Company Overview

Theravance Biopharma, Inc. (TBPH) is a biopharmaceutical company primarily focused on the development and commercialization of medicines. The company's diverse portfolio includes a marketed product, a late-stage investigational therapy, and a number of earlier-stage programs, positioning it as a versatile player in the dynamic healthcare industry.

Historical Background

Founded in 1997 as a part of Innoviva, Inc., Theravance Biopharma has undergone a transformative journey, emerging as an independent entity in 2014 through a spin-off from its parent company. This strategic move has enabled the firm to sharpen its focus on its core mission of delivering innovative medicines that make a difference in patients' lives. In the early years following the spin-off, Theravance Biopharma faced several challenges in its drug development efforts. In August 2017, the company announced an increase in its anticipated operating loss for the year, primarily driven by its decision to accelerate funding for the next phase of development of izencitinib, one of its investigational JAK inhibitor programs. September 2021 marked a significant turning point for the company, as it announced a strategic update and corporate restructuring, including a 75% reduction in its workforce, following unfavorable results from its late-stage development programs. Despite these setbacks, Theravance Biopharma achieved a major milestone in November 2018 with the FDA approval of YUPELRI (revefenacin), its LAMA compound for the maintenance treatment of patients with chronic obstructive pulmonary disease (COPD). In July 2022, the company completed the sale of its equity interests in Theravance Respiratory Company, LLC to Royalty Pharma, representing its 85% economic interest in the sales-based royalty rights on worldwide net sales of GlaxoSmithKline's TRELEGY ELLIPTA, providing a substantial cash influx to advance its pipeline and operations.

Key Products and Pipeline

At the heart of Theravance Biopharma's operations lies YUPELRI® (revefenacin) inhalation solution, a once-daily, nebulized long-acting muscarinic antagonist (LAMA) approved for the maintenance treatment of chronic obstructive pulmonary disease (COPD) in the United States. The company co-promotes YUPELRI with its partner, Viatris Inc. (VTRS), and has seen steady growth in the product's performance, with net sales reaching an all-time high of $62.2 million in the third quarter of 2024, representing a 7% year-over-year increase and a 14% sequential improvement.

In the US, Viatris leads the commercialization of YUPELRI, and Theravance co-promotes the product under a profit and loss sharing arrangement (65% to Viatris, 35% to Theravance). Outside the US (excluding China and adjacent territories), Viatris is responsible for development and commercialization and will pay Theravance a tiered royalty on net sales ranging from low double-digits to mid-teens.

For the three and nine months ended September 30, 2024, Theravance's implied 35% share of YUPELRI net sales was $21.77 million and $60.18 million, respectively, representing increases of 7% compared to the prior year periods. The increases were primarily driven by a 14% increase in customer demand and increases in market share in the hospital setting (approaching 19%) and in the community setting (reaching 32%).

Theravance Biopharma's pipeline is anchored by its late-stage investigational therapy, ampreloxetine, a once-daily norepinephrine reuptake inhibitor (NRI) in development for the treatment of symptomatic neurogenic orthostatic hypotension (nOH) in patients with Multiple System Atrophy (MSA). The company is currently progressing the CYPRESS Phase 3 study, which is evaluating ampreloxetine's efficacy and safety in this rare neurological disorder. With the enrollment of the final patients in the open-label portion of the CYPRESS study expected by mid-2025, Theravance Biopharma is poised to achieve a significant milestone in the development of this potential first-in-class therapy for MSA patients.

In June 2022, Theravance aligned with the FDA on a path to a New Drug Application (NDA) filing for ampreloxetine, with one additional Phase 3 clinical study (CYPRESS) in MSA patients with symptomatic nOH, using the Orthostatic Hypotension Symptom Assessment (OHSA) composite score as the primary endpoint. In July 2022, Royalty Pharma agreed to invest up to $40 million to advance the development of ampreloxetine in MSA in exchange for unsecured low single-digit royalties on future ampreloxetine sales.

In addition to its marketed and late-stage assets, Theravance Biopharma maintains a portfolio of earlier-stage research and development programs, focusing on areas such as skin-targeted pan-Janus kinase (JAK) inhibitors. While the company has decided not to progress these earlier-stage programs internally, it continues to explore potential partnering opportunities to unlock their value.

The company also has an economic interest in royalties from GSK's TRELEGY ELLIPTA, which saw 17% year-over-year growth to $789M in Q3 2024.

Financials

Theravance Biopharma's financial performance has been marked by both successes and challenges. In the third quarter of 2024, the company reported total revenues of $16.9 million, a year-over-year increase of 8%, driven by strong collaboration revenues from its partnership with Viatris. However, the company has also grappled with net losses, reporting a net loss of $12.7 million in the same quarter. This is a reflection of the company's ongoing investments in the development of its pipeline and the commercialization of YUPELRI.

For the most recent fiscal year (2023), Theravance Biopharma reported revenue of $57.42 million, a net loss of $55.19 million, operating cash flow of -$26.99 million, and free cash flow of -$29.49 million. In the most recent quarter (Q3 2024), the company reported revenue of $16.87 million, up 7% year-over-year, a net loss of $12.70 million, operating cash flow of -$5.20 million, and free cash flow of -$5.21 million. The increase in revenue was primarily driven by an 8% increase in collaboration revenue from the Viatris agreement.

Theravance Biopharma primarily sells in the United States market.

Liquidity

The company's liquidity position remains stable, with $91.4 million in cash, cash equivalents, and marketable securities as of September 30, 2024. Theravance Biopharma has also demonstrated a commitment to capital discipline, completing a $325.3 million share repurchase program in early 2024.

As of the most recent reporting period, Theravance Biopharma's debt-to-equity ratio stood at 0.24, with cash and cash equivalents of $23.38 million. The company's current ratio and quick ratio were both 4.97, indicating a strong ability to meet short-term obligations.

Strategic Priorities and Corporate Governance

Theravance Biopharma's strategic priorities are centered on maximizing the value of its key assets, including YUPELRI and ampreloxetine, while exploring options to unlock further shareholder value. In November 2024, the company's Board of Directors announced the formation of a strategic review committee to evaluate all available alternatives for the company's assets, including YUPELRI, ampreloxetine, Trelegy, and its tax attributes.

The company has also taken steps to enhance its corporate governance, separating the roles of Chair of the Board and Chief Executive Officer. This move is aimed at sharpening the company's operational focus and aligning with the interests of its shareholders.

Guidance and Future Outlook

Theravance Biopharma has reaffirmed its previous guidance for the full year 2024 on R&D and SG&A expenses. The company expects R&D expenses in Q4 2024 to be slightly higher than Q3 2024 due to the continued progression of the CYPRESS study, while SG&A expenses in Q4 2024 are expected to be similar to Q3 2024. This would put the company near the midpoint of their full year 2024 guidance for both R&D and SG&A.

The company also expects its non-GAAP results and cash burn in Q4 2024 to be consistent with Q3 2024. Looking ahead to 2025, Theravance Biopharma's management has expressed confidence in progressing the CYPRESS study to a major value inflection point without relying on the capital market, citing the company's minimal cash burn.

Conclusion

Theravance Biopharma's journey has been marked by both triumphs and challenges, but the company's commitment to innovation, capital discipline, and strategic positioning continues to position it as a player to watch in the evolving healthcare landscape. As the company navigates the complexities of the industry, investors will closely monitor its ability to maximize the potential of its key assets and unlock further shareholder value through its strategic review process. With a focus on YUPELRI's continued growth, the progression of the ampreloxetine program, and careful management of expenses, Theravance Biopharma aims to create long-term value for its shareholders while advancing its mission to develop and deliver innovative medicines.