UNITED STATES
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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, 2023

OR

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 

Accelerated Filer

Emerging Growth Company

Non-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, 2023, the number of the registrant’s outstanding ordinary shares was 52,813,104.

Table of Contents

THERAVANCE BIOPHARMA, INC.

TABLE OF CONTENTS

Page No.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

3

Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022

3

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2023 and 2022

4

Condensed Consolidated Statements of Shareholders’ Equity (Deficit) for the three and six months ended June 30, 2023 and 2022

5

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022

6

Notes to Condensed Consolidated Financial Statements

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3. Quantitative and Qualitative Disclosures About Market Risk

29

Item 4. Controls and Procedures

29

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

29

Item 1A. Risk Factors

30

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

61

Item 6. Exhibits

62

Signatures

63

2

Table of Contents

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, 

    

2023

    

2022

Assets

Current assets:

Cash and cash equivalents

$

105,596

$

298,172

Short-term marketable securities

 

61,855

 

29,312

Receivables from collaborative arrangements

 

15,796

 

16,785

Prepaid clinical and development services

979

1,513

Other prepaid and current assets

7,777

7,682

Total current assets

 

192,003

 

353,464

Property and equipment, net

 

9,553

 

11,875

Operating lease assets

38,453

40,126

Future contingent milestone and royalty assets

194,200

194,200

Restricted cash

 

836

 

836

Other assets

11,585

6,899

Total assets

$

446,630

$

607,400

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable

$

1,569

$

1,554

Accrued personnel-related expenses

 

5,371

 

10,314

Accrued clinical and development expenses

 

4,006

 

4,932

Accrued general and administrative expenses

2,874

4,020

Operating lease liabilities

9,160

6,753

Deferred revenue

 

24

 

24

Other accrued liabilities

 

1,542

 

1,118

Total current liabilities

 

24,546

 

28,715

Long-term operating lease liabilities

42,521

45,407

Future royalty payment contingency

26,556

25,438

Long-term deferred revenue

181

192

Unrecognized tax benefits

64,987

64,191

Other long-term liabilities

7,678

1,657

Commitments and contingencies

Shareholders’ Equity

Preferred shares, $0.00001 par value: 230 shares authorized, no shares issued or outstanding

 

Ordinary shares, $0.00001 par value: 200,000 shares authorized; 53,694 and 65,227 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

 

1

1

Additional paid-in capital

 

1,172,090

1,295,725

Accumulated other comprehensive loss

 

(286)

 

(15)

Accumulated deficit

 

(891,644)

 

(853,911)

Total shareholders’ equity

 

280,161

 

441,800

Total liabilities and shareholders’ equity

$

446,630

$

607,400

See accompanying notes to condensed consolidated financial statements.

3

Table of Contents

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, 

    

2023

    

2022

    

2023

    

2022

Revenue:

Viatris collaboration agreement

$

13,743

$

10,878

$

24,154

$

21,565

Collaboration revenue

6

172

12

181

Licensing revenue

2,500

Total revenue

 

13,749

 

11,050

 

24,166

 

24,246

Expenses:

Research and development (1)

 

9,425

14,924

23,997

38,177

Selling, general and administrative (1)

19,278

16,222

38,461

34,064

Restructuring and related expenses (1)

1,169

3,005

2,743

12,329

Total expenses

 

29,872

 

34,151

 

65,201

 

84,570

Loss from operations

 

(16,123)

 

(23,101)

 

(41,035)

 

(60,324)

Interest expense

(568)

(2,137)

(1,118)

(4,274)

Interest income and other income (expense), net

 

2,504

2,440

5,483

2,065

Loss from continuing operations before income taxes

 

(14,187)

 

(22,798)

 

(36,670)

 

(62,533)

Provision for income tax (expense) benefit

 

(1,458)

5

(1,063)

(519)

Net loss from continuing operations

(15,645)

(22,793)

(37,733)

(63,052)

Income from discontinued operations before income taxes

14,602

28,915

Provision for income tax expense

Net income from discontinued operations

14,602

28,915

Net loss

$

(15,645)

$

(8,191)

$

(37,733)

$

(34,137)

Net unrealized loss on available-for-sale investments

(337)

(17)

(271)

(45)

Total comprehensive loss

$

(15,982)

$

(8,208)

$

(38,004)

$

(34,182)

Net income (loss) per share:

Continuing operations - basic and diluted

$

(0.28)

$

(0.30)

$

(0.63)

$

(0.83)

Discontinued operations - basic and diluted

$

$

0.19

$

$

0.38

Net loss - basic and diluted

$

(0.28)

$

(0.11)

$

(0.63)

$

(0.45)

Shares used to compute basic and diluted net income (loss) per share

 

56,682

76,270

 

59,791

 

75,761

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

Three Months Ended June 30, 

Six Months Ended June 30, 

(In thousands)

    

2023

    

2022

2023

    

2022

Research and development

$

1,855

$

2,909

$

4,296

$

7,439

Selling, general and administrative

 

4,409

 

5,030

 

8,632

 

10,528

Restructuring and related expenses

1,770

357

6,287

Total share-based compensation expense

$

6,264

$

9,709

$

13,285

$

24,254

See accompanying notes to condensed consolidated financial statements.

4

Table of Contents

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

   

Gain (Loss)

   

Deficit

   

Equity

Balances at March 31, 2023

60,542

$

1

$

1,246,506

$

51

$

(875,999)

$

370,559

Repurchase of ordinary shares, net of transaction costs

(7,283)

(80,543)

(80,543)

Proceeds from ESPP purchases

63

446

446

Employee share-based compensation expense

6,264

6,264

Issuance of restricted shares

424

Option exercises

Repurchase of shares to satisfy tax withholding

(52)

(583)

(583)

Net unrealized loss on marketable securities

(337)

(337)

Net loss

(15,645)

(15,645)

Balances at June 30, 2023

53,694

$

1

$

1,172,090

$

(286)

$

(891,644)

$

280,161

Accumulated

Additional

Other

Total

Ordinary Shares

Paid-In

Comprehensive

Accumulated

Shareholders'

Shares

   

Amount

   

Capital

   

Loss

   

Deficit

   

Equity

Balances at December 31, 2022

65,227

$

1

$

1,295,725

$

(15)

$

(853,911)

$

441,800

Repurchase of ordinary shares, net of transaction costs

(12,441)

(135,896)

(135,896)

Proceeds from ESPP purchases

63

446

446

Employee share-based compensation expense

13,285

13,285

Issuance of restricted shares

981

Option exercises

Repurchase of shares to satisfy tax withholding

(136)

(1,470)

(1,470)

Net unrealized loss on marketable securities

(271)

(271)

Net loss

(37,733)

(37,733)

Balances at June 30, 2023

53,694

$

1

$

1,172,090

$

(286)

$

(891,644)

$

280,161

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)

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, 

    

2023

    

2022

Operating activities

Net loss

$

(37,733)

$

(34,137)

Less: Net income from discontinued operations

28,915

Net loss from continuing operations

(37,733)

(63,052)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

 

1,177

 

1,949

Amortization and accretion income, net

(1,092)

(31)

Future royalty payment contingency interest accretion

1,118

Share-based compensation

 

13,285

 

24,254

Gain on sale of Velusetrag

(2,721)

(Gain) loss on disposal of property and equipment

1,352

(96)

Gain from lease modification

(47)

Amortization of right-of-use assets

1,817

1,314

Changes in operating assets and liabilities:

Receivables from collaborative and licensing arrangements

 

989

 

1,577

Prepaid clinical and development services

533

7,934

Other prepaid and current assets

(95)

2,619

Right-of-use lease assets

(144)

(2,689)

Other assets

1,751

(145)

Accounts payable

 

83

 

(26)

Accrued personnel-related expenses, accrued clinical and development expenses, and other accrued liabilities

 

(6,534)

 

(11,135)

Deferred revenue

(11)

(180)

Operating lease liabilities

(479)

82

Other long-term liabilities

 

326

 

(17)

Net cash used in operating activities - continuing operations

(23,657)

(40,410)

Net cash used in operating activities - discontinued operations

(389)

Net cash used in operating activities

 

(23,657)

 

(40,799)

Investing activities

Purchases of property and equipment

 

(1,790)

 

(363)

Purchases of marketable securities

 

(134,534)

 

(53,763)

Maturities of marketable securities

 

31,435

 

91,699

Sale of short-term investments and marketable securities

71,377

Proceeds from the sale of property and equipment

1,513

1,866

Net cash (used in) provided by investing activities - continuing operations

(31,999)

39,439

Net cash provided by (used in) investing activities - discontinued operations

Net cash (used in) provided by investing activities

 

(31,999)

 

39,439

Financing activities

Ordinary share repurchases

(135,896)

Proceeds from ESPP purchases

446

487

Repurchase of shares to satisfy tax withholding

(1,470)

(1,795)

Net cash used in financing activities - continuing operations

(136,920)

(1,308)

Net cash provided by (used in) financing activities - discontinued operations

Net cash used in financing activities

 

(136,920)

 

(1,308)

Net decrease increase in cash, cash equivalents, and restricted cash

 

(192,576)

 

(2,668)

Cash, cash equivalents, and restricted cash at beginning of period

 

299,008

 

90,796

Cash, cash equivalents, and restricted cash at end of period

$

106,432

$

88,128

Supplemental disclosure of cash flow information

Cash paid for interest

$

$

15,127

Cash paid for income taxes, net

$

14

$

25

Supplemental disclosure of non-cash investing and financing activities

Recognition of tenant improvement allowance assigned to sublease

$

6,490

$

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 development and commercialization of medicines. The Company’s focus is to deliver medicines that make a difference® in people's lives.

Basis of Presentation

The Company’s condensed consolidated financial information as of June 30, 2023 and for the three and six months ended June 30, 2023 and 2022 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, 2022 financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (“SEC”) on March 1, 2023.

The results for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023, 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 year ended December 31, 2022 (see Note 7. Discontinued Operations”). 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. Certain prior year comparable operating expenses within the condensed consolidated statements of operations and comprehensive loss have been reclassified as restructuring and related expenses. The reclassification had no effect on reported losses, total assets, or shareholders’ equity.

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.

The Company expects its cash, cash equivalents and marketable securities will be sufficient to fund its capital return program and its operations for at least the next twelve months from the issuance date of these condensed consolidated financial statements based on current operating plans and financial forecasts.

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, 2022.

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Recently Issued Accounting Pronouncements Not Yet Adopted

The Company has evaluated 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 the net loss attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding for the period, excluding shares subject to repurchase and without consideration of potentially dilutive securities. Diluted net loss per share is computed by giving effect to all potentially dilutive ordinary shares outstanding for the period, which primarily consist of instruments issued and outstanding under the Company’s equity incentive and employee share purchase plans and shares issuable upon note conversion (for the 2022 periods only). Ordinary share equivalents are excluded from the computation in periods in which they have an anti-dilutive effect unless the consideration of any one of them gives a dilutive effect.

Three Months Ended

June 30, 

Six Months Ended

June 30, 

(In thousands, except per share data)

    

2023

    

2022

2023

    

2022

Numerator:

Net loss from continuing operations

$

(15,645)

$

(22,793)

$

(37,733)

$

(63,052)

Net income from discontinued operations

14,602

28,915

Net loss

$

(15,645)

$

(8,191)

(37,733)

(34,137)

Denominator:

 

 

Weighted-average ordinary shares outstanding

56,682

76,270

59,791

75,761

Less: weighted-average ordinary shares subject to forfeiture

Weighted-average ordinary shares outstanding - basic and diluted

56,682

76,270

59,791

75,761

Net income (loss) per share:

Continuing operations - basic and diluted

$

(0.28)

$

(0.30)

$

(0.63)

$

(0.83)

Discontinued operations - basic and diluted

$

$

0.19

$

$

0.38

Net loss per share - basic and diluted

$

(0.28)

$

(0.11)

$

(0.63)

$

(0.45)

Anti-dilutive Securities

In accordance with Accounting Standards Codification (“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 six months ended June 30, 2023 and 2022, 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

June 30, 

Six Months Ended

June 30, 

(In thousands)

    

2023

    

2022

    

2023

    

2022

Share issuances under equity incentive plans and employee share purchase plan

3,693

5,660

4,114

6,239

Share issuances upon the conversion of convertible senior notes

6,676

6,676

Total

 

3,693

12,336

4,114

12,915

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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 November 2018, YUPELRI was approved by the US Food and Drug Administration (the “FDA”) for the maintenance treatment of patients with chronic obstructive pulmonary disease (“COPD”).

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 the Company). Outside the US (excluding 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 also holds exclusive development and commercialization rights to nebulized revefenacin in China and adjacent territories, which include Hong Kong SAR, the Macau SAR, and Taiwan, and the Company is eligible to receive low double-digit tiered royalties on net sales of nebulized revefenacin in this region, if approved. Viatris is responsible for all aspects of development and commercialization in the China and adjacent territories, including pre- and post-launch activities and product registration and all associated costs. 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.

As of June 30, 2023, the Company is eligible to receive from Viatris potential global development, regulatory and sales milestone payments (excluding China and adjacent territories) 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 Company is also eligible to receive additional potential development and sales milestones totaling $52.5 million related to Viatris’ development and commercialization of nebulized revefenacin in China and adjacent territories.

The Viatris Agreement is considered to be within the scope of ASC 808, Collaborative Arrangements, 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, 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, Revenue Recognition, and, as such, the reimbursable program costs are excluded from the original transaction price.

The future potential milestone amounts for the Viatris Agreement were not included in the original 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 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

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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, 2023, 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)

2023

2022

2023

2022

Viatris collaboration agreement - Amounts receivable from Viatris

$

13,743

$

10,878

$

24,154

$

21,565

While Viatris records the total net sales of YUPELRI within its condensed 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, 2023 of $19.3 million and $35.7 million, respectively, before deducting shared expenses. For the three and six months ended June 30, 2022, the Company’s implied 35% share of net sales of YUPELRI were $17.2 million and $32.5 million, respectively, before deducting shared expenses.

Other Collaborative Arrangement Revenues

The Company’s other collaborative arrangement revenues consisted of:

Three Months Ended

June 30, 

Six Months Ended

June 30, 

(In thousands)

    

2023

    

2022

2023

    

2022

Viatris

$

6

$

6

$

12

$

12

Alfasigma

166

169

Total collaboration revenue

$

6

$

172

$

12

$

181

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.

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 expenses related to reimbursement payments:

Three Months Ended

June 30, 

Six Months Ended

June 30, 

(In thousands)

    

2023

    

2022

2023

    

2022

Viatris

$

1,947

$

1,543

$

3,700

$

3,079

Revenue from Licensing Arrangements

Pfizer

In December 2019, the Company entered into a global license agreement with Pfizer Inc. (“Pfizer”) 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 had an exclusive license to develop, manufacture and commercialize certain compounds for all uses other than gastrointestinal, ophthalmic, and

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respiratory applications. The Company received an upfront cash payment of $10.0 million in 2019, and for the three and six months ended June 31, 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. In June 2023, the Company received notice from Pfizer terminating the Pfizer Agreement, effective as of October 7, 2023, at which time the skin-selective pan-JAK inhibitor program will be returned to the Company.

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 amounts shown on the condensed consolidated statements of cash flows.

June 30, 

(In thousands)

2023

2022

Cash and cash equivalents

$

105,596

$

87,292

Restricted cash

836

836

Total cash, cash equivalents, and restricted cash shown on the condensed consolidated
statements of cash flows

$

106,432

$

88,128

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. The cash-related amounts reported in the table above exclude the Company’s investments in short and long-term marketable securities, if any, that are reported separately on the condensed consolidated balance sheets.

The Company periodically engages in foreign exchange transactions as a part of its operations. For the three and six months ended June 30, 2023, the Company’s net realized and unrealized foreign currency gains were not material, and for the three and six months ended June 30, 2022, the Company recognized net realized and unrealized foreign currency losses of $0.7 million and $1.1 million, respectively. These amounts are included in the Company’s condensed consolidated statements of operations within “Interest income and other income (expense), net”.

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:

June 30, 2023

    

    

    

Gross

    

Gross