU 2018-15 became effective on January 1, 2020, and the adoption did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures. However, the adoption of ASU 2018-15 may result in an increase in capitalized assets related to qualifying cloud computing arrangement implementation costs in the future.

In November 2018, the FASB issued ASU 2018-18, Collaboration Arrangements: Clarifying the Interaction between Topic 808 and Topic 606 (“ASU 2018-18”). 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 Topic 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 became effective on January 1, 2020, and the Company elected to adopt ASU 2018-18, retrospectively, only for contracts that were not completed as of January 1, 2020. The adoption of ASU 2018-18 did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”) as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards. ASU 2019-12 removes certain exceptions from Topic 740, Income Taxes, including (i) the exception to the incremental approach for intra period tax allocation when there is a loss from continuing operations and income or a gain from other items such as discontinued operations or other comprehensive income; (ii) the exception to accounting for outside basis differences of equity method investments and foreign subsidiaries; and (iii) the exception to limit tax benefit recognized in interim periods in cases when the year-to-date losses exceed anticipated losses. ASU 2019-12 also simplifies GAAP in several other areas of Topic 740 such as (i) franchise taxes and other taxes partially based on income; (ii) step-up in tax basis goodwill considered part of a business combination in which the book goodwill was originally recognized or should be considered a separate transaction; (iii) separate financial statements of entities not subject to tax; and (iv) interim recognition of enactment of tax laws or rate changes. ASU 2019-12 is effective for annual reporting periods and interim periods within those years beginning after December 15, 2020, and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2019-12 on its condensed consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and other Options (Subtopic 470-20) and Derivatives and Hedging: Contracts in Entity’s Own Equity (Subtopic 815-10) (“ASU 2020-06”). ASU 2020-06 simplifies the complexity associated with applying US GAAP for certain financial instruments with characteristics of liabilities and equity by removing certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. The standard also enhances the consistency of earnings-per-share calculations by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in diluted earnings-per-share calculations. ASU 2020-06 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2021, and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2020-06 on its condensed consolidated financial statements and related disclosures.

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

Share-Based Compensation - Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Share-Based Compensation
Total share-based compensation expense	$ 15,564	$ 13,019	$ 47,425	$ 36,538
Research and development
Share-Based Compensation
Total share-based compensation expense	7,761	6,458	23,724	18,338
Selling, general and administrative
Share-Based Compensation
Total share-based compensation expense	$ 7,803	$ 6,561	$ 23,701	$ 18,200

Net Loss per Share - Anti-dilutive Securities (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Anti-Dilutive Securities
Anti-dilutive securities (in shares)	14,739,000	14,016,000	13,242,000	13,167,000
Share issuances under equity incentive plans and ESPP
Anti-Dilutive Securities
Anti-dilutive securities (in shares)	8,063,000	7,340,000	6,566,000	6,491,000
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)			0	414,000

Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Nov. 30, 2018	Dec. 31, 2017
Cash and cash equivalents	$ 93,282	$ 58,064	$ 102,403
Restricted cash	833		8,329
Total cash, cash equivalents, and restricted cash shown on the condensed consolidated statements of cash flows	$ 94,115	$ 58,897	$ 110,732		$ 378,854
9.0% non-recourse notes due 2033
Interest rate (as a percent)	9.00%		9.00%	9.00%

Organization and Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2020
Organization and Summary of Significant Accounting Policies
Basis of Presentation	Basis of Presentation The Company’s condensed consolidated financial information as of September 30, 2020, and the three and nine months ended September 30, 2020 and 2019 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 United States (“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, 2019 financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission (“SEC”) on February 27, 2020. The results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020, 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. Furthermore, the estimates used in the preparation of the Company’s condensed consolidated financial statements may change due to the uncertainty and disruption in the global economy and financial markets related to the novel coronavirus (“COVID-19”) pandemic. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including revenue, expenses, clinical trials, and research and development costs, will depend on future developments that are highly uncertain and may be impacted by the emergence of new information concerning the COVID-19 pandemic and the actions taken to contain or treat the disease.
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, 2019.
Recently Adopted Accounting Pronouncements	Recently Adopted Accounting Pronouncements 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 became effective on January 1, 2020, and the adoption did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures primarily due to the high credit quality and short-term maturities of the Company’s marketable securities. In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Accordingly, ASU 2018-15 requires a customer in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. ASU 2018-15 became effective on January 1, 2020, and the adoption did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures. However, the adoption of ASU 2018-15 may result in an increase in capitalized assets related to qualifying cloud computing arrangement implementation costs in the future. In November 2018, the FASB issued ASU 2018-18, Collaboration Arrangements: Clarifying the Interaction between Topic 808 and Topic 606 (“ASU 2018-18”). 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 Topic 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 became effective on January 1, 2020, and the Company elected to adopt ASU 2018-18, retrospectively, only for contracts that were not completed as of January 1, 2020. The adoption of ASU 2018-18 did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures. Recently Issued Accounting Pronouncements Not Yet Adopted In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”) as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards. ASU 2019-12 removes certain exceptions from Topic 740, Income Taxes, including (i) the exception to the incremental approach for intra period tax allocation when there is a loss from continuing operations and income or a gain from other items such as discontinued operations or other comprehensive income; (ii) the exception to accounting for outside basis differences of equity method investments and foreign subsidiaries; and (iii) the exception to limit tax benefit recognized in interim periods in cases when the year-to-date losses exceed anticipated losses. ASU 2019-12 also simplifies GAAP in several other areas of Topic 740 such as (i) franchise taxes and other taxes partially based on income; (ii) step-up in tax basis goodwill considered part of a business combination in which the book goodwill was originally recognized or should be considered a separate transaction; (iii) separate financial statements of entities not subject to tax; and (iv) interim recognition of enactment of tax laws or rate changes. ASU 2019-12 is effective for annual reporting periods and interim periods within those years beginning after December 15, 2020, and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2019-12 on its condensed consolidated financial statements and related disclosures. In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and other Options (Subtopic 470-20) and Derivatives and Hedging: Contracts in Entity’s Own Equity (Subtopic 815-10) (“ASU 2020-06”). ASU 2020-06 simplifies the complexity associated with applying US GAAP for certain financial instruments with characteristics of liabilities and equity by removing certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. The standard also enhances the consistency of earnings-per-share calculations by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in diluted earnings-per-share calculations. ASU 2020-06 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2021, and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2020-06 on its condensed consolidated financial statements and related disclosures. The Company has evaluated other recently issued accounting pronouncements and does not currently believe that any of these pronouncements will have a material impact on its condensed consolidated financial statements and related disclosures.

Net Loss per Share - GSK Notes (Details) - GSK Notes	Jun. 22, 2020 USD ($) $ / shares shares
Principal amount	$ 280,336,000
Value of exchangeable shares	$ 9,644,792,000,000
Shares issued on conversion of Notes \| shares	9,644,807
Percentage of principal amount of debt (as a percent)	108.50%
Initial exchange ratio	34.4044
Denomination for conversion of debt	$ 1,000
Initial exchange price \| $ / shares	$ 29.066
Premium over volume weighted average price (as a percent)	35.00%

Public Offering of Ordinary Shares

9 Months Ended

Sep. 30, 2020

Public Offering of Ordinary Shares

Public Offering of Ordinary Shares

10. Public Offering of Ordinary Shares

On February 14, 2020, the Company sold 5,500,000 ordinary shares at a price to the public of $27.00 per share (the “Shares”). The gross proceeds to the Company from the offering were $148.5 million, before deducting underwriting discounts and commissions and offering expenses. The Shares were issued pursuant to the Company’s currently effective shelf registration statement on Form S-3 and an accompanying prospectus (File No. 333-235339) filed with the SEC, which became effective automatically on December 3, 2019, and a prospectus supplement filed with the SEC in connection with the offering.

Long-Term Debt (Tables)

9 Months Ended

Sep. 30, 2020

Long-Term Debt

Schedule of long-term debt

The following is a summary of the carrying value of the Non-Recourse 2035 Notes as of September 30, 2020:


	September 30,
(In thousands)	2020
9.5% Non-Recourse 2035 Notes
Principal amount	$	410,677
Less: 5% retention by the Company		(20,534)
Unamortized debt issuance costs - 9.5% Non-Recourse 2035 Notes		(4,006)
Unamortized debt issuance costs - Modified 9.0% Non-Recourse 2033 Notes		(1,655)
Total	$	384,482

- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02.22)
-URI http://asc.fasb.org/extlink&oid=120391452&loc=d3e13212-122682

Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 45
-Paragraph 1A
-URI http://asc.fasb.org/extlink&oid=119993939&loc=d3e28541-108399

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 6
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21506-112644

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(e),(f))
-URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 45
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=119993939&loc=d3e28551-108399

Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 7
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21521-112644

Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21538-112644

Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 470
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=75038535&loc=d3e64711-112823

Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 55
-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=114775985&loc=d3e28878-108400

Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21475-112644

+ Details

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenue:
Total revenue	$ 18,257	$ 12,427	$ 53,127	$ 43,915
Costs and expenses:
Research and development (1)	67,371	52,006	195,788	152,223
Selling, general and administrative (1)	27,501	25,622	78,606	73,035
Total costs and expenses	94,872	77,628	274,394	225,258
Loss from operations	(76,615)	(65,201)	(221,267)	(181,343)
Income from investment in TRC, LLC	13,403	7,197	48,299	21,792
Interest expense	(11,573)	(8,068)	(32,905)	(23,827)
Loss on extinguishment of debt			(15,464)
Interest and other income, net	1,235	2,089	2,033	7,258
Loss before income taxes	(73,550)	(63,983)	(219,304)	(176,120)
Provision for income tax (expense) benefit	(93)	5,552	(279)	5,271
Net loss	(73,643)	(58,431)	(219,583)	(170,849)
Net unrealized gain (loss) on available-for-sale investments	(158)	(35)	(23)	260
Total comprehensive loss	$ (73,801)	$ (58,466)	$ (219,606)	$ (170,589)
Net loss per share:
Basic and diluted net loss per share (in dollars per share)	$ (1.16)	$ (1.05)	$ (3.55)	$ (3.08)
Shares used to compute basic and diluted net loss per share (in shares)	63,303	55,858	61,881	55,445
Total share-based compensation expense	$ 15,564	$ 13,019	$ 47,425	$ 36,538
Research and development
Net loss per share:
Total share-based compensation expense	7,761	6,458	23,724	18,338
Selling, general and administrative
Net loss per share:
Total share-based compensation expense	7,803	6,561	23,701	18,200
Collaborative revenue
Revenue:
Total revenue	7,261	8,836	19,381	21,666
Licensing revenue
Revenue:
Total revenue			1,500	18,500
Mylan collaboration agreement
Revenue:
Total revenue	$ 10,996	$ 3,591	$ 32,246	$ 3,749

Revenue (Tables)

9 Months Ended

Sep. 30, 2020

Revenue

Schedule of revenue recognized from collaborative arrangements


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2020		2019		2020		2019
Janssen	$	7,252	$	8,807	$	19,353	$	21,522
Other		9		29		28		144
Total collaboration revenue	$	7,261	$	8,836	$	19,381	$	21,666

Summary of changes in deferred revenue


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2020		2019		2020		2019
Collaboration revenue recognized in the period from:
Amounts included in deferred revenue at the beginning of the period	$	7,261	$	8,836	$	19,381	$	21,661
Performance obligations satisfied in previous period		—		—		—		—

Summary of profit sharing revenue and collaboration loss


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2020		2019		2020		2019
Mylan collaboration agreement - Amounts receivable from Mylan	$	10,996	$	3,591	$	32,246	$	3,749
Collaboration loss - Amounts payable to Mylan	$	—	$	—	$	—	$	1,582

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2020		2019		2020		2019
Janssen	$	1,461	$	930	$	4,231	$	3,125
Mylan		(57)		53		1,565		287
Total reduction to R&D expense, net	$	1,404	$	983	$	5,796	$	3,412

Revenue - Janssen Biotech Agreement (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Feb. 28, 2018	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Collaborative Arrangements and Co-Promote Agreement
Percentage of profit share	33.00%			35.00%
Revenue from collaborative arrangements		$ 7,261	$ 8,836	$ 19,381	$ 21,661
Research and development		67,371	52,006	195,788	152,223
Janssen
Collaborative Arrangements and Co-Promote Agreement
Upfront payment receivable	$ 100,000
Percentage of profit share	67.00%
Maximum potential payments receivable	$ 900,000
Revenue from collaborative arrangements		7,252	8,807	19,353	21,522
Deferred revenue		18,500		18,500
Research and development		$ 9,800	$ 11,500	$ 29,000	$ 29,100
Janssen \| Collaborative Arrangement
Collaborative Arrangements and Co-Promote Agreement
Collaborative arrangement, future development and commercialization milestones	700,000
Janssen \| Collaborative Arrangement \| TD-1473
Collaborative Arrangements and Co-Promote Agreement
Collaborative arrangement, opt in fee	$ 200,000

Revenue

9 Months Ended

Sep. 30, 2020

Revenue

Revenue

3. Revenue

Revenue from Collaborative Arrangements

The Company recognized revenues from its collaborative arrangements as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2020		2019		2020		2019
Janssen	$	7,252	$	8,807	$	19,353	$	21,522
Other		9		29		28		144
Total collaboration revenue	$	7,261	$	8,836	$	19,381	$	21,666

Changes in Deferred Revenue Balances

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				Nine Months Ended
	September 30,				September 30,
(In thousands)	2020		2019		2020		2019
Collaboration revenue recognized in the period from:
Amounts included in deferred revenue at the beginning of the period	$	7,261	$	8,836	$	19,381	$	21,661
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 the Company 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 determined it is partially within the scope of Accounting Standards Codification, Topic 606, Revenue from Contracts with Customers (“ASC 606”) as the research and development activities to be performed through the initial Phase 2 development period of the collaborative arrangement are considered to be part of the Company’s ordinary activities. 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 the $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 nine months ended September 30, 2020, the Company recognized $7.3 million and $19.4 million, respectively, as revenue from collaboration arrangements related to the Janssen Agreement. The remaining transaction price of $18.5 million, related to the $100.0 million upfront payment, 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). Consequently, delays in trial activity and/or changes to the total budget will impact the timing and amount of revenue recognized in any given reporting period. For the three and nine months ended September 30, 2020, the Company incurred $9.8 million and $29.0 million, respectively, in research and development costs related to the Janssen Agreement. For the three and nine months ended September 30, 2019, the Company incurred $11.5 million and $29.1 million, respectively, in research and development costs related to the Janssen Agreement. In future reporting periods, the Company will reevaluate the 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 of $15.0 million for the achievement of 50% enrollment in the related Phase 3 twelve-month safety study.

As of September 30, 2020, excluding the aggregate $30.0 million payment noted above, 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 European Union (“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 and partially within the scope of ASC 606, as the parties are active participants and exposed to the risks and rewards of the collaborative activity with a unit of account provided to Mylan as a customer. 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 determined the license to develop and commercialize revefenacin to be a unit of account for which Mylan is a customer and a separate performance obligation. The joint steering committee participation was also determined to be a performance obligation for which the Company analogized to ASC 606 to recognize revenue. Using the concepts from ASC 606, 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 received in 2015 related to an ordinary share purchase agreement with Mylan; 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 prices. 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 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.

As of September 30, 2020, $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 eleven 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. In accordance with the applicable accounting guidance, amounts receivable from Mylan in connection with the commercialization of YUPELRI are recorded within the condensed consolidated statements of operations as revenue from “Mylan collaboration agreement” irrespective of whether the overall collaboration is profitable. Amounts payable to Mylan in connection with the commercialization of YUPELRI are recorded within the condensed consolidated statements of operations as a collaboration loss within selling, general and administrative expenses. Any reimbursement from Mylan attributed to the 65% cost-sharing of the Company’s R&D expenses 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 ordinary activities.

The following YUPELRI-related amounts were recognized within revenue in the Company’s condensed consolidated statements of operations:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2020		2019		2020		2019
Mylan collaboration agreement - Amounts receivable from Mylan	$	10,996	$	3,591	$	32,246	$	3,749
Collaboration loss - Amounts payable to Mylan	$	—	$	—	$	—	$	1,582

While Mylan records the total net sales of YUPELRI within its financial statements, Mylan collaboration agreement revenue includes the Company’s implied 35% share of net sales of YUPELRI for the three and nine months ended September 30, 2020 of $13.0 million and $36.4 million, respectively. The Company’s implied 35% share of net sales of YUPELRI for the three and nine months ended September 30, 2019 was $5.8 million and $8.9 million, respectively.

Reimbursement of R&D Expense

As noted above, 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				Nine Months Ended
	September 30,				September 30,
(In thousands)	2020		2019		2020		2019
Janssen	$	1,461	$	930	$	4,231	$	3,125
Mylan		(57)		53		1,565		287
Total reduction to R&D expense, net	$	1,404	$	983	$	5,796	$	3,412

Revenue from Licensing Arrangements

Mylan

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 and 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 is 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 that was entered into in January 2015. 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 payment 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.

In March 2020, the Company earned a $1.5 million development milestone payment for the acceptance of a clinical trial application associated with the use of YUPELRI monotherapy in China and adjacent territories.

Pfizer

In December 2019, the Company entered into a global license agreement with Pfizer Inc. for its preclinical skin-selective, locally-acting pan-JAK inhibitor program (the “Pfizer Agreement”). The compounds in this program are designed to target validated pro-inflammatory pathways and are specifically designed to possess skin-selective activity with minimal systemic exposure.

Under the Pfizer Agreement, Pfizer has an exclusive license to develop, manufacture and commercialize certain compounds for all uses other than gastrointestinal, ophthalmic and respiratory applications. Under the terms of the Pfizer Agreement, the Company received an upfront cash payment of $10.0 million and is eligible to receive up to an additional $240.0 million in development and sales milestone payments from Pfizer. In addition, the Company will be eligible to receive a tiered royalty on worldwide net sales of any potential products under the license at percentage royalty rates ranging from middle single-digits to low double-digits.

The Pfizer Agreement is accounted for under ASC 606. The Company identified two performance obligations primarily comprised of the delivery of the license and samples of tangible materials which was completed in December 2019. The transaction price was determined to be the upfront payment of $10.0 million which the Company recognized as licensing revenue in December 2019.

The future potential milestones payable under the Pfizer 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 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.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI http://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130556-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (e)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

+ Details

Investments and Fair Value Measurements

9 Months Ended

Sep. 30, 2020

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 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:


		September 30, 2020
				Gross		Gross
		Amortized		Unrealized		Unrealized		Estimated
(In thousands)		Cost		Gains		Losses		Fair Value
US government securities	Level 1	$	130,024	$	81	$	(1)	$	130,104
US government agency securities	Level 2		99,928		41		—		99,969
Corporate notes	Level 2		—		—		—		—
Commercial paper	Level 2		41,986		4		—		41,990
Marketable securities			271,938		126		(1)		272,063
Money market funds	Level 1		35,615		—		—		35,615
Total		$	307,553	$	126	$	(1)	$	307,678


		December 31, 2019
				Gross		Gross
		Amortized		Unrealized		Unrealized		Estimated
(In thousands)		Cost		Gains		Losses		Fair Value
US government securities	Level 1	$	100,746	$	108	$	—	$	100,854
Corporate notes	Level 2		25,466		9		(1)		25,474
Commercial paper	Level 2		112,066		31		(2)		112,095
Marketable securities			238,278		148		(3)		238,423
Money market funds	Level 1		35,736		—		—		35,736
Total		$	274,014	$	148	$	(3)	$	274,159

As of September 30, 2020, all of the available-for-sale securities had contractual maturities within 11 months and the weighted-average maturity of marketable securities was approximately 3 months. There have been no material changes to the Company’s valuation techniques during the three and nine months ended September 30, 2020.

Available-for-sale debt securities with unrealized losses are summarized below:


	September 30, 2020
	Less than 12 Months				Greater than 12 Months				Total
			Gross				Gross				Gross
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
(In thousands)	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
US government securities	$	10,090	$	(1)	$	—	$	—	$	10,090	$	(1)
Commercial paper		4,998		—		—		—		4,998		—
Total	$	15,088	$	(1)	$	—	$	—	$	15,088	$	(1)


	December 31, 2019
	Less than 12 Months				Greater than 12 Months				Total
			Gross				Gross				Gross
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
(In thousands)	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Corporate notes	$	5,507	$	(1)	$	—	$	—	$	5,507	$	(1)
Commercial paper		28,137		(2)		—		—		28,137		(2)
Total	$	33,644	$	(3)	$	—	$	—	$	33,644	$	(3)

The Company invests primarily in high credit quality and short-term maturity 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 reviewed its available-for-sale debt securities and determined that there were no credit-related losses to be recognized as of September 30, 2020.

As of September 30, 2020, the Company’s accumulated other comprehensive income on its condensed consolidated balance sheets consisted of net unrealized gains or losses on available-for-sale investments. For the nine months ended September 30, 2020, the Company sold marketable securities for total proceeds of $19.9 million and recognized minimal net realized gains from the sales based on the specific identification method. The Company did not sell any of its marketable securities for the three months ended September 30, 2020 and the comparable three and nine months periods in 2019.

Revenue - Development and Commercialization Agreement (Details) $ in Thousands	1 Months Ended				3 Months Ended			9 Months Ended		12 Months Ended		24 Months Ended
	Dec. 31, 2019 USD ($) plan	Jun. 30, 2019 USD ($)	Feb. 28, 2018	Jan. 31, 2015 plan	Sep. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2016 USD ($)	Mar. 31, 2020 USD ($)
Collaborative Arrangements and Co-Promote Agreement
Milestone payment					$ 18,257		$ 12,427	$ 53,127	$ 43,915
Percentage of profit share			33.00%					35.00%
Mylan
Collaborative Arrangements and Co-Promote Agreement
Upfront payment receivable		$ 18,500
Potential milestone or contingent payments													$ 1,500
Transaction price					34,200			$ 34,200
Number of performance obligations \| plan				2
Performance period (in years)				17 years				11 years
Deferred revenue					300			$ 300
Percentage of profit share								65.00%
Mylan \| Purchase Agreement
Collaborative Arrangements and Co-Promote Agreement
Premium proceeds from sale of ordinary shares											$ 4,200
Mylan \| Development and Commercialization Agreement
Collaborative Arrangements and Co-Promote Agreement
Initial cash payment											$ 15,000	$ 30,000
Mylan \| YUPELRI Monotherapy
Collaborative Arrangements and Co-Promote Agreement
Potential milestone or contingent payments		9,000
Mylan \| YUPELRI Monotherapy \| Development and Commercialization Agreement
Collaborative Arrangements and Co-Promote Agreement
Potential milestone or contingent payments					160,000			$ 160,000
Mylan \| Future potential combination products
Collaborative Arrangements and Co-Promote Agreement
Potential milestone or contingent payments		7,500			45,000			45,000
Mylan \| Milestone - 50% enrollment in Phase 3 twelve-month safety study \| Development and Commercialization Agreement
Collaborative Arrangements and Co-Promote Agreement
Milestone payment										$ 15,000
Mylan \| Sales milestones
Collaborative Arrangements and Co-Promote Agreement
Potential milestone or contingent payments		$ 37,500
Mylan \| Sales milestones \| YUPELRI Monotherapy
Collaborative Arrangements and Co-Promote Agreement
Potential milestone or contingent payments					$ 150,000			$ 150,000
Pfizer
Collaborative Arrangements and Co-Promote Agreement
Upfront payment receivable	$ 10,000					$ 10,000
Number of performance obligations \| plan	2
Pfizer \| Sales milestones
Collaborative Arrangements and Co-Promote Agreement
Milestone payment	$ 240,000

Revenue - Revenue from Collaborative Arrangements (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Collaboration revenue recognized in the period from:
Revenue from collaborative arrangements	$ 7,261	$ 8,836	$ 19,381	$ 21,661
Janssen
Collaboration revenue recognized in the period from:
Revenue from collaborative arrangements	7,252	8,807	19,353	21,522
Other
Collaboration revenue recognized in the period from:
Revenue from collaborative arrangements	9	29	28	144
Collaborative revenue
Collaboration revenue recognized in the period from:
Revenue from collaborative arrangements	$ 7,261	$ 8,836	$ 19,381	$ 21,666

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Operating activities
Net loss	$ (219,583)	$ (170,849)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	5,394	4,676
Amortization and accretion income, net	(1,023)	(2,599)
Share-based compensation	47,425	36,538
Amortization of right-of-use assets	2,213	3,029
Amounts due from TRC, LLC	(20,337)	(11,239)
Interest shortfall on 2035 notes, net	10,144
Loss on extinguishment of debt	15,464
Other	(42)	148
Changes in operating assets and liabilities:
Accounts receivable		534
Receivables from collaborative and licensing arrangements	9,597	5,458
Prepaid clinical and development services	(18,025)	(575)
Other prepaid and current assets	(2,274)	(106)
Tax receivable	37	(3,700)
Other assets	541	3
Accounts payable	2,133	(543)
Accrued personnel-related expenses, accrued clinical and development expenses, and other accrued liabilities	(178)	(9,846)
Accrued interest payable	132	4,482
Deferred revenue	(19,382)	(21,661)
Operating lease liabilities	2,021	(2,307)
Other long-term liabilities	265	(5,288)
Net cash used in operating activities	(185,478)	(173,845)
Investing activities
Purchases of property and equipment	(5,372)	(1,873)
Purchases of marketable securities	(337,556)	(366,412)
Maturities of marketable securities	281,318	266,168
Proceeds from the sale of marketable securities	19,928
Proceeds from the sale of property and equipment	35	5
Proceeds from the sale of VIBATIV business, net		5,000
Net cash used in investing activities	(41,647)	(97,112)
Financing activities
Proceeds from the sale of ordinary shares, net	139,915
Proceeds from issuance of 2035 notes, net	380,000
Payment of issuance costs on 2035 notes	(5,326)
Payment of redemption premium on 2033 notes	(11,470)
Principal payment on 2033 notes	(235,347)
Proceeds from ESPP purchases	2,545	2,605
Proceeds from option exercises	960	2,973
Repurchase of shares to satisfy tax withholding	(8,935)	(2,743)
Net cash provided by financing activities	262,342	2,835
Net increase (decrease) in cash, cash equivalents, and restricted cash	35,218	(268,122)
Cash, cash equivalents, and restricted cash at beginning of period	58,897
Cash, cash equivalents, and restricted cash at end of period	94,115	110,732
Supplemental disclosure of cash flow information
Cash paid for interest	20,287	17,097
Cash paid for income taxes, net	$ 14	22
Right-of-use assets obtained in exchange for lease obligations (1)		$ 49,847

Income Taxes - (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Income Taxes - (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Provision for income tax benefit (expense)
Income tax provision	$ 93	$ (5,552)	$ 279	$ (5,271)
Provision for income taxes on undistributed earnings of foreign subsidiaries	$ 0		$ 0

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

Revenue - Revenue from Licensing Arrangements (Details) $ in Thousands	1 Months Ended			3 Months Ended			9 Months Ended
	Dec. 31, 2019 USD ($) plan	Jun. 30, 2019 USD ($)	Jan. 31, 2015 plan	Sep. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Mar. 31, 2020 USD ($)
Collaborative Arrangements and Co-Promote Agreement
Milestone payment				$ 18,257		$ 12,427	$ 53,127	$ 43,915
Mylan
Collaborative Arrangements and Co-Promote Agreement
Potential milestone or contingent payments									$ 1,500
Upfront payment receivable		$ 18,500
Number of performance obligations \| plan			2
Mylan \| Sales milestones
Collaborative Arrangements and Co-Promote Agreement
Potential milestone or contingent payments		37,500
Mylan \| Development and Sales Milestones
Collaborative Arrangements and Co-Promote Agreement
Potential milestone or contingent payments				205,000			205,000
Mylan \| YUPELRI Monotherapy
Collaborative Arrangements and Co-Promote Agreement
Potential milestone or contingent payments		9,000
Mylan \| YUPELRI Monotherapy \| Sales milestones
Collaborative Arrangements and Co-Promote Agreement
Potential milestone or contingent payments				150,000			150,000
Mylan \| YUPELRI Monotherapy \| Development and Sales Milestones
Collaborative Arrangements and Co-Promote Agreement
Potential milestone or contingent payments				160,000			160,000
Mylan \| YUPELRI Monotherapy \| European Union Regulatory Issues [Member]
Collaborative Arrangements and Co-Promote Agreement
Potential milestone or contingent payments				10,000			10,000
Mylan \| Future potential combination products
Collaborative Arrangements and Co-Promote Agreement
Potential milestone or contingent payments		7,500		$ 45,000			$ 45,000
Mylan \| Future potential combination products \| Development and Sales Milestones
Collaborative Arrangements and Co-Promote Agreement
Potential milestone or contingent payments		$ 54,000
Pfizer
Collaborative Arrangements and Co-Promote Agreement
Upfront payment receivable	$ 10,000				$ 10,000
Number of performance obligations \| plan	2
Pfizer \| Sales milestones
Collaborative Arrangements and Co-Promote Agreement
Milestone payment	$ 240,000

Long-Term Debt (Details) - USD ($) $ in Thousands		1 Months Ended		3 Months Ended	9 Months Ended
Long-Term Debt (Details) - USD ($) $ in Thousands	Feb. 21, 2020	Oct. 31, 2020	Nov. 30, 2018	Sep. 30, 2020	Sep. 30, 2020	Feb. 28, 2020	Sep. 30, 2019
Debt Instrument [Line Items]
Percentage of note to be retained				5.00%	5.00%
Interest shortfall on 2035 notes, net					$ 10,144
Loss on extinguishment of debt					(15,464)
Issuer II Class C Units
Debt Instrument [Line Items]
Percentage of economic interest	85.00%
Percentage of equity interest	75.00%
9.5% fixed rate term notes due 2035
Debt Instrument [Line Items]
Principal amount	$ 400,000			$ 410,677	410,677
Less: 5% retention by the Company				(20,534)	(20,534)
Unamortized debt issuance costs				(4,006)	(4,006)
Total long-term debt				$ 384,482	$ 384,482
Interest rate (as a percent)	9.50%			9.50%	9.50%
Percentage of note to be sold	95.00%
Percentage of note to be retained	5.00%
Interest shortfall on 2035 notes, net				$ 9,000	$ 10,100
Net principal				390,100	390,100
Estimated fair value				388,200	388,200
Unamortized debt issuance costs				4,006	4,006
9.0% non-recourse notes due 2033
Debt Instrument [Line Items]
Principal amount			$ 250,000
Unamortized debt issuance costs				$ (1,655)	$ (1,655)	$ (1,800)
Interest rate (as a percent)			9.00%	9.00%	9.00%		9.00%
Percentage of debt redemption premium			5.00%
Loss on extinguishment of debt					$ 15,500
Unamortized debt issuance costs				$ 1,655	1,655	$ 1,800
Creditors fees			$ 4,400		500
Third party fees			$ 300
3.25% Convertible Senior Notes Due 2023
Debt Instrument [Line Items]
Principal amount				$ 230,000	$ 230,000
Interest rate (as a percent)				3.25%	3.25%
Notes fair value				$ 201,500	$ 201,500
TRC
Debt Instrument [Line Items]
Percentage of economic interest	85.00%				85.00%
Percentage of equity interest				85.00%	85.00%
TRC \| Minimum
Debt Instrument [Line Items]
Upward tiering royalties (as a percent)	6.50%
TRC \| Maximum
Debt Instrument [Line Items]
Upward tiering royalties (as a percent)	10.00%
TRC \| Issuer II Class C Units
Debt Instrument [Line Items]
Percentage of economic interest	63.75%
TRC \| Arbitration against Innoviva and TRC
Debt Instrument [Line Items]
Percentage of economic interest		85.00%

Cash, Cash Equivalents, and Restricted Cash

9 Months Ended

Sep. 30, 2020

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 current period and comparable prior year period condensed consolidated balance sheets that sum to the total of the same such amount shown on the condensed consolidated statements of cash flows.


	September 30,
(In thousands)	2020		2019
Cash and cash equivalents	$	93,282	$	102,403
Restricted cash		833		8,329
Total cash, cash equivalents, and restricted cash shown on the condensed consolidated statements of cash flows	$	94,115	$	110,732

Restricted cash pertains to certain lease agreements and letters of credit by which the Company has pledged cash and cash equivalents as collateral. As of September 30, 2019, the Company also maintained restricted cash for debt servicing of its 9.0% non-recourse notes, previously due on or before 2033. The cash-related amounts reported in the table above exclude the Company’s investments in short and long-term marketable securities that are reported separately on the condensed consolidated balance sheets.

Theravance Respiratory Company, LLC (Details) - TRC $ in Millions		1 Months Ended	3 Months Ended		9 Months Ended
	Feb. 21, 2020	Oct. 31, 2020	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) item	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)
Theravance Respiratory Company, LLC
Percentage of equity interest			85.00%		85.00%
Percentage of economic interest	85.00%				85.00%
Number of fiscal quarters \| item					4
Equity method investments			$ 48.9		$ 48.9		$ 28.6
Amount due			48.9		48.9
Royalty payments			13.4	$ 7.2	48.3	$ 21.8
Royalty expenses			$ 0.5	$ 2.3	1.2	$ 2.3
Termination fees					$ 8.5
Arbitration against Innoviva and TRC
Theravance Respiratory Company, LLC
Percentage of economic interest		85.00%

Revenue - Condensed Statement Of Operations (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Development and Collaboration Agreement
Revenue from collaborative arrangements	$ 7,261	$ 8,836	$ 19,381	$ 21,661
Mylan collaboration agreement
Development and Collaboration Agreement
Revenue from collaborative arrangements	10,996	3,591	32,246	3,749
Collaboration Loss				1,582
YUPELRI Monotherapy \| Mylan collaboration agreement
Development and Collaboration Agreement
Revenue from collaborative arrangements	$ 13,000	$ 5,800	$ 36,400	$ 8,900
Percentage of net sales	35.00%	35.00%	35.00%	35.00%

Long-Term Debt

9 Months Ended

Sep. 30, 2020

Long-Term Debt

Long-Term Debt

6. Long-Term Debt

9.5% Non-Recourse Notes Due 2035

On February 21, 2020, Theravance Biopharma R&D, Inc. (“Theravance R&D”), a wholly-owned subsidiary of the Company, and Triple Royalty Sub II LLC (the “Issuer II” or “Triple II”), a wholly-owned subsidiary of Theravance Biopharma R&D, entered into certain note purchase agreements (“Note Purchase Agreements”) with certain note purchasers (“Note Purchasers”), relating to the private placement by Issuer II of $400.0 million 9.5% Fixed Rate Term Notes due on or before 2035 (the “Non-Recourse 2035 Notes”). Ninety-five percent of the Non-Recourse 2035 Notes were sold to the Note Purchasers pursuant to the Note Purchase Agreements. The remaining 5% of the Non-Recourse 2035 Notes (the “Retained Notes”) were retained by the Company to comply with Regulation RR — Credit Risk Retention (17 C.F.R. Part 246). The Retained Notes are eliminated in the Company’s condensed consolidated financial statements. The transaction closed on February 28, 2020.

The Non-Recourse 2035 Notes are secured by all of Issuer II’s right, title and interest as a holder of certain membership interests (the “Issuer II Class C Units”) in Theravance Respiratory Company, LLC (“TRC”). TRC holds the right to receive upward-tiering royalties ranging from 6.5% to 10% on worldwide net sales of TRELEGY, and the Company holds an 85% economic interest in TRC. The Issuer II Class C Units represent 75% of the Company's 85% economic interest, which equates to 63.75% of the economic interests in TRC.

The source of principal and interest payments for the Non-Recourse 2035 Notes are the future royalty payments generated from the TRELEGY program, and as a result, the holders of the Non-Recourse 2035 Notes have no recourse against the Company even if the TRELEGY payments are insufficient to cover the principal and interest payments for the Non-Recourse 2035 Notes. Prior to and including the December 5, 2024 payment date, in the event that the distributions received by the Issuer II from TRC in a quarter is less than the interest accrued for that quarter, the principal amount of the Non-Recourse 2035 Notes will increase by the interest shortfall amount for that quarter. The principal amount of the Non-Recourse 2035 Notes increased by $9.0 million and $10.1 million which represented the shortfall between the distributions received from TRC and the total interest payments due during the three and nine months ended September 30, 2020, respectively. While the holders of the Non-Recourse 2035 Notes have no recourse against the Company, the terms of the Non-Recourse 2035 Notes also provide that the Company, at its option, may satisfy the quarterly interest payment obligations by making a capital contribution to the Issuer II.

The Non-Recourse 2035 Notes are not convertible into Company equity and have no security interest in nor rights under any agreement with Glaxo Group Limited or one of its affiliates (“GSK”). See “Note 7. Theravance Respiratory Company, LLC” for further information regarding GSK. The Non-Recourse 2035 Notes may be redeemed by Issuer II on and after February 28, 2022, in whole or in part, at specified redemption premiums. The Non-Recourse 2035 Notes bear an annual interest rate of 9.5%, with interest and principal paid quarterly beginning June 5, 2020. Since the principal and interest payments on the Non-Recourse 2035 Notes are ultimately based on royalties from TRELEGY product sales, which will vary from quarter to quarter, the Non-Recourse 2035 Notes may be repaid prior to the final maturity date in 2035. Following the redemption or repayment of the Non-Recourse 2035 Notes, all TRELEGY-related pledged cash flows will revert back to the Company.

The portion of the Non-Recourse 2035 Notes classified as a current liability, if any, is based on the amount of royalties received, or receivable, as of September 30, 2020, that are expected to be used to make a principal repayment on the Non-Recourse 2035 Notes within the next 12 months.

The following is a summary of the carrying value of the Non-Recourse 2035 Notes as of September 30, 2020:


	September 30,
(In thousands)	2020
9.5% Non-Recourse 2035 Notes
Principal amount	$	410,677
Less: 5% retention by the Company		(20,534)
Unamortized debt issuance costs - 9.5% Non-Recourse 2035 Notes		(4,006)
Unamortized debt issuance costs - Modified 9.0% Non-Recourse 2033 Notes		(1,655)
Total	$	384,482

As of September 30, 2020, the net principal and estimated fair value of the Non-Recourse 2035 Notes were $390.1 million and $388.2 million, respectively. The inputs to determine fair value of the Non-Recourse 2035 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.

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”). On February 28, 2020, the Company refinanced the Non-Recourse 2033 Notes by issuing the Non-Recourse 2035 Notes and a portion of those proceeds were used to repay, in full, the remaining outstanding balance of the Company’s Non-Recourse 2033 Notes. Pursuant to the terms of the Non-Recourse 2033 Notes, the Company paid a debt redemption premium of 5% of the outstanding principal as of the refinancing date.

The refinancing of the Non-Recourse 2033 Notes involved multiple lenders who were considered members of a loan syndicate. To determine whether the refinancing was to be accounted for as a debt extinguishment or modification, the Company considered whether the lenders involved in the Non-Recourse 2033 Notes and the Non-Recourse 2035 Notes remained the same or changed and whether the change in debt terms was substantial. The debt terms are considered substantially different if the present value of the cash inflows and outflows of the Non-Recourse 2035 Notes, including all principal increases and lender fees on the refinancing date, was at least 10% different from the present value of the remaining cash inflows and outflows of the Non-Recourse 2033 Notes (the “10% Test”). The Company performed the 10% Test for each individual lender participating in the loan syndication by assuming the exercise and non-exercise of the prepayment option. The cash flow assumption generating the smaller change was used as the basis for determining whether the 10% threshold was met. For existing lenders who participated in the Non-Recourse 2035 Notes as part of the new loan syndicate, the refinancing was accounted for as an extinguishment or a modification depending upon whether the change in the cash flows was more or less than 10%, respectively. The lenders from the Non-Recourse 2033 Note offering who did not participate in the Non-Recourse 2035 Notes were accounted for as a debt extinguishment.

For debt determined to be extinguished, the total unamortized deferred financing costs and the associated redemption premium of $15.5 million were expensed as “Loss on extinguishment of debt” within the condensed consolidated financial statements of operations for the nine months ended September 30, 2020. In addition, $0.3 million of new third-party costs were expensed, and $4.4 million of new creditor fees were capitalized as debt discount. For debt determined to be modified, the related unamortized deferred financing costs of $1.8 million, as of February 28, 2020, will continue to be amortized through the remaining term of the Non-Recourse 2035 Notes, and $0.5 million of new creditor fees were expensed for the nine months ended September 30, 2020.

3.25% Convertible Senior Notes Due 2023

The Company has $230.0 million of 3.25% convertible senior notes due in 2023 (“Convertible Senior 2023 Notes”) outstanding as of September 30, 2020 with an estimated fair value of $201.5 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 September 30, 2020. 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.