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UNITED STATES

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-36033

THERAVANCE BIOPHARMA, INC.

(Exact Name of Registrant as Specified in its Charter)


Cayman Islands		98-1226628
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

PO Box 309
Ugland House, South Church Street
George Town, Grand Cayman, Cayman Islands		KY1-1104
(Address of Principal Executive Offices)		(Zip Code)

(650) 808-6000

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Ordinary Share $0.00001 Par Value	TBPH	The Nasdaq Global Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer ☒		Smaller Reporting Company ☐
Non-accelerated Filer ☐		Emerging Growth Company ☐
Accelerated Filer ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 1, 2022, the number of the registrant’s outstanding ordinary shares was 76,427,244.

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THERAVANCE BIOPHARMA, INC.

TABLE OF CONTENTS


	Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 (unaudited)	3
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2022 and 2021 (unaudited)	4
Condensed Consolidated Statements of Shareholders’ Deficit for the three and six months ended June 30, 2022 and 2021 (unaudited)	5
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (unaudited)	6
Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3. Quantitative and Qualitative Disclosures About Market Risk	32
Item 4. Controls and Procedures	32

PART II. OTHER INFORMATION
Item 1. Legal Proceedings	32
Item 1A. Risk Factors	32
Item 6. Exhibits	66
Signatures	67

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

THERAVANCE BIOPHARMA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share data)


	June 30,		December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	87,292	$	89,959
Short-term marketable securities		45,558		83,506
Receivables from collaborative arrangements		12,488		14,065
Amounts due from TRC, LLC		—		43,534
Prepaid clinical and development services		2,311		10,245
Other prepaid and current assets		7,080		8,561
Total current assets		154,729		249,870
Property and equipment, net		12,531		13,657
Operating lease assets		41,112		39,690
Equity in net assets of TRC, LLC		148,250		67,537
Restricted cash		836		837
Other assets		3,303		3,228
Total assets	$	360,761	$	374,819

Liabilities and Shareholders' Deficit
Current liabilities:
Accounts payable	$	3,074	$	3,098
Accrued personnel-related expenses		6,958		12,796
Accrued clinical and development expenses		7,627		17,010
Accrued general and administrative expenses		6,052		2,898
Accrued interest payable		3,990		3,940
Current portion of non-recourse notes due 2035, net		—		16,940
Operating lease liabilities		2,624		503
Deferred revenue		24		98
Other accrued liabilities		2,275		1,304
Total current liabilities		32,624		58,587
Convertible senior notes due 2023, net		228,571		228,035
Non-recourse notes due 2035, net		396,125		371,359
Long-term operating lease liabilities		50,642		52,681
Long-term deferred revenue		204		310
Other long-term liabilities		2,404		2,420
Commitments and contingencies

Shareholders’ Deficit
Preferred shares, $0.00001 par value: 230 shares authorized, no shares issued or outstanding		—		—
Ordinary shares, $0.00001 par value: 200,000 shares authorized; 76,427 and 74,435 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively		1		1
Additional paid-in capital		1,410,415		1,387,469
Accumulated other comprehensive loss		(45)		—
Accumulated deficit		(1,760,180)		(1,726,043)
Total shareholders’ deficit		(349,809)		(338,573)
Total liabilities and shareholders’ deficit	$	360,761	$	374,819

See accompanying notes to condensed consolidated financial statements.

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THERAVANCE BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

Revenue:
Viatris collaboration agreement	$	10,878	$	10,934	$	21,565	$	21,319
Collaboration revenue		172		1,980		181		5,852
Licensing revenue		—		—		2,500		—
Total revenue		11,050		12,914		24,246		27,171

Expenses:
Research and development (1)		15,571		51,093		38,824		118,692
Selling, general and administrative (1)		16,986		25,931		34,828		56,481
Transaction-related legal expenses (Note 13)		3,778		—		5,057		—
Restructuring and related expenses (1)		1,594		—		10,918		—
Total expenses		37,929		77,024		89,627		175,173

Loss from operations		(26,879)		(64,110)		(65,381)		(148,002)
Income from investment in TRC, LLC		28,127		21,926		53,237		38,473
Interest expense		(11,884)		(11,612)		(23,539)		(23,485)
Interest income and other income (expense), net		2,440		1,171		2,065		937
Loss before income taxes		(8,196)		(52,625)		(33,618)		(132,077)
Provision for income tax benefit (expense)		5		220		(519)		(7)
Net loss	$	(8,191)	$	(52,405)	$	(34,137)	$	(132,084)

Net unrealized loss on available-for-sale investments		(17)		(9)		(45)		(39)
Total comprehensive loss	$	(8,208)	$	(52,414)	$	(34,182)	$	(132,123)

Net loss per share:
Basic and diluted net loss per share	$	(0.11)	$	(0.80)	$	(0.45)	$	(2.03)
Shares used to compute basic and diluted net loss per share		76,270		65,669		75,761		65,085

(1)	Amounts include share-based compensation expense as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2022		2021		2022		2021
Research and development	$	3,556	$	7,315	$	8,086	$	15,236
Selling, general and administrative		5,794		7,626		11,292		15,537
Restructuring and related expenses		359		—		4,876		—
Total share-based compensation expense	$	9,709	$	14,941	$	24,254	$	30,773

See accompanying notes to condensed consolidated financial statements.

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THERAVANCE BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT

(Unaudited)

(In thousands)


						Accumulated
				Additional		Other				Total
	Ordinary Shares			Paid-In		Comprehensive		Accumulated		Shareholders'
	Shares	Amount		Capital		Loss		Deficit		Deficit
Balances at March 31, 2022	76,081	$	1	$	1,400,566	$	(28)	$	(1,751,989)	$	(351,450)
Proceeds from ESPP purchases	72		—		487		—		—		487
Employee share-based compensation expense	—		—		9,709		—		—		9,709
Issuance of restricted shares	313		—		—		—		—		—
Repurchase of shares to satisfy tax withholding	(39)		—		(347)		—		—		(347)
Net unrealized loss on marketable securities	—		—		—		(17)		—		(17)
Net loss	—		—		—		—		(8,191)		(8,191)
Balances at June 30, 2022	76,427	$	1	$	1,410,415	$	(45)	$	(1,760,180)	$	(349,809)

						Accumulated
				Additional		Other				Total
	Ordinary Shares			Paid-In		Comprehensive		Accumulated		Shareholders'
	Shares	Amount		Capital		Loss		Deficit		Deficit
Balances at December 31, 2021	74,435	$	1	$	1,387,469	$	—	$	(1,726,043)	$	(338,573)
Proceeds from ESPP purchases	72		—		487		—		—		487
Employee share-based compensation expense	—		—		24,254		—		—		24,254
Issuance of restricted shares	2,109		—		—		—		—		—
Repurchase of shares to satisfy tax withholding	(189)		—		(1,795)		—		—		(1,795)
Net unrealized loss on marketable securities	—		—		—		(45)		—		(45)
Net loss	—		—		—		—		(34,137)		(34,137)
Balances at June 30, 2022	76,427	$	1	$	1,410,415	$	(45)	$	(1,760,180)	$	(349,809)

						Accumulated
				Additional		Other				Total
	Ordinary Shares			Paid-In		Comprehensive		Accumulated		Shareholders'
	Shares	Amount		Capital		Income (Loss)		Deficit		Deficit
Balances at March 31, 2021	65,218	$	1	$	1,233,060	$	17	$	(1,606,296)	$	(373,218)
Net proceeds from sale of ordinary shares	7,705		—		108,180		—		—		108,180
Proceeds from ESPP purchases	189		—		2,862		—		—		2,862
Employee share-based compensation expense	—		—		14,941		—		—		14,941
Issuance of restricted shares	399		—		—		—		—		—
Option exercises	—		—		2		—		—		2
Repurchase of shares to satisfy tax withholding	(41)		—		(727)		—		—		(727)
Net unrealized gain on marketable securities	—		—		—		(9)		—		(9)
Net loss	—		—		—		—		(52,405)		(52,405)
Balances at June 30, 2021	73,470	$	1	$	1,358,318	$	8	$	(1,658,701)	$	(300,374)

						Accumulated
				Additional		Other				Total
	Ordinary Shares			Paid-In		Comprehensive		Accumulated		Shareholders'
	Shares	Amount		Capital		Income (Loss)		Deficit		Deficit
Balances at December 31, 2020	64,328	$	1	$	1,222,818	$	47	$	(1,526,617)	$	(303,751)
Net proceeds from sale of ordinary shares	7,705		—		108,180		—		—		108,180
Proceeds from ESPP purchases	189		—		2,862		—		—		2,862
Employee share-based compensation expense	—		—		30,773		—		—		30,773
Issuance of restricted shares	1,587		—		—		—		—		—
Option exercises	—		—		5		—		—		5
Repurchase of shares to satisfy tax withholding	(339)		—		(6,320)		—		—		(6,320)
Net unrealized loss on marketable securities	—		—		—		(39)		—		(39)
Net loss	—		—		—		—		(132,084)		(132,084)
Balances at June 30, 2021	73,470	$	1	$	1,358,318	$	8	$	(1,658,701)	$	(300,374)

See accompanying notes to condensed consolidated financial statements.

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THERAVANCE BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Six Months Ended June 30,
	2022		2021
Operating activities
Net loss	$	(34,137)	$	(132,084)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,402		2,926
Amortization and accretion income, net		(31)		31
Share-based compensation		24,254		30,773
Gain on disposal of property and equipment		(96)		—
Gain on sale of Velusetrag		(2,721)		—
Amortization of right-of-use assets		1,314		1,752
Gain from lease modification		(47)		—
Undistributed earnings from TRC, LLC		(37,179)		2,986
Interest shortfall on 2035 notes, net		7,372		—
Other		—		(168)
Changes in operating assets and liabilities:
Receivables from collaborative and licensing arrangements		1,577		3,648
Prepaid clinical and development services		7,934		4,461
Other prepaid and current assets		2,619		(1,993)
Right-of-use lease assets		(2,689)		—
Other assets		(145)		997
Accounts payable		(26)		4,026
Accrued personnel-related expenses, accrued clinical and development expenses, and other accrued liabilities		(11,135)		(33,125)
Accrued interest payable		50		(74)
Deferred revenue		(180)		(5,852)
Operating lease liabilities		82		1,718
Other long-term liabilities		(17)		—
Net cash used in operating activities		(40,799)		(119,978)

Investing activities
Purchases of property and equipment		(363)		(1,923)
Purchases of marketable securities		(53,763)		(40,014)
Maturities of marketable securities		91,699		191,400
Proceeds from the sale of property and equipment		1,866		—
Net cash provided by investing activities		39,439		149,463

Financing activities
Proceeds from the sale of ordinary shares, net		—		108,180
Principal payment on 2035 notes		—		(10,730)
Proceeds from ESPP purchases		487		2,862
Proceeds from option exercises		—		5
Repurchase of shares to satisfy tax withholding		(1,795)		(6,320)
Net cash (used in) provided by financing activities		(1,308)		93,997

Net (decrease) increase in cash, cash equivalents, and restricted cash		(2,668)		123,482
Cash, cash equivalents, and restricted cash at beginning of period		90,796		82,300
Cash, cash equivalents, and restricted cash at end of period	$	88,128	$	205,782

Supplemental disclosure of cash flow information
Cash paid for interest	$	15,127	$	22,490
Cash paid for income taxes, net	$	25	$	12

See accompanying notes to condensed consolidated financial statements.

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THERAVANCE BIOPHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Summary of Significant Accounting Policies

Theravance Biopharma, Inc. (“Theravance Biopharma” or the “Company”) is a biopharmaceutical company primarily focused on the discovery, development, and commercialization of medicines. The Company’s core purpose is to create medicines that make a difference^® in people's lives.

On July 20, 2022, the Company successfully completed the sale of its units in Theravance Respiratory Company, LLC, representing its 85% economic interests in the sales-based royalty rights on worldwide net sales of GSK’s TRELEGY ELLIPTA (“TRELEGY”) to Royalty Pharma Investments 2019 ICAV. In conjunction with the closing of the sale, the Company repaid its 9.5% Non-Recourse Notes Due 2035 for approximately $420.0 million. See Note 13. Subsequent Events” for more information regarding the sale.

Basis of Presentation

The Company’s condensed consolidated financial information as of June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 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, 2021 financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (“SEC”) on February 28, 2022.

The results for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any other interim period or for any future period. These condensed consolidated financial statements include the accounts of the Company and its subsidiaries, and intercompany transactions and balances have been eliminated.

Use of Estimates

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

Significant Accounting Policies

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, 2021.

Recently Adopted Accounting Pronouncements

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 815-40) (“ASU 2020-06”). ASU 2020-06 simplifies the complexity associated with applying 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 became effective for fiscal years and interim periods within those fiscal years

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beginning after December 15, 2021. The Company evaluated ASU 2020-06 and determined that its adoption did not have an impact on the Company’s condensed consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

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.

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 June 30,				Six Months Ended June 30,
(In thousands, except per share data)	2022		2021		2022		2021
Numerator:
Net loss	$	(8,191)	$	(52,405)	$	(34,137)	$	(132,084)
Denominator:
Weighted-average ordinary shares outstanding		76,270		65,669		75,761		65,199
Less: weighted-average ordinary shares subject to forfeiture		—		—		—		(114)
Weighted-average ordinary shares used to compute basic and diluted net loss per share		76,270		65,669		75,761		65,085
Basic and diluted net loss per share	$	(0.11)	$	(0.80)	$	(0.45)	$	(2.03)

For the three and six months ended June 30, 2022 and 2021, diluted and basic net loss per share were 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 June 30,		Six Months Ended June 30,
(In thousands)	2022	2021	2022	2021
Share issuances under equity incentive plans and ESPP	5,660	6,228	6,239	8,307
Share issuances upon the conversion of convertible senior notes	6,676	6,676	6,676	6,676
Total	12,336	12,904	12,915	14,983

3. Revenue

Revenue from Collaborative Arrangements

Viatris

In January 2015, the Company and Viatris Inc. (“Viatris”) established a strategic collaboration (the “Viatris 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 acute care setting.

In the US, Viatris is leading the commercialization of YUPELRI, and the Company co-promotes the product under a profit and loss sharing arrangement (65% to Viatris; 35% to Theravance Biopharma). Outside the US (including China and adjacent territories), Viatris is responsible for development and commercialization and will pay the Company a tiered royalty on net sales at percentage royalty rates ranging from low double-digits to mid-teens. Viatris is the principal in the sales transactions, and as a result, the Company does not reflect the product sales in its condensed consolidated financial statements.

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As of June 30, 2022, the Company is eligible to receive from Viatris potential global development, regulatory and sales milestone payments totaling up to $257.5 million in the aggregate, with $205.0 million associated with YUPELRI monotherapy, and $52.5 million associated with future potential combination products. Of the $205.0 million associated with monotherapy, $187.5 million relates to sales milestones based on achieving certain levels of net sales and $17.5 million relates to global development and regulatory actions. The $52.5 million associated with future potential combination products relates solely to development and regulatory actions.

The Viatris 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 Viatris as a customer. Under the terms of the Viatris Agreement, which included the delivery by the Company of a license to Viatris to develop and commercialize revefenacin in exchange for $15.0 million received in 2015, Viatris 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 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 and a separate performance obligation, for which Viatris is a customer, with the $15.0 million for the delivery of the license representing the transaction price.

The future potential milestone amounts for the Viatris 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.

Following the US Food and Drug Administration (“FDA”) approval of YUPELRI in November 2018, net amounts payable to or receivable from Viatris each quarter under the profit-sharing structure are disaggregated according to their individual components. In accordance with the applicable accounting guidance, amounts receivable from Viatris in connection with the commercialization of YUPELRI are recorded within the condensed consolidated statements of operations as revenue from “Viatris collaboration agreement” irrespective of whether the overall collaboration is profitable. Amounts payable to Viatris, if any, 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 Viatris 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. For the three and six months ended June 30, 2022, YUPELRI continued to be profitable for the Company.

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


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2022		2021		2022		2021
Viatris collaboration agreement - Amounts receivable from Viatris	$	10,878	$	10,934	$	21,565	$	21,319

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While Viatris records the total net sales of YUPELRI within its consolidated financial statements, Viatris collaboration agreement revenue includes the Company’s implied 35% share of net sales of YUPELRI for the three and six months ended June 30, 2022 of $17.2 million and $32.5 million, respectively, before deducting shared expenses. For the three and six months ended June 30, 2021, the Company’s implied 35% share of net sales of YUPELRI were $14.6 million and $27.5 million, respectively, before deducting shared expenses.

Other Collaborative Arrangements

The Company recognized revenues from its other collaborative arrangements as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2022		2021		2022		2021
Alfasigma	$	166	$	3	$	169	$	7
Viatris		6		6		12		12
Janssen		—		1,971		—		5,833
Total collaboration revenue	$	172	$	1,980	$	181	$	5,852

All of the recognized revenues from the Company’s other collaborative arrangements presented in the table above were included in deferred revenue at the beginning of the respective periods.

Janssen Biotech

In February 2018, the Company entered into a global co-development and commercialization agreement with Janssen Biotech, Inc. (“Janssen”) for izencitinib and related back-up compounds for inflammatory intestinal diseases, including ulcerative colitis and Crohn’s disease (the “Janssen Agreement”). The Company received an upfront payment of $100.0 million related to the Janssen Agreement. Following unfavorable Phase 3 clinical trial results for izencitinib announced in August 2021, Janssen terminated the Janssen Agreement effective January 16, 2022. As a result, the Company did not recognize any collaboration revenue related to the Janssen Agreement for the three and six months ended June 30, 2022. For the three and six months ended June 30, 2021, the Company recognized $2.0 million and $5.8 million, respectively, in collaboration revenue related to the Janssen Agreement.

Reimbursement of R&D Expenses

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 June 30,				Six Months Ended June 30,
(In thousands)	2022		2021		2022		2021
Viatris	$	1,543	$	67	$	3,079	$	161
Janssen		—		1,193		—		2,525
Total reduction to R&D expense, net	$	1,543	$	1,260	$	3,079	$	2,686

Revenue from Licensing Arrangements

Pfizer

In December 2019, the Company entered into a global license agreement with Pfizer Inc. (“Pfizer”) for our 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.

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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. The Company received an upfront cash payment of $10.0 million in 2019, and in March 2022, the Company recognized $2.5 million in licensing revenue related to a development milestone payment from Pfizer for the dosing of the first patient in the Phase 1 clinical trial.

As of June 30, 2022, the Company is eligible to receive up to an additional $237.5 million in development and sales milestone payments from Pfizer. In addition, the Company is 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.

4. Sale of Velusetrag

Velusetrag is an oral, investigational medicine developed for gastrointestinal motility disorders. It is a highly selective agonist with high intrinsic activity at the human 5-HT4 receptor.

In 2012, the Company partnered with Alfasigma S.p.A. (“Alfasigma”) in the development of velusetrag and its commercialization in certain countries. In April 2018, Alfasigma exercised its option to continue to develop and commercialize velusetrag, and the Company elected not to pursue further development. Global rights to develop, manufacture and commercialize velusetrag were transferred to Alfasigma under the terms of the collaboration arrangement.

On June 30, 2022, the Company entered into an Asset Purchase Agreement (“APA”) to sell all of its velusetrag assets to Alfasigma. In connection with the closing of the transaction, Alfasigma acquired, among other things, (i) intellectual property and (ii) books and records related to velusetrag. As consideration for the velusetrag sale, the Company received an upfront payment of $2.8 million in July 2022, and pursuant to the terms of the APA, the Company is eligible to receive up to $105.0 million in additional future developmental and sales milestones.

At the time of the sale, the velusetrag assets had no remaining book value on the Company’s records, and as of June 30, 2022, all of the velusetrag assets were delivered to Alfasigma. For the three and six months ended June 30, 2022, the Company recognized a net gain of $2.7 million, after transaction costs, related to the sale of velusetrag within “interest income and other income (expense), net” on the consolidated statements of operations.

5. 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 amounts shown on the condensed consolidated statements of cash flows.


	June 30,
(In thousands)	2022		2021
Cash and cash equivalents	$	87,292	$	204,949
Restricted cash		836		833
Total cash, cash equivalents, and restricted cash shown on the condensed consolidated statements of cash flows	$	88,128	$	205,782

The Company maintains restricted cash for certain lease agreements and letters of credit by which the Company has pledged cash and cash equivalents as collateral. Separately, the Company also maintains restricted cash for debt servicing of its 9.5% non-recourse 2035 notes. See “Note 7. Debt” for further information regarding the 9.5% non-recourse 2035 notes. The cash-related amounts reported in the table above exclude the Company’s investments in any short and long-term marketable securities that are reported separately on the condensed consolidated balance sheets.

6. 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

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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:

June 30, 2022