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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 September 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 October 31, 2022, the number of the registrant’s outstanding ordinary shares was 67,365,912.

Table of Contents

THERAVANCE BIOPHARMA, INC.

TABLE OF CONTENTS


	Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 (unaudited)	3
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2022 and 2021 (unaudited)	4
Condensed Consolidated Statements of Shareholders’ Equity (Deficit) for the three and nine months ended September 30, 2022 and 2021 (unaudited)	5
Condensed Consolidated Statements of Cash Flows for the nine months ended September 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	22
Item 3. Quantitative and Qualitative Disclosures About Market Risk	35
Item 4. Controls and Procedures	35

PART II. OTHER INFORMATION
Item 1. Legal Proceedings	36
Item 1A. Risk Factors	36
Item 6. Exhibits	69
Signatures	71

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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)


	September 30,		December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	418,538	$	89,959
Short-term marketable securities		68,294		83,506
Receivables from collaborative arrangements		14,114		14,065
Prepaid clinical and development services		2,645		10,245
Other prepaid and current assets		8,127		8,561
Amounts due from TRC, LLC (Discontinued operations)		—		43,534
Total current assets		511,718		249,870
Property and equipment, net		11,884		13,657
Operating lease assets		39,992		39,690
Future contingent milestone and royalty assets		194,200		—
Restricted cash		836		837
Other assets		4,866		3,228
Equity in net assets of TRC, LLC (Discontinued operations)		—		67,537
Total assets	$	763,496	$	374,819

Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
Accounts payable	$	5,337	$	3,098
Accrued personnel-related expenses		7,560		12,796
Accrued clinical and development expenses		4,078		17,010
Accrued general and administrative expenses		3,749		2,898
Operating lease liabilities		692		503
Deferred revenue		24		98
Current portion of non-recourse notes due 2035, net		—		16,940
Accrued interest payable		—		1,246
Other accrued liabilities		142		1,304
Income tax payable (Discontinued operations)		120,550		—
Accrued interest payable (Discontinued operations)		—		2,694
Total current liabilities		142,132		58,587

Long-term operating lease liabilities		51,381		52,681
Future royalty payment contingency		24,888		—
Long-term deferred revenue		199		310
Unrecognized tax benefits		62,661		240
Other long-term liabilities		1,657		2,180
Non-recourse notes due 2035, net		—		371,359
Convertible senior notes due 2023, net		—		228,035
Commitments and contingencies

Shareholders’ Equity (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; 67,366 and 74,435 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		1		1
Additional paid-in capital		1,324,247		1,387,469
Accumulated other comprehensive loss		(121)		—
Accumulated deficit		(843,549)		(1,726,043)
Total shareholders’ equity (deficit)		480,578		(338,573)
Total liabilities and shareholders’ equity (deficit)	$	763,496	$	374,819

See accompanying notes to condensed consolidated financial statements.

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THERAVANCE BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021

Revenue:
Viatris collaboration agreement	$	12,445	$	10,397	$	34,010	$	31,716
Collaboration revenue		6		2,797		187		8,649
Licensing revenue		—		—		2,500		—
Total revenue		12,451		13,194		36,697		40,365

Expenses:
Research and development (1)		9,867		43,739		48,691		162,431
Selling, general and administrative (1)		16,277		21,299		51,105		77,780
Restructuring and related expenses (1)		509		1,771		11,427		1,771
Total expenses		26,653		66,809		111,223		241,982

Loss from operations		(14,202)		(53,615)		(74,526)		(201,617)
Interest expense		(1,545)		(2,136)		(5,819)		(6,410)
Loss on extinguishment of debt		(3,034)		—		(3,034)		—
Interest income and other income (expense), net		2,758		(166)		4,823		771
Loss from continuing operations before income taxes		(16,023)		(55,917)		(78,556)		(207,256)
Provision for income tax benefit (expense)		—		7		(12)		—
Net loss from continuing operations		(16,023)		(55,910)		(78,568)		(207,256)

Income from discontinued operations before income taxes		1,115,016		20,602		1,143,930		39,864
Provision for income tax expense		(182,362)		—		(182,868)		—
Net income from discontinued operations		932,654		20,602		961,062		39,864

Net income (loss)	$	916,631	$	(35,308)	$	882,494	$	(167,392)

Net unrealized gain (loss) on available-for-sale investments		(76)		6		(121)		(33)
Total comprehensive income (loss)	$	916,555	$	(35,302)	$	882,373	$	(167,425)

Net income (loss) per share:
Continuing operations - basic and diluted	$	(0.21)	$	(0.76)	$	(1.04)	$	(3.05)
Discontinued operations - basic and diluted	$	12.35	$	0.28	$	12.70	$	0.59
Net income (loss) - basis and diluted	$	12.14	$	(0.48)	$	11.66	$	(2.46)

Shares used to compute basis and diluted net income (loss) per share		75,515		73,574		75,678		67,945

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


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2022		2021		2022		2021
Research and development	$	2,623	$	6,956	$	10,709	$	22,192
Selling, general and administrative		5,196		7,414		16,488		22,951
Restructuring and related expenses		711		—		5,587		—
Total share-based compensation expense	$	8,530	$	14,370	$	32,784	$	45,143

See accompanying notes to condensed consolidated financial statements.

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THERAVANCE BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(In thousands)


						Accumulated
				Additional		Other				Total
	Ordinary Shares			Paid-In		Comprehensive		Accumulated		Shareholders'
	Shares	Amount		Capital		Loss		Deficit		Equity
Balances at June 30, 2022	76,427	$	1	$	1,410,415	$	(45)	$	(1,760,180)	$	(349,809)
Repurchase of ordinary shares	(9,645)		—		(94,037)		—		—		(94,037)
Proceeds from ESPP purchases	—		—		1		—		—		1
Employee share-based compensation expense	—		—		8,530		—		—		8,530
Issuance of restricted shares	655		—		—		—		—		—
Repurchase of shares to satisfy tax withholding	(71)		—		(662)		—		—		(662)
Net unrealized loss on marketable securities	—		—		—		(76)		—		(76)
Net income	—		—		—		—		916,631		916,631
Balances at September 30, 2022	67,366	$	1	$	1,324,247	$	(121)	$	(843,549)	$	480,578

						Accumulated
				Additional		Other				Total
	Ordinary Shares			Paid-In		Comprehensive		Accumulated		Shareholders'
	Shares	Amount		Capital		Loss		Deficit		Equity
Balances at December 31, 2021	74,435	$	1	$	1,387,469	$	—	$	(1,726,043)	$	(338,573)
Repurchase of ordinary shares	(9,645)		—		(94,037)		—		—		(94,037)
Proceeds from ESPP purchases	72		—		488		—		—		488
Employee share-based compensation expense	—		—		32,784		—		—		32,784
Issuance of restricted shares	2,764		—		—		—		—		—
Repurchase of shares to satisfy tax withholding	(260)		—		(2,457)		—		—		(2,457)
Net unrealized loss on marketable securities	—		—		—		(121)		—		(121)
Net income	—		—		—		—		882,494		882,494
Balances at September 30, 2022	67,366	$	1	$	1,324,247	$	(121)	$	(843,549)	$	480,578

						Accumulated
				Additional		Other				Total
	Ordinary Shares			Paid-In		Comprehensive		Accumulated		Shareholders'
	Shares	Amount		Capital		Income		Deficit		Deficit
Balances at June 30, 2021	73,470	$	1	$	1,358,318	$	8	$	(1,658,701)	$	(300,374)
Net proceeds from sale of ordinary shares	—		—		—		—		—		—
Proceeds from ESPP purchases	—		—		—		—		—		—
Employee share-based compensation expense	—		—		14,370		—		—		14,370
Issuance of restricted shares	391		—		—		—		—		—
Option exercises	—		—		—		—		—		—
Repurchase of shares to satisfy tax withholding	(163)		—		(2,286)		—		—		(2,286)
Net unrealized gain on marketable securities	—		—		—		6		—		6
Net loss	—		—		—		—		(35,308)		(35,308)
Balances at September 30, 2021	73,698	$	1	$	1,370,402	$	14	$	(1,694,009)	$	(323,592)

						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	188		—		2,862		—		—		2,862
Employee share-based compensation expense	—		—		45,143		—		—		45,143
Issuance of restricted shares	1,978		—		—		—		—		—
Option exercises	—		—		5		—		—		5
Repurchase of shares to satisfy tax withholding	(501)		—		(8,606)		—		—		(8,606)
Net unrealized loss on marketable securities	—		—		—		(33)		—		(33)
Net loss	—		—		—		—		(167,392)		(167,392)
Balances at September 30, 2021	73,698	$	1	$	1,370,402	$	14	$	(1,694,009)	$	(323,592)

See accompanying notes to condensed consolidated financial statements.

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THERAVANCE BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Nine Months Ended September 30,
	2022		2021
Operating activities
Net income (loss)	$	882,494	$	(167,392)
Less: Net income from discontinued operations		(961,062)		(39,864)
Net loss from continuing operations		(78,568)		(207,256)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		3,057		4,551
Amortization and accretion income, net		(342)		9
Ampreloxetine interest accretion		424		—
Share-based compensation		32,784		45,143
Gain on disposal of property and equipment		(96)		—
Gain on sale of Velusetrag		(2,709)		—
Amortization of right-of-use assets		2,284		2,758
Gain from lease modification		—		(1,863)
Loss on extinguishment of debt		3,034		—
Other		—		35
Changes in operating assets and liabilities:
Receivables from collaborative and licensing arrangements		(49)		1,867
Prepaid clinical and development services		7,600		7,132
Other prepaid and current assets		(1,148)		(99)
Right-of-use lease assets		(2,587)		—
Other assets		(1,743)		(1,006)
Accounts payable		2,150		2,206
Accrued personnel-related expenses, accrued clinical and development expenses, and other accrued liabilities		(18,465)		(36,573)
Accrued interest payable		(1,246)		—
Deferred revenue		(186)		(8,648)
Operating lease liabilities		(1,111)		443
Other long-term liabilities		(421)		776
Net cash used in operating activities - continuing operations		(57,338)		(190,525)
Net cash used in operating activities - discontinued operations		(5,598)		25,101
Net cash used in operating activities		(62,936)		(165,424)

Investing activities
Purchases of property and equipment		(306)		(2,962)
Purchases of marketable securities		(93,260)		(104,774)
Maturities of marketable securities		108,700		221,400
Sale of short-term investments and marketable securities		5		—
Proceeds from the sale of Velusetrag		2,709		—
Proceeds from the sale of property and equipment		1,866		6
Net cash provided by investing activities - continuing operations		19,714		113,670
Net cash provided by investing activities - discontinued operations		1,095,134		—
Net cash provided by investing activities		1,114,848		113,670

Financing activities
Proceeds from the sale of ordinary shares, net		—		108,180
Repurchases of ordinary shares		(94,037)		—
Proceeds from ampreloxetine funding, net		24,464		—
Principal payment on 2035 notes		(399,998)		(10,730)
Principal payment on 2023 notes		(231,605)		—
Proceeds from ESPP purchases		488		2,862
Proceeds from option exercises		—		5
Repurchase of shares to satisfy tax withholding		(2,457)		(8,606)
Net cash (used in) provided by financing activities - continuing operations		(703,145)		91,711
Net cash used in financing activities - discontinued operations		(20,189)		—
Net cash (used in) provided by financing activities		(723,334)		91,711

Net increase in cash, cash equivalents, and restricted cash		328,578		39,957
Cash, cash equivalents, and restricted cash at beginning of period		90,796		82,300
Cash, cash equivalents, and restricted cash at end of period	$	419,374	$	122,257

Supplemental disclosure of cash flow information
Cash paid for interest	$	22,244	$	26,954
Cash paid (received) for income taxes, net	$	26	$	(3,814)

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.

Basis of Presentation

The Company’s condensed consolidated financial information as of September 30, 2022 and for the three and nine months ended September 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 nine months ended September 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.

On July 20, 2022, the Company completed a monetization of its ownership interests in a significant equity method investment which had a major effect on the Company’s financial results for the three and nine months ended September 30, 2022 (see Note 8. Sale of Equity Interests in Theravance Respiratory Company, LLC). In accordance with GAAP, the transaction was accounted for as a sale of a financial asset. For all periods presented, the results of the sale have been included as discontinued operations on these condensed consolidated financial statements.

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

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within those fiscal years 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 Income (Loss) per Share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares outstanding, less ordinary shares subject to forfeiture. Diluted net income (loss) per share is computed by dividing net income (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 September 30,				Nine Months Ended September 30,
(In thousands, except per share data)	2022		2021		2022		2021
Numerator:
Net loss from continuing operations	$	(16,023)	$	(55,910)	$	(78,568)	$	(207,256)
Net income from discontinued operations		932,654		20,602		961,062		39,864
Net income (loss)		916,631		(35,308)		882,494		(167,392)

Denominator:
Weighted-average ordinary shares outstanding		75,515		73,574		75,678		68,021
Less: weighted-average ordinary shares subject to forfeiture		—		—		—		(76)
Weighted-average ordinary shares outstanding - basic and diluted		75,515		73,574		75,678		67,945

Net income (loss) per ordinary share:
Continuing operations - basic and diluted	$	(0.21)	$	(0.76)	$	(1.04)	$	(3.05)
Discontinued operations - basic and diluted	$	12.35	$	0.28	$	12.70	$	0.59
Net income (loss) - basic and diluted	$	12.14	$	(0.48)	$	11.66	$	(2.46)

Anti-dilutive Securities

In accordance with ASC 260, Earnings Per Share, if a company incurred a loss related to its continuing operations, then potential ordinary shares are considered anti-dilutive for the periods in which the loss was recognized. For the three and nine months ended September 30, 2022 and 2021, the Company recognized losses from continuing operations. As a result, the following ordinary equivalent shares were not included in the computation of diluted net loss per share for both continuing operations and discontinuing operations:


	Three Months Ended September 30,		Nine Months Ended September 30,
(In thousands)	2022	2021	2022	2021
Share issuances under equity incentive plans and purchase plans	5,036	8,900	7,137	8,307
Share issuances upon the conversion of convertible senior notes	—	6,676	—	6,676
Total	5,036	15,576	7,137