Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 20202023

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 No. 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.)

P.O. Box 309C/O Theravance Biopharma US, Inc.

Ugland House, South Church Street901 Gateway Boulevard

George Town, Grand CaymanSouth San Francisco, Cayman IslandsCA

KY1-110494080

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code: 650-808-6000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of Each Classeach class

    

Trading Symbol

    

Name of Each Exchange On Which Registeredeach exchange on which registered

Ordinary Share $0.00001 Par Value

TBPH

The Nasdaq Global Market

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No

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 an 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 

Accelerated Filer 

Non-accelerated Filer 

Smaller reporting company 

Emerging growth company 

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). 

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $1.28 billion,$458.8 million, based upon the closing price of $20.99$10.35 on the Nasdaq Global Market on June 30, 2020.2023.

On February 19, 2021,23, 2024, there were 64,327,83048,164,708 of the registrant’s ordinary shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Specified portions of the registrant’s definitive Proxy Statement to be issued in conjunction with the registrant’s 20212024 Annual Meeting of Shareholders, which is expected to be filed not later than 120 days after the registrant’s fiscal year ended December 31, 2020,2023, are incorporated by reference into Part III of this Annual Report. Except as expressly incorporated by reference, the registrant’s Proxy Statement shall not be deemed to be a part of this Annual Report on Form 10-K.

Table of Contents

THERAVANCE BIOPHARMA, INC.

20202023 Form 10-K Annual Report

Table of Contents

PART I

    

Item 1.

Business

4

Item 1A.

Risk Factors

2120

Item 1B.

Unresolved Staff Comments

5851

Item 1C.

Cybersecurity

51

Item 2.

Properties

5852

Item 3.

Legal Proceedings

5852

Item 4.

Mine Safety Disclosures

5853

PART II

Item 5.

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

5954

Item 6.

Selected Financial Data[Reserved]

6156

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

6157

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

7564

Item 8.

Financial Statements and Supplementary Data

7664

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

11865

Item 9A.

Controls and Procedures

11865

Item 9B.

Other Information

12065

Item 9C.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

66

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

12067

Item 11.

Executive Compensation

12067

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

12067

Item 13.

Certain Relationships and Related Transactions, and Director Independence

12067

Item 14.

Principal Accountant Fees and Services

12067

PART IV

Item 15.

Exhibits and Financial Statement Schedules

12168

Exhibit Index

12269

SignaturesItem 16.

Form 10-K Summary

12672

Signatures

73

2

Table of Contents

Special Note regarding Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements involve risks, uncertainties and assumptions. All statements in this Annual Report on Form 10-K, other than statements of historical facts, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans, intentions, designs, expectations, and objectives are forward-looking statements. The words “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “designed,” “developed,” “drive,” “estimate,” “expect,” “forecast,” “goal,” “indicate,” “intend,” “may,” “mission,” “opportunities,” “plan,” “possible,” “potential,” “predict,” “project,” “pursue,” “represent,” “seek,” “suggest,” “should,” “target,” “will,” “would,” and similar expressions (including the negatives thereof) are intended to identify forward looking statements, although not all forward looking statements contain these identifying words. These statements reflect our current views with respect to future events or our future financial performance, are based on assumptions, and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We may not actually achieve the plans, intentions, expectations or objectives disclosed in our forward-looking statements and the assumptions underlying our forward-looking statements may prove incorrect. Therefore, you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions, expectations, and objectives disclosed in the forward-looking statements that we make. Factors that we believe could cause actual results or events to differ materially from our forward-looking statements include, but are not limited to, those discussed in “Risk Factors,” in Item 1A, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and elsewhere in this Annual Report on Form 10-K. Our forward-looking statements in this Annual Report on Form 10-K are based on current expectations, and we do not assume any obligation to update any forward-looking statements for any reason, even if new information becomes available in the future. In addition, while we expect the effects of COVID-19 to continue to adversely impact our business operations and financial results, the extent of the impact on our ability to generate revenue from YUPELRI® (revefenacin), our clinical development programs (including but not limited to our later stage clinical programs for izencitinib and ampreloxetine), and the value of and market for our ordinary shares, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time. These potential future developments include, but are not limited to, the ultimate duration of the COVID-19 pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the United States and in other countries, other measures taken by us and those we work with to help protect individuals from contracting COVID-19, and the effectiveness of actions taken globally to contain and treat the disease, including vaccine availability, distribution, acceptance and effectiveness.When used in this report, all references to “Theravance Biopharma”, the “Company”, or “we” and other similar pronouns refer to Theravance Biopharma, Inc. collectively with its subsidiaries.

3

Table of Contents

PART I

ITEM 1. BUSINESS

Overview

Theravance Biopharma, Inc. (“Theravancewe,” “our,” “Theravance Biopharma” or the “Company”) is a diversified biopharmaceutical company primarily focused on the discovery, development and commercialization of organ-selective medicines. Our purposefocus is to create transformational deliver medicines to improve the lives of patients suffering from serious illnesses. Our research is focusedthatmake a difference® in the areas of inflammation and immunology.people’s lives.

In pursuit of our purpose, we apply insights and innovation at each stageleverage decades of our business and utilize our internal capabilities and thoseexpertise, which has led to the development of partners around the world. We apply organ-selective expertise to biologically compelling targets to discover and develop medicines designed to treat underserved localized diseases and to limit systemic exposure, in order to maximize patient benefit and minimize risk. These efforts leverage years of experience in developing lung-selective medicines to treat respiratory disease, including the United States (“US”) Food and Drug Administration (the “FDA”) approved YUPELRI® (revefenacin) inhalation solution indicated for the maintenance treatment of patients with chronic obstructive pulmonary disease (“COPD”). Our pipelineAmpreloxetine, our late-stage investigational once-daily norepinephrine reuptake inhibitor in development for the treatment of internally discovered programs is targetedsymptomatic neurogenic orthostatic hypotension (“nOH”) in patients with Multiple System Atrophy (“MSA”) has the potential to address significant patient needs.

We have an economic interestbe a first in potential future payments from Glaxo Group or oneclass therapy effective in treating a constellation of its affiliates (“GSK”) pursuant to its agreements with Innoviva, Inc. (“Innoviva”) relating to certain programs, including TRELEGY.cardinal symptoms in MSA patients.

2020 Highlights2023 Significant Developments

Despite the delays and disruption caused by the COVID-19 pandemic, 2020 was a successful year in terms of progress as our key programs advanced towards important milestones.

YUPELRI Sales Growth

In the second full year since its commercial launch in the first quarter of 2019,2023, YUPELRI continued to experience solidexperienced sales growth and reached all-time high yearly net sales growth in 2020.and profitability. Through the combined commercialization efforts with our partner Viatris Inc. (formerly, Mylan N.V.(“Viatris”), our collaboration revenue related tototal YUPELRI net sales increased by 221%9% to $221.0 million in 20202023 compared to 2019. YUPELRI is the first2022. Hospital volumes, which we are directly responsible for, grew 46% in 2023 compared to 2022 and only once-daily, nebulized maintenance medicine for COPD. Theravance Biopharma and Viatris copromote in the US, with our combined sales infrastructures targeting health care professionals that treat the universe of COPD patients suitable for YUPELRI. Theravance Biopharma focuses on the hospital segment whereas Viatris focuses on the outpatient segment. While the COVID-19 pandemic impactedwas a meaningful contributor to YUPELRI’s overall net sales growth trajectory in 2020, we saw sales growth recover infor the second half of the year, and we continue to be encouraged by market feedback and performance indicators, including hospital formulary success, patient uptake, and market access, over the past 12 months.year.

Progression of Late-Stage StudiesInitiation of Ampreloxetine and Izencitinib

Ampreloxetine, our norepinephrine reuptake inhibitor, continued to progress in twoNew Phase 3 studies, one designed to assess treatment benefit over four weeks andClinical Study

In the other to assess durabilityfirst quarter of response. Given limitations of existing neurogenic orthostatic hypotension (“nOH”) treatments,2023, we initiated the ampreloxetine may represent an important treatment option for patients and a meaningful commercial opportunity in the US.To address the challenges presented by COVID-19, we modified our Phase 3 program to allow for a decentralized approach for treating patients in the trial. We anticipate reporting results on ournew Phase 3 clinical study of(CYPRESS) in MSA patients with symptomatic nOH, using the Orthostatic Hypotension Symptom Assessment Scale (“OHSA”) composite score as the primary endpoint. In May 2023, we announced that the FDA granted Orphan Drug Designation status to ampreloxetine infor the treatment of symptomatic nOH in the third quarterpatients with MSA.The study is currently enrolling patients with 42 clinical sites open across 11 countries, as of 2021.February 26, 2024.

Capital Return Program

Izencitinib (formerly known as TD-1473),In 2023, we repurchased 18.63 million of our oral gut-selective pan-JAKshares on the open market at a weighted average cost of $10.551 per share for an approximate aggregate cost of $196.6 million, excluding fees and expenses. Since the inception of the capital return program in September 2022 through its completion in early January 2024, we repurchased a total of 31.41 million shares at a weighted average cost of $10.354 per share for an approximate aggregate cost of $325.3 million which reduced our shares by 37% since the inception of the capital return program.

Discontinued Investment in Research

In February 2023, we announced that we discontinued our research activities, including the inhaled Janus kinase (JAK) inhibitor for inflammatory intestinal diseases, partnered with Janssen Biotech, Inc. (“Janssen”), continued to progress in aprogram, and prioritized our R&D resources toward the ampreloxetine Phase 2b/3 study and the completion of the YUPELRI Peak Inspiratory Flow Rate (PIFR-2) Phase 4 study. As a result of halting further investment in ulcerative colitisresearch activities, our headcount was reduced by approximately 17% in March 2023. We plan to seek a partnership to continue progression of our inhaled JAK inhibitor program.

Board Governance Changes

In 2023, we appointed three new independent directors reflecting our ongoing commitment to bringing new perspectives and complementary skills to the Company. In addition, we put forth a Phase 2 study in Crohn’s disease. Izencitinib is intendedproposal to treat inflammatory intestinal disease directlydeclassify the board of the directors over time which was approved at the siteour May 2023 Annual General Meeting of inflammation in an organ-selective manner, with minimal systemic exposure or corresponding immunosuppressive effects. We anticipate reporting results from both studies in the third quarter of 2021.Shareholders.

4

Table of Contents

Positive Phase 1 Data and Clinical Progression of TD-0903

TD-0903 is a lung-selective, nebulized Janus kinase inhibitor (“JAKi”) in development for the potential treatment of hospitalized patients with Acute Lung Injury caused by COVID-19. We dosed our first patient in a Phase 1 study in April 2020 and results from that study in healthy volunteers showed a favorable safety and tolerability profile across the full range of nebulized doses and low systemic levels of TD-0903 in the systemic circulation, consistent with the lung-selective design. Data from Phase 1 provided confidence to continue dosing patients in a Phase 2 study, with results expected in the second quarter of 2021.

Advancement of TD-5202 into the Clinic

TD-5202, our oral gut-selective irreversible JAK3 inhibitor for inflammatory intestinal diseases, partnered with Janssen, continued to progress in the clinic. In the third quarter of 2019, we initiated a Phase 1 single ascending dose and multiple ascending dose study primarily designed to evaluate the safety and tolerability of TD-5202 in healthy subjects. In February 2020, we announced that data from the Phase 1 study indicated that TD-5202 was generally well tolerated as a single oral dose up to 2000 milligrams and as a twice-daily oral dose up 2000 milligrams total per day given for ten consecutive days in healthy subjects. We and our partner Janssen believe TD-5202 represents a promising additional therapeutic approach for addressing a range of inflammatory intestinal diseases.

Financing

We successfully closed on two financing transactions during the first quarter of 2020. In February 2020, we closed on an offering of 5,500,000 ordinary shares at a price to the public of $27.00 per share raising $148.5 million, before deducting underwriting discounts and commissions and estimated offering expenses. Also, in February 2020, we closed on a private placement of $400.0 million of non-recourse Triple II 9.5% fixed rate term notes. The notes are secured by a portion of the future payments we expect to receive related to royalties due on net sales of TRELEGY. We used a portion of the net proceeds from this transaction to repay in full the remaining outstanding balance of the $250.0 million Triple PhaRMASM 9.0% fixed rate term notes due 2033. We are using the remainder of the net proceeds from both transactions to support continued execution of our key development programs.

Impact of COVID-19 Pandemic

The effects of the COVID-19 pandemic and the related actions by governments, companies, and individuals around the world to attempt to contain the spread of the virus (including new variants of COVID-19) continues to present a substantial public health and economic challenge and is affecting our employees, patients, communities, clinical trial sites, suppliers, business partners and business operations. The full extent to which the COVID-19 pandemic will continue to directly or indirectly impact our business, results of operations and financial condition, including revenue, expenses, clinical trials and research and development costs, will depend on future developments that are highly uncertain and may be impacted by the emergence of new information concerning the COVID-19 pandemic, ongoing spread of the disease across the US and the globe, and the actions taken to contain or treat the disease, including vaccine availability, distribution, acceptance and effectiveness.

YUPELRI (revefenacin) Inhalation Solution

We and our collaboration partner, Viatris, continue to supply YUPELRI to our patients and currently do not anticipate any interruptions in supply. The manufacture of YUPELRI continues at or near normal levels.

In mid-March 2020, we suspended in-person sales calls to accounts in response to the COVID-19 pandemic. Our promotional focus and efforts quickly pivoted to increased digital promotional investments and, in early August 2020, leveraging an optimized hybrid selling model with virtual and in-person selling interactions. While overall market challenges remain due to the ongoing COVID-19 pandemic, YUPELRI increased its market share and it was profitable on a stand-alone brand basis for the first time in the second half of 2020.

5

Table of Contents

We continue to monitor the impact of the ongoing COVID-19 pandemic on demand for YUPELRI, including the duration and degree to which we may see declines in customer orders or delays in starting new patients on YUPELRI.

At this time, we are unable to predict with certainty the ultimate disruptive impact of the ongoing COVID-19 pandemic on both YUPELRI and the rest of our business, but we believe the pandemic may continue to put downward pressure on our sales to the extent that it continues to depress in-person customer interactions.

Clinical Trial Activity

While we are currently continuing the clinical trials that we had underway in sites across the globe prior to the onset of the pandemic, the timelines have been adversely impacted. We frequently evaluate each of our clinical trial programs to determine any additional necessary modifications and have worked closely with regulators, sites, clinical research organizations and data safety monitoring boards. Given the significant strains on the healthcare system across the globe, we made the decision in mid-March 2020 to temporarily suspend the screening of new patients for our clinical trials of izencitinib, a gut-selective oral JAKi in development for inflammatory intestinal disease in Crohn’s and ulcerative colitis, and ampreloxetine, a norepinephrine reuptake inhibitor (“NRI”) under evaluation for the treatment of symptomatic nOH, which are further discussed below. The screening of new patients into these trials was temporarily suspended for 4 weeks in order to prioritize ongoing support for patients who were already in screening and those who were already randomized. We implemented mitigation plans to help ensure patients in the clinical trials continued to have access to drug supply and regular visits with their physicians for study visits per trial protocols.

Screening of new patients resumed in mid-April 2020 in a controlled and measured fashion as individual sites confirmed their ability to support the study requirements, and new patients were able to be assessed for their eligibility to participate in the izencitinib and ampreloxetine studies. Study sites and necessary supporting medical infrastructure for our studies, such as endoscopy suites for our study of izencitinib in ulcerative colitis, have been gradually available for participation in and support of our trial through the year, increasing as cases dip and deceasing as cases surge. In recognition of the increasing range of barriers presented by the ongoing pandemic on the ability of nOH patients to travel to sites and access medicines, we worked with the FDA to decentralize the Phase 3 studies in the ampreloxetine program. We are working to offer the decentralized approach across the ampreloxetine Phase 3 program in the US and globally in an effort to overcome the challenges patients face regarding travel, healthcare access and participation in clinical trials. We currently expect Phase 3 results for ampreloxetine for symptomatic nOH and for izencitinib Phase 2b results in ulcerative colitis and Phase 2 results in Crohn's disease in the third quarter of 2021.

During the second quarter of 2020, we progressed our preclinical candidate TD-0903 into the clinic at an accelerated pace in response to the COVID-19 pandemic. We designed TD-0903 to be a lung-selective nebulized JAKi with the intent of addressing lung hyperinflammation in both the acute and chronic setting. In June 2020, we completed Phase 1 and entered a two-part Phase 2 study in the United Kingdom (“UK”) to explore the potential of TD-0903 to treat hospitalized patients with Acute Lung Injury caused by COVID-19 and prevent progression to Acute Respiratory Distress Syndrome and the need for assisted ventilation. To expedite enrollment, we opened additional sites in other regions including Europe, US, South Africa and South America. We have completed Phase 2, Part 1 dose escalation and moved into Part 2. Phase 2, Part 2 is a randomized, double-blind, parallel-group study evaluating efficacy and safety of one dose (3 mg) of TD-0903 (selected based on the data from Part 1) as compared with placebo in 198 hospitalized patients with confirmed symptomatic COVID-19 who require supplemental oxygen. We expect to report results from the Phase 2, Part 2 study in the second quarter of 2021.

Business Operations

We continue to monitor the ongoing COVID-19 pandemic and plan to continue taking steps to identify and attempt to mitigate the adverse impacts on, and risks to, our business posed by its spread and actions taken by governmental and health authorities to address the COVID-19 pandemic. The threat of COVID-19 has caused us to modify our business practices, including implementing a work from home policy for all employees, with the exception of key operations and lab personnel, since early March 2020. We have restricted all non-essential business travel, and we expect to continue to implement measures as may be required or recommended by government authorities or as we

6

Table of Contents

determine are in the best interests of our employees, clinical trial sites and participants, the patients we serve and other stakeholders in light of COVID-19.

Our Programs

The tablechart below summarizes the status of our approved product, product candidate in development, and our other product candidates in development. The table also includes the status of the respiratory programs in which we have an economic interest and for which GSK is responsible pursuant to agreements between Innoviva and GSK (“GSK-Partnered Respiratory Programs”). These programs consist primarily of the Trelegy program. We have an economic interest in these programs through our interest in Theravance Respiratory Company, LLC (“TRC”), a limited liability company managed by Innoviva. The status of all GSK-Partnered Respiratory Programs referenced in this Annual Report on Form 10-K are based solely upon publicly available information and may not reflect the most recent developments under the programs.interest.

GraphicGraphic

Graphic

(1)We hold an 85% economic interest in upward-tiering royalty stream of 6.5% – 10% payable by GSK (net of TRC expenses paid and the amount of cash, if any, expected to be used by TRC pursuant to the TRC Agreement over the next four fiscal quarters). 75% of TRC royalties received is pledged to service outstanding notes, and 25% of royalties received are retained by us. All statements concerning TRELEGY are based on publicly available information.

Graphic

Graphic

Glossary of Defined Terms used in Table Above:

COPD: Chronic Obstructive Pulmonary Disease;

CD: Crohn’s Disease;

FF: Fluticasone Furoate;

JAKi: Janus Kinase Inhibitor;

LAMA: Long-Acting Muscarinic Antagonist;

MSA: Multiple System Atrophy;

nOH: Neurogenic Orthostatic Hypotension;

NRI:Norepinephrine Reuptake Inhibitor;

UC: Ulcerative Colitis;

UMEC: Umeclidinium; and

VI: Vilanterol

7

Table of Contents

Core Program HighlightsUpdates

YUPELRI (revefenacin) Inhalation Solution

YUPELRI (revefenacin) inhalation solution is a once-daily, nebulized long-acting muscarinic antagonist (“LAMA”) approved for the maintenance treatment of COPD in the US. LAMAs are recognized by international COPD treatment guidelines as a cornerstone of maintenance therapy for COPD, regardless of severity of disease. Our market research indicates there is an enduring population of COPD patients in the US that either need or prefer nebulized delivery for maintenance therapy. The stability of revefenacin in both metered dose inhaler and dry powder inhaler (“MDI/DPI”) formulations suggests that revefenacin could also serve as a foundation for novel handheld combination products.

In November 2018,5

Table of Contents

We co-developed YUPELRI was approved by the FDA for the maintenance treatment of patients with COPD. Following shipments into commercial channel in late 2018, we andour collaboration partner, Viatris formally launched our sales and marketing efforts in early 2019. As described above and in Item 1A.Risk Factorentitled“We face risks related to health epidemics, including the recent COVID-19 pandemic, which could have a material adverse effect on our business and results of operations,” although YUPELRI net sales growth continued for the year ended December 31, 2020 compared to 2019, the trajectory was impacted by COVID-19, and we have observed increased volatility in YUPELRI sales. However, our YUPELRI operations were profitable on a brand basis for the first time in the second half of 2020. In addition, we are tracking several key performance metrics to gauge success in building market acceptance, including formulary success and market access.

Viatris Collaboration

In January 2015, Viatris and we established a strategic collaboration for the development and commercialization of revefenacin. Partnering with a leader in nebulized respiratory therapies enables us to expand the breadth of our revefenacin development program and extend our commercial reach beyond the acute care setting. Viatris funded the Phase 3 development program of YUPELRI, enabling us to advance other high value pipeline assets alongside YUPELRI.

Inc. Under the terms of the Viatris Development and Commercialization Agreement (the “Viatris Agreement”), Viatris and we co-develop revefenacin for COPD and other respiratory diseases. We led the US Phase 3 development program for YUPELRI in COPD, and Viatris was responsible for reimbursement of our costs related to the registrational program up until the approval of the first new drug application, (“NDA”), after which costs arewere shared. With YUPELRI was approved by the FDA for the maintenance treatment of patients with COPD in November 2018. In the US, Viatris is leading the commercialization of YUPELRI, and we co-promote the product in the US under a profit and loss sharing arrangement (65% to Viatris; 35% to Theravance Biopharma)us). Outside the US (excluding China and adjacent territories), Viatris is responsible for development and commercialization and will pay us a tiered royalty on net sales at percentage royalty rates ranging from low double-digits to mid-teens.

In June 2019, we announced the expansion of the Viatris Agreement to grant Viatris exclusive development and commercialization rights to nebulized revefenacin in China and adjacent territories, which include Hong Kong SAR, the Macau SAR, and Taiwan. In exchange, we received an upfront payment of $18.5 million (before a required tax withholding) and will be eligible to receive additional potential development and sales milestones totaling $54.0 million and low double-digit tiered royalties on net sales of nebulized revefenacin, if approved. In March 2020, we earned a $1.5 million development milestone for the acceptance of a clinical trial application associated with the use of revefenacin monotherapy in China and adjacent territories. Viatris is responsible for all aspects of development and commercialization in the partnered regions, including pre- and post-launch activities and product registration and all associated costs. We retain worldwide rights to revefenacin delivered through other dosage forms, such as a MDI/DPI.

In 2019, we granted Viatris exclusive development and commercialization rights to nebulized revefenacin in China and adjacent territories, which include the Hong Kong SAR, the Macau SAR, and Taiwan, (collectively, the “China Region”) and we are eligible to receive low double-digit tiered royalties on net sales of nebulized revefenacin, if approved. As noted above, Viatris is responsible for all aspects of development and commercialization of nebulized revefenacin in the China Region, including pre- and post-launch activities and product registration and all associated costs.

Under the terms of the Viatris Agreement, as amended, as of December 31, 2020,2023, we arewere eligible to receive from Viatris potential global development, regulatory and sales milestone payments totaling(excluding the China Region) of up to $257.5$205.0 million in the aggregate with $205.0$160.0 million associated with YUPELRI monotherapy and $52.5$45.0 million associated with future potential combination products. Of the $205.0$160.0 million associated with monotherapy, $187.5$10.0 million relates to regulatory actions in the EU and $150.0 million relates to sales milestonesbased on achieving certain levels of annual US net sales as follows:

 YUPELRI US Net Sales

Sales Milestones

(In a Calendar Year)

Due from Viatris

$250.0 million

$25.0 million

$500.0 million

$50.0 million

$750.0 million

$75.0 million

As of December 31, 2023, we were also eligible to receive additional potential development and sales milestones of up to $52.5 million related to Viatris’ development and commercialization of nebulized revefenacin in the China Region with $45.0 million associated with YUPELRI monotherapy and $7.5 million associated with future potential combination products. Of the $45.0 million associated with monotherapy, $7.5 million relates to regulatory approval in the China Region and $37.5 million relates to sales milestones based on achieving certain levels of cumulative net sales and $17.5 million relatesin the China Region as follows:

YUPELRI China Region Net Sales

Sales Milestones

(Cumulative)

Due from Viatris

$100.0 million

$2.5 million

$200.0 million

$5.0 million

$400.0 million

$10.0 million

$800.0 million

$20.0 million

With respect to global development and regulatory actions. The $52.5 million associated with future potential combination products relates solelythe China Region royalties, we are eligible to global development and regulatory actions.receive low double-digit tiered royalties on net sales of nebulized revefenacin as follows:

 YUPELRI China Region Net Sales Thresholds

Royalty Rate

(Annual)

Due from Viatris

≤ $75.0 million

14%

> $75.0 million to ≤ $150.0 million

17%

> $150 million

20%

86

Table of Contents

Lung-selective, Nebulized Pan-Janus Kinase (JAK) Inhibitor (TD-0903)In November 2023, we learned that Viatris’ Phase 3 study of YUPELRI in China was positive, and the data were consistent with previous findings of YUPELRI’s strong efficacy. Viatris plans to move forward with a registrational filing for YUPELRI in China in mid-2024.

TD-0903 isIn August 2021, we announced that in collaboration with our partner Viatris, we were initiating a lung-selective, nebulized Janus kinase inhibitor (“JAKi”),Phase 4 study comparing improvements in clinical developmentlung function in adults with severe to very severe COPD and suboptimal inspiratory flow rate following once-daily treatment with either revefenacin (YUPELRI) delivered via standard jet nebulizer or tiotropium delivered via a dry powder inhaler (Spiriva® HandiHaler®). This study was aimed at helping to better inform decisions when physicians are designing a personalized COPD treatment plan with patients. We agreed to pay 35% of the Phase 4 study costs, and Viatris agreed to pay 65% of the Phase 4 study costs. The first patient for the potential treatment of hospitalized patients with Acute Lung Injury (“ALI”Phase 4 study was enrolled in January 2022. In January 2024, we announced that the Phase 4 study did not show a statistically significant difference between YUPELRI and Spiriva HandiHaler on the primary endpoint, change from baseline in trough forced expiratory volume in one second (FEV1) caused by COVID-19. We discovered TD-0903, and it has been shown in experimental murine models to have potent, broad inhibition of JAK-STAT signalingat day 85. While the primary endpoint in the airways following challenges with multiple cytokines. Preclinical studies suggest that TD-0903 has a very high lung to plasma ratioPhase 4 study was not met, YUPELRI demonstrated an efficacy and rapid metabolic clearance resulting in low systemic exposure, compatiblesafety profile consistent with its lung selectivity. TD-0903 is administered via nebulized inhalation solution, which further enhances its lung selectivity. Preclinical pharmacodynamic studies indicate that TD-0903 has an extended duration of action that should enable once daily dosingperformance in humans.other clinical studies.

We believe TD-0903 hasWhile Viatris records total YUPELRI net sales, we are entitled to a 35% share of the potential to inhibit the cytokine storm associated with ALI and prevent progression to Acute Respiratory Distress Syndrome (“ARDS”)net profit (loss). The first healthy volunteer was dosed in a Phase 1 studyOur implied 35% share of TD-0903 in April 2020, and in June 2020, we completed Phase 1 and entered a two-part Phase 2 study. Phase 2total YUPELRI net sales is designed to evaluate the efficacy, safety, and tolerability of TD-0903 in subjects with confirmed symptomatic COVID-19 hospitalized for symptomatic respiratory insufficiency. This study will also evaluate the PK of TD-0903 in these subjects. To expedite enrollment, we opened additional sites in other regions including Europe, the US, South Africa and South America.presented below:

We completed Phase 2, Part 1 a small sub-study of 25 patients intended to assess safety, PK and exploratory clinical measures of three doses of TD-0903 versus placebo. Data showed that inhaled administration of nebulized TD-0903, once daily over seven days, was generally well-tolerated and showed a numerical trend towards improved clinical status, reduced hospital stay and fewer deaths compared to placebo during a 28-day observation period. TD-0903 also demonstrated evidence of improvements in several relevant inflammatory biomarkers and low systemic exposure at all doses. This demonstrates the lung-selective design features of the molecule.

We have moved into Phase 2 Part 2, which is a randomized, double-blind, parallel-group study evaluating efficacy and safety of one dose (3 mg) of TD-0903 (selected based on the data from Part 1) as compared with placebo in 198 patients. We expect to report results from the Phase 2 Part 2 study in the second quarter of 2021.

Year Ended December 31, 

Change

(In thousands)

  

2023

  

2022

  

$

  

%

    

YUPELRI net sales (100% recorded by Viatris)

$

220,962

$

201,866

$

19,096

9

%  

YUPELRI net sales (Theravance Biopharma implied 35%)

77,337

70,653

6,684

9

Ampreloxetine (TD-9855)

Ampreloxetine is an investigational, once-daily norepinephrine reuptake inhibitor (“NRI”) being developedthat we are developing for the treatment of Multiple System Atrophy (“MSA”) patients with symptomatic neurogenic orthostatic hypotension (“nOH”). nOH is caused by primary autonomic failure conditions including multiple system atrophy, Parkinson’s disease and pure autonomic failure. The compoundthe majority of patients with MSA experience symptoms of nOH. Ampreloxetine has high affinity for binding to the norepinephrine transporters.(“NE”) transporter. By blocking the action of these transporters,the NE transporter, ampreloxetine causes an increase in extracellular concentrations of norepinephrine. Ampreloxetine is wholly owned by us.Theravance Biopharma.

Based on positive top-line four-week results from a small exploratory Phase 2 study in nOH and discussions with the FDA, we advanced ampreloxetine into a Phase 3 program. We announced the initiation of patient dosing in study in early 2019. The Phase 3 program includesconsisted of two studies.pivotal studies and one non-pivotal study. The first pivotal study (SEQUOIA) is, a four-week, randomized double-blind, placebo-controlled study, was designed to evaluate the efficacy and safety of ampreloxetine in Parkinson’s disease (“PD”), pure autonomic failure (“PAF”) and MSA patients with symptomatic nOH. The second pivotal study (REDWOOD) is, a four-month open label study followed by a six-week randomized withdrawal phase was designed to evaluate the durability of the same patient group’s response to ampreloxetine. The protocol for the pivotal studies stipulated an enrollment threshold of ampreloxetine. We announced40% MSA patients based on the initiation ofhypothesis ampreloxetine would work the best in patients with MSA because they have more intact nerves on which ampreloxetine can exert its effect, relative to the other patient dosingtypes in eachthe study. The third, non-pivotal study (OAK), was a three and half year long-term extension study.

In September 2021, we reported that the SEQUOIA Phase 3 clinical study did not meet its primary endpoint. Most treatment-related adverse events were mild or moderate in early 2019.severity. Serious adverse events occurred in two patients on placebo and four on ampreloxetine, none of which were considered related to the study drug. No deaths were reported, and there was no signal for supine hypertension.

In April 2022, we reported that the REDWOOD Phase 3 also includes a 26-week open-labelclinical study (OAK), which is a long-term extension study that will be ongoing atdid not meet its primary endpoint as the time of registration, to allow participants completing REDWOOD to have continued access to ampreloxetineresults were not statistically significant for up to 3.5 years and to collect safety and tolerability data over the course of treatment. As described above and in Item 1A. Risk Factors, the COVID-19 pandemic has impacted the timeline for our clinical trials. In recognition of the increasing range of barriers presented by the ongoing pandemic on the abilityoverall population of patients which included patients with PD, PAF, and MSA. The pre-specified subgroup analysis by disease type suggested that the average benefit seen in patients receiving ampreloxetine was largely driven by a benefit to travelMSA patients. The benefit to sites and access medicines, we worked with the FDA to decentralize the Phase 3 studiesMSA patients in the ampreloxetine program. We are working to offer the decentralized approach across the ampreloxetine Phase 3 programstudy was observed in the US and globally in an effort to overcome the challenges patients face regarding travel, healthcare access and participation in clinical trials. We expect the SEQUOIA study to report data in the third quarter of 2021.multiple endpoints including Orthostatic Hypotension Symptom Assessment Scale (“OHSA”) composite, Orthostatic Hypotension Daily Activities Scale (“OHDAS”) composite, Orthostatic Hypotension Questionnaire (“OHQ”) composite

97

Table of Contents

Gut-selective Pan-JAK Inhibitor Program (Izencitinib)and OHSA #1. Throughout the study, there was no indication of worsening of supine hypertension among any of the patient sub-groups. Data suggest that ampreloxetine was well-tolerated and no new safety signals were identified among any of the patient sub-groups.

JAK inhibitors function by inhibitingIn June 2022, we held a Type C meeting with the activityFDA. From this meeting, we aligned on a path to a New Drug Application (“NDA”) filing with one additional Phase 3 clinical study (CYPRESS) in MSA patients with symptomatic nOH, using the OHSA composite score as the primary endpoint. This Phase 3 study was initiated in the first quarter of one or more2023, and the study is currently open to recruitment with the expectation of enrolling the final patient into the open label period of the Janus kinase familystudy in the second half of enzymes (JAK1, JAK2, JAK3, TYK2)2024. In May 2023, we announced that play a key role in cytokine signaling. Inhibiting these JAK enzymes interferes with the JAK/STAT signaling pathway and, in turn, modulates the activity of a wide range of pro-inflammatory cytokines. JAK inhibitors are currently approvedFDA granted Orphan Drug Designation status to ampreloxetine for the treatment of rheumatoid arthritis, myelofibrosis, and ulcerative colitis and have demonstrated therapeutic benefit forsymptomatic nOH in patients with Crohn’s disease. However, these products are known to have side effects based on their systemic exposure. In izencitinib, our program goal is to develop an orally administered, gut-selective pan-JAK inhibitor specifically designed to distribute adequately and predominantly to the tissues of the intestinal tract, treating inflammation in those tissues while minimizing systemic exposure. We believe izencitinib could be a potential treatment for a range of inflammatory intestinal diseases, and it is in development for the treatment of ulcerative colitis and Crohn’s disease.MSA. 

BasedIn July 2022, Royalty Pharma Investments 2019 ICAV (“Royalty Pharma”) agreed to invest up to $40.0 million to advance the development of ampreloxetine in MSA in exchange for unsecured low single-digit royalties. Royalty Pharma’s $40.0 million investment in ampreloxetine included a $25.0 million upfront payment received in July 2022 and an additional $15.0 million payment upon the first regulatory approval of ampreloxetine. In exchange, Royalty Pharma will receive future unsecured royalties of 2.5% on positive results from a Phase 1b exploratory study in ulcerative colitisannual ampreloxetine global net sales up to $500.0 million and following dialogues with4.5% on annual global net sales over $500.0 million. If ampreloxetine regulatory approval is not achieved or if ampreloxetine sales are never recognized, the FDA and European Medicines Agency (“EMA”) regarding study design, we advanced izencitinib into two clinical studies in inflammatory intestinal diseases. The Phase 2 (DIONE) study is a twelve-week randomized, double-blind, placebo-controlled study designed to evaluate the efficacy and safety of patients with Crohn’s disease, which began dosing patients in late 2018. The Phase 2b/3 (RHEA) study is a randomized, double-blind, placebo-controlled study to evaluate the efficacy and safety of eight weeks induction and 44 weeks maintenance therapy in patients with ulcerative colitis, which began dosing patients in early 2019. As described above and in Item 1A. Risk Factors, the COVID-19 pandemic has impacted the timeline for our clinical trials. Data from the Phase 2b portion of the ulcerative colitis study and the Phase 2 Crohn’s disease studies is expected in the third quarter of 2021.

amounts invested by Royalty Pharma would not be repaid by us.

Irreversible JAK3 Inhibitor (TD-5202)

TD-5202 is an investigational, orally administered, gut-selective, irreversible JAK3Skin-selective Pan-JAK inhibitor that has demonstrated a high affinity for the JAK3 enzyme. Through the selective inhibition of JAK3, TD-5202 interferes with the JAK/STAT signaling pathway and, in turn, modulates the activity of select pro-inflammatory cytokines, including IL-2, IL-15, and IL-21 which play a central role in the pathogenesis of T-cell mediated disease, including inflammatory intestinal disease, such as celiac disease. Importantly, TD-5202 is specifically designed to act locally within the intestinal wall thereby limiting systemic exposure.Program

In September 2019, we announced the initiation of a Phase 1 single ascending dose and multiple ascending dose trial designed to evaluate the safety and tolerability of TD-5202 in healthy participants, plus assess plasma pharmacokinetics of TD-5202 to confirm circulating levels are low, consistent with a gut-selective approach. In February 2020, we announced that data from the Phase 1 study indicated that TD-5202 was generally well tolerated as a single oral dose up to 2000 milligrams and as a twice-daily oral dose up 2000 milligrams total per day given for ten consecutive days in healthy participants.

We are developing izencitinib and TD-5202 in collaboration with Janssen as part of the companies’ global co-development and commercialization agreement for novel, gut-selective JAK inhibitors.

Janssen Biotech Collaboration

In February 2018,December 2019, we announcedentered into a global co-development and commercializationlicense agreement with JanssenPfizer Inc. (“Pfizer”) for izencitinibour 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 related back-up compounds for inflammatory intestinal diseases, including ulcerative colitis and Crohn's disease.are specifically designed to possess skin-selective activity with minimal systemic exposure. Under the terms of the agreement, we received an upfront payment of $100.0 million and will be eligible to receive up to an additional $900.0 million in potential payments, inclusive of a potential opt-in payment following completion of the Phase 2 Crohn’s study and the Phase 2b induction portion of the ulcerative colitis study. At that time, Janssen can elect to obtainPfizer Agreement, Pfizer had an exclusive license to develop, manufacture and commercialize izencitinibcertain compounds for all uses other than gastrointestinal, ophthalmic, and certain related compounds by paying usrespiratory applications. We received an upfront cash payment of $10.0 million in 2019, and in March 2022, we received a fee$2.5 million development milestone payment from Pfizer for the first patient dosed in a Phase 1 clinical trial of $200.0 million. Upon such election,the skin-selective pan-JAK inhibitor program. In June 2023, we and Janssen will jointly develop and commercialize izencitinib in inflammatory intestinal diseases, and we and Janssen will share profits and losses inreceived notice from Pfizer terminating the US and expenses relatedPfizer Agreement, effective as of October 7, 2023, at which time the skin-selective pan-JAK inhibitor program was returned to a potential Phase 3 program (67% to Janssen; 33% to Theravance Biopharma). In addition, we would receive royalties on ex-US sales at double-digit tiered percentage royalty rates.us.

Economic Interests and Other Assets

Mid- and Long-Term Economic Interest in TRELEGY®

In July 2022, we completed the sale of all of our equity interests in Theravance Respiratory Company, LLC (“TRC”) representing our 85% economic interest in the sales-based royalty rights on worldwide net sales of GSK plc's (“GSK”) TRELEGY ELLIPTA (“TRELEGY”) to Royalty Pharma for approximately $1.1 billion in upfront cash while retaining future value through the right to receive contingent milestone payments and certain outer year-royalties (the “TRELEGY Royalty Transaction”).

From and after January 1, 2023, for any calendar year starting with the year ended December 31, 2023 and ending with the year December 31, 2026, upon certain milestone minimum royalty amounts for TRELEGY being met, Royalty Pharma is obligated to make certain cash payments to us (the “Milestone Payment(s)”). As of January 1, 2024, a total of $200.0 million in potential Milestone Payments remain available to us. For the next potential Milestone Payment, we are eligible to receive either (i) $25.0 million if Royalty Pharma receives $240.0 million or more in royalty payments from GSK with respect to 2024 TRELEGY global net sales, which we would expect to occur in the event TRELEGY global net sales are approximately $2.86 billion; or (ii) $50.0 million if Royalty Pharma receives $275.0 million or more in royalty payments from GSK with respect to 2024 TRELEGY global net sales, which we would expect to occur in the event TRELEGY global net sales exceed approximately $3.21 billion. Fourth quarter of 2023 global net sales were $737.0 million which represented an increase of 35% year-over-year, and total 2023 global net sales were $2.7 billion which represented an increase of 28% year-over-year.

In addition to potential Milestone Payments, we will receive from Royalty Pharma 85% of the royalty payments on TRELEGY payable (a) for sales or other activities occurring on and after January 1, 2031 related to TRELEGY in the

108

Table of Contents

The closingUS, and (b) for sales or other activities occurring on and after July 1, 2029 related to TRELEGY outside of the opt-in portion of the transaction is subjectUS. US TRELEGY royalties payable to clearance under the Hart-Scott-Rodino Antitrust Improvements Act (“HSR Act”). After Phase 2, Janssen would lead subsequent development of izencitinibus by Royalty Pharma are expected to end in Crohn’s disease if it makes such an election. We will lead development of izencitinib in ulcerative colitis through completion of the Phase 2b/3 study. If izencitinib is commercialized, we have the optionlate 2032, and ex-US royalties are expected to co-commercializeend in the US,mid-2030s and Janssen would have sole commercialization responsibilities outside the US. 

Lung-selective Pan-JAK Inhibitor Program (TD-8236)

TD-8236 is an investigational, inhaled lung-selective pan-JAK inhibitor that has demonstrated a high affinity for each of the JAK family of enzymes (JAK1, JAK2, JAK3are country specific. Royalty rates are upward tiering from 6.5% to 10% and TYK2) that play a key role in cytokine signaling. Inhibiting these JAK enzymes interferes with the JAK/STAT signaling pathway and, in turn, modulates the activity of a wide range of pro-inflammatory cytokines. While orally-administered JAK inhibitors are currently approved for the treatment of a range of inflammatory diseases, no inhaled JAK inhibitor is approved for the treatment of airway disease, including asthma. The pan-JAK activity of TD-8236 suggests that it may impact a broad range of cytokines that have been associated both T2-high and T2-low asthma. Many moderate to severe asthma patients comprising both T2 phenotypes remain symptomatic despite being compliant on high doses of inhaled steroids. Importantly, TD-8236 is designed to distribute and exert its anti-inflammatory effect within the lungs following dry powder inhalation, with the potential to treat inflammation within that organ while minimizing systemic exposure. In preclinical assessments, TD-8236 has shown to potently inhibit targeted mediators of T2-high and T2-low asthma in human cells.

In September 2019, we announced positive results from a Phase 1 single-ascending dose and multiple-ascending dose clinical trial of TD-8236. The Part C extension portion of the Phase 1 trial, assessing additional biomarkers in patients with moderate to severe asthma, demonstrated that biomarkers of JAK target engagement (including exhaled nitric oxide and pSTAT1 and pSTAT6 in cellular fractions of bronchoalveolar lavage fluid) were reduced after 7 days of once-daily dosing at a dose level of 1500 µg. In December 2019, we announced the initiation of a Phase 2 allergen challenge study of TD-8236 in mild allergic asthma patients, and we reported results of the Phase 1C study in the third quarter of 2020. TD-8236 is the first JAK inhibitor to be studied in a Phase 2a Lung Allergen Challenge (“LAC”) study, but inconsistent with our expectations, it had no impact on decrease in lung function (FEV1) following allergen inhalation after 14 days of once-daily dosing at dose levels of 150 µg and 1500 µg compared to placebo and did not meet the primary study objective. The collective data set (preclinical, Phase 1, Phase 2a) demonstrates TD-8236 engages the JAK mechanism at a dose of 1500 µg as evidenced by the reduction in FeNO and reductions in pSTAT, but does not protect against the lung function decline seen after allergen inhalation.

After completing additional analysis on TD-8236 gene signature and biomarker data from the Phase 1C study, we found that the data are consistent with target engagement in the lung. However, based on our current understanding of TD-8236, we have decided to pause the clinical program for this specific compound in its current form and apply our learnings to refining and expanding molecules in our portfolio of inhaled JAK inhibitors. The robust body of scientific evidence from TD-8236 and TD-0903 programs provide confidence for us to continue the lung-selective inhaled JAK inhibitor program for asthma. The full data set for TD-8236 will be presented at future scientific meetings.

Economic Interest in GSK-Partnered Respiratory Programs

We hold an 85% economic interest in any future payments that may be made by GSK to Theravance Respiratory Company, LLC (“TRC”) pursuant to its agreements with Innoviva (net of TRC expenses paid and the amount of cash, if any, expected to be used by TRC pursuant to the TRC LLC Agreement over the next four fiscal quarters) relating to the GSK-Partnered Respiratory Programs, which Innoviva partnered with GSK and assigned to TRC in connection with Innoviva’s separation of its biopharmaceutical operations into its then wholly-owned subsidiary Theravance Biopharma in June 2014. The GSK-Partnered Respiratory Programs consists primarily of the TRELEGY program, which is described in more detail below. We are entitled to this economic interest through our equity ownership in TRC. Our economic interest does not include any payments associated with RELVAR ELLIPTA/BREO ELLIPTA, ANORO ELLIPTA or vilanterol monotherapy.total annual net sales.

The following information regarding the TRELEGY program is based solely upon publicly available information and may not reflect the most recent developments under the programs.

11

Table of Contents

TRELEGY (the combination of fluticasone furoate/umeclidinium bromide/vilanterol)

TRELEGY provides the activity of an inhaled corticosteroid (FF) plus two bronchodilators (UMEC, a LAMA, and VI, a long-acting beta2 agonist, or LABA) in a single delivery device administered once-daily. TRELEGY is approved for use in the US, and European Union (“EU”), and other countries for the long-term, once-daily, maintenance treatment of patients with COPD. We hold an 85% economic interest in the royalties payable by GSK to TRC on worldwide net sales (net of TRC expenses paid and the amount of cash, if any, expected to be used by TRC pursuant to the TRC LLC Agreement over the next four fiscal quarters) through our interest in TRC. Those royalties are upward-tiering from 6.5% to 10%, resulting in cash flows to us of approximately 5.5% to 8.5% of worldwide net sales of TRELEGY (net of TRC expenses paid and the amount of cash, if any, expected to be used by TRC pursuant to the TRC LLC Agreement over the next four fiscal quarters). Theravance Biopharma is not responsible for any of GSK’s costs related to the development or commercialization of TRELEGY.

GSK and Innoviva conducted two global pivotal Phase 3 studies of TRELEGY in COPD, the IMPACT study and the FULFIL study. In September 2017, GSK and Innoviva announced thatAdditionally, the FDA approved TRELEGY for the long-term, once-daily, maintenance treatment of appropriate patients with COPD. In August 2019, GSK announced that it had filed a supplemental new drug application (“sNDA”) to the FDA supporting revised labelling for TRELEGY on reduction in risk of all-cause mortality compared with ANORO ELLIPTA in patients with COPD. The FDA postponed an Advisory Committee meeting that was previously scheduled for April 21, 2020 related to this sNDA which was subsequently rescheduled for August 31, 2020. During the FDA’s Advisory Committee, the panel voted against the proposed all-cause mortality labeling claim. GSK announced during their third-quarter conference call on October 28, 2020 that the company received a Complete Response Letter from the FDA for the label update.

Additionally, GSK and Innoviva conducted a Phase 3 (CAPTAIN) study of TRELEGY in patients with asthma. In May 2019, GSK and Innoviva announced that the study had met its primary endpoint, and in October 2019, GSK announced it had filed a sNDA with the FDA seeking an additional indication for the use of once-daily, single-inhaler triple therapy, TRELEGY for the treatment ofto treat asthma in adults. The FDA approved the asthma sNDAadults in September 2020 making TRELEGY the first once-daily single inhaler triple therapy for the treatment of both asthma and COPD in the US. GSK has obtained approval for the asthma indication in ten additional markets. TRELEGY is currently expected to generate global peak sales of $3.7 billionin 2027 according to consensus estimates. Over the past three years, TRELEGY has shown substantial growth, with global net sales increasing annually from $661.4 million in 2019 to $2.7 billion in 2023.

Theravance Respiratory Company, LLC

Prior toSee “Risk Factors—We do not control the June 2014 spin-off from Innoviva,commercialization of TRELEGY; accordingly, our former parent company, Innoviva assigned to Theravance Respiratory Company, LLC (“TRC”), a Delaware limited liability company formed by Innoviva, its strategic alliance agreement with GSKreceipt of Milestone Payments and all of its rights and obligations under its collaboration agreement with GSK, other than with respect to RELVAR ELLIPTA/BREO ELLIPTA, ANORO ELLIPTA and vilanterol monotherapy.

Our equity interest in TRC is the mechanism by which we are entitled to the 85% economic interest in any future payments made by GSK under the strategic alliance agreement and under the portionreceipt of the collaboration agreement assigned to TRC by Innoviva (net of TRC expenses paid and the amount of cash, if any, expected to be used by TRC pursuant to the TRC LLC Agreement over the next four fiscal quarters). TRELEGY isvalue we currently the only commercial product arising out of the GSK agreements assigned by Innoviva to TRC. Royalty payments from GSK to TRC arisinganticipate from the net sales of Trelegy are presented in our consolidated statements of operations within “Income from investment in TRC, LLC” and is classified as non-operating income. During the three months ended June 30, 2020, we also recorded $8.5 million within “Income from investment in TRC, LLC” representing our share of a $10.0 million fee that GSK agreedOuter Years Royalty will depend on, among other factors, GSK’s ability to pay TRC upon termination of the inhaled Bifunctional Muscarinic Antagonist-Beta2 Agonist (“MABA”) program in June 2020. Seventy-five percent of the “Income from investment in TRC, LLC,” as evidenced by the Issuer II Class C Units (defined below), is available only further commercialize TRELEGY” for payment of the $400.0 million aggregate amount of 9.5% fixed rate non-recourse term notes due 2035 (the “Non-Recourse 2035 Notes”) and is not available to pay our other obligations or the claims of our other creditors.

Our special purpose subsidiary Triple Royalty Sub II LLC (the “Issuer II”) issued the Non-Recourse 2035 Notes in February 2020, the proceeds of which were used in part to repay the outstanding balance of our 9.0% non-recourse notes, due on or before 2033 (the “Non-Recourse 2033 Notes”) that were issued in November 2018. The Non-Recourse 2035 Notes are secured by all of the Issuer II’s rights, title and interest as a holder of certain membership

12

Table of Contents

interests (the “Issuer II Class C Units”) in TRC. The Issuer II Class C Units entitle the Issuer II to receive 63.75% of the economic interest that TRC receives in any future payments made by GSK under the agreements described above, or 75% of the income from our 85% ownership interest in TRC.

On June 10, 2020, we disclosed in a Form 8-K that we had formally objected to TRC and Innoviva, as the manager of TRC, regarding their proposed plan to use TRELEGY royalties to invest in certain privately-held companies, funds that would otherwise be available for distribution to us under the terms of the TRC LLC Agreement. We intend to continue to seek to protect our interests in this matter consistent with the dispute resolution procedures of the TRC LLC Agreement. In this regard, we initiated an arbitration proceeding against Innoviva and TRC in October 2020 challenging the authority of Innoviva and TRC to pursue such a business plan rather than distribute such funds to us in a manner consistent with the TRC LLC Agreement and our 85% economic interest in TRC. The arbitration hearing was held during the week of February 16, 2021, with post-hearing briefing and arguments to take place over the next few weeks. We currently anticipate a decision in those proceedings near the end of the first quarter or early in the second quarter of 2021.additional information.

Other Economic InterestsDevelopment Projects

Selective 5-HT4 Agonist (TD-8954)Our focus remains on near-term value opportunities which consists of executing our ampreloxetine registration Phase 3 study (CYPRESS) and preparing for the NDA filing process. In February 2023, as part of our 2023 Strategic Actions, we announced the decision to discontinue research activities including our inhaled JAK program, including nezulcitinib, a nebulized, lung-selective JAK inhibitor positioned for the treatment of acute and chronic lung diseases.

TD-8954 is a selective 5-HT4 receptor agonist being developed for potential use in the treatment of gastrointestinal motility disorders.

Takeda Collaborative Arrangement

In June 2016, we entered into a License and Collaboration Agreement (the “Takeda Agreement”) with Millennium Pharmaceuticals, Inc. (“Millennium”), in order to establish a collaboration for the development and commercialization of TD-8954 (TAK-954). Millennium is an indirect wholly-owned subsidiary of Takeda Pharmaceutical Company Limited (“Takeda”). TD-8954 is currently in a Phase 2 study as a potential treatment for post-operative gastrointestinal dysfunction. Under the terms of the Takeda Agreement, Takeda is responsible for worldwide development and commercialization of TD-8954. We received an upfront cash payment of $15.0 million and will be eligible to receive success-based development, regulatory and sales milestone payments from Takeda. We will also be eligible to receive a tiered royalty on worldwide net sales by Takeda at percentage royalty rates ranging from low double-digits to mid-teens.

Skin-selective Pan-JAK inhibitor program

In December 2019, we 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.

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. We received an upfront cash payment of $10.0 million and are eligible to receive up to an additional $240.0 million in development and sales milestone payments from Pfizer. In addition, we are 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.

Research Projects

Our research goal is to design organ-selective medicines that target diseased tissues, without systemic exposure, in order to maximize patient benefit and minimize risk. The intention is to expand the therapeutic index of our potential medicines compared to conventional systemic therapies. Our efforts leverage years of experience in developing lung-selective medicines, such as YUPELRI, to treat respiratory diseases, and have led to the discovery of the gut-selective pan-JAK inhibitor izencitinib and irreversible JAK3 inhibitor TD-5202 for inflammatory intestinal diseases and the lung-selective inhaled JAK inhibitor TD-8236 and nebulized pan JAK inhibitor TD-0903 in serious respiratory disease. We plan to advance towards the clinic other research projects with various mechanisms of action, each specifically tailored for the organ of interest, as we identify and validate potentially appropriate compounds. Our research is focused

13

Table of Contents

in the areas of inflammation and immunology, and our pipeline of internally discovered programs is targeted to address significant patient needs.

Our Strategy

Our core purposefocus is to create transformational deliver medicines that make a difference® in people's lives. In pursuit of our purpose, we leverage decades of expertise, which has led to improve the livesdevelopment of FDA-approved YUPELRI® (revefenacin) inhalation solution indicated for the maintenance treatment of patients suffering from serious illnesses.with COPD. Ampreloxetine, our late-stage investigational norepinephrine reuptake inhibitor in development for symptomatic nOH, has the potential to be a first in class therapy effective in treating a constellation of cardinal symptoms in MSA patients. We striveare committed to apply insight and innovation at each stage of our business, including research, development and commercialization. Our principle strategic objective is to transform the treatment of serious diseases through the discovery, development, and commercialization of organ-selective medicines designed to maximize patient benefit while minimizing patient risk.creating/driving shareholder value.

We follow these core guiding principles in our mission to drive value creation:

Focus on insight and innovation;
Outsource non-core activities;

Focus on insight and innovation;

Create and foster an integrated environment; and

Outsource non-core activities;

Aggressively manage uncertainty.

Create and foster an integrated environment; and

Aggressively manage uncertainty.

We manage our pipeline with the goal of optimizing program value and allocation of resources. We employ multiple strategies for commercialization of our products. Our approach may involve retaining product rights and marketing a product independently in the US or we may partner a product to extend our commercial reach, to expand our geographic reach, and/or to manage the financial risk associated with the program. Alternatively, we may monetize or divest an asset that we designate as outside our core business, where we believe the program is optimized by leveraging partner capabilities and removing or limiting our research and development costs.

9

Table of Contents

Manufacturing

We rely primarily on a network of third-party manufacturers, including contract manufacturing organizations to produce the active pharmaceutical ingredients (“API”) and drug products required for our clinical trials and drug product.trials. We believe that we and our partners have in-house expertise to manage this network of third-party manufacturers, and we believe that we will be able to continue to negotiate third-party manufacturing arrangements on commercially reasonable terms and that it will not be necessary for us to rely on internal manufacturing capacity in order to develop or, potentially, commercialize our products. However, if we are unable to obtain contract manufacturing or obtain such manufacturing on commercially reasonable terms, or if manufacturing is interrupted at one of our suppliers, whether due to regulatory or other reasons, we may not be able to develop our products or commercialize productour products as planned.

Any inability to acquire sufficient quantities of API or drug product in a timely manner from current or future sources could disrupt our research and development programs, the conduct of future clinical trials or our commercialization efforts. For more information, see the risk factor under the heading “There is a single source of supply for a number of our product candidates and for YUPELRI, and our business will be harmed if any of these single-source manufacturers are not able to satisfy demand and alternative sources are not available” of this Annual Report on Form 10-K.

Government Regulation

The development and commercialization of pharmaceutical products and our product candidates by us, our collaboration partners and licensees, GSK, and Cumberland Pharmaceuticals Inc. (“Cumberland”) and our ongoing researchthose commercializing products in which we have an economic interest, such as GSK, are subject to extensive regulation by governmental authorities in the US and other countries. Before marketing in the US, any medicine must undergo rigorous preclinical studies and clinical studies and an extensive regulatory approval process implemented by the FDA under the Federal Food, Drug, and Cosmetic Act. Outside the US, the ability to market a product depends upon receiving a marketing authorization from the appropriate regulatory authorities which are subject to equally rigorous regulatory obligations. The requirements governing the conduct of clinical studies,

14

Table of Contents

marketing authorization, pricing and reimbursement vary widely from country to country. In any country, however, the commercialization of pharmaceutical products is permitted only if the appropriate regulatory authority is satisfied that we have presented adequate evidence of the safety, quality and efficacy of the product.

Before commencing clinical studies in humans in the US, we must submit to the FDA an investigational new drug application (“IND”) that includes, among other things, the general investigational plan and protocols for specific human studies and the results of preclinical studies. An IND will go into effect 30 days following its receipt by the FDA unless the FDA issues a clinical hold. Once clinical studies have begun under the IND, they are usually conducted in three phases and under FDA oversight. These phases generally include the following:

Phase 1. The product candidate is introduced into patients or healthy human volunteers and is tested for safety, dose tolerance and pharmacokinetics.

Phase 2. The product candidate is introduced into a limited patient population to assess the efficacy of the drug in specific, targeted indications, assess dosage tolerance and optimal dosage, and identify possible adverse effects and safety risks.

Phase 3. If a compound is found to be potentially effective and to have an acceptable safety profile in Phase 2 evaluations, the3 clinical study will be expandedtrials are undertaken to further demonstrateevaluate dosage, clinical efficacy, optimal dosagepotency and safety withinin an expanded patient population.population at geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit profile of the product and provide an adequate basis for product labeling.

The results of product development, preclinical studies and clinical studies must be submitted to the FDA as part of an NDA. The NDA also must contain extensive manufacturing information.information, and under the Pediatric Research Equity Act (“PREA”), certain applications for approval must also include an assessment, generally based on clinical study data, of the safety and effectiveness of the subject drug in relevant pediatric populations. The submission of an NDA generally requires payment of a substantial user fee to the FDA under the Prescription Drug User Fee Act (“PDUFA”) establishes timeframes for FDA review of NDAs, with a, subject to certain limited deferrals, waivers and reductions. FDA’s PDUFA performance goal of reviewingis to review and actingact on 90 percent of priority new molecular entity (“NME”) NDA submissions within 6 months of the 60-day filing date, and to review and act on 90 percent of standard NME NDA submissions within 10 months of the 60-day filing

10

Table of Contents

date. The 2007 Food and Drug Administration Amendments Act gave the FDA authority to require implementation ofmay determine that a formal Risk Evaluation and Management Strategy (“REMS”) is necessary to ensure that the benefits of a product outweigh its risks. At the end of the review period, the FDA communicates either approval of the NDA or issues a complete response letter (“CRL”) listing the application’s deficiencies. The CRL may require additional testing or information, including additional pre-clinical or clinical data, for the FDA to reconsider the application. Even if such additional information and data are submitted, the FDA may decide that the NDA still does not meet the standards for approval. Data from clinical trials are not always conclusive and the FDA may interpret data differently than the sponsor. FDA approval of any application may include many delays or never be granted. If FDA grants approval, an approval letter authorizes commercial marketing of the product candidate with specific prescribing information for specific indications. Post-approval modifications to the drug, such as changes in indications, labeling, or manufacturing processes or facilities, may require a sponsor to develop additional data or conduct additional pre-clinical studies or clinical trials, to be submitted in a new or supplemental NDA, which would require FDA approval.

OnceIf an application is approved, drug products are subject to continuing regulation by the FDA, and the FDA may withdraw the product approval if compliance with post-marketing regulatory standards is not maintained or if safety or quality issues are identified after the product reaches the marketplace. In addition, the FDA may require post-marketing studies, sometimes referred to as Phase 4 studies, to monitor the safety and effectiveness of approved products, and may limit further marketing of the product based on the results of these post-marketing studies. The FDA has broad post-market regulatory and enforcement powers, including the ability to require changes to a product’s approved labeling, including the addition of new warnings and contraindications, or the implementation of other risk management measures, including distribution-related restrictions, if there are new safety information developments, suspend or delay issuance of approvals, seize products, withdraw approvals, enjoin violations, and initiate criminal prosecution.

If regulatory approval for a medicine is obtained, the clearance to market the product will be limited to those diseases and conditions approved by FDA and for which the medicine was shown to be effective, as demonstrated through clinical studies and specified in the medicine’s labeling. Even ifIf this regulatory approval is obtained, a marketed medicine, its manufacturer and its manufacturing facilities are subject to continual review and periodic inspections by the FDA. The FDA ensures the quality of approved medicines, by carefully monitoring manufacturers’ compliance with its current Good Manufacturing Practice (“cGMP”) regulations.regulations by conducting regular, periodic visits to re-inspect equipment, facilities, and processes following the initial approval of a product. Failure to comply with applicable cGMP requirements and conditions of product approval may lead the FDA to take enforcement actions or seek sanctions, including fines, issuance of warning letters, civil penalties, injunctions, suspension of manufacturing operations, operating restrictions, withdrawal of FDA approval, seizure or recall of products, and criminal prosecution. The cGMP regulations for drugs contain minimum requirements for the methods, facilities, and controls used in manufacturing, processing, and packaging of a medicine. The regulations are intended to make sure that a medicine is safe for use, and that it has the ingredients and strength it claims to have. Discovery of previously unknown problems with a medicine, manufacturer or facility may result in restrictions on the medicine or manufacturer, including fines, issuance of warning letters, civil penalties, injunctions, suspension of manufacturing operations, operating restrictions, costly recalls, or withdrawal of FDA approval, and criminal prosecution.

Additionally, the medicine fromFDA and other federal regulatory agencies closely regulate the market.marketing and promotion of drugs through, among other things, standards and regulations for direct-to-consumer advertising, advertising and promotion to healthcare professionals, communications regarding unapproved uses, industry-sponsored scientific and educational activities, and promotional activities involving the Internet. A product cannot be promoted before it is approved. After approval, product promotion can include only those claims relating to safety and effectiveness that are consistent with the labeling approved by the FDA. Healthcare providers are permitted to prescribe drugs for “off-label” uses - that is, uses not approved by the FDA and not described in the product’s labeling - because the FDA does not regulate the practice of medicine. However, FDA regulations impose restrictions on manufacturers’ communications regarding off-label uses. Broadly speaking, a manufacturer may not promote a drug for off-label use, but under certain conditions may engage in non-promotional, balanced, scientific communication regarding off-label use. Failure to comply with applicable FDA requirements and restrictions in this area may subject a company to adverse publicity and enforcement action by the FDA, the Department of Justice, or the Office of the Inspector General of the Department of Health and Human Services, as well as state authorities. This could subject a company to a range of penalties that could have a significant commercial impact, including civil and criminal fines and agreements that materially restrict the manner in which a company promotes or distributes a drug.

11

Table of Contents

We, our collaboration partners and licensees are also subject to various laws and regulations regarding laboratory practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances in connection with our research.drug development. In each of these areas, as above, the FDA and other regulatory authorities have broad regulatory and enforcement powers, including the ability to suspend or delay issuance of approvals, seize

15

Table of Contents

products, withdraw approvals, enjoin violations, and initiate criminal prosecution, any one or more of which could have a material adverse effect upon our business, financial condition and results of operations.

Outside the US, our, our collaboration partners’, licensees’, GSK’s and Cumberland’sthe ability to market products will also depend on receiving marketing authorizations from the appropriate regulatory authorities. Risks similar to those associated with FDA approval described above exist with the regulatory approval processes in other countries.

United States Healthcare Reform

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (together the(the “Healthcare Reform Act”), substantially changed the way healthcare is financed by both governmental and private insurers, and impacts pricing and reimbursement of YUPELRI and the marketed drugs with respect to which we are entitled to royalty or similar payments, and related commercial operations. Certain provisions of the Healthcare Reform Act have been subject to judicial challenges as well as efforts to repeal or replacemodify them or to alter their interpretation or implementation. We expect that the Healthcare Reform Act, its implementation, efforts to repeal or replace,modify, or invalidate, the Healthcare Reform Act or portions thereof, or its implementation, and other healthcare reform measures that may be adopted in the future, could have a material adverse effect on our industry generally and on the ability of us, our collaboration partners, or those commercializing products with respect to which we have an economic interest or right to receive royalties to maintain or increase sales of our existing products or to successfully commercialize our product candidates, if approved. For more information, see the risk factor under the heading “Changes in healthcare law and implementing regulations, including government restrictions on pricing and reimbursement, as well as healthcare policy and other healthcare payor cost-containment initiatives, may negatively impact us, our collaboration partners, or those commercializing products with respect to which we have an economic interest or right to receive royalties” of this Annual Report on Form 10-K.

Pharmaceutical Pricing and Reimbursement

We participated in and had certain price reporting obligations under the Medicaid Drug Rebate program for VIBATIV for whichand other programs and we remain responsible for data reported under those programs in past quarters, as described in greater detail under the risk factor “If we failed to comply with our reporting and payment obligations under the Medicaid Drug Rebate program or other governmental pricing programs, we could be subject to additional reimbursement requirements, penalties, sanctions and fines, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects” of this Annual Report on Form 10-K.

Our ability, and the ability of our collaboration partners, licensees, or those commercializing products with respect to which we have an economic interest or right to receive royalties to commercialize our products successfully, and our ability to attract commercialization partners for our products, depends in significant part on the availability of adequate financial coverage and reimbursement from third-party payors, including, in the US, governmental payors such as the Medicare and Medicaid programs, managed care organizations, and private health insurers. The Inflation Reduction Act of 2022 (the “IRA”) establishes a new manufacturer discount program, Part B and Part D inflation rebates, and a Drug Price Negotiation Program under which the prices for Medicare units of certain high Medicare spend drugs without generic or biosimilar competition will be capped by reference to, among other things, a specified non-federal average manufacturer price, with negotiated prices set to take effect starting in 2026. Whether any of our products are selected for negotiation for a given year will depend on whether they are at least 7 years post-approval/licensure; whether they meet any of the exclusions from eligibility for selection for negotiation, such as the exclusion of certain orphan drugs; their expenditures under Medicare Part B or Part D during a statutorily specified period; and whether a generic of the product has been determined to have come to market. Ampreloxetine received an Orphan Drug Designation status from the FDA, which should mean it will not be selected for negotiation, assuming it continues to meet all other criteria for the exclusion from eligibility for selection. However, our understanding of whether and when our products are likely to be subject to selection for negotiation could evolve as the Drug Price Negotiation Program is implemented. We further expect continued scrutiny on pricing from Congress, agencies, and

12

Table of Contents

other bodies with respect to drug pricing. The reimbursement environment is described in greater detail under the risk factor “Changes in healthcare law and implementing regulations, including government restrictions on pricing and reimbursement, as well as healthcare policy and other healthcare payor cost-containment initiatives, may negatively impact us, our collaboration partners, or those commercializing products with respect to which we have an economic interest or right to receive royalties” of this Annual Report on Form 10-K.

Coverage and Reimbursement

Market acceptance and sales of any one or more of our product candidates will depend on reimbursement policies and may be affected by future healthcare reform measures in the US. Significant uncertainty exists as to the coverage and reimbursement status of any drug products for which we obtain regulatory approval. In the US and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend in part on the availability of reimbursement from third-party payers. Third-party payers include government health administrative authorities, managed care providers, private health insurers and other organizations. The process for determining whether a payer will provide coverage for a drug product may be separate from the process for setting the price or reimbursement rate that the payer will pay for the drug product. Third-party payers may limit coverage to specific drug products on an approved list, or formulary, which might not include all of the FDA-approved drugs for a particular indication. Third-party payers are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain FDA approvals. Any approved products we commercialize may not be considered by payers to be medically necessary or cost-effective for particular diseases or conditions. A payer’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.

Fraud and Abuse Laws

Our interactions and arrangements with customers and third-party payors are subject to applicable US federal and state fraud and abuse laws and equivalent third country laws. These laws and the related risks are described in greater detail under the risk factor “Our relationships with customers and third-party payors are subject to applicable anti-kickback, fraud and abuse, transparency and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, exclusion, contractual damages, reputational harm and diminished profits and future earnings” of this Annual Report on Form 10-K.

16

Table of Contents

Data Privacy and Protection

We are subject to laws and regulations that address privacy and data security. In the US, numerous federal and state laws and regulations, including state data breach notification laws, state health information and/or genetic privacy laws, and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act (“FTC Act”)), govern the collection, use, disclosure, and protection of health-relatedhealth-related and other personal information. Similar obligations apply outside of the US. For example, the General Data Protection Regulation (“GDPR”) which entered into force on May 25, 2018 amplified existing data protection obligations in the EU. These laws and related risks are described in greater detail under the risk factor “If we fail to comply with data protection laws and regulations, we could be subject to government enforcement actions (which could include civil or criminal penalties), private litigation and/or adverse publicity, which could negatively affect our operating results and business” of this Annual Report on Form 10-K.

Patents and Proprietary Rights

We will be able to protect our technology from unauthorized use by third parties only to the extent that our technology is covered by valid and enforceable patents or is effectively maintained as trade secrets. Our success in the future will depend in part on obtaining patent protection for our product candidates. Accordingly, patents and other proprietary rights are essential elements of our business. Our policy is to seek patent protection in the US and selected foreign countries patent protection for novel technologies, andincluding compositions of matter that are commercially important to the development of our business. Issued US and foreign patents generally expire 20 years after their filing date. For proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other elements

13

Table of Contents

of our drug discovery process that involve proprietary know-how and technology that is not covered by patent applications, we rely on trade secret protection and confidentiality agreements to protect our interests. We require all of our employees, consultants, and advisors to enter into confidentiality agreements. Where it is necessary to share our proprietary information or data with outside parties, our policy is to make available only that information and data required to accomplish the desired purpose and only pursuant to a duty of confidentiality on the part of those parties.

As of December 31, 2020,2023, we owned 507a total of 176 issued US patents and 2,2531,002 granted foreign patents, as well as additional pending US patent applications and foreign patent applications. The claims in these various patents and patent applications are typically directed to compositions of matter, including claims covering product candidates, crystalline forms, lead compounds and key intermediates, pharmaceutical compositions, methods of use and/or processes for making our compounds. Our patents and patent applications are also directed to other inventions made during the research and development process. In particular, our wholly-owned subsidiary Theravance Biopharma R&D IP, LLC owns the following US patents whichthat are listed in the FDA Approved Drug Products with Therapeutic Equivalence Evaluations (Orange Book) for YUPELRI (revefenacin) inhalation solution: US Patent No. 7,288,657, expiring on December 23, 2025; US Patent No. 7,491,736, expiring March 10, 2025; US Patent No. 7,521,041, expiring March 10, 2025; US Patent No. 7,550,595, expiring March 10, 2025; US Patent No. 7,585,879, expiring March 10, 2025; US Patent No. 7,910,608, expiring March 10, 2025; US Patent No. 8,034,946, expiring March 10, 2025; US Patent No. 8,053,448, expiring March 10, 2025; US Patent No. 8,273,894, expiring March 10, 2025; US Patent No. 8,541,451, expiring August 25, 2031; US Patent No. 9,765,028, expiring July 14, 2030; US Patent No. 10,106,503, expiring March 10, 2025; US Patent No. 10,343,995, expiring March 10, 2025; and US Patent No. 10,550,081, expiring July 14, 2030; US Patent No. 11,008,289, expiring July 14, 2030; US Patent No. 11,247,969, expiring March 10, 2025; US Patent 11,484,531, expiring October 23, 2039; US Patent 11,691,948, expiring July 14, 2030; and US Patent 11,858,898, expiring July 14, 2030 (each of the aforementioned expiration dates not including any patent term extensions that may be available under the Drug Price Competition and Patent Term Restoration Act of 1984). Thus, the last to expire patent currently listed in the Orange Book for YUPELRI (revefenacin) inhalation solution expires on August 25, 2031.October 23, 2039. On December 19, 2018, we filed patent term extension (“PTE”) applications in the US Patent and Trademark Office (“USPTO”) for US Patent Nos. 7,288,657 and 7,585,879. These PTE applications are currently pending and, if granted, we will be permitted to extend the term of one of these patents for the period determined by the USPTO.

Issued US and foreign patents generally expire 20 years after their filing date. The patent rights relating to YUPELRI (revefenacin) inhalation solution currently consist of issued US patents, pending US patent applications and certain counterpart patents and patent applications in a number of jurisdictions, including Europe. Europe and China.

Additionally, some of our patents and patent applications are directed to products in development. Our patent rights relating to ampreloxetine and izencitinib currently include an issued US composition of matter patentspatent that expireexpires in 2030 and 2036, respectively (notan issued US method of treatment patent that expires in 2037 (in each case, not including any patent term extensions that may be available under the Drug Price Competition and Patent Term Restoration Act of 1984), as well as. The patent portfolio for this development product includes additional issued US patents, pending US patent applications and/or counterpartand granted patents and patent applications in a number of jurisdictions. Nevertheless, issued patents can be

17

Table of Contents

challenged, narrowed, invalidated, or circumvented, which could limit our ability to stop competitors from marketing similar products and threaten our ability to commercialize our product candidates. Our patent position, similar to other companies in our industry, is generally uncertain and involves complex legal and factual questions. To maintain our proprietary position, we will need to obtain effective claims and potentially enforce these claims once granted. It is possible that, before any of our products can be commercialized, any related patent may expire or remain in force only for a short period following commercialization, thereby reducing any advantage of the patent. Also, we do not know whether any of our patent applications will result in any issued patents or, if issued, whether the scope of the issued claims will be sufficient to protect our proprietary position.

Patent Term Restoration, Regulatory Exclusivities, and Hatch-Waxman Litigation

Depending upon the timing, duration, and specifics of FDA approval of our product candidates, some of our US patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of

14

Table of Contents

an IND and the submission date of an NDA, plus the time between the submission date of an NDA and the approval of that application, except that the period is reduced by any time during which the applicant failed to exercise due diligence. Only one patent applicable to an approved drug is eligible for the extension, and the extension must be applied for prior to expiration of the patent and within 60 days of approval. The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.

The Hatch-Waxman Act also provides periods of regulatory exclusivity for products that would serve as a reference listed drug, or RLD, for an abbreviated new drug application, or ANDA, or application submitted under section 505(b)(2) of the FDCA, or 505(b)(2) application. If a product is a new chemical entity, or NCE — generally meaning that the active moiety has never before been approved in any drug — there is a period of five years from the product’s approval during which the FDA may not accept for filing any ANDA or 505(b)(2) application for a drug with the same active moiety. An ANDA or 505(b)(2) application may be submitted after four years, however, if the sponsor of the application makes a “Paragraph IV” certification stating that one or more of the Orange Book listed patents are invalid or will not be infringed by the applicant’s product.

A product, if not an NCE, or a new product use may instead qualify for a three-year period of exclusivity if the NDA contains new clinical data (other than bioavailability studies), derived from studies conducted by or for the sponsor, that were necessary for approval. In that instance, the exclusivity period does not preclude filing or review of an ANDA or 505(b)(2) application; rather, the FDA is precluded from granting final approval to the ANDA or 505(b)(2) application until three years after approval of the RLD. Additionally, the exclusivity applies only to the conditions of approval that required submission of the clinical data.

Once the FDA accepts for filing an ANDA or 505(b)(2) application containing a Paragraph IV certification, the applicant must within 20 days provide notice to the RLD NDA holder and patent owner that the application has been submitted and provide the factual and legal basis for the applicant’s assertion that the patent is invalid or not infringed. If the NDA holder or patent owner files suit against the ANDA or 505(b)(2) applicant for patent infringement within 45 days of receiving the Paragraph IV notice, the FDA is prohibited from approving the ANDA or 505(b)(2) application for a period of 30 months or the resolution of the underlying suit, whichever is earlier. If the RLD has NCE exclusivity and the notice is given and suit filed during the fifth year of exclusivity, the regulatory stay extends until 7.5 years after the RLD approval. The FDA may approve the proposed product before the expiration of the regulatory stay if a court finds the patent invalid or not infringed or if the court shortens the period because the parties have failed to cooperate in expediting the litigation.

During January 2023, we received notice from Accord Healthcare, Inc.; Cipla USA, Inc. and Cipla Limited; Eugia Pharma Specialties Ltd.; Lupin Inc.; Mankind Pharma Ltd.; Orbicular Pharmaceutical Technologies Private Limited; and Teva Pharmaceuticals, Inc. (collectively, the “generic companies”), that they have each filed with FDA an ANDA, for a generic version of YUPELRI. The notices from the generic companies each included a Paragraph IV certification with respect to five of our patents listed in FDA’s Orange Book for YUPELRI. The asserted patents relate generally to polymorphic forms of and a method of treatment using YUPELRI. In February 2023, we filed patent infringement suits against the generic companies in federal district court, which continue in the United States District Court for the District of New Jersey. That complaint alleges that by filing the ANDAs, the generic companies have infringed five of our Orange Book listed patents. We are seeking a permanent injunction to prevent the generic companies from introducing a generic version of YUPELRI that would infringe our patents. As a result of this lawsuit, a stay of approval through May 2026 will be imposed by FDA on the generic companies’ ANDAs pending any adverse court decision.

We have subsequently filed further complaints and amended complaints regarding newly-granted Orange Book listed patents, as well as certain non-Orange Book listed patents. These new complaints do not result in any further stay of approval by FDA.

As of February 28, 2024, we have settled all litigation with Accord Healthcare, Inc.; Lupin Pharmaceuticals, Inc.; Orbicular Pharmaceutical Technologies Private Limited; and Teva Pharmaceuticals, Inc. pursuant to individual agreements in which we granted these companies a royalty-free, non-exclusive, non-sublicensable, non-transferable license to manufacture and market their respective generic versions of YUPELRI inhalation solution in the US on or

15

Table of Contents

after the licensed launch date of April 23, 2039, subject to certain exceptions as is customary in these type of agreements. As required by law, the settlements are subject to review by the U.S. Department of Justice and the Federal Trade Commission. The patent litigation against the three remaining generic companies, along with certain affiliates, remains pending.

This litigation and the related risks are described in greater detail under the risk factor “Litigation to protect or defend our intellectual property or third-party claims of intellectual property infringement would require us to divert resources and may prevent or delay our drug discovery and development efforts”of this Annual Report on Form 10-K.

Competition

Our late-stage development programs, and the marketed products to which we are entitled to profit share revenue, royalty or similar payments are primarily target three therapeutic areas—focused on respiratory gastrointestinal, and neurological. In research, we apply organ-selective expertise to biologically compelling targets to discover and develop medicines designed to treat underserved localized diseases and to limit systemic exposure, in order to maximize patient benefit and minimize risk.neurological therapeutics. Our commercial infrastructure is focused primarily on the acute care setting. We expect that any medicines that we commercialize with our collaborative partners or on our own will compete with existing and future market-leading medicines.

Many of our competitors have substantially greater financial, technical and personnel resources than we have. In addition, many of these competitors have significantly greater commercial infrastructures than we have. Our ability to compete successfully will depend largely on our ability to leverage our experience in drug discovery, development and commercialization to:

develop medicines that are superior to other products in the market;

discover and develop medicines that are superior to other products in the market;

attract and retain qualified scientific, clinical development and commercial personnel;

attract and retain qualified scientific, clinical development and commercial personnel;

obtain patent and/or other proprietary protection for our medicines and technologies;

obtain patent and/or other proprietary protection for our medicines and technologies;

obtain required regulatory approvals;

obtain required regulatory approvals;

commercialize approved products; and

commercialize approved products; and

successfully collaborate with pharmaceutical companies in the development and commercialization of new medicines.

successfully collaborate with pharmaceutical companies in the discovery, development and commercialization of new medicines.

YUPELRI (revefenacin) inhalation solution a long-acting muscarinic antagonist (LAMA)

YUPELRI competes predominately with the nebulized LAMA Lonhala® Magnair® (glycopyrrolate) dosed two times per day and with short acting nebulized bronchodilators that are dosed three to four times per day.During 2023, Sunovion Pharmaceuticals Inc. voluntarily withdrew Lonhala® Magnair® (glycopyrrolate) from the US market due to limited utilization, leaving YUPELRI as the only approved nebulized LAMA as of December 31, 2023.

Verona Pharma plc’s ensifentrine, a first-in-class, selective inhaled dual inhibitor of PDE3 and PDE4 is expected to launch in the US in the second half of 2024. Nebulized ensifentrine has the potential to be complementary to YUPELRI given that it is another nebulized treatment for COPD.

Sanofi and Regeneron Pharmaceutical, Inc. are expecting US approval for their first-in-class, IL-4/IL-13 monoclonal antibody (mAb) Dupixent® (dupilumab) for COPD in the second halfof 2024. The expanded indication is expected to be a maintenance treatment for patients with moderate-to-severe COPD, who are uncontrolled with current SOC triple therapy (LAMA + LABA + ICS) and have evidence of Type 2 inflammation and frequent exacerbation history. Dupixent is currently indicated for atopic dermatitis, asthma, chronic rhinosinusitis with nasal polyposis, eosinophilic esophagitis and prurigo nodularis.

Ampreloxetine norepinephrine reuptake inhibitor (“NRI”)

If successfully developed and approved, ampreloxetine would be expected to serve as the only safe, convenient, and durably effective treatment option for MSA patients with symptomatic nOH. While droxidopa is currently the sole product approved for nOH patients, it was approved to treat dizziness, lightheadedness, or the “feeling that you are about to black out” in adults who experience nOH and who have MSA or other conditions. Droxidopa has never demonstrated

16

Table of Contents

a durable effect on nOH symptoms including failure of a confirmatory study known as RESTORE which was required by the FDA as a condition of an accelerated approval. Northera®, marketed by Lundbeck NA Ltd., is the branded version of droxidopa and became generic in 2021. Midodrine, which is approved for OH, is not indicated to improve symptoms of nOH. Both midodrine and droxidopa must be taken 3 times daily and carry a black box warning for its potential to lead to a “marked elevation of supine blood pressure”. Pending confirmation of its clinical profile in the CYPRESS study, it is anticipated that ampreloxetine will represent a differentiated treatment option for MSA patients with symptomatic nOH.

Trelegy or FF/UMEC/VI (fluticasone(the combination of fluticasone furoate/umeclidinium bromide/vilanterol)

For treatment of COPD, Trelegy competes in the USall major markets with AstraZeneca’s Breztri® Aerosphere® (budesonide/glycopyrronium/formoterol fumarate, dosed twice per day). Breztri was approved for COPD by EMA in December 2020 and is expected to launch in 2021. Trimbow® (beclometasone dipropionate/formoterol fumarate/glycopyrronium bromide, dosed twice per day) from Chiesi Farmaceutici is an additional COPD competitor in Europe. TRELEGY also competes with Breztri in Japan and China for COPD.

For treatment of asthma, TRELEGY is the only triple therapy approved in the US and competes in Japan with Novartis’s Enerzair® Breezhaler® (indacaterol acetate, glycopyrronium bromide and mometasone furoate, dosed once daily). Enerzair and Trimbow are currently under review by EMA, and, if approved in Europe they will compete with TRELEGY.

18

Table of Contents

In both COPD and asthma, TRELEGY also competes with “open triple” therapy which can be accomplished by the concurrent use of two or three products. An example of such use includes a LABA/ICS combination, such as AstraZeneca’s Symbicort® and a LAMA such as Boehringer Ingelheim’s Spiriva.

Gut-selective Pan-JAK Inhibitor Program (Izencitinib)

If successfully developed and approved, izencitinib would be expected to compete with biologics, which have become the mainstay of treatment in moderate-to-severe IBD patients, steroids, immunosuppressants, and other JAK inhibitors (all of which provide systemic exposure and are, thus, not gut-selective). Biologics for treatment of IBD (all of which require intravenous or sub-cutaneous administration) include the anti-TNF monoclonal antibodies Humira® (adalimumab), marketed by AbbVie Inc., and Remicade® (infliximab), marketed by Janssen Pharmaceuticals, Inc., and the anti-integrin antibody Entyvio® (vedolizumab), marketed by Takeda Pharmaceuticals America, Inc. Pfizer Inc.’s Xeljanz® (tofacitinib) was the first systemic JAK inhibitor approved by the FDA for the treatment of ulcerative colitis, although other systemic JAK inhibitors are currently in clinical development for IBD including filgotinib (Gilead Sciences, Inc.) and upadacitinib (AbbVie Inc.).

Ampreloxetine norepinephrine reuptake inhibitor (“NRI”)

If successfully developed and approved, ampreloxetine would be expected to compete predominantly with Northera® (droxidopa) marketed by Lundbeck NA Ltd., and to a lesser extent, midodrine and fludrocortisone which are available as generics. In addition, generic droxidopa is expected to enter the US market in February 2021 following expiration of the orphan drug exclusivity for NortheraSpiriva®.

Human Capital

As of December 31, 2020,2023, we had 35999 employees. Of these employees, 33188 were based in the US, and 2811 were non-US.based in Dublin, Ireland.

Our abilityCulture and Employee Engagement

We consider our employee relations first-rate and strive to sustainprovide a culture of purpose, engagement, and growlearning. We have a strong value proposition anchored in our business requires usCore Values—We Think it Through, We Find a Way, We Get it Done, and We Win Together. We strive to hire, retainlive these values across the Company every day, integrating them into everything from our interview, hiring, and develop a highly skilledonboarding processes to our PULSE performance process, total rewards, and diverse workforce. Werecognition programs.In addition to valuing professional qualifications, we emphasize the importance of character and integrity, as much as professional qualifications, and we seek to fosterfostering a culture of empowerment where employees have ownership in business outcomes. We strive to

Reflected in our Core Values are behaviors that keep our people engaged and working collaboratively with an understanding that behaviors that matter are reflected in our Core Values - thinking it through, finding a way, getting it done, and winning together.collaboratively. Our employees are encouraged to ask questions, make suggestions, and provide input through many forms of corporate communication, such as an open-door policy, all employeeall-employee meetings, an anonymous online suggestion box, and an Employee Pulse Survey,employee PULSE survey. Our employee PULSE survey is designed to ask questions, make suggestions,assist us in measuring overall employee engagement, and weconsistently achieve participation rates between 85% to 100%. Our 2023 survey scores averaged an overall score of 4.5 on a scale of 1 (Strongly Disagree) through 5 (Strongly Agree), and we received 100% participation from employees. These survey results provide input.important insight into organizational success and allow areas of opportunity to be identified and addressed.

Diversity and Inclusion

We strive to build a culture of diversity and inclusion through our business and human resources practices and policies, and we work to eliminate discrimination and harassment in all of its forms, including related to color, race, sex or gender, sexual orientation, gender identity, age, pregnancy, caste, disability, ethnicity, national origin or ancestry, religious beliefs, veteran status, uniformed servicemember status, or physical or mental disability. We have both a Diversity & Inclusion Council and a Women’s Leadership Network, which are each Company-sponsored, employee-led groups that aim to improve attraction, retention, development, inclusion, and engagement of a diverse and global workforce.

Talent Acquisition and Retention

We believe that our philosophy of providing competitive compensation and benefits and our focus on providing opportunities for career growth and development fosters interest from external candidates in Company openings, increases Company employee tenure, and reduces voluntary employee turnover. The global acceptance rate of our employment offers is consistently high. We believe we are successful in our retention efforts because we provide challenging work assignments, cross functional teamwork experiences and career progression supported by new skill building. We invest in employee learning and development by identifying and providing training and development programs, speakers, and other materials and have personnel specifically focused on employee learning and development. Based upon informal and formal feedback, including our Employee Pulse Surveys, management’s relationship with

19

Table of Contents

employees is very good. Because retention of the employee base is key to our business strategy, executive management provides quarterly updates on turnover metrics to our board of directors.

Total Rewards

We reward our employees beyond a competitive base salary. Our employees also receive cash bonus opportunities, equity incentives, health and wellness benefits and programs, and educational benefits. We strive to offer a competitive total rewards package that is responsive to market needs based upon the specific requirements of the job. Some examples of benefits offered include:

quality, affordable health insurance coverage available to both full-time and part-time employees and their eligible dependents;
matching contributions to a tax-qualified defined contribution savings (“401k”) plan, on a dollar-for-dollar basis up to a set dollar amount of an employee’s cash compensation;
an employee stock purchase plan (“ESPP”); and
training and development programs designed to support and improve workplace performance.

Culture

We expect all employees to observe the highest levels of business ethics while also delivering the highest levels of performance. These expectations are set forthoutlined and reinforced in various documents and forms of communication within and across our Company. The Company encourages employees to speak up and raise questions and concerns promptly about any situation that may violate our Code of Business Conduct, our core valuesCore Values, or our policies. We believe that it benefits the entire Company for employees to raise concerns so the Company may consider them carefully and address them properly. We seek to promote an environment that fosters honest communications about matters of conduct related to our business activities, whether that conduct occurs within the Company, involves one of the Company’s contractors, suppliers, consultants, or clients, or involves any other party with a business relationship with the Company. We work diligently to make clear that management is prepared to address any reported violations and to ensure that it is known that any form of retaliation is strictly prohibited. In addition, we have an easily-accessibleeasily accessible hotline available to employees wishing to report complaints anonymously.

17

Table of Contents

Diversity, Equity, and Inclusion

As an equal-opportunity employer, we strive to build and maintain a culture of diversity, equity, and inclusion through both our business and human resources practices and policies. We work to eliminate discrimination and harassment in all its forms, including related to color, race, sex or gender, sexual orientation, gender identity, age, pregnancy, caste, disability, ethnicity, national origin, ancestry, religious beliefs, veteran status, uniformed service member status, or physical or mental disability. We strive to build and foster a culture where all employees feel empowered to be their authentic selves. Our Diversity, Equity & Inclusion Council and Women’s Leadership Network are Company-sponsored, employee-led groups that aim to improve attraction, retention, development, inclusion, and engagement of a diverse and global workforce. For the benefit of our employees, patients, and community, we must celebrate, encourage, and support similarities and differences to drive innovation.

Talent, Development, and Total Rewards

We believe that our talent strategy of providing exciting career growth and development opportunities, recognizing, and rewarding performance, providing competitive compensation and benefits assists us in attracting and retaining the best talent. We believe we are successful in our retention efforts because we provide challenging work assignments, cross-functional teamwork experiences, and career progression supported by new skill-building. We invest in employee learning and development by identifying and providing training and development programs, speakers, tuition reimbursement, and cross-training in areas of interest beyond hired role.

We work diligently to attract the best talent from a diverse range of sources to meet the current and future demands of our business. We offer a competitive total rewards package that supports our business strategy to attract, retain and reward our employees in a highly competitive market. Our employees are provided with a strong base salary, cash bonus opportunities, equity incentives, health and wellness benefits, and programs. We regularly evaluate our compensation programs with an independent consultant and utilize industry benchmarking. In addition, we provide a variety of programs and services that meet our employees' needs and encourage work-life balance. These services include competitive and affordable healthcare and additional insurance benefits for both full-time and part-time employees, including eligible dependents. We also match contributions to tax-qualified defined contribution savings (401k) plans, offer an employee share purchase plan (“ESPP”), and provide training and development programs designed to improve workplace performance while supporting flexible, hybrid-remote working.

Understanding the importance of goal setting and ongoing career development conversations, we require managers and employees to play an active role in the PULSE performance management process at monthly, quarterly, and annual frequencies. PULSE is designed to increase clarity and accountability for roles and responsibilities, strengthen communication, and build trust, all while championing personal and professional growth, learning, and success.

Workplace Safety

Workplace safety is always a priority for us. To maintain a safe and healthy workplace, we have implemented initiatives, procedures, and policies designed to address risk and stay compliant with relevant national and international health and safety standards. We continue to focus on employee wellness and safety, policy updates based on Centers for Disease Control and Prevention (“CDC”), county, federal, and state guidelines, and ongoing employee communication.

Financial Information About Geographic Areas

Information on our total revenues attributed to geographic areas and customers who represented at least 10% of our total revenues is included in “Item 8, Note 4.3. Segment Information,” to our consolidated financial statements in this Annual Report on Form 10-K.

Corporation Information

Theravance Biopharma was incorporated in the Cayman Islands in July 2013 under the name Theravance Biopharma, Inc. Theravance Biopharma began operating as an independent, publicly-traded company on June 2, 2014 following a spin-off from Innoviva, Inc. Our corporate address in the Cayman Islands and principal executive office is P.O. Box 309, Ugland House,

18

Table of Contents

Grand Cayman, KY1-1104, Cayman Islands, and the address of our wholly-owned US operating subsidiary is Theravance Biopharma US, Inc. is, 901 Gateway Boulevard, South San Francisco, California 94080.94080, which also serves as our principal executive office. While Theravance Biopharma is incorporated under Cayman Island law, the Company became an Irish tax resident effective July 1, 2015. The office address of our wholly-owned Irish operating subsidiary, Theravance Biopharma Ireland Limited, is Connaught House, Burlington Road,The Lennox Building, Suite 101, 50 Richmond Street South, Saint Kevin’s, Dublin, 4, Ireland.

Available Information

Our Internet address is www.theravance.com. Our investor relations website is located at http:https://investor.theravance.com. We make available free of charge on our investor relations website under “SEC Filings” our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, our directors’ and officers’ Section 16 Reports and any amendments to those reports as soon as reasonably practicable after filing or

20

Table of Contents

furnishing such materials to the US Securities and Exchange Commission (“SEC”). The SEC maintains a website that contains the materials we file with or furnish to the SEC at www.sec.gov. Our current Code of Business Conduct, Corporate Governance Guidelines, Articles of Association, Board of Director Committee Charters, and other materials, including amendments thereto, may also be found on our investor relations website under “Corporate Governance.” The information found on our website is not part of this or any other report that we file with or furnish to the SEC. Theravance Biopharma and the Theravance Biopharma logo are registered trademarks of the Theravance Biopharma group of companies. Trademarks, tradenames, or service marks of other companies appearing in this report are the property of their respective owners.

19

Table of Contents

ITEM 1A. RISK FACTORS

The risks described below and elsewhere in this Annual Report on Form 10-K and in our other public filings with the SEC are not the only risks facing the Company.us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Summary of Principal Risks Associated with Theravance Biopharma’s Business

We anticipate that we will incur losses for the foreseeable future. We may never achieve or sustain profitability;profitability from our operations;

We face risks relatedIf YUPELRI’s acceptance by physicians, patients, third party payors, or the medical community in general does not continue to health epidemics, including the recent COVID-19 pandemic, which could have a material adverse effect on our business and resultsgrow, we may not receive significant additional revenues from sales of operations;this product;

In collaboration with Viatris, we are responsible for marketing and sales of YUPELRI in the US, which subjects us to certain risks;

Any delay in commencing or completing clinical studies for product candidates or product and any adverse results from clinical or non-clinical studies or regulatory obstacles product candidates or product may face, would harm our business and the price of our securities could fall;

If our product candidates are not approved by regulatory authorities, including the FDA, we will be unable to commercialize them;

If additional capital is not available, we may have to curtail operations or we could be forced to share our rights to commercialize our product candidates with third parties on terms that may not be favorable to us;
If our partners do not satisfy their obligations under our agreements with them, or if they terminate our partnerships with them, we may not be able to develop or commercialize our partnered product candidates as planned;

We do not control TRC and, in particular, have no control over the GSK Partnered Respiratory Programs, including TRELEGY, or access to non-public information regarding the development of the GSK Partnered Respiratory Programs;
If there are any adverse developments or perceived adverse developments with respect to the GSK-Partnered Respiratory Programs in which we have a substantial economic interest, including TRELEGY, our business will be harmed, and the price of our securities could fall; and
Our ongoing drug discovery and development efforts might not generate additional successful product candidates or approvable drugs.drugs;

We face substantial competition from companies with more resources and experience than we have, which may result in others discovering, developing, receiving approval for or commercializing products before or more successfully than we do;

We are subject to extensive and ongoing regulation, oversight and other requirements by the FDA and failure to comply with these regulations and requirements may subject us to penalties that may adversely affect our financial condition or our ability to commercialize any approved products; and

We and/or our collaboration partners and those commercializing products with respect to which we have an economic interest or right to receive royalties may face competition from companies seeking to market generic versions of any approved products in which we have an interest, such as YUPELRI.

RISKS RELATING TO THE COMPANY

We anticipate that we will incur losses for the foreseeable future. We may never achieve or sustain profitability.profitability from our operations.

First as part of Innoviva, Inc., and since June 2, 2014 as Theravance Biopharma, we have been engaged in discovery and development of compounds and product candidates since mid-1997.1997. We may never generate sufficient

21

Table of Contents

cash or revenue from the sale of medicines, royalties on sales by our partnersto achieve sustainable cash flow or profitability from our interest in Theravance Respiratory Company, LLC (“TRC”) to achieve profitability. Duringoperations. For the year ended December 31, 2020, 2019, and 2018,2023, we recognized a net lossesloss of $278.0 million, $236.5 million and $215.5 million, respectively, which are reflected in the shareholders’ deficit on our consolidated balance sheets.$55.2 million. We reflect the cumulative net loss incurred after June 2, 2014, the effective date of our spin-off from Innoviva, Inc. (the “Spin-Off”), as accumulated deficit on our consolidated balance sheets, which was $1.5 billion$909.1 million as of December 31, 2020.2023. We expect tomay continue to incur net losses at least over the next several years as we continue our drug discovery anddue to expenditures relating to the development efforts and incur significant preclinical and clinical development costs related toof our current product candidatescandidate, which we are advancing into and commercializationthrough

20

Table of Contents

later stage clinical studies without a partner and development costs relatingwhich we may prepare to YUPELRI.commercialize. In particular,addition, we may invest strategically in efforts to the extent we continue to advancesupport our product candidates intodevelopment and through additional clinical studies, we will incur substantial expenses. For example, we initiated a Phase 2b/3 induction and maintenance study of izencitinib in ulcerative colitis, we initiated a Phase 2 induction study of izencitinib in Crohn’s disease, and we have progressed ampreloxetine (TD-9855) into a Phase 3 registrational program. The expenses associated with these clinical studies are substantial.commercial pipeline. While our YUPELRI operations werehave been profitable on a brand basis forsince the second halfthird quarter of 2020,we will continue to incur costs and expenses associated with the commercialization of YUPELRI in the United States (“US”),US, including the maintenance of an independent sales and marketing organization with appropriate technical expertise, a medical affairs presence and consultant support, and post-marketing studies. Our commitment of resources to the continued development of our existing product candidates, our discovery programs,ampreloxetine and YUPELRI will require significant additional funding.ongoing funding, and we expect our sales and marketing expenditures to increase in 2024 as we prepare for the potential commercial launch of ampreloxetine. Our operating expenses also will increase if, among other things:

ourany earlier stage potential products move into and through later-stage clinical development, which is generally more expensive than early stage development;

additional preclinical product candidates are selected for clinical development;

we pursue clinical development of our potential or current products in new indications;

we pursue clinical development of our potential or current products in new indications;

our clinical trials become more complicated or need to be extended due to the COVID-19 pandemic or other similar external factors;

we increase the number of patents we are prosecuting or maintaining or otherwise expend additional resources on patent prosecution or defense;defense or patent litigation; or
we acquire or in-license additional technologies, product candidates, products or businesses.

we acquire or in-license additional technologies, product candidates, products or businesses.

While we are generating revenues and income from (i) sales of YUPELRI, (ii) our economic interest in royalties from net sales of TRELEGY paid to TRC (63.75% of which amounts are used to make payments on the Non-Recourse 2035 Notes), (iii)and royalty interests, and payments under collaboration agreements, and (iv) minor royalties from the net sales of VIBATIV, we domay not expect to generate significant revenues or become profitableprofit from our operations in the near future. As a result of the COVID-19 pandemic (defined below), weWe could experience declines in revenues from these sources. Sincefail to meet our revenue expectations. If we or our collaborators or licensees mayare not able to successfully develop additional products, obtain required regulatory approvals, manufacture products at an acceptable cost or with appropriate quality, or successfully market and sell such products, and do so with desired margins, our expenses will continue to exceed any revenues we may receive forin the foreseeable future.

22

TableOur strategic business plan is subject to significant uncertainties and risks as a result of, Contents

Inamong other factors, the absencesales levels of substantial licensing payments,our approved product, unplanned expenses, clinical program outcomes, expenses being higher than anticipated, cash receipts being lower than anticipated, whether, when and on what terms we are able to enter into new collaboration arrangements, and the need to satisfy contingent payments or other revenues from third-party collaborators, royalties on sales of products licensed under our intellectual property rights, future revenues from those product candidates in development that receive regulatory approval or other sources of revenues, we will continueliabilities. Our ability to incur operating losses and will require additional capital to execute our business strategy. The likelihood of reaching,reach, and the time required to reach, and then to sustain, profitability are highlyfrom operations is uncertain. As a result, we expect to continue tomay incur substantial losses forin the foreseeable future. We are uncertain when or if we will ever be able to achieve or sustain profitability. Failure to become and remain profitable from operations would adversely affect the price of our securities and our ability to raise capitalcontinue operations as planned.

If YUPELRI’s acceptance by physicians, patients, third-party payors, or the medical community in general does not continue to grow, we may not receive significant additional revenues from sales of this product.

The commercial success of YUPELRI depends upon its acceptance by physicians, patients, third-party payors and the medical community in general. YUPELRI’s acceptance by these parties may not continue operations.

We face risks related to health epidemics, includinggrow as we have planned. YUPELRI competes predominately with short acting nebulized bronchodilators that are dosed three to four times per day. If physicians, patients, third-party payors, or the recent COVID-19 pandemic, which could havemedical community in general believe that YUPELRI is not a material adverse effect onpreferred treatment option for those with COPD, we may see declines, or fail to grow. If YUPELRI’s acceptance does not continue to grow, or declines from previous levels, our business and financial results of operations.could be materially harmed.

Our business has beenIn collaboration with Viatris, we are responsible for marketing and will continue to be adversely affected by the recent widespread and contagious outbreak of respiratory illness caused by a novel strain of coronavirus, SARS-CoV-2, causing the Coronavirus Disease 2019, also known as COVID-19 (the “COVID-19 pandemic”). Global health concerns relating to the COVID-19 pandemic have been weighing on the macroeconomic environment, and the pandemic has significantly increased economic volatility and uncertainty.

The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place or stay-at-home orders, and business shutdowns. These measures have adversely impacted and may further impact our employees and operations and the operations of our customers, suppliers and business partners, and may negatively impact spending patterns, payment cycles and insurance coverage levels. In addition, certain aspects of our business, such as laboratory-based research, cannot be conducted remotely and other aspects of our business, like our hospital-based sales team, our field-based medical affairs team, and our support of sites in our clinical trials, cannot be accomplished as effectively or efficiently remotely. These measures by government authorities, as well as the precautions we will take in order to operate our business responsibly in light of the COVID-19 pandemic, may continue to remain in place for a significant period of time, and they are likely to continue to adversely affect our business and results of operations.

In addition, we expect sales cycles, particularly for new customers, to continue to be impacted as a result of the COVID-19 pandemic, and we have observed continued volatility in YUPELRI sales. Sales momentum has been affected by COVID-19 and may continue to be in the future. We market YUPELRI in the hospital setting, where healthcare workers are prioritizing the treatment of patients with or suspected of COVID-19 disease. In mid-March 2020, we suspended in-person sales calls to accounts in response to the COVID-19 pandemic. We are currently re-engaging with these customers in-person when certain criteria are met and remotely via telephone calls, electronic mail, digital outreach or video conferencing as we seek to continue to support healthcare professionals and patient care. Customer orders or new patient use of YUPELRI may decline as a result of, among other things, a shift in our marketing efforts to remote communication methods, increased workload of healthcare providers, and the impact of the Center for Disease Control interim guidelines for limiting the exposure of health care workers to the virus that causes COVID-19, in which drug nebulization in COVID-19 positive patients is listed as a high-risk procedure while present in the room for procedures when the healthcare providers’ eyes, nose, or mouth are not protected. We are preparing for continued volatility during 2021as disruptions of day-to-day operations of hospitals and clinics may continue. In addition, while we do not currently anticipate any supply issues, the COVID-19 pandemic could impact our supply of YUPELRI in the future. At this stage, we are unableUS, which subjects us to predictcertain risks.

We currently maintain a sales force in the US to support our co-promotion obligations for YUPELRI under our agreement with certainty the ultimate disruptive impactViatris. The risks of the COVID-19 pandemic on both YUPELRI and the rest offulfilling our business.US co-promotion obligations to Viatris include:

costs and expenses associated with maintaining an independent sales and marketing organization with appropriate technical expertise and supporting infrastructure, including third-party vendor logistics and

2321

Table of Contents

consultant support, which costs and expenses could, depending on the scope and method of the marketing effort, exceed any product revenue;

In addition,

our ability to retain effective sales and marketing personnel and medical science liaisons in the US;

the ability of our sales and marketing personnel to obtain access to, and educate adequate numbers of prescribers about prescribing YUPELRI, in appropriate clinical situations; and

the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines.

If we are not successful in maintaining a sales and marketing organization with appropriate experience, technical expertise, supporting infrastructure and the COVID-19 pandemic makes the conductability to obtain access to and educate adequate numbers of physicians about prescribing YUPELRI in appropriate clinical trials more challenging given the paramount importancesituations, we will have difficulty maintaining effective commercialization of adequate safety monitoring, collection of data and distribution of study drug, all of which are traditionally achieved by in-person visits to our study sites. We expect challenges to continue to arise from quarantines, shelter-in-place or stay-at-home orders, site closures, travel limitations, potential interruptions to the supply chain for investigational products, other measure to help prevent the spread of COVID-19 or other considerations if site personnel or trial participants become infected with COVID-19. These challenges may lead to difficulties in meeting protocol-specified procedures. In light of the COVID-19 pandemic, the Company is implementing mitigation plans to help ensure patientsYUPELRI in the clinical trials have continued access to drug supply and regular visits with their physicians for study visits per trial protocols, but there is a risk that our trial data could be impacted if our efforts are insufficient. It is also possible that demand for products that we may pursue could be materially andhospital setting, which would adversely affected as a result of COVID-19 and any related economic impact. Furthermore, we cannot assure you that our publicly-announced initiatives addressing COVID-19 will result in commercially-viable products.

The spread of COVID-19 has caused us to modifyaffect our business practices (including employee travel, mandating that all personnel other than key operations and lab personnel work from home, temporary closures of offices,financial results, and reduction of physical participation in commercial activities, meetings, eventsthe condition and conferences), and we may take further actions as may be required by government authorities or that we determine are in the best interestsprice of our employees, customers and business partners. There is no certainty that such actions will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities. If significant portions of our workforce, and particularly our field-based teams and laboratory staff, are unable to work effectively, including due to illness, quarantines, social distancing, government actions or other restrictions in connection with the COVID-19 pandemic, our operations will be impacted. The COVID-19 pandemicsecurities could limit the ability of our customers, suppliers and business partners to perform under their contracts with us, including third-party payers’ ability to make timely payments to us during and following the pandemic. We may also experience a shortage of supplies and materials or a suspension of services from third parties. Additionally, while the potential economic impact brought by, and the duration of, the coronavirus pandemic is difficult to assess or predict, the impact of the coronavirus on the global financial markets may reduce our ability to access capital, which could negatively impact our long-term liquidity. Even after the COVID-19 pandemic subsides, we may continue to experience an adverse impact to our business as a result of its global economic impact, including any recession that has occurred or may occur in the future.

The extent to which the COVID-19 pandemic impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or address its impact, vaccine rollout and how quickly and to what extent normal economic and operating activities can resume. There are no comparable recent events which may provide guidance as to the effect of the spread of the COVID-19 pandemic, and, as a result, the ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. We do not yet know the full extent of COVID-19’s impact on our business, our operations, or the global economy as a whole. However, the effects are likely to continue to have a material adverse impact on our future results of operations.fall.

Any delay in commencing or completing clinical studies for product candidates or product and any adverse results from clinical or non-clinical studies or regulatory obstacles product candidates or product may face, would harm our business and the price of our securities could fall.

Each of our productProduct candidates must undergo extensive non-clinical and clinical studies as a condition to regulatory approval. Non-clinical and clinicalClinical studies are expensive, take many years to complete and study results may lead to delays in further studies, new requirements for conducting future studies or decisions to terminate programs. The commencement and completion of clinical studies for our product candidatescandidate may be delayed and programs may be terminated due to many factors, including, but not limited to:

lack of effectiveness of product candidates during clinical studies;

adverse events, safety issues or side effects (or perceived adverse developments or results) relating to the product candidates or their formulation into medicines;

24

Table of Contents

inability to raise additional capital in sufficient amounts to continue our development programs, which are very expensive;

inability to enter into partnering arrangements relating to the development and commercialization of our programs and product candidates or partner decisions not to maintain a partnership with us;

delays in patient enrollment and variability in the number and types of patients available for clinical studies;

the need to sequence clinical studies as opposed to conducting them concomitantly in order to conserve resources;

our inability or the inability of our collaborators or licensees to manufacture or obtain from third parties materials sufficient for use in non-clinical and clinical studies;

governmental or regulatory delays or suspensions of the conduct of the clinical trials and changes in regulatory requirements, policy and guidelines, including as a result of any class-based risks that emerge as an area of FDA or other regulatory agency focus;

lack of efficacy of product candidate during clinical studies;

adverse events, safety issues or side effects (or perceived adverse developments or results) relating to the product candidate or its formulation into medicines;

unfavorable study data or unfavorable interpretations of data among the FDA and foreign regulatory authorities;

insufficient capital to continue our development program;

inability to enter into partnering arrangements relating to the development and commercialization of our program and product candidate or partner decisions not to maintain a partnership with us;

delays in patient enrollment and variability in the number and types of patients available for clinical studies;

competitive clinical trials;

our inability or the inability of our collaborators or licensees to manufacture or obtain from third parties materials sufficient for use in non-clinical and clinical studies;

governmental or regulatory delays or suspensions of the conduct of the clinical trials and changes in regulatory requirements, policy and guidelines;

challenges related to the COVID-19 pandemic, including with recruitment and/or progressing patients through studies;

failure of our

failure of any partners to advance our product candidates through clinical development;

22

difficulty in maintaining contact with patients after treatment, resulting in incomplete data;

difficulty in maintaining contact with patients after treatment, resulting in incomplete data;

varying regulatory requirements or interpretations of data among the FDA and foreign regulatory authorities; and

varying regulatory requirements or interpretations of data among the FDA and foreign regulatory authorities;

a disturbance where we or our collaborative partners are enrolling patients in clinical trials, such as a pandemic, terrorist activities or war, political unrest or a natural disaster.

new clinical trial regulations in the European Union; and

a disturbance where we or our collaborative partners are enrolling patients in clinical trials, such as a pandemic, terrorist activities or war, political unrest or a natural disaster.

Any adverse developments or results or perceived adverse developments or results with respect to our clinical programsprogram including, without limitation, any delays in development in our programs as we are currently experiencing due to the COVID-19 pandemic,program, any halting of development in our programs,program, any difficulties or delays encountered with regard to the FDA or other third country regulatory authorities with respect to our programs,program, or any indication from clinical or non-clinical studies that the compounds in our programsprogram are not safe, efficacious or efficacious,sufficiently differentiated from those of our competitors, could have a material adverse effect on our business and cause the price of our securities to fall.

In July 2019, the FDA issued a Boxed Warning For example, in August 2021 we announced that our Phase 2b study of izencitinib in ulcerative colitis did not meet its primary endpoint, and in September 2021, we announced that our four-week SEQUOIA Phase 3 study for a systemically active pan-JAK inhibitor, calling out an increased risk of pulmonary embolism and death following the results of a safetyampreloxetine did not meet its primary endpoint. There can be no assurance that our Phase 3 study in patients with rheumatoid arthritis. We are focused on developing pan-JAK inhibitors that are designed to remain organ-selective so that they do not become systemically active in order to minimize the risk of side effects. It is unknown at this time what, if any, additional requirements the FDA may put in place with respect to the development of JAK inhibitors generally or what other future FDA actions may havefor ampreloxetine will be completed on the prospects for JAK inhibitors. Delaystimeline we expect or adverse developmentsat all, that the CYPRESS study will meet its endpoints, or results or perceived adverse developments or results relatingthat ampreloxetine will ultimately be found to JAK inhibitors could harm our businessbe safe and could cause the price of our securities to fall. Examples of such adverse developments include, but are not limited to:effective.

the FDA and/or other regulatory authorities determining that additional non-clinical or clinical studies are required with respect to our JAK inhibitor programs;

safety, efficacy or other concerns relating to our JAK inhibitor programs or JAK inhibitors under development or commercialized by other companies;

the FDA determining that class-based warnings are required for JAK inhibitors generally; or

25

Table of Contents

any change in FDA policy or guidance regarding JAK inhibitors.

If our product candidates are not approved by regulatory authorities, including the FDA, we will be unable to commercialize them.

The FDA must approve any new medicine before it can be marketed and sold in the US. We will not obtain this approval for a product candidate, such as ampreloxetine, unless and until the FDA approves an NDA. We, or our collaborative partners, must provide the FDA and similar foreign regulatory authorities with data from preclinical and clinical studies that demonstrate that our product candidates comply with the regulatory requirements for the quality of medicinal products and are safe and effective for a defined indication before they can be approved for commercial distribution. FDA or foreign regulatory authorities may disagree with our trial design and our interpretation of data from preclinical studies and clinical trials. The processes by which regulatory approvals are obtained from the FDA and foreign regulatory authorities to market and sell a new product are complex, require a number of years, depend upon the type, complexity and novelty of the product candidate and involve the expenditure of substantial resources for research, development and testing. The FDA has substantial discretion in the drug approval process and may require us to conduct additional non-clinical and clinical testing or to perform post-marketing studies. Further, the implementation of new laws and regulations, and revisions to FDA clinical trial design guidance may lead to increased uncertainty regarding the approvability of new drugs. See the risk factor entitled “Any delay in commencing or completing clinical studies for product candidates or product and any adverse results from clinical or non-clinical studies or regulatory obstacles product candidates or product may face, would harm our business and the price of our securities could fall” above for additional information. The rapidly shifting environment surrounding the collective response to the COVID-19 pandemic has led to additional guidance from US and foreign regulatory agencies with respect to numerous matters regarding the conduct of clinical trials in general and the development of COVID-19 related therapies, which is subject to the risk of further change, misinterpretation or non-compliance due to the rapidly changing regulatory landscape. In addition, the FDA has additional standards for approval of new drugs, including recommended advisory committee meetings for certain new molecular entities, and formal risk evaluation and mitigation requirements at the FDA’s discretion. Even if we receive regulatory approval of a product, the approval may limit the indicated uses for which the drug may be marketed or impose significant restrictions or limitations on the use and/or distribution of such product.

In addition, in order to market our medicines in foreign jurisdictions, we or our collaborative partners must obtain separate regulatory approvals in each country. The approval procedure varies among countries and can involve additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. Conversely, failure to obtain approval in one or more jurisdictions may make approval in other jurisdictions more difficult. These laws, regulations, additional requirements and changes in interpretation could cause non-approval or further delays in the FDA’s or other regulatory authorities’ review and approval of our and our collaborative partner’s partners’

23

Table of Contents

product candidates, which would materially harm our business and financial condition and could cause the price of our securities to fall.

If additional capital is not available, we may have to curtail operations or we could be forced to share our rights to commercialize our product candidates with third parties on terms that may not be favorable to us.

Based on our current operating plans and financial forecasts, we believe that our existing cash, cash equivalents and marketable securities will be sufficient to meet our anticipated operating needs for at least the next twelve months. However, our current operating plans or financial forecasts occasionally change. For example, in August 2017, we announced an increase in our anticipated operating loss for 2017, primarily driven by our decision to accelerate funding associated with the next phase of development of izencitinib in our JAK inhibitor program. If our current operating plans or financial forecasts change, we may require or seek additional funding sooner in the form of public or private equity or equity-linked offerings, debt financings or additional collaborations and licensing arrangements.

We may need to raise additional capital in the future to, among other things:

fund our discovery efforts and research and development programs;

26

Table of Contents

fund our commercialization strategies for any approved products and to prepare for potential product approvals;

support our independent sales and marketing organization and medical affairs team;

support our additional investments in YUPELRI, including potential post-marketing clinical studies;

progress any additional product candidates into later-stage development without funding from a collaboration partner;

progress mid-to-late stage product candidates into later-stage development, if warranted;

respond to competitive pressures; and

acquire complementary businesses or technologies.

Our future capital needs depend on many factors, including:

the scope, duration and expenditures associated with our discovery efforts and research and development programs;

continued scientific progress in these programs;

the extent to which we encounter technical obstacles in our research and development programs;

the outcome of potential licensing or partnering transactions, if any;

competing technological developments;

the extent of our proprietary patent position in any approved products and our product candidates;

our facilities expenses, which will vary depending on the time and terms of any facility lease or sublease we may enter into, and other operating expenses;

the scope and extent of the expansion of our sales and marketing efforts;

potential litigation and other contingencies; and

the regulatory approval process for our product candidates.

We may seek to raise additional capital or obtain future funding through public or private equity offerings, debt financings or additional collaborations and licensing arrangements to meet our capital needs or to take advantage of opportunistic market conditions. We may not be able to obtain additional financing on terms favorable to us, if at all. General market conditions may make it difficult for us to seek financing from the capital markets. We may be required to relinquish rights to our technologies, product candidates or territories, or grant licenses on terms that are not favorable to us, in order to raise additional funds through collaborations or licensing arrangements. We may sequence preclinical and clinical studies as opposed to conducting them concomitantly in order to conserve resources, or delay, reduce or eliminate one or more of our research or development programs and reduce overall overhead expenses. If we are unable to raise additional capital or obtain future funding in sufficient amounts or on terms acceptable to us, we may have to make reductions in our workforce and may be prevented from continuing our discovery, development and commercialization efforts and exploiting other corporate opportunities. This would likely harm our business, prospects and financial condition and cause the price of our securities to fall.

27

Table of Contents

We may seek to obtain future financing through the issuance of debt or equity, which may have an adverse effect on our shareholders or may otherwise adversely affect our business.

If we raise funds through the issuance of additional debt, including convertible debt or debt secured by some or all of our assets, or equity, any debt securities or preferred shares issued will have rights, preferences and privileges senior to those of holders of our ordinary shares in the event of liquidation. Neither the terms of our $230.0 million of 3.25% convertible senior notes, due 2023 (the “Convertible Senior 2023 Notes”) nor the terms of the Issuer II’s 9.5% Fixed Rate Term Notes due on or before 2035 (the “Non-Recourse 2035 Notes”) restrict our ability to issue additional debt. If additional debt is issued or we otherwise borrow additional funds, there is a possibility that once all senior claims are settled, there may be no assets remaining to pay out to the holders of ordinary shares. Moreover, 75% of the income from our investment in TRC, as evidenced by the Issuer II Class C Units, is currently available only for payment of the Non-Recourse 2035 Notes and is not available to pay our other obligations or the claims of our other creditors. In addition, if we raise funds through the issuance of additional equity, whether through private placements or public offerings, such an issuance would dilute ownership of our current shareholders that do not participate in the issuance. If we are unable to obtain any needed additional funding, we may be required to reduce the scope of, delay, or eliminate some or all of, our planned research, development and commercialization activities or to license to third parties the rights to develop and/or commercialize products or technologies that we would otherwise seek to develop and/or commercialize ourselves or on terms that are less attractive than they might otherwise be, any of which could materially harm our business.

Furthermore, the terms of any additional debt securities we may issue in the future may impose restrictions on our operations, which may include limiting our ability to incur additional indebtedness, pay dividends on or repurchase our share capital, or make certain acquisitions or investments. In addition, we may be subject to covenants requiring us to satisfy certain financial tests and ratios, and our ability to satisfy such covenants may be affected by events outside of our control.

If our partners do not satisfy their obligations under our agreements with them, or if they terminate our partnerships with them,us, we may not be able to develop or commercialize our partnered product candidates as planned.

In January 2015, we entered into a collaboration agreement with Viatris for the development and commercialization of a nebulized formulation of our LAMA revefenacin, including YUPELRI. Under the terms of the agreement, we and Viatris will co-develop nebulized revefenacin, including YUPELRI, for COPD and other respiratory diseases. In June 2016,2019, we entered into a Licensegranted Viatris exclusive development and Collaboration Agreement with Millennium Pharmaceuticals, Inc., an indirect wholly-owned subsidiarycommercialization rights to nebulized revefenacin in China and adjacent territories, which include the Hong Kong SAR, the Macau SAR, and Taiwan, and we are eligible to receive low double-digit tiered royalties on net sales of Takeda Pharmaceutical Company Limited (collectively with Millennium, “Takeda”) in order to establish a collaborationnebulized revefenacin, if approved. Viatris is responsible for theall aspects of development and commercialization of TD-8954, a selective 5-HT4 receptor agonistnebulized revefenacin in development for gastrointestinal motility disorders. Under the terms of the agreement, Takeda is responsible for worldwide developmentChina and commercialization of TD-8954. In February 2018, we announced a global co-developmentadjacent territories, including pre- and commercialization agreement with Janssen for izencitinibpost-launch activities and related back-up compounds for inflammatory intestinal diseases, including ulcerative colitisproduct registration and Crohn’s disease. In December 2019, we entered into a License Agreement with Pfizer Inc. (“Pfizer”). Under the license agreement, we provide Pfizer with an exclusive global license to develop, manufacture and commercialize compounds from our preclinical program for skin-targeted, locally-acting pan-Janus kinase (JAK) inhibitors that can be rapidly metabolized. We also have an exclusive development and commercialization agreement with Alfasigma for velusetrag, our internally discovered 5-HT4 agonist for the treatment of gastromotility disorders, under which we have transferred to Alfasigma global rights for velusetrag.all associated costs. In connection with these agreements, these parties haveViatris has certain rights regarding the use of patents and technology with respect to the compounds in our development programs, including development and marketing rights.

Our partners have in the past andpartner may in the future not fulfill all of their obligations under theseour agreements, and, in certain circumstances, they or we may terminate our partnership with them. In addition,For example, in June 2023, we received notice from Pfizer terminating the License Agreement (the “Pfizer Agreement”) with Pfizer Inc. (“Pfizer”) regarding our partners may alsopreclinical program for skin targeted, locally acting pan Janus kinase (JAK) inhibitors that can be facing significant business interruptionsrapidly metabolized as a result of October 2023. We are assessing our choices with respect to the COVID-19 pandemic. In either event, weprogram covered by the Pfizer Agreement. We may be unable to assume the development and commercialization responsibilities covered by the agreements or enter into alternative arrangements with a third-party to develop and commercialize such product candidates. If a partner elected to promote alternative products and product candidates such as its own products and product candidates in preference to those licensed from us, does not devote an adequate amount of time and resources to our product or product candidates or is otherwise unsuccessful in its efforts with respect to our products or product candidates, the development and commercialization of

28

Table of Contents

products and product candidates covered by the agreements could be delayed or terminated, and future payments to us could be delayed, reduced or eliminated and our business and financial condition could be materially and adversely affected. Accordingly, our ability to receive any revenue from the products and product candidates covered by these agreements is dependent on the efforts of our partners. If a partner terminates or breaches its agreements with us, otherwise fails to complete its obligations in a timely manner or alleges that we have breached our contractual obligations under these agreements, the chances of successfully developing or commercializing products and product candidates under the collaboration could be materially and adversely affected. In addition, effective collaboration with a partner requires coordination to achieve complex and detail-intensive goals between entities that potentially have different priorities, capabilities and processes and successful navigation of the challenges such coordination entails. We could also become involved in disputes with a partner, which could lead to delays in or termination of our development and commercialization programs and time-consuming and expensive litigation or arbitration. Furthermore, termination of an agreement by a partner could have an adverse effect on the price of our ordinary shares or other securities even if not material to our business.

We do not control TRC and, in particular, have no control over the GSK-Partnered Respiratory Programs or access to non-public information regarding the development of the GSK-Partnered Respiratory Programs.

Innoviva assigned to TRC its strategic alliance agreement with GSK and all of its rights and obligations under its LABA collaboration agreement other than with respect to RELVAR ELLIPTA/BREO ELLIPTA, ANORO ELLIPTA and vilanterol monotherapy. Our equity interest in TRC entitles us to an 85% economic interest in any future payments made by GSK under the strategic alliance agreement and under the portion of the collaboration agreement assigned to TRC (the “GSK Agreements”) (net of TRC expenses paid and the amount of cash, if any, expected to be used by TRC pursuant to the TRC LLC Agreement over the next four fiscal quarters), which agreements govern Innoviva’s and GSK’s respective interests in the GSK-Partnered Respiratory Programs. Our equity interest primarily covers TRELEGY (the combination of fluticasone furoate, umeclidinium, and vilanterol in a single ELLIPTA inhaler) products. Our economic interest does not include any payments by GSK associated with RELVAR ELLIPTA/BREO ELLIPTA, ANORO ELLIPTA or vilanterol monotherapy. Innoviva controls TRC and, except for certain consent rights, we have no right to participate in the business and affairs of TRC. Innoviva has the exclusive right to appoint TRC’s manager who, among other things, is responsible for the day-to-day management of the GSK-Partnered Respiratory Programs and exercises the rights relating to the GSK-Partnered Respiratory Programs. As a result, we have no rights to participate in, or access to non-public information about, the development and commercialization work GSK and Innoviva are undertaking with respect to the GSK-Partnered Respiratory Programs and no right to enforce rights under the GSK Agreements assigned to TRC. We have had, currently have and may in the future have disagreements with Innoviva and TRC regarding Innoviva’s decisions regarding the management of TRC that could require invoking the dispute resolution procedures set forth in the TRC LLC Agreement and that, if resolved in a manner adverse to our interests, could have a material impact on our operations. See Part II, Item 1 “Legal Proceedings.” Moreover, we have many of the same risks with respect to our and TRC’s dependence on GSK as we have with respect to our dependence on our own partners, including any adverse impacts on GSK’s operations as a result of the COVID-19 pandemic.

If there are any adverse developments or perceived adverse developments with respect to the GSK-Partnered Respiratory Programs in which we have a substantial economic interest, including TRELEGY, our business will be harmed, and the price of our securities could fall.

We have no access to non-public information regarding the development progress of, or plans for, the GSK-Partnered Respiratory Programs, including TRELEGY, and we have little, if any, ability to influence the progress of those programs because our interest in these programs is only through our ownership interest in TRC, which is controlled by Innoviva. However, if any of the GSK-Partnered Respiratory Programs in which we have a substantial economic interest encounter delays, do not demonstrate required quality, safety and efficacy, are terminated, or if there are any adverse developments or perceived adverse developments with respect to such programs, our business will be harmed, and the price of our securities could fall. Examples of such adverse developments include, but are not limited to:

disappointing or lower than expected sales of TRELEGY;

the emergence of new closed triple or other alternative therapies or any developments regarding competitive therapies, including comparative price or efficacy of competitive therapies;

29

Table of Contents

disputes between GSK and Innoviva or between us and Innoviva, such as our 2019 arbitration and our current dispute with Innoviva (See Part II, Item 1 “Legal Proceedings”), each of which concern the withholding of royalty payments we believe are due to us under the TRC LLC Agreement;

GSK deciding to modify, delay or halt the TRELEGY program;

the FDA and/or other national or foreign regulatory authorities determining that any of the studies under the TRELEGY program does not demonstrate the required quality, safety or efficacy, or that additional non-clinical or clinical studies are required with respect to the program;

any adverse effects resulting from the COVID-19 pandemic;

any safety, efficacy or other concerns regarding the TRELEGY program or any GSK-Partnered Respiratory Program in which we have a substantial economic interest; or

any particular FDA requirements or changes in FDA policy or guidance regarding the TRELEGY program or any other GSK-Partnered Respiratory Program or any particular regulatory requirements in other jurisdictions or changes in the policies or guidance adopted by foreign regulatory authorities.

Because GSK is a strategic partner of Innoviva, a strategic partner of TRC and a significant shareholder of us, it may take actions that in certain cases are materially harmful to our business and to our other shareholders.

Based on our review of publicly available filings, as of December 31, 2020, GSK beneficially owned 15.0% of our outstanding ordinary shares (although GSK, through a subsidiary, has issued $280,336,000 of exchangeable senior notes due 2023 (the “GSK Notes”), initially exchangeable into 9,644,792 of our ordinary shares which, as of December 31, 2020, represented 15.0% of our outstanding ordinary shares). GSK is also a strategic partner to Innoviva with rights and obligations under the GSK Agreements, which include the strategic alliance agreement and the collaboration agreement assigned to TRC, that may cause GSK’s interests to differ from our interests and those of our other shareholders. For example, GSK’s commercialization efforts are guided by a portfolio approach across products in which we have an indirect interest through TRC and products in which we have no interest. Accordingly, GSK’s commercialization efforts may have the effect of reducing the value of our interest in TRC. Furthermore, GSK has a substantial respiratory product portfolio in addition to the products covered by the GSK Agreements. GSK may make respiratory product portfolio decisions or statements about its portfolio which may be, or may be perceived to be, harmful to the respiratory products partnered with Innoviva and TRC. For example, GSK could promote its own respiratory products and/or delay or terminate the development or commercialization of the respiratory programs covered by the GSK Agreements, which include TRELEGY. Also, given the potential future royalty payments GSK may be obligated to pay under the GSK Agreements, GSK may seek to acquire us or acquire our interests in TRC in order to effectively reduce those payment obligations and the price at which GSK might seek to acquire us may not reflect our true value. As a result of these differing interests, GSK may take actions that it believes are in its best interest but which might not be in the best interests of either us or our other shareholders. In addition, GSK could also seek to challenge our or Innoviva’s post-Spin-Off operations as violating or allowing it to terminate the GSK Agreements, including by violating the confidentiality provisions of those agreements or the master agreement between GSK, Innoviva and us entered into in connection with the Spin-Off (the “Master Agreement”), or otherwise violating its legal rights. While we believe our operations fully comply with the GSK Agreements, the Master Agreement and applicable law, there can be no assurance that we or Innoviva will prevail against any such claims by GSK. Moreover, regardless of the merit of any claims by GSK, we may incur significant cost and diversion of resources in defending them. In addition, any other action or inaction by either GSK or Innoviva that results in a material dispute, allegation of breach, litigation, arbitration, or significant disagreement between those parties or between us and either of those parties may be interpreted negatively by the market or by our investors, could harm our business and cause the price of our securities to fall. Other examples of these kinds of issues include but are not limited to non-performance of other contractual obligations and allegations of non-performance, disagreements over the relative marketing and sales efforts for Innoviva’s partnered products and other GSK respiratory products, disputes over public statements, and similar matters. In general, any uncertainty about respiratory programs partnered with GSK, the enforceability of the GSK Agreements or the relationship/partnership between Innoviva and GSK or between us and Innoviva could result in significant reduction in the market price of our securities and other material harm to our business.

30

Table of Contents

We do not control the commercialization of TRELEGY and we do not control TRC; accordingly the amount of royalties we receive will depend on, among other factors, GSK’s ability to further commercialize TRELEGY and TRC’s decisions concerning use of cash in accordance with the TRC LLC Agreement.

We only receive revenues from TRELEGY based on the amount of sales of this product by GSK in the form of our economic interest in the royalties paid by GSK to TRC, which is managed by Innoviva. There are no required minimum future payments associated with the product and any royalties we receive will depend on GSK’s ability to commercialize the product, the future payments, if any, made by GSK to TRC, TRC’s expenses, and the amount of cash, if any, expected to be used by TRC pursuant to the TRC LLC Agreement. Following our 2019 arbitration with Innoviva concerning its withholding of certain royalty distributions to the TRC members, the arbitrator ruled, among other things, that in the future if Innoviva desires to invest TRC funds in any initiatives that require the consent of GSK under the collaboration agreement, Innoviva must first obtain the consent of GSK. The timeframe for seeking GSK’s consent for these initiatives and the associated dates by which GSK’s consent must be received means that royalty distributions could be delayed for several quarters (if GSK ultimately does not consent) or perhaps not made at all until the completion of the initiatives (to the extent that GSK does consent and agrees with TRC that TRC funding will be used for such initiatives). This involves a number of risks and uncertainties, including:

any future withholding by Innoviva or TRC of royalty distributions;

GSK’s ability to have an adequate supply of TRELEGY product;

ongoing compliance by GSK or its suppliers with the FDA’s current Good Manufacturing Practice;

compliance with other applicable FDA and other regulatory requirements in the US or other foreign jurisdictions, including those described elsewhere in this report;

competition, whether from current competitors or new products developed by others in the future;

claims relating to intellectual property;

any future disruptions in GSK’s business which would affect its ability to commercialize TRELEGY, including, disruptions due to the COVID-19 pandemic;

the ability of TRELEGY to achieve wider acceptance among physicians, patients, third-party payors, or the medical community in general;

the amount of cash associated with any additional future TRELEGY commercialization initiatives that Innoviva proposes to GSK for TRC to pursue, the time it may take to present those initiatives to GSK for approval and the time it takes for GSK to consent or not consent;

global economic conditions;

decisions made by Innoviva, as TRC’s manager, regarding the timing and amount of distributions;

the resolution of any disputes between Innoviva and TRC, on the one hand, and us, on the other, regarding the timing of distributions, the amount of distributions, and the proper business activities of TRC, including the current dispute with Innoviva and TRC described below; and

any of the other risks relating to commercialization of TRELEGY.

These risks and uncertainties could materially impact the amount and timing of future royalties or other revenues we may receive from sales of TRELEGY, which could have a material adverse effect on our future revenues, other financial results and our financial position and cause the price of our securities to fall.

On June 10, 2020, we disclosed in a Form 8-K that we had formally objected to TRC and Innoviva, as the manager of TRC, regarding their proposed plan to use TRELEGY royalties to invest in certain privately-held companies, funds that would otherwise be available for distribution to us under the terms of the TRC LLC Agreement. We intend to

31

Table of Contents

continue to seek to protect our interests in this matter consistent with the dispute resolution procedures of the TRC LLC Agreement. In this regard, we initiated an arbitration proceeding against Innoviva and TRC in October 2020 challenging the authority of Innoviva and TRC to pursue such a business plan rather than distribute such funds to us in a manner consistent with the TRC LLC Agreement and our 85% economic interest in TRC. The arbitration hearing was held during the week of February 16, 2021, with post-hearing briefing and arguments to take place over the next few weeks. We currently anticipate a decision in those proceedings near the end of the first quarter or early in the second quarter of 2021. There can be no assurance that we will prevail in the arbitration or that it will result in us receiving additional distributions from TRC. An adverse result could materially and adversely affect the funds that we and our affiliates would otherwise expect to receive from TRC in the future.

In the future, Innoviva may cause TRC to withhold funds from distribution to its members, including our affiliates, for additional TRELEGY development or commercialization initiatives that may be proposed, which would need to be approved by GSK in order to be implemented, or for other purposes. To the extent any TRELEGY development or commercialization initiatives are timely approved by GSK and implemented, such initiatives may require funding beyond the amount withheld by TRC, and TRC may withhold additional amounts in subsequent quarters with respect to these initiatives. Accordingly, we cannot predict the amount of the funds that our affiliates would otherwise expect to receive from TRC that TRC may withhold in the future, or the timing of any such withholding.

We may object to the withholding of funds for additional proposed TRELEGY initiatives or other purposes on the basis that such withholding is in violation of the terms of the TRC LLC Agreement or otherwise, and such objection could result in additional legal proceedings between us, TRC and Innoviva. Any such legal proceedings could divert the attention of management and cause us to incur significant costs, regardless of the outcome, which we cannot predict. An adverse result could materially and adversely affect the funds that our affiliates would otherwise expect to receive from TRC in the future and thus have a material adverse effect on our business, financial condition, and results of operations.

Our ongoing drug discovery and development efforts might not generate additional successful product candidates or approvable drugs.

Our compounds in clinical trials and our future leads for potential drug compounds are subject to the risks and failures inherent in the development of pharmaceutical products. These risks include, but are not limited to, the inherent difficulty in selecting the right drug and drug target and avoiding unwanted side effects, as well as unanticipated problems relating to product development, testing, enrollment, obtaining regulatory approvals, maintaining regulatory compliance, manufacturing, competition and costs and expenses that may exceed current estimates.

Clinical studies involving our product candidates may reveal that those candidates are ineffective, inferior to existing approved medicines, unacceptably toxic, or that they have other unacceptable side effects. In addition, the results of preclinical studies do not necessarily predict clinical success, and larger and later-stage clinical studies may not produce the same results as earlier-stage clinical studies. For example, despite promising early stage studies, we previously announced that two late stage clinical programs failed to meet their primary endpoints. There can be no assurance that our Phase 3 study for ampreloxetine will meet its primary endpoint, and developments and results from that study may be adverse or may be perceived to be adverse.

24

Table of Contents

Frequently, product candidates that have shown promising results in early preclinical or clinical studies have subsequently suffered significant setbacks or failed in later non-clinical or clinical studies. In some instances, there can be significant variability in safety and/or efficacy results between different trials of the same product candidate due to numerous factors, including changes in trial protocols, differences in size and type of the patient populations, varying levels of adherence to the dosing regimen and other trial protocols and the rate of dropout among clinical trial participants. Clinical and non-clinical studies of product candidates often reveal that it is not possible or practical to continue development efforts for these product candidates. In addition, the design of a clinical trial can determine whether its results will support regulatory approval and flaws in the design of a clinical trial may not become apparent until the clinical trial is well underway or completed. IfAs our clinical studies for one of our currentprior product candidates such as the clinical studies for our JAK inhibitor programs or ampreloxetine in patients with nOH, are substantially delayed or suggestsuggested that any of our product candidates maycandidate was not be efficacious or well tolerated,in the indications we couldwere investigating, we choose to cease development of thesethis product candidates.candidate. In addition, our product candidates may have undesirable side effects or other unexpected characteristics that could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restricted label or the delay or denial of regulatory approval by regulatory authorities.

32

Table of Contents

We face substantial competition from companies with more resources and experience than we have, which may result in others discovering, developing, receiving approval for or commercializing products before or more successfully than we do.

Our ability to succeed in the future depends on our ability to demonstrate and maintain a competitive advantage with respect to our approach to the discovery, development and commercialization of medicines. Our objective is to discover, develop and commercialize new small molecule medicines with superior efficacy, convenience, tolerability and/or safety using our proprietary insight in chemistry, biology and multivalency, where applicable.safety. We expect that any medicines that we commercialize with or without our collaborative partners will compete with existing or future market-leading medicines.

Many of our current and potential competitors have substantially greater financial, technical and personnel resources than we have. In addition, many of these competitors have significantly greater commercial infrastructures than we have. Our ability to compete successfully will depend largely on our ability to leverage our experience in drug discovery and development, and, more recently, commercialization, to:

discover and develop medicines that are superior to other products in the market;

attract and retain qualified personnel;

obtain and enforce patent and/or other proprietary protection for our medicines and technologies;

conduct effective clinical trials and obtain required regulatory approvals;

develop and effectively implement commercialization strategies, with or without collaborative partners; and

successfully collaborate with pharmaceutical companies in the discovery, development and commercialization of new medicines.to:

develop medicines that are superior to other products in the market;

attract and retain qualified personnel;

obtain and enforce patent and/or other proprietary protection for our medicines and technologies;

conduct effective clinical trials and obtain required regulatory approvals;

develop and effectively implement commercialization strategies, with or without collaborative partners; and

successfully collaborate with pharmaceutical companies in the development and commercialization of new medicines.

Pharmaceutical companies, including companies with which we collaborate, may invest heavily to quickly discover and develop or in-license novel compounds that could make our product candidatesor product candidate obsolete. Accordingly, our competitorsother companies may succeed in obtaining patent protection, conducting clinical trials, receiving FDA or equivalent regulatory approval outside the US or discovering, developing and commercializing medicines before we do. Other companies are engaged in the discovery of medicines that would compete with the product candidatescandidate that we are developing.developing or our existing product.

Any new medicine that competes with a generic or proprietary market leading medicine must demonstrate compelling advantages in efficacy, convenience, tolerability and/or safety in order to overcome severe price competition and be commercially successful. For example, YUPELRI competes predominantly with the nebulized LAMA Lonhala® Magnair® (glycopyrrolate) dosed two times per day andpredominately with short acting nebulized bronchodilators that are dosed three to four times per day.day, Verona Pharma plc’s ensifentrine, a first-in-class, selective inhaled dual inhibitor of PDE3 and PDE4 is expected to launch in the US in the second half of 2024, and Sanofi and

25

Table of Contents

Regeneron Pharmaceutical, Inc. are expecting US approval for their first-in-class, IL-4/IL-13 monoclonal antibody (mAb) Dupixent® (dupilumab) for COPD in the second halfof 2024 for the maintenance treatment for patients with moderate-to-severe COPD, who are uncontrolled with current SOC triple therapy (LAMA + LABA + ICS) and have evidence of Type 2 inflammation and frequent exacerbation history. If successfully developed and approved, ampreloxetine would be expected to serve as the only safe, convenient, and durably effective treatment option for MSA patients with symptomatic nOH, entering a market where generic droxidopa is currently the sole product approved for nOH patients and midodrine is approved for OH. If we are not able to compete effectively against our current and future competitors, our business will not grow, our financial condition and operations will suffer and the price of our securities could fall.

If we are unable to enter into future collaboration arrangements or if any such collaborations with third parties are unsuccessful, we will be unable to fully develop and commercialize all of our product candidates and our business will be adversely affected.

We have collaborations with a number of third parties including Janssen for izencitinib and related back-up compounds for inflammatory intestinal diseases, including ulcerative colitis and Crohn’s disease and Viatris for the development and commercialization of a nebulized formulation of revefenacin, our LAMA compound (including YUPELRI). Also, through our interest in TRC we may participate economically in Innoviva’s collaborations with GSK with respect to the GSK-Partnered Respiratory Programs. Additional collaborations will likely be needed to fund later-stage development of certain programs that have not been licensed to a collaborator and to commercialize the product candidates in our programs if approved by the necessary regulatory authorities. We evaluate commercial strategy on a product by product basis either to engage pharmaceutical or other healthcare companies with an existing sales and marketing organization and distribution system to market, sell and distribute our products or to commercialize a product ourselves. However, we may not be able to establish these sales and distribution relationships on acceptable

33

Table of Contents

terms, or at all, or may encounter difficulties in commercializing a product ourselves. For any of our product candidates that receive regulatory approval in the future and are not covered by our current collaboration agreements, we will need a partner in order to commercialize such products unless we establish independent sales, marketing and distribution capabilities with appropriate technical expertise and supporting infrastructure.

Collaborations with third parties regarding our programs may require us to relinquish material rights, including revenue from commercialization of our medicines, or to assume material ongoing development obligations that we would have to fund. These collaboration arrangements are complex and time-consuming to negotiate, and if we are unable to reach agreements with third-party collaborators, we may fail to meet our business objectives and our financial condition may be adversely affected. We face significant competition in seeking third-party collaborators. We may be unable to find third parties to pursue product collaborations on a timely basis or on acceptable terms. Furthermore, for any collaboration, we may not be able to control the amount of time and resources that our partners devote to our product candidates and our partners may choose to prioritize alternative programs or otherwise be unsuccessful in their efforts with respect to our products or product candidates. In addition, effective collaboration with a partner requires coordination to achieve complex and detail-intensive goals between entities that potentially have different priorities, capabilities and processes and successful navigation of the challenges such coordination entails. For example, Viatris has a substantial existing product portfolio and other considerations that influence its resource allocation, and other priorities and internal organizational processes that differ from our own. As a result of these differing interests and processes, Viatris may take actions that it believes are in its best interest but which might not be in the best interests of either us or our other shareholders. Our inability to successfully collaborate with third parties would increase our development costs and may cause us to choose not to continue development of certain product candidates, would limit the likelihood of successful commercialization of some of our product candidates, may cause us not to continue commercialization of our authorized products and could cause the price of our securities to fall.

We depend on third parties in the conduct of our non-clinical and clinical studies for our product candidates.

We depend on independent clinical investigators, contract research and manufacturing organizations and other third-party service providers in the conduct of our non-clinical and clinical studies for our product candidates. We rely heavily on these parties for execution of our non-clinical and clinical studies, and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that our clinical studies are conducted in accordance with good clinical, laboratory and manufacturing practices (“GXPs”) and other regulations as required by the FDA and foreign regulatory authorities, and the applicable protocol. Failure by these parties to comply with applicable regulations and practices in conducting studies of our product candidates can result in a delay in our development programs or non-approval of our product candidates by regulatory authorities. Furthermore, to the extent the operations of these third parties are disrupted as result of the COVID-19 pandemic or otherwise, our development programs could be delayed.

The FDA, and equivalent authorities in third countries, enforces GXPs and other regulations through periodic inspections of trial sponsors, clinical research organizations (“CROs”), principal investigators and trial sites. If we or any of the third parties on which we have relied to conduct our clinical studies are determined to have failed to comply with GXPs (or other equivalent regulations outside the US), the study protocol or applicable regulations, the clinical data generated in our studies may be deemed unreliable. This could result in non-approval of our product candidates by the FDA, or equivalent authorities in other countries, or we, the FDA, or equivalent authorities in other countries may decide to conduct additional audits or require additional clinical studies, which would delay our development programs, could result in significant additional costs and cause the price of our securities to fall.

34

Table of Contents

There is a single source of supply for a number of our product candidates and for YUPELRI, and our business will be harmed if any of these single-source manufacturers are not able to satisfy demand and alternative sources are not available.

We have limited in-house production capabilities for preclinical and clinical study purposes and depend primarily on a number of third-party Active Pharmaceutical Ingredient (“API”) and drug product manufacturers.manufacturers for clinical study purposes and we depend on third party suppliers for warehousing and storage of our existing API and drug product. We may not have long-term agreements with these third parties and our agreements with these parties may be terminable at will by either party at any time. In addition, there is a single supplier of YUPELRI API, and a single supplier of YUPELRI drug product.product and YUPELRI is warehoused in a single facility. If, for any reason, any of these third-party manufacturers are unable or unwilling to perform, or if their performance does not meet regulatory requirements, alternative manufacturers may not be available or may not be available on acceptable terms. For example, while we have not been directly or indirectly materially impacted, manufacturers and warehousing suppliers are periodically impacted by natural disasters, accidents, labor disputes, labor shortages, regulatory actions, public healthy emergencies and geopolitical factors. Any inability to acquire sufficient quantities of API and drug product in a timely manner from these third parties could delay preclinical and clinical studies or prevent us from developing our product candidates in a cost-effective manner or on a timely basis or adversely impact the commercialization of YUPELRI.YUPELRI sales. In addition, manufacturers of our API and drug product are subject to the FDA’s current Good Manufacturing Practice (“cGMP”) regulations and similar foreign standards and we do not have control over compliance with these regulations by our manufacturers.

Our manufacturing strategy presents the following additional risks:

because of the complex nature of many of our compounds, our manufacturers may not be able to successfully manufacture our APIs and/or drug products in a cost-effective and/or timely manner and changing manufacturers for our APIs or drug products could involve lengthy technology transfer, validation and regulatory qualification activities for the new manufacturer;

the processes required to manufacture certain of our APIs and drug products are specialized and available only from a limited number of third-party manufacturers;

some of the manufacturing processes for our APIs and drug products have not been scaled to quantities needed for continued clinical studies or commercial sales, and delays in scale-up to higher quantities could delay clinical studies, regulatory submissions and commercialization of our product candidates; and

because some of the third-party manufacturers are located outside of the US, there may be difficulties in importing our APIs and drug products or their components into the US as a result of, among other things, FDA import inspections, incomplete or inaccurate import documentation or defective packaging.

because of the complex nature of many of our compounds, our manufacturers may not be able to successfully manufacture our APIs and/or drug products in a cost-effective and/or timely manner and changing manufacturers for our APIs or drug products could involve lengthy technology transfer, validation and regulatory qualification activities for the new manufacturer;

We have a significant amount of debt, including our Non-Recourse 2035 Notes and Convertible Senior 2023 Notes, that are senior in capital structure and cash flow, respectively, to holders of our ordinary shares. Satisfying the obligations relating to our debt could adversely affect the amount or timing of distributions to our shareholders.

As of December 31, 2020, we had $649.2 million in total long-term liabilities outstanding, comprised primarily of $378.3 million in net principal that remains outstanding under the Issuer II’s (defined below) Non-Recourse 2035 Notes and $230.0 million in principal that remains outstanding under our Convertible Senior 2023 Notes (together with the Non-Recourse 2035 Notes, the “Notes”).

The Convertible Senior 2023 Notes are unsecured debt and are not redeemable by us prior to the maturity date except for certain changes in tax law. Holders of the Convertible Senior 2023 Notes may require us to purchase all or any portion of their notes at 100% of their principal amount, plus any unpaid interest, upon a fundamental change such as a change of control of us or the termination of trading of our ordinary shares in accordance with the indenture governing the Convertible Senior 2023 Notes.

Until the Non-Recourse 2035 Notes are paid in full, holders of the Non-Recourse 2035 Notes have a perfected security interest in the Issuer II Class C Units that represent a 63.75% economic interest in any future payments that may be made by GSK to TRC under the strategic alliance agreement and under the portion of the collaboration agreement assigned to TRC by Innoviva (net of TRC expenses paid and the amount of cash, if any, expected to be used by TRC pursuant to the TRC LLC Agreement over the next four fiscal quarters) relating to the GSK-Partnered Respiratory Programs, including the TRELEGY program.

35

Table of Contents

the processes required to manufacture certain of our APIs and drug products are specialized and available only from a limited number of third-party manufacturers;

Prior to and including the December 5, 2024 payment date, the terms of the Non-Recourse 2035 Notes provide that in the event that the distributions received by the Issuer II from TRC in a quarter is less than the interest accrued for that quarter, the principal amount of the Non-Recourse 2035 Notes will increase by the interest shortfall amount for that quarter. The terms of the Non-Recourse 2035 Notes also provide that Theravance Biopharma, at its option, may satisfy the quarterly interest payment obligations by making a capital contribution to the Issuer II.

Satisfying the obligations of these Notes could adversely affect the amount or timing of any distributions to our shareholders. In addition, the Non-Recourse 2035 Notes may be redeemed by Issuer II on and after February 28, 2022, in whole or in part, at specified redemption premiums. We may further choose to satisfy, repurchase, or refinance any Non-Recourse 2035 Notes, to the extent allowable, through public or private equity or debt financings if we deem such financings are available on favorable terms. If any or all of the Convertible Senior 2023 Notes are not converted into our ordinary shares before the maturity date, we will have to pay the holders the full aggregate principal amount of the Convertible Senior 2023 Notes then outstanding. If the Non-Recourse 2035 Notes are not refinanced or paid in full the holders of the Non-Recourse 2035 Notes will have the right to foreclose on the Issuer II Class C Units that represent a 63.75% economic interest in future royalties due on net sales of TRELEGY and related assets. If the Issuer II Class C Units are foreclosed upon, we will lose any right to receive 75% of the future royalty payments made by GSK in connection with the net sales of TRELEGY and related assets. Any of the above payments could have a material adverse effect on our cash position. Our failure to satisfy these obligations may result in a default under the applicable indenture governing these Notes, which could result in a default under certain of our other debt instruments, if any. Any such default would harm our business and the price of our securities could fall. For more information, see Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.

the availability of specialized materials needed to manufacture our APIs and drug products or YUPELRI;

Servicing our Convertible Senior 2023 Notes requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our debt. Additionally, holders may require us to repurchase our Convertible Senior 2023 Notes under certain circumstances, and we may not have sufficient cash to do so.

Our ability to make interest or principal payments when due or to refinance the Convertible Senior 2023 Notes depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations sufficient to satisfy our obligations under the Convertible Senior 2023 Notes and any future indebtedness we may incur and to make necessary capital expenditures. In addition, the issuance of the Non-Recourse 2035 Notes reduced the cash available for us to make interest or principal payments on, or to refinance, the Convertible Senior 2023 Notes. We may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, refinancing or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance the Convertible Senior 2023 Notes or future indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities on desirable terms or at all, which could result in a default on the Convertible Senior 2023 Notes or future indebtedness.

The holders of the Convertible Senior 2023 Notes may have the right to require us to repurchase the Convertible Senior 2023 Notes upon the occurrence of a “fundamental change” such as a change of control of our Company or the termination of trading of our ordinary shares, as defined in the indenture governing the Convertible Senior 2023 Notes. We may not have sufficient funds to repurchase the Convertible Senior 2023 Notes in cash or have the ability to arrange necessary financing on acceptable terms. Our failure to repurchase the Convertible Senior 2023 Notes when required would result in an event of default with respect to the Convertible Senior 2023 Notes. In addition, any acceleration of the repayment of the Convertible Senior 2023 Notes or future indebtedness after any applicable notice or grace periods could have a material adverse effect on our business, results of operations and financial condition.

because some of the third-party manufacturers are located in numerous locations outside of the US, and we are conducting global clinical trials there may be difficulties in shipping and importing and exporting our APIs and drug products or their components globally.

Our business and operations would suffer in the event of significant disruptions of information technology systems or security breaches.

We rely extensively on computer systems to maintain information and manage our finances and business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information (including but not limited to trade secrets or other intellectual property, proprietary business information and personal information) and it is critical that we maintain the confidentiality and integrity of such confidential information. Although we have security

36

Table of Contents

measures in place, our internal information technology systems and those of our CROs and other service providers, including cloud-based and hosted applications, data and services, are vulnerable to service interruptions and security breaches from inadvertent or intentional actions by our employees, service providers and/or business partners, from cyber-attacks by malicious third parties, and/or from, natural disasters, terrorism, war and telecommunication and electrical failures. Cyber-attacks are increasing in their frequency, sophistication, and intensity, and have become increasingly difficult to detect. Significant disruptions of information technology systems or security breaches could adversely affect our business operations and result in financial, legal, business and reputational harm to us, including significant liability and/or significant disruption to our business. If a disruption of information technology systems or security breach results in a loss of or damage to our data or regulatory applications, unauthorized access, use, or disclosure of, or the prevention of access to, confidential information, or other harm to our business, we could incur liability and reputational harm, we could be required to comply with federal and/or state breach notification laws and foreign law equivalents, we may incur legal expenses to protect our confidential information, the further development of our product candidates could be delayed and the price of our securities could fall. For example, the loss of clinical trial data from completed or ongoing clinical trials of our product candidates could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. As another example, we may incur penalties imposed by the competent authorities in the EU Member States in case of breach of the EU rules governing the collection and processing of personal data, including unauthorized access to or disclosure of personal data. Although we have security and fraud prevention measures in place, we have been subject to immaterial payment fraud activity. In 2017, we filed a lawsuit (which has since been resolved) against a former employee for misappropriation of our confidential, proprietary and trade secret information. Moreover, there can be no assurance that such security measures will prevent service interruptions or security breaches that could adversely affect our business. These same risks also apply to our partners and vendors, who similarly hold sensitive and critical information related to our business in computer systems and are similarly potentially vulnerable to attack.

If we lose key management or scientific personnel, or if we fail to attract and retain key employees, our ability to discover and develop our product candidates and commercialize our products, if any, will be impaired.

We are highly dependent on principal members of our management team and scientific staff, and in particular, our Chief Executive Officer, Rick E Winningham, to operate our business. Mr. Winningham has significant pharmaceutical industry experience. The loss of Mr. Winningham’s services could impair our ability to discover, develop and commercialize new medicines.

If we fail to retain our qualified personnel or replace them when they leave, we may be unable to continue our discovery, development and commercialization activities, which may cause the price of our securities to fall.

In addition, our US operating subsidiary’s facility and most of its employees are located in northern California, headquarters to many other biotechnology and biopharmaceutical companies and many academic and research institutions. As a result, competition for certain skilled personnel in our market is intense. None of our employees have employment commitments for any fixed period of time and they all may leave our employment at will. If we fail to retain our qualified personnel or replace them when they leave, we may be unable to continue our development and commercialization activities and the price of our securities could fall.

Global economic, political and social conditions may harm our ability to do business, increase our costs and negatively affect our stock price.

Worldwide economic conditions remain uncertain due to the United Kingdom (“UK”) recent withdrawal from the EU (often referred to as “Brexit”), current global economic challenges, the COVID-19 pandemic, and other disruptions to global and regional economies and markets.

Brexit has created significant uncertainty about the future relationship between the UK and the EU, including with respect to the laws and regulations that will apply as the UK determines which EU laws to replace or replicate in the event of a withdrawal. From a regulatory perspective, the UK’s withdrawal bears significant complexity and risks.

In light of the fact that a significant portion of the regulatory framework in the UK is derived from EU laws, Brexit could materially impact the EU regulatory regime governing development, manufacture, importation, approval and commercialization of our product candidates in the UK or the EU. For example, a marketing authorization for a

37

Table of Contents

medicinal product granted by the European Commission or by the competent authorities of EU member states will no longer encompass the UK. A separate authorization granted by the UK competent authorities will be required to place medicinal products on the UK market. In addition, the UK’s withdrawal from the EU affects manufacturing sites that hold an EU manufacturing authorization issued by the UK competent authorities which could impact our ability to rely on UK manufacturing sites to supply medicinal products intended for the EU market will depend on. All of these changes could increase our costs and otherwise adversely affect our business. In addition, currency exchange rates for the British Pound and the Euro with respect to each other and to the US dollar have already been, and may continue to be, negatively affected by Brexit, which could cause volatility in our quarterly financial results.

Further, development of our product candidates and/or regulatory approval may be delayed for other political events beyond our control. For example, a US federal government shutdown or budget sequestration, such as ones that occurred during 2013, 2018, and 2019, may result in significant reductions to the FDA’s budget, employees and operations, which may lead to slower response times and longer review periods, potentially affecting our ability to progress development of our product candidates or obtain regulatory approval for our product candidates. Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

Our operations also depend upon favorable trade relations between the US and those foreign countries in which our materials suppliers have operations. A protectionist trade environment in either the US or those foreign countries in which we do business, such as a change in the current tariff structures, export compliance or other trade policies, may materially and adversely affect our operations.

External factors, such as potential terrorist attacks, acts of war, geopolitical and social turmoil or similar events in many parts of the world, could also prevent or hinder our ability to do business, increase our costs and negatively affect our stock price. These geopolitical, social and economic conditions could harm our business.

Our US operating subsidiary’s facility is located near known earthquake fault zones, and the occurrence of an earthquake, extremist attack or other catastrophic disaster could cause damage to our facilities and equipment, which could require us to cease or curtail operations.

Our US operating subsidiary’s facility is located in the San Francisco Bay Area near known earthquake fault zones and therefore will be vulnerable to damage from earthquakes. In October 1989, a major earthquake struck this area and caused significant property damage and a number of fatalities. We are also vulnerable to damage from other types of disasters, including power loss, attacks from extremist organizations, fire, floods, communications failures and similar events. If any disaster were to occur, our ability to operate our business could be seriously impaired. In addition, the unique nature of our research activities and of much of our equipment could make it difficult and costly for us to recover from this type of disaster. We may not have adequate insurance to cover our losses resulting from disasters or other similar significant business interruptions and we do not plan to purchase additional insurance to cover such losses due to the cost of obtaining such coverage. Any significant losses that are not recoverable under our insurance policies could seriously impair our business and financial condition, which could cause the price of our securities to fall.

If YUPELRI does not continue to be accepted by physicians, patients, third-party payors, or the medical community in general, we may not receive significant additional revenues from sales of this product.

The commercial success of YUPELRI depends upon its acceptance by physicians, patients, third-party payors and the medical community in general. YUPELRI may not continue to be accepted by these parties. YUPELRI competes predominantly with the nebulized LAMA Lonhala® Magnair® (glycopyrrolate) dosed two times per day and with short acting nebulized bronchodilators that are dosed three to four times per day. We have seen increased volatility in sales of YUPELRI coinciding with the suspension of in-person sales calls, having less access to physicians and other healthcare providers and the progression of the COVID-19 pandemic and, if physicians, patients, third-party payors, or the medical community in general believe that nebulized therapy presents a risk of further spreading COVID-19 or that YUPELRI is otherwise not a preferred treatment option for those with COPD, we may see long-term declines. Shifts to novel marketing tactics are being deployed in an effort to keep awareness levels and business generation positive, but these untested and unvalidated tactics may not be effective at maintaining YUPELRI brand growth. If YUPELRI’s acceptance does not continue to grow, or declines from previous levels, our business and financial results could be materially harmed.

38

Table of Contents

In collaboration with Viatris, we are responsible for marketing and sales of YUPELRI in the US, which subjects us to certain risks.

We currently maintain a sales force in the US and plan to continue to augment our sales and marketing personnel to support our co-promotion obligations for YUPELRI under our agreement with Viatris. The risks of fulfilling our US co-promotion obligations to Viatris include:

costs and expenses associated with maintaining an independent sales and marketing organization with appropriate technical expertise and supporting infrastructure, including third-party vendor logistics and consultant support, which costs and expenses could, depending on the scope and method of the marketing effort, exceed any product revenue for several years;

our ability to retain effective sales and marketing personnel and medical science liaisons in the US;

the ability of our sales and marketing personnel to obtain access to and educate adequate numbers of physicians about prescribing YUPELRI, in appropriate clinical situations; and

the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines.

If we are not successful in maintaining a sales and marketing organization with appropriate experience, technical expertise, supporting infrastructure and the ability to obtain access to and educate adequate numbers of physicians about prescribing YUPELRI in appropriate clinical situations, we will have difficulty maintaining effective commercialization of YUPELRI in the hospital setting, which would adversely affect our business and financial results and the condition and the price of our securities could fall.

We are subject to extensive and ongoing regulation, oversight and other requirements by the FDA and failure to comply with these regulations and requirements may subject us to penalties that may adversely affect our financial condition or our ability to commercialize any approved products.

Prescription drug advertising and promotion are closely scrutinized by the FDA, including substantiation of promotional claims, disclosure of risks and safety information, and the use of themes and imagery in advertising and promotional materials. As with all companies selling and marketing products regulated by the FDA in the US, we are prohibited from promoting any uses of an approved product, such as YUPELRI, that are outside the scope of those uses that have been expressly approved by the FDA as safe and effective on the product’s label.

26

Table of Contents

The manufacturing, labeling, packaging, adverse event reporting, advertising, promotion, and recordkeeping for an approved product remain subject to extensive and ongoing regulatory requirements. If we become aware of previously unknown problems with an approved product in the US or overseas or at a contract manufacturer’s facilities, a regulatory authority may impose restrictions on the product, the contract manufacturers or on us, including requiring us to reformulate the product, conduct additional clinical studies, change the labeling of the product, withdraw the product from the market or require the contract manufacturer to implement changes to its facilities.

We are also subject to regulation by regional, national, state, and local agencies, including the Department of Justice, the Federal Trade Commission, the Office of Inspector General of the US Department of Health and Human Services (“OIG”) and other regulatory bodies with respect to any approved product, such as YUPELRI, as well as governmental authorities in those foreign countries in which any product is approved for commercialization. The Federal Food, Drug, and Cosmetic Act, the Public Health Service Act and other federal and state statutes and regulations govern to varying degrees the research, development, manufacturing, and commercial activities relating to prescription pharmaceutical products, including non-clinical and clinical testing, approval, production, labeling, sale, distribution, import, export, post-market surveillance, advertising, dissemination of information and promotion. If we or any third parties that provide these services for us are unable to comply, we may be subject to regulatory or civil actions or penalties that could significantly and adversely affect our business.

39

Table of Contents

Regulatory approval for our product candidates, if any, may include similar or other limitations on the indicated uses for which we can market our medicines or the patient population that may utilize our medicines, which may limit the market for our medicines or put us at a competitive disadvantage relative to alternative therapies.

Failure to satisfy required post-approval requirements and/or commitments may have implications for a product’s approval and may carry civil monetary penalties. Any failure to maintain regulatory approval will materially limit the ability to commercialize a product or any future product candidates and if we fail to comply with FDA regulations and requirements, the FDA could potentially take a number of enforcement actions against us, including the issuance of untitled letters, warning letters, preventing the introduction or delivery of the product into interstate commerce in the US, misbranding charges, product seizures, injunctions, and civil monetary penalties, which would materially and adversely affect our business and financial condition and may cause the price of our securities to fall.

The risks identified in this risk factor relating to regulatory actions and oversight by agencies in the US and throughout the world also apply to the commercialization of any partnered products by our collaboration partners and those commercializing products with respect to which we have an economic interest or right to receive royalties, including GSK, and Cumberland Pharmaceuticals Inc. (“Cumberland”), and such regulatory actions and oversight may limit those parties’ ability to commercialize such products, which could materially and adversely affect our business and financial condition, and which may cause the price of our securities to fall.

We and/or our collaboration partners and those commercializing products with respect to which we have an economic interest or right to receive royalties may face competition from companies seeking to market generic versions of any approved products in which we have an interest, such as TRELEGY or YUPELRI.

Under the Drug Price Competition and Patent Term Restoration Act of 1984, a company may submit an abbreviated new drug application (“ANDA”) under section 505(j) of the Federal Food, Drug, and Cosmetic Act to market a generic version of an approved drug. Because a generic applicant does not conduct its own clinical studies, but instead relies on the FDA’s finding of safety and effectiveness for the approved drug, it is able to introduce a competing product into the market at a cost significantly below that of the original drug. Although we have multiple patents protecting YUPELRI until at leastwith expiration dates ranging from 2025 to 2039 that are listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book, and those commercializing products with respect to which wegeneric applicants have an economic interest or right to receive royalties similarly have patents protecting their products, such as TRELEGYsubmitted, and VIBATIV, generic applicants could potentially submit additional, “paragraph IV certifications” to FDA stating that such patents are invalid or will not be infringed by the applicant’s product. We have not received any suchIn fact, on January 10, 2023, the FDA included seven ANDAs that referred to YUPELRI (revefenacin) inhalation solution and contained a paragraph IV notifications norcertification on its Paragraph IV Certifications List. As of February 28, 2024, we have settled litigation with some of the generic applicants, and pursuant to individual agreements, we granted these companies a royalty-free, non-exclusive, non-sublicensable, non-transferable license to manufacture and market their respective generic versions of YUPELRI inhalation solution in the US on or after the licensed launch date of April 23, 2039, subject to certain exceptions as is customary in these type of

27

Table of Contents

agreements. We are wenot aware of any other paragraph IV notifications with respect to products in which we have an economic interest or right to receive royalties, but ifroyalties. Our collaboration partner, Viatris, is responsible for enforcing our Orange Book patents relating to YUPELRI, in consultation with us, and our views may differ from theirs with respect to the ongoing litigation, process or strategy and we have a reduced ability to control the outcome of the litigation. If any competitors successfully challenge the patents related to these products, including YUPELRI, we and/or our collaboration partners and those commercializing products with respect to which we have an economic interest or right to receive royalties would face substantial competition. If we are not able to compete effectively against such future competition, our business will not grow, our financial condition and operations will suffer and the price of our securities could fall.

For additional discussion of the risk of generic competition to YUPELRI, please see the following risk factor below entitledIf our efforts to protect the proprietary nature of the intellectual property related to our technologies are not adequate, we may not be able to compete effectively in our current or future markets” and “Litigation to protect or defend our intellectual property or third party claims of intellectual property infringement will require us to divert resources and may prevent or delay our drug discovery and development efforts.”

If we are unable to enter into future collaboration arrangements or if any such collaborations with third parties are unsuccessful, we may be unable to fully develop and commercialize certain product candidates and our business will be adversely affected.

We have a collaboration with Viatris for the development and commercialization of a nebulized formulation of revefenacin, which is a LAMA compound (including YUPELRI). In addition, we plan to seek a partnership to continue progression of our inhaled JAK inhibitor program. Additional collaborations, if any, may be needed to progress additional programs and to commercialize the product candidates in our programs if approved by the necessary regulatory authorities. We evaluate commercial strategy on a product by product basis either to engage pharmaceutical or other healthcare companies with an existing sales and marketing organization and distribution system to market, sell and distribute our products or to commercialize a product ourselves. However, we may not be able to establish these sales and distribution relationships on acceptable terms, or at all, or may encounter difficulties in commercializing a product ourselves. For any of our product candidates that receive regulatory approval in the future and are not covered by our current collaboration agreements, we will need a partner in order to commercialize such products unless we establish independent sales, marketing and distribution capabilities with appropriate technical expertise and supporting infrastructure.

Collaborations with third parties regarding our programs may require us to relinquish material rights, including revenue from commercialization of our medicines, or to assume material ongoing development obligations that we would have to fund. These collaboration arrangements are complex and time-consuming to negotiate, and if we are unable to reach agreements with third-party collaborators, we may fail to meet our business objectives and our financial condition may be adversely affected. We face significant competition in seeking third-party collaborators. We may be unable to find third parties to pursue product collaborations on a timely basis or on acceptable terms.

Furthermore, once we enter into a collaboration, our collaboration partners are frequently important for the success of the product or product candidate. For example, Viatris’ role in the commercialization of YUPELRI is important to the overall success of product. In addition, since we do not currently intend to progress our skin-selective pan-JAK inhibitor program internally, Pfizer was important to such program’s development. However, for any collaboration, we may not be able to control the amount of time and resources that our partners devote to our products or product candidates and our partners may choose to prioritize alternative programs or otherwise be unsuccessful in their efforts with respect to our products or product candidates. In addition, effective collaboration with a partner requires coordination to achieve complex and detail-intensive goals between entities that potentially have different priorities, capabilities and processes and successful navigation of the challenges such coordination entails. For example, Viatris has a substantial existing product portfolio largely comprising generic products, other considerations and incentives that influence its resource allocation, and background, experiences, priorities, and internal organizational processes that differ from our own. As a result of these differing backgrounds, interests, and processes, Viatris may take actions that it believes are in its best interest, but which might not be in the best interests of either us or our other shareholders. Our inability to successfully collaborate with third parties would increase our development costs and may cause us to choose not to continue development of certain product candidates, would limit the likelihood of successful commercialization of

28

Table of Contents

some of our product candidates, may cause us not to continue commercialization of our authorized products and could cause the price of our securities to fall.

We depend on third parties in the conduct of our non-clinical and clinical studies for our product candidates.

We depend on independent clinical investigators, contract research and manufacturing organizations and other third-party service providers in the conduct of our non-clinical and clinical studies for our product candidates. We rely heavily on these parties for execution of our non-clinical and clinical studies, and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that our clinical studies are conducted in accordance with good clinical, laboratory and manufacturing practices (“GXPs”) and other regulations as required by the FDA and foreign regulatory authorities, and the applicable protocol. Failure by these parties to comply with applicable regulations and practices in conducting studies of our product candidates can result in a delay in our development programs or non-approval of our product candidates by regulatory authorities.

The FDA, and equivalent authorities in third countries, enforces GXPs and other regulations through periodic inspections of trial sponsors, clinical research organizations (“CROs”), principal investigators and trial sites. If we or any of the third parties on which we have relied to conduct our clinical studies are determined to have failed to comply with GXPs (or other equivalent regulations outside the US), the study protocol or applicable regulations, the clinical data generated in our studies may be deemed unreliable. This could result in non-approval of our product candidates by the FDA, or equivalent authorities in other countries, or we, the FDA, or equivalent authorities in other countries may decide to conduct additional audits or require additional clinical studies, which would delay our development programs, could result in significant additional costs and cause the price of our securities to fall.

If there are any adverse developments or perceived adverse developments with respect to TRELEGY, we may not receive Milestone Payments or the revenue we expect from the Outer Years Royalty, which would harm our business and could cause the price of our securities to fall.

Through the milestone payments we may receive from Royalty Pharma if certain TRELEGY global net sales thresholds are met following our sale of our economic interest in TRELEGY (the “Milestone Payments”) and pursuant to our right to receive from Royalty Pharma 85% of the royalty payments on the Assigned Collaboration Products (as defined in the Purchase Agreement) payable (a) for sales or other activities occurring on and after January 1, 2031 related to the Assigned Collaboration Products in the US, and (b) for sales or other activities occurring on and after July 1, 2029 related to the Assigned Collaboration Products outside of the US (the “Outer Years Royalty” and, together with the Milestone Payments, the “Ongoing Economic Interest”), we may participate in the mid- and long-term economically in royalty payments from GSK with respect to the TRELEGY. However, we cannot assure you as to the amount, if any, we might receive. We have no access to non-public information regarding the development progress of, or plans for TRELEGY, and we have no current authority to enforce rights under the GSK Agreements assigned to TRC. However, if there are any adverse developments or perceived adverse developments with respect to TRELEGY, we may not realize the value we currently anticipate from the Ongoing Economic Interest, which would harm our business and may cause the price of our securities to fall. Examples of such adverse developments include, but are not limited to:

disappointing or lower than expected sales of TRELEGY;

the emergence of new closed triple or other alternative therapies or any developments regarding competitive therapies, including comparative price or efficacy of competitive therapies;

disputes between any of Royalty Pharma, GSK, Innoviva and us;

GSK deciding to modify, delay or halt the TRELEGY program;

any safety, efficacy or other concerns regarding the TRELEGY program; or

any particular FDA requirements or changes in FDA policy or guidance regarding the TRELEGY program or any particular regulatory requirements in other jurisdictions or changes in the policies or guidance adopted by foreign regulatory authorities.

29

Table of Contents

We do not control the commercialization of TRELEGY; accordingly, our receipt of Milestone Payments and receipt of the value we currently anticipate from the Outer Years Royalty will depend on, among other factors, GSK’s ability to further commercialize TRELEGY.

Our Ongoing Economic Interest in TRELEGY consists of the potential Milestone Payments and our right to receive from Royalty Pharma the Outer Years Royalty, both of which are ultimately based on the amount of sales of this product by GSK. Any benefit we may receive from the Ongoing Economic Interest will depend on GSK’s ability to commercialize the product, and the future payments, if any, made by GSK to Royalty Pharma.

Accordingly, our Ongoing Economic Interest involves a number of risks and uncertainties, including:

GSK’s ability to have an adequate supply of TRELEGY product;

ongoing compliance by GSK or its suppliers with the FDA’s current Good Manufacturing Practice;

compliance with other applicable FDA and other regulatory requirements in the US or other foreign jurisdictions, including those described elsewhere in this report;

competition, whether from current competitors or new products developed by others in the future;

claims relating to intellectual property;

any future disruptions in GSK’s business which would affect its ability to commercialize TRELEGY, including, disruptions due to the COVID-19 pandemic;

the ability of TRELEGY to achieve wider acceptance among physicians, patients, third-party payors, or the medical community in general;

global economic conditions; and

any of the other risks relating to commercialization of TRELEGY.

These risks and uncertainties could materially impact the amount and timing of future Milestone Payments and Outer Years Royalty, which could have a material adverse effect on our future revenues, other financial results and our financial position and cause the price of our securities to fall.

If we lose key management, sales or scientific personnel, or if we fail to attract and retain key employees, our ability to discover and develop our product candidates and commercialize our products will be impaired.

We are highly dependent on principal members of our management team and commercial and scientific staff, and in particular, our Chief Executive Officer, Rick E Winningham, to operate our business. Mr. Winningham has significant pharmaceutical industry experience. The loss of Mr. Winningham’s services could impair our ability to discover, develop and commercialize new medicines.

If we fail to retain our qualified personnel or replace them when they leave, we may be unable to continue our development and commercialization activities, which may cause the price of our securities to fall. The Restructuring announced in September 2021, and completed in the third quarter of 2022, and the additional headcount reductions announced in February 2023, may make retention of our current personnel both more important and more challenging.

In addition, our US operating subsidiary’s facility and most of its employees are located in northern California, headquarters to many other biotechnology and biopharmaceutical companies and many academic and research institutions. As a result, competition for certain skilled personnel in our market is intense. None of our employees have employment commitments for any fixed period of time and they all may leave our employment at will. If we fail to retain our qualified personnel or replace them when they leave, we may be unable to continue our development and commercialization activities and the price of our securities could fall.

30

Table of Contents

Our business and operations would suffer in the event of significant disruptions of information technology systems or security breaches.

We rely extensively on computer systems to maintain information and manage our finances and business. In the ordinary course of business, we collect, store, and transmit large amounts of confidential information (including but not limited to trade secrets or other intellectual property, proprietary business information and personal information) and it is critical that we maintain the confidentiality and integrity of such confidential information. Although we have security measures in place, our internal information technology systems and those of our CROs and other service providers, including cloud based and hosted applications, data and services, may be vulnerable to service interruptions and security breaches from inadvertent or intentional actions by our employees, service providers and/or business partners, from cyber-attacks by malicious third parties, including but not limited to those involving malware and ransomware, which can disrupt operations significantly, and/or from, natural disasters, terrorism, war and telecommunication and electrical failures. Cyber-attacks are increasing in their frequency, sophistication, and intensity, and have become increasingly difficult to detect. Significant disruptions of information technology systems or security breaches could adversely affect our business operations and result in financial, legal, business, and reputational harm to us, including significant liability and/or significant disruption to our business. If a disruption of information technology systems or security breach results in a loss of or damage to our data or regulatory applications, unauthorized access, use, or disclosure of, or the prevention of access to, confidential information, or other harm to our business, we could incur liability and reputational harm, we could be required to comply with federal and/or state breach notification laws and foreign law equivalents, we may incur legal expenses to protect our confidential information, the further development of our product candidates could be delayed and the price of our securities could fall. For example, the loss of clinical trial data from completed or ongoing clinical trials of our product candidates could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. As another example, we may incur penalties imposed by the competent authorities in the EU Member States in case of breach of the EU rules governing the collection and processing of personal data, including unauthorized access to or disclosure of personal data. In addition, we may suffer damages as a result of civil (class action) claims in response to security breaches. Although we have security and fraud prevention measures in place, we have been subject to immaterial payment fraud activity. In 2017, we filed a lawsuit (which has since been resolved) against a former employee for misappropriation of our confidential, proprietary and trade secret information. Moreover, there can be no assurance that our security measures will prevent service interruptions or security breaches that could adversely affect our business. These same risks also apply to our partners and vendors, who similarly hold sensitive and critical information related to our business in computer systems and are similarly potentially vulnerable to service interruptions and security breaches.

We face risks related to widespread illnesses, including the recent COVID-19 pandemic, which could have a material adverse effect on our business and results of operations.

Our business has been and may continue to be adversely affected by the outbreak of respiratory illness caused by a novel strain of coronavirus, SARS-CoV-2, causing the Coronavirus Disease 2019, also known as COVID-19 (the “COVID-19 pandemic”).

Sales momentum was affected by COVID-19 in the past and may continue to be in the future. We market YUPELRI in the hospital setting and to pulmonologists, whose practices were, and may be in the future, impacted by the pandemic or future respiratory pandemics. Customer orders or new patient use of YUPELRI may decline or fail to grow as a result of, among other things, a shift in our marketing efforts, increased workload of healthcare providers, staffing challenges at hospitals, and the impact of any concerns regarding nebulization in COVID-19 positive patients.

Challenges to the conduct of clinical trials may continue to arise due to the COVID-19 pandemic from site closures, site staffing shortages, potential interruptions to the supply chain for investigational products, or other considerations if site personnel or trial participants become infected with COVID-19. These challenges may lead to difficulties in meeting protocol-specified procedures.

If significant portions of our workforce, and particularly our field-based teams, are unable to work effectively, including due to illness, quarantines, social distancing, government actions or other restrictions in connection with the COVID-19 pandemic or other health emergencies, our operations will be impacted. The COVID-19 pandemic or other health emergencies could limit the ability of our customers, suppliers, and business partners to perform under their

31

Table of Contents

contracts with us, including third-party payers’ ability to make timely payments to us during and following the pandemic. Even now that the COVID-19 pandemic has largely subsided, we may continue to experience an adverse impact to our business as a result of its global economic impacts.

Global economic, political, and social conditions may harm our ability to do business, increase our costs and negatively affect our stock price.

Worldwide economic conditions remain uncertain due to current global economic challenges, hostilities in Ukraine and the Middle East, the COVID-19 pandemic and other health emergencies, the United Kingdom’s (“UK”) withdrawal from the EU (often referred to as “Brexit”), inflation, instability in the US banking sector and other disruptions to global and regional economies and markets.

Further, development of our product candidates and/or regulatory approval may be delayed for other political events beyond our control. For example, a US federal government shutdown or budget sequestration, such as ones that occurred during 2013, 2018, and 2019, may result in significant reductions to the FDA’s budget, employees, and operations, which may lead to slower response times and longer review periods, potentially affecting our ability to progress development of our product candidates or obtain regulatory approval for our product candidates. Further, future government shutdowns, including as a result of the US failing to raise the debt ceiling, could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

Our operations also depend upon favorable trade relations between the US and those foreign countries, including China, in which our materials suppliers have operations. A protectionist trade environment in either the US or those foreign countries in which we do business, such as a change in the current tariff structures, export compliance or other trade policies, may materially and adversely affect our operations.

Brexit created significant uncertainty about the future relationship between the UK and the EU, including with respect to the laws and regulations that will apply as the UK determines which EU laws to replace or replicate after withdrawal. From a regulatory perspective, the UK’s withdrawal bears significant complexity and risks.

External factors, such as potential terrorist attacks, acts of war, geopolitical and social turmoil, including the ongoing hostilities between Russia and Ukraine, similar events in many parts of the world or the worsening of such factors, could also prevent or hinder our ability to do business, increase our costs and negatively affect our stock price. These geopolitical, social, and economic conditions could harm our business.

Our US operating subsidiary’s facility is located near known earthquake fault zones, and the occurrence of an earthquake, extremist attack or other catastrophic disaster could cause damage to our facilities and equipment, which could require us to cease or curtail operations.

Our US operating subsidiary’s facility is located in the San Francisco Bay Area near known earthquake fault zones and therefore will be vulnerable to damage from earthquakes. In October 1989, a major earthquake struck this area and caused significant property damage and a number of fatalities. We are also vulnerable to damage from other types of disasters, including power loss, attacks from extremist organizations, fire, floods, communications failures, and similar events. If any disaster were to occur, our ability to operate our business could be seriously impaired. In addition, the unique nature of our drug development activities and of much of our equipment could make it difficult and costly for us to recover from this type of disaster. We may not have adequate insurance to cover our losses resulting from disasters or other similar significant business interruptions and we do not plan to purchase additional insurance to cover such losses due to the cost of obtaining such coverage. Any significant losses that are not recoverable under our insurance policies could seriously impair our business and financial condition, which could cause the price of our securities to fall.

If sufficient capital is not available, we may have to further curtail operations or we could be forced to share our rights to commercialize our product candidates with third parties on terms that may not be favorable to us.

Based on our current operating plans and financial forecasts, we believe that our existing cash, cash equivalents and marketable securities will be sufficient to meet our anticipated operating needs for at least the next twelve months. However, our current operating plans or financial forecasts occasionally change. For example, in August 2017, we announced an increase in our anticipated operating loss for 2017, primarily driven by our decision to accelerate funding associated with the next phase of development of izencitinib in our JAK inhibitor program. In addition, following

32

Table of Contents

unfavorable results from our late-stage development programs, in September 2021, we announced a strategic update and corporate restructuring (the “2021 Restructuring”), including a reduction in headcount by approximately 75% through a reduction in our workforce of regular and contingent workers. The 2021 Restructuring was completed during the third quarter of 2022, and we announced additional headcount reductions in February 2023. If our current operating plans or financial forecasts change, we may require or seek additional funding in the form of public or private equity or equity-linked offerings, debt financings or additional collaborations and licensing arrangements. In addition, as of December 31, 2023, we had cash, cash equivalents and marketable securities of $102.4 million, which do not reflect our repurchase of $0.4 million of our ordinary shares during January 2024 under our share repurchase program.

Our future capital needs depend on many factors, including:

support and investments in YUPELRI, including funding our commercialization strategies and post marketing clinical studies;

the scope, duration, expenditures, and technical obstacles associated with our ampreloxetine program, including preparing for potential product approvals of ampreloxetine and its potential commercialization;

the occurrence of events triggering Royalty Pharma’s obligations to make Milestone Payments to us;

the outcome of potential licensing or partnering transactions, if any;

responding to competitive pressures and competing technological developments;

the extent of our proprietary patent position in any approved products and our product candidates;

our facilities expenses, which will vary depending on the time and terms of any facility lease or sublease we may enter into, and other operating expenses;

the scope and extent of the sales and marketing efforts, including our independent sales and marketing organization and medical affairs team;

litigation, potential litigation and other contingencies; and

the regulatory approval process for our product candidates.

If we require additional funding, we may not be able to obtain additional financing on terms favorable to us, if at all. General market conditions may make it difficult for us to seek financing from the capital markets. We may be required to relinquish rights to our technologies, product candidates or territories, or grant licenses on terms that are not favorable to us, in order to raise additional funds through collaborations or licensing arrangements. We may also have to sequence studies as opposed to conducting them concomitantly in order to conserve resources, or, as we announced in September 2021 and in February 2023, we may need to delay, reduce, or eliminate one or more of our programs and reduce overall overhead expenses. In addition, we may have to make additional reductions in our workforce and may be prevented from continuing our development and commercialization efforts and exploiting other corporate opportunities. This would likely harm our business, prospects and financial condition, and cause the price of our securities to fall.

We may seek to obtain future financing through the issuance of debt or equity, which may have an adverse effect on our shareholders or may otherwise adversely affect our business.

We may in the future need to raise additional funds to continue to progress our business. If we raise funds through the issuance of additional debt, including convertible debt or debt secured by some or all of our assets, or equity, any debt securities or preferred shares issued will have rights, preferences, and privileges senior to those of holders of our ordinary shares in the event of liquidation. We do not have any outstanding long-term debt, but if additional debt is issued or we otherwise borrow additional funds in the future, there is a possibility that once all senior claims are settled, there may be no assets remaining to pay out to the holders of ordinary shares. In addition, if we raise funds through the

33

Table of Contents

issuance of additional equity, whether through private placements or public offerings, such an issuance would dilute ownership of our current shareholders that do not participate in the issuance. If we are unable to obtain any needed additional funding, we may be required to reduce the scope of, delay, or eliminate some or all of, our planned development and commercialization activities or to license to third parties the rights to develop and/or commercialize products or technologies that we would otherwise seek to develop and/or commercialize ourselves or on terms that are less attractive than they might otherwise be, any of which could materially harm our business.

Furthermore, the terms of any debt securities we may issue in the future may impose restrictions on our operations, which may include limiting our ability to incur additional indebtedness, pay dividends on or repurchase our share capital, or make certain acquisitions or investments. In addition, we may be subject to covenants requiring us to satisfy certain financial tests and ratios, and our ability to satisfy such covenants may be affected by events outside of our control.

We may be treated as a US corporation for US federal income tax purposes.

For US federal income tax purposes, a corporation generally is considered tax resident in the place of its incorporation. Theravance Biopharma is incorporated under Cayman Islands law and established tax residency in Ireland effective July 1, 2015. Therefore, it should be a non-US corporation under this general rule. However, Section 7874 of the Internal Revenue Code of 1986, as amended (the “Code”), contains rules that may result in a foreign corporation being treated as a US corporation for US federal income tax purposes. The application of these rules is complex and there is little guidance regarding certain aspects of their application.

Under Section 7874 of the Code, a corporation created or organized outside the US will be treated as a US corporation for US federal tax purposes if (i) the foreign corporation directly or indirectly acquires substantially all of the properties held directly or indirectly by a US corporation, (ii) the former shareholders of the acquired US corporation hold at least 80% of the vote or value of the shares of the foreign acquiring corporation by reason of holding stock in the

40

Table of Contents

US acquired corporation, and (iii) the foreign corporation’s “expanded affiliated group” does not have “substantial business activities” in the foreign corporation’s country of incorporation relative to its expanded affiliated group’s worldwide activities. For this purpose, “expanded affiliated group” generally means the foreign corporation and all subsidiaries in which the foreign corporation, directly or indirectly, owns more than 50% of the stock by vote and value, and “substantial business activities” generally means at least 25% of employees (by number and compensation), assets and gross income of our expanded affiliated group are based, located, and derived, respectively, in the country of incorporation.

We do not expect to be treated as a US corporation under Section 7874 of the Code, because we do not believe that the assets contributed to us by Innoviva constituted “substantially all” of the properties of Innoviva (as determined on both a gross and net fair market value basis). However, the Internal Revenue Service may disagree with our conclusion on this point and assert that, in its view, the assets contributed to us by Innoviva did constitute “substantially all” of the properties of Innoviva. In addition, there could be legislative proposals to expand the scope of US corporate tax residence and there could be changes to Section 7874 of the Code or the Treasury Regulations promulgated thereunder that could apply retroactively and could result in Theravance Biopharma being treated as a US corporation.

If it were determined that we should be treated as a US corporation for US federal income tax purposes, we could be liable for substantial additional US federal income tax on our post-Spin-Off taxable income. In addition, though we have no current plans to pay any dividends, payments of any dividends to non-US holders may be subject to US withholding tax.

Future tax reform, including changes in tax rates and imposition of new taxes, could impact our results of operations and financial condition.

We are incorporated in the Cayman Islands, maintain subsidiaries in the Cayman Islands (until December 2020), the US, the UK and Ireland, and effective July 1, 2015, we migrated our tax residency from the Cayman Islands to Ireland. We are subject to new, evolving, or revised tax laws and regulations in such jurisdictions, and the enactment of or increases in taxes, or other changes in the application of existing taxes, in such jurisdictions may have an adverse effect on our business or on our results of operations. Due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change. Our future effective tax rate could be affected by changes in our mix

34

Table of Contents

of earnings in countries with differing statutory tax rates, changes in valuation of our deferred tax assets and liabilities, or changes in tax laws or their interpretation, including possible US tax reform and contemplated changes in other countries of long-standing tax principles. These and other similar changes, if finalized and adopted, could have a material impact on our income tax expense and deferred tax balances.

Taxing authorities may challenge our structure and transfer pricing arrangements.

We are incorporated in the Cayman Islands, maintain subsidiaries in the Cayman Islands (until December 2020), the US, the UK and Ireland, and effective July 1, 2015, we migrated our tax residency from the Cayman Islands to Ireland. Due to economic and political conditions, various countries are actively considering changes to existing tax laws. We cannot predict the form or timing of potential legislative changes that could have a material adverse impact on our results of operations. We are aware that Ireland has implemented certainfurther tax law changes and is expected to implement additional tax law changesthrough the Finance Act 2021 to comply with the European Union Anti-Tax Avoidance Directives. These changes include the first ever Irish controlled foreign company (“CFC”) rules which came into effect on January 1, 2019. Due to provisions in Finance Bill 2019, Ireland will also implement certain transfer pricing rule changes, with effect from 2020. We are continuing to evaluate and monitor the applicability of the CFC rules published in Finance Act 2018, but our current assessment, based on the rules and guidance publishedChanges to date, is that theincluding reverse-hybrid mismatch and interest limitation rules, are unlikelynot expected to have a material impact on our operations. Statutory language has been provided for the transfer pricing rule changes, and we believe that the transfer pricing rules are unlikely to have a material impact on our operations. New UKCompany’s tax legislation was introduced by the Finance Act 2019 (“FA 2019”) that imposes a tax related to offshore receipts in respect of intangible property held in low tax jurisdictions (“ORIP”) and became effective in April 2019. FA 2019 also included a power for amendments to the ORIP legislation to be made by regulation by December 31, 2019. On October 15, 2019, the UK published further guidance intended to facilitate the administration of the ORIP regime. However, a number of issues and areas of uncertainty remain. We have reviewed the original legislation in conjunction with the guidance and believe that the ORIP regime may apply to certain cash receipts. Based on this analysis, we believe that the ORIP charge on UK-derived cash receipts through 2020 is not material.position.

In April 2020, we became aware of a withholding tax regulation that could be interpreted to apply to certain of our previous intra-group transactions. Additional draft guidance on this withholding tax regime was released in late 2020 and early 2021, and based on our analysis of this guidance, we do not believe the exposure to be material. We continue to monitor the evolving legislation relating to this matter and will consider its impact on our consolidated financial statements.

In addition, significant judgment is required in determining our worldwide provision for income taxes. Various factors may have favorable or unfavorable effects on our income tax rate including, but not limited to the performance of certain functions and ownership of certain assets in tax-efficient jurisdictions such as the Cayman Islands and Ireland, together with intra-group transfer pricing agreements. Taxing authorities may challenge our structure and transfer pricing arrangements through an audit or lawsuit. Responding to or defending such a challenge could be expensive and consume time and other resources, and divert management’s time and focus from operating our business. We cannot predict

41

Table of Contents

whether taxing authorities will conduct an audit or file a lawsuit challenging this structure, the cost involved in responding to any such audit or lawsuit, or the outcome. We may be required to pay taxes for prior periods, interest, fines or penalties, and may be obligated to pay increased taxes in the future which could result in reduced cash flows and have a material adverse effect on our business, financial condition and growth prospects.

We were a passive foreign investment company, or “PFIC,” for 2014, but we were not a PFIC from 2015 through 2020,2023, and we do not expect to be a PFIC for the foreseeable future.

For US federal income tax purposes, we generally would be classified as a PFIC for any taxable year if either (i) 75% or more of our gross income (including gross income of certain 25% or more owned corporate subsidiaries) is “passive income” (as defined for such purposes) or (ii) the average percentage of our assets (including the assets of certain 25% or more owned corporate subsidiaries) that produce passive income or that are held for the production of passive income is at least 50%. In addition, whether our Company will be a PFIC for any taxable year depends on our assets and income over the course of each such taxable year and, as a result, cannot be predicted with certainty until after the end of the year.

Based upon our assets and income during the course of 2014, we believe that our Company and one of our Company’s wholly-owned subsidiaries, Theravance Biopharma R&D, Inc. was a PFIC for 2014. Based upon our assets and income from 2015 through 2020,2023, we do not believe that our Company is a PFIC since 2015. Based on existing tax law, we do not expect to be a PFIC for the foreseeable future based on our current business plans and current business model. For any taxable year (or portion thereof) in which our Company is a PFIC that is included in the holding period of a US holder, the US holder is generally subject to additional US federal income taxes plus an interest charge with respect to certain distributions from Theravance Biopharma or gain recognized on a sale of Theravance Biopharma shares. Similar rules would apply with respect to distributions from or gain recognized on an indirect sale of Theravance Biopharma Ireland Limited. US holders of our ordinary shares may have filed an election with respect to Company shares held at any time during 2014 to be treated as owning an interest in a “qualified electing fund” (“QEF”) or to “mark to market” their ordinary shares to avoid the otherwise applicable interest charge consequences of PFIC treatment with respect to our ordinary shares. A foreign corporation will not be treated as a QEF for any taxable year in which such foreign corporation is not treated as a PFIC. QEF and mark to market elections generally apply to the taxable year for

35

Table of Contents

which the election is made and all subsequent taxable years unless the election is revoked with consent of the Secretary of Treasury. US holders of our ordinary shares should consult their tax advisers regarding the tax reporting implications with respect to any QEF and mark to market elections made with respect to our Company and with respect to their indirect interests in Theravance Biopharma R&D, Inc.

If we are unable to maintain effective internal controls, our business, financial position, and results of operations could be adversely affected.

If we are unable to maintain effective internal controls, our business, financial position, and results of operations could be adversely affected. We are subject to the reporting and other obligations under the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which require annual management assessments of the effectiveness of our internal control over financial reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the US. Any failure to achieve and maintain effective internal controls could have an adverse effect on our business, financial position, and results of operations. In addition, our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting annually. If our independent registered public accounting firm is unable to attest to the effectiveness of our internal control over financial reporting, investor confidence in our reported results will be harmed and the price of our securities may fall. These reporting and other obligations place significant demands on our management and administrative and operational resources, including accounting resources.

42

Table of Contents

Agreements entered into with or for the benefit of GSK in connection with the Spin-Off may significantly restrict our business and affairs.

On March 3, 2014, in connection with the Spin-Off, we, Innoviva and GSK entered into a number of agreements that may significantly restrict our business and affairs. In particular, we, Innoviva and GSK entered into the Master Agreement which, among other things, requires GSK’s consent to make any changes to (i) a Separation and Distribution Agreement and ancillary agreements that would, individually or in the aggregate, reasonably be expected to adversely affect GSK in any material respect or (ii) the TRC LLC Agreement, which consent is not to be unreasonably withheld, conditioned or delayed, provided that GSK may withhold, condition or delay such consent in its sole discretion with respect to certain sections of the TRC LLC Agreement and any changes to the governance structure of TRC, the confidentiality restrictions, the consent rights, and the transfer restrictions in the TRC LLC Agreement. We and GSK also entered into (i) the Governance Agreement that expired on December 31, 2017, (ii) a registration rights agreement that gives GSK certain registration rights with respect to our ordinary shares held by GSK and (iii) an extension agreement that extends to us certain restrictive covenants similar to those applicable to Innoviva under the GSK Agreements. There can be no assurance that these restrictions will not materially harm our business, particularly given that GSK’s interests may not be aligned with the interests of our business or our other shareholders.

Certain of our directors and officers may have actual or potential conflicts of interest because of their equity ownership in Innoviva, which actual or potential conflicts may harm our business, prospects and financial condition and result in the diversion of corporate opportunities to Innoviva.

Certain of our directors and officers hold shares of Innoviva’s common stock or rights to acquire such shares, and these holdings may be significant for some of these individuals compared to their total assets. This ownership of Innoviva common stock by certain of our directors and officers may create, or may create the appearance of, conflicts of interest when these directors and officers are faced with decisions that could have different implications for Innoviva and for us. For example, potential or actual conflicts could arise relating to: our relationship with Innoviva, including Innoviva’s and our respective rights and obligations under agreements entered into in connection with the Spin-Off; Innoviva’s management of TRC, particularly given that we and Innoviva have different economic interests in TRC; and corporate opportunities that may be available to both companies in the future. Although we and Innoviva have implemented policies and procedures to identify and properly address such potential and actual conflicts of interest, there can be no assurance that, when such conflicts are resolved in accordance with applicable laws, such conflicts of interest will not harm our business, prospects and financial condition and result in the diversion of corporate opportunities to Innoviva.

If we are required to indemnify Innoviva or Cumberland, or if we are not able to enforce our indemnification rights against Innoviva or Cumberland, our business prospects and financial condition may be harmed.

We agreed to indemnify Innoviva from and after the Spin-Off with respect to (i) all debts, liabilities and obligations transferred to us in connection with the Spin-Off (including our failure to pay, perform or otherwise promptly discharge any such debts, liabilities or obligations after the Spin-Off), (ii) any misstatement or omission of a material fact resulting in a misleading statement in our Information Statement distributed to Innoviva stockholders in connection with the Spin-Off and (iii) any breach by us of certain agreements entered into with Innoviva in connection with the Spin-Off (namely, the Separation and Distribution Agreement, a Transition Services Agreement, an Employee Matters Agreement, a Tax Matters Agreement, and a Facility Sublease Agreement). We are not aware of any existing indemnification obligations at this time, but any such indemnification obligations that may arise could be significant. Under the terms of the Separation and Distribution Agreement, Innoviva agreed to indemnify us from and after the Spin-Off with respect to (i) all debts, liabilities and obligations retained by Innoviva after the Spin-Off (including its failure to pay, perform or otherwise promptly discharge any such debts, liabilities or obligations after the Spin-Off) and (ii) any breach by Innoviva of the Separation and Distribution Agreement, the Transition Services Agreement, the Employee Matters Agreement, the Tax Matters Agreement, and the Facility Sublease Agreement. Our and Innoviva’s ability to satisfy these indemnities, if called upon to do so, will depend upon our and Innoviva’s future financial strength. If we are required to indemnify Innoviva, or if we are not able to enforce our indemnification rights against Innoviva, our business prospects and financial condition may be harmed.

43

Table of Contents

In addition, the agreement relating to the sale of VIBATIV to Cumberland contains indemnification obligations of both us and Cumberland. If we are required to indemnify Cumberland or if we are unable to enforce our indemnification rights against Cumberland for any reason, our business and financial condition may be harmed.

RISKS RELATED TO LEGAL AND REGULATORY UNCERTAINTY

If our efforts to protect the proprietary nature of the intellectual property related to our technologies are not adequate, we may not be able to compete effectively in our current or future markets.

We rely upon a combination of patents, patent applications, trade secret protection and confidentiality agreements to protect the intellectual property related to our technologies. Any involuntary disclosure to or misappropriation by third parties of this proprietary information could enable competitors to quickly duplicate or surpass our technological achievements, thus eroding our competitive position in our market. The status of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and is very uncertain. As of December 31, 2020,2023, we owned 507a total of 176 issued US patents and 2,2531,002 granted foreign patents, as well as additional pending US and foreign patent applications. Our patent applications may be challenged or fail to result in issued patents and our existing or future patents may be invalidated or be too narrow to prevent third parties from developing or designing around these patents.patents, including the patents that relate to YUPELRI. If the sufficiency of the breadth or strength of protection provided by our patents with respect to a product candidate is threatened, it could dissuade companies from collaborating with us to develop product candidates and threaten our ability to commercialize products. Further, if we encounter delays in our clinical trials or in obtaining regulatory approval of our product candidates, the effective patent lives of the related product candidates wouldcould be reduced.

In addition, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable, for processes for which patents are difficult to enforce and for any other elements of our drug discovery and development processes that involve proprietary know-how, information and technology that is not covered by patent applications. Although we require our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information and technology to enter into confidentiality agreements, we cannot be certain that this know-how, information and technology will not be misappropriated, disclosed or used for unauthorized purposes or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Further, the laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the US. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the US and abroad. If we are unable to prevent material disclosure of the intellectual property related to our technologies to third parties, we will not be able to establish or, if established, maintain a competitive advantage in our market, which could materially adversely affect our business, financial condition, and results of operations, which could cause the price of our securities to fall.

36

Table of Contents

Litigation to protect or defend our intellectual property or third-party claims of intellectual property infringement wouldwill require us to divert resources and may prevent or delay our drug discovery and development efforts.

Our commercial success depends in part on us and our partners not infringing the patents and proprietary rights of third parties. Third parties may assert that we or our partners are using their proprietary rights without authorization. There are third-party patents that may cover materials or methods for treatment related to our product candidates. At present, we are not aware of any patent infringement claims with merit that would adversely and materially affect our ability to develop our product candidates, but nevertheless the possibility of third-party allegations cannot be ruled out. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. Furthermore, parties making claims against us or our partners may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates. Defense against these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.

In the event of a successful claim of infringement against us, we may have to pay substantial damages, obtain one or more licenses from third parties or pay royalties. In addition, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and we have done so from time to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize one or more of our product candidates, which could harm our business significantly.

44

Table of Contents

In addition, we have initiated, and in the future we could again be required to initiate, litigation to enforce our proprietary rights against infringement by third parties, prevent the unauthorized use or disclosure of our trade secrets and confidential information, or defend the validity of our patents. For example, in 2017, we filed a lawsuit against a former employee for misappropriation of certain of our confidential, proprietary and trade secret information. While this litigation has since been resolved, prosecution of claims to enforce or defend our rights against others involve substantial litigation expenses and divert substantial employee resources from our business but may not result in adequate remedy to us or sufficiently mitigate the harm to our business caused by any intellectual property infringement, unauthorized access, use or disclosure of trade secrets. For example, in February 2023, we filed patent infringement lawsuits against seven companies and certain of their affiliates seeking to market a generic version of YUPELRI, and in December 2023, we amended the lawsuit to include several non-Orange Book listed patents. Additional lawsuits were filed later in 2023 and into 2024 based on newly-issued patents. If these companies are found not to infringe one or more of our patents or the litigation results in one or more of our patents being invalidated, the generic companies may be able to launch their products prior to the expiration of the patents, which range from 2028 to 2039. Our collaboration partner, Viatris, is responsible for enforcing our Orange Book patents relating to YUPELRI, in consultation with us, and their views on the ongoing litigation, process or strategy may differ from ours, and we have a reduced ability to control the outcome of the litigation. For additional discussion of risks related to partnering programs, please see the risk factor entitled “If we are unable to enter into future collaboration arrangements or if any such collaborations with third parties are unsuccessful, we may be unable to fully develop and commercialize certain product candidates and our business will be adversely affected.” If we fail to effectively enforce our proprietary rights against others, our business will be harmed and the price of our securities could fall.

If the efforts of our partners or future partners to protect the proprietary nature of the intellectual property related to collaboration assets are not adequate, the future commercialization of any medicines resulting from collaborations could be delayed or prevented,negatively impacted, which would materially harm our business and could cause the price of our securities to fall.

The risks identified in the two preceding risk factors may also apply to the intellectual property protection efforts of our partners or future partners and to GSK with respect to the GSK-Partnered Respiratory ProgramsTRELEGY in which we hold an economic interest.maintain the Ongoing Economic Interest. To the extent the intellectual property protection of any partnered assets is successfully challenged or encounters problems with the US Patent and Trademark Office or other comparable agencies throughout the world, the future commercialization of these potential medicines could no longer be delayed or prevented.economically feasible. Any challenge to the intellectual property protection of a late-stage development or commercial-stage asset, particularly those of the GSK-Partnered Respiratory Programs in which we hold an economic interest,TRELEGY, could harm our business and cause the price of our securities to fall.

37

Table of Contents

Product liability and other lawsuits could divert our resources, result in substantial liabilities and reduce the commercial potential of our medicines.

The risk that we may be sued on product liability claims is inherent in the development and commercialization of pharmaceutical products. Side effects of, or manufacturing defects in, products that we or our partners develop or commercialize could result in the deterioration of a patient’s condition, injury or even death. Once a product is approved for sale and commercialized, the likelihood of product liability lawsuits tends to increase. Claims may be brought by individuals seeking relief for themselves or by individuals or groups seeking to represent a class, asserting injuries based both on potential adverse effects described in the label as well as adverse events not yet observed. We also face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials. In addition, changes in laws outside the US are expanding our potential liability for injuries that occur during clinical trials. Product liability claims could harm our reputation, regardless of the merit or ultimate success of the claim, which may adversely affect our and our partners’ ability to commercialize our products and cause the price of our securities to fall. These lawsuits may divert our management from pursuing our business strategy and may be costly to defend. In addition, if we are held liable in any of these lawsuits, we may incur substantial liabilities and may be forced to limit or forgo further commercialization of the applicable products.

Although we maintain general liability and product liability insurance, this insurance may not fully cover potential liabilities and we cannot be sure that our insurer will not disclaim coverage as to a future claim. In addition, inability to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product liability claims could prevent or inhibit the commercial production and sale of our products, which could adversely affect our business.

We may also be required to prosecute or defend general commercial, intellectual property, securities and other lawsuits. Litigation typically involves substantial expenses and diverts substantial employee resources from our business. The cost of defending any product liability litigation or engaging in any other legal proceeding, even if resolved in our favor, could be substantial and uncertainties resulting from the initiation and continuation of the litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace and achieve our business goals.

45

Table of Contents

If we fail to comply with data protection laws and regulations, we could be subject to government enforcement actions (which could include civil or criminal penalties), private litigation and/or adverse publicity, which could negatively affect our operating results and business.

We are subject to data protection laws and regulations (i.e., laws and regulations that address privacy and data security). In the US, numerous federal and state laws, and regulations, including state data breach notification laws, state health information and/or genetic privacy laws, and federal and state consumer protection laws (e.g., Section 5 of the FTC Act), govern the collection, use, disclosure, and protection of health related and other personal information. In California, the California Consumer Privacy Act (“CCPA”) took effect on January 1, 2020. The CCPA establishes certain requirements for data use and sharing transparency, and provides California residents certain rights concerning the use, disclosure, and retention of their personal data. Similarly, there are a number of legislative proposalsThe California Privacy Rights Act (“CPRA”) currently in effect, significantly amends the United States, at bothCCPA. Virginia, Colorado, Utah, Indiana, Iowa, Tennessee, Montana, Texas, and Connecticut have enacted privacy laws similar to the federal and state level,CCPA that could impose new obligations or limitations in areas affecting our business. These laws and regulations are evolving and subject to interpretation and may impose limitations on our activities or otherwise adversely affect our business. The obligations to comply with the CCPA and evolving legislation require us,involve, among other things, updates to update our notices and developthe development of new processes internally and with our partners. We may be subject to fines, penalties, or private actions in the event of non-compliance with the such laws. Failure to comply with data protection laws and regulations could result in unfavorable outcomes, including increased compliance costs, delays or impediments in the development of new products, increased operating costs, diversion of management time and attention, government enforcement actions and create liability for us (which could include civil and/or criminal penalties), private litigation and/or adverse publicity that could negatively affect our operating results and business.

In addition, we may obtain health information from third parties (e.g., healthcare providers who prescribe our products) that are subject to privacy and security requirements under the Health Insurance Portability and Accountability Act of 1996, the Health Information Technology for Economic and itsClinical Health Act, and their implementing regulations, (collectively, “HIPAA”). HIPAA imposes privacy and security obligations on covered entity health care providers, health plans, and health care clearinghouses, as well as their “business associates”—certain persons or entities that create, receive, maintain, or transmit protected health information in connection with providing a specified service or performing a function on behalf of a covered entity. Although we are not directly subject to HIPAA—other than with respect to providing certain employee benefits—HIPAA, we could be

38

Table of Contents

subject to criminal penalties if we knowingly obtain, use, or disclosereceive individually identifiable health information maintained by a HIPAA covered entity in a manner that is not authorized or permitted by HIPAA. HIPAA generally requires that healthcare providers

Further at the federal level, the Federal Trade Commission (“FTC”) also sets expectations for failing to take appropriate steps to keep consumers’ personal information secure, or failing to provide a level of security commensurate to promises made to individual about the security of their personal information (such as in a privacy notice) may constitute unfair or deceptive acts or practices in violation of Section 5(a) of the Federal Trade Commission Act (“FTC Act”). The FTC expects a company’s data security measures to be reasonable and other covered entities obtain written authorizations from patients priorappropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to disclosing protectedimprove security and reduce vulnerabilities. Individually identifiable health information is considered sensitive data that merits stronger safeguards. With respect to privacy, the FTC also sets expectations that companies honor the privacy promises made to individuals about how the company handles consumers’ personal information; any failure to honor promises, such as the statements made in a privacy policy or on a website, may also constitute unfair or deceptive acts or practices in violation of the patient (unless an exceptionFTC Act. While we do not intend to engage in unfair or deceptive acts or practices, the authorization requirement applies). If authorization is requiredFTC has the power to enforce promises as it interprets them, and events that we cannot fully control, such as data breaches, may be result in FTC enforcement. Enforcement by the patient fails to execute an authorizationFTC under the FTC Act can result in civil penalties or the authorization fails to contain all required provisions, then we may not be allowed access to and use of the patient’s information and our research efforts could be impaired or delayed. Furthermore, use of protected health information that is provided to us pursuant to a valid patient authorization is subject to the limits set forth in the authorization (e.g., for use in research and in submissions to regulatory authorities for product approvals). In addition, HIPAA does not replace federal, state, international or other laws that may grant individuals even greater privacy protections.enforcement actions.

EU Member States and other jurisdictions where we operate, such as Switzerland and the UK, have adopted data protection laws and regulations, which impose significant compliance obligations. For example, the General Data Protection Regulation (“GDPR”) which became applicable on May 25, 2018, replacing the EU Data Protection Directive,, imposes strict obligations and restrictions on the ability to collect, analyze, anduse, store, disclose. transfer or otherwise process personal data, including health data from clinical trials subjects and adverse event reporting.

Switzerland has adopted laws that impose restrictions and obligations similar to the GDPR. TheseThe GDPR and Switzerland’s data protection laws impose a broad range of requirements and obligations relating to the processing and restrictions concern,protection of personal data, including obligations to having legal bases for processing personal data (which may result in particular,some instances in obtaining the consent of the individuals to whom the personal data relate,relate), providing detailed information about the information providedprocessing activities to the individuals, the transferdealing with restrictions on sharing of personal data with third parties and transferring personal data out of the European Economic Area (“EEA”) or Switzerland, security breach notifications, securityhaving contracting arrangements in place where required (such as with clinical trial sites and confidentiality of thevendors), notifying in certain instances personal data as well as substantial potential fines for breaches of theto data protection obligations.authorities and/or affected individuals, appointing data protection officers, conducting data protection impact assessments, responding to privacy rights requests and keeping records of processing activities. . Data protection authorities from the different EU Member States and the EEA may interpret the GDPR and applicable related national laws differently and imposewhich could effectively result in requirements additional to those provided incurrently understood to apply under the GDPR. In addition, guidance on implementation and compliance practices may be updated or otherwise revised, which adds to the complexity of processing personal data in the EU. When processing personal data of subjects in the EU, we have to comply with the applicable data protection and electronic communications laws. In particular, as we rely on service providers processing personal data of data subjects in the EU, we have to enter into suitable contract terms with such providers and receive sufficient guarantees that such providers meet the requirements of the applicable data protection laws, particularly the GDPR which imposes specific and relevant obligations. Enforcement by EU and UK regulators is active, and failure to comply with the GDPR or applicable Member State law may result in substantial fines. The GDPR increases substantially the penalties to which we could be subject in the event of any non-compliance, including fines of up to 10,000,000 Euros or up to 2% of our total worldwide annual turnover for certain comparatively minor offenses, or up to 20,000,000 Euros or up to 4% of our total worldwide annual turnover for more serious offenses. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with data protection authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR.

With regard to transfer of personal data, the GDPR restricts the ability of companies to transfer personal data from the EU to the U.S. and other countries, which may incur compliance costs for implementing lawful transfer mechanisms, conducting data transfer impact assessments, and implementing additional measures where necessary to ensure that personal data transferred are adequately protected in a manner essentially equivalent to the EU. The GDPR provides different transfer mechanisms we can use to lawfully transfer personal data from the EU to countries outside the EU. An example is relying on the EU Standard Contractual Clauses as approved by the European Commission in June 2021. Compliance with EU data transfer obligations can be costly and time-consuming. Data importers must also expend resources in analyzing their ability to comply with transfer obligations, including implementing new safeguards

4639

Table of Contents

Legal mechanismsand controls to allow for the transfer offurther protect personal data from the EEA to the US have been challenged in the European Court of Justice, which generally increases uncertainty around compliance with EU privacy law requirements as these relate to transfer of data from the EU to the US. In 2016, the European Commission and the US Department of Commerce (“DOC”) put in place the EU US “Privacy Shield,” which has been relied on by some US companies since that time to transfer data to the US, and, in its third annual review of the Privacy Shield in October 2019, the European Commission concluded that the US continues to ensure an adequate level of protection for personal data transferred under the Privacy Shield. However, on July 16, 2020, the European Court of Justice ruled that the Privacy Shield is invalid. As a result, from July 16, 2020 companies may no longer rely on the Privacy Shield as a basis on which to transfer personal data from the EU to the US. US-based companies are permitted to rely on other authorized means and procedures to transfer personal data provided by the GDPR. However, the most common authorized procedure to transfer personal data out of the EU, the European Commission’s Standard Contractual Clauses, may, as a result of the Court judgement of July 16, 2020, also come under increased scrutiny. Following the Court’s ruling, the European Data Protection Board issued a statement providing among other things that it is a primary responsibility of the exporter and the importer, when considering whether to rely on Standard Contractual Clauses to export data from the EU to third countries, to ensure that these third countries maintain a level of protection that is essentially equivalent to that guaranteed by the GDPR in light of the EU Charter of Human Rights. Companies may need to revise their Standard Contractual Clauses in light of the July 16, 2020 judgement. Companies that have not taken steps to demonstrate that their Standard Contractual Clauses and personal data recipients in the US are suitable to transfer to receive the personal data may be subject to enforcement actions by competent authorities in the EU for failure to comply with related data privacy rules.

In addition, the privacy and data security landscape in the EU continues to remain in flux. The agreement that has been concluded between the EU and the UK following the UK’s withdrawal from the EU on January 31, 2020 may require organizations to revisit the way they transfer personal data from and to the UK from the EU. The Trade and Cooperation Agreement concluded between the EU and the UK provides for a transition period of six months starting January 1, 2021. During this period personal data may, in accordance with the requirements of the GDPR, flow from the EEA to the UK and from the UK to the EEA. If the European Commission does not adopt an Adequacy Decision concerning the level of data protection in the UK within this six month period, any potential flows of personal data between the EEA and the UK will subsequently be subject to the same restrictions as those imposed on other third countries.

data. If we or our vendors fail to comply with applicable data privacy laws concerning, or if the legal mechanisms we or our vendors rely upon to allow, for the transfer of personal data from the EEA or Switzerland to the US (or other countries not considered by the European Commission to provide an adequate level of data protection) are not considered adequate, we could be subject to government enforcement actions, including an order to stop transferring the personal data outside of the EEA and significant penalties against us. Moreover, our business could be adversely impacted if our ability to transfer personal data out of the EEA, the UK or Switzerland to the US is restricted, which could adversely impact our operating results.

Failure to comply with data protection laws and regulations could result in unfavorable outcomes, including increased compliance costs, delays or impediments in the development of new products, increased operating costs, diversion of management time and attention, government enforcement actions and create liability for us (which could include civil, administrative, and/or criminal penalties), private litigation and/or adverse publicity that could negatively affect our operating results and business.

Changes in healthcare law and implementing regulations, including government restrictions on pricing and reimbursement, as well as healthcare policy and other healthcare payor cost-containment initiatives, may negatively impact us, our collaboration partners, or those commercializing products with respect to which we have an economic interest or right to receive royalties.

The continuing efforts of the government, insurance companies, managed care organizations and other payors of health care costs to contain or reduce costs of health care may adversely affect us, our collaboration partners, or those commercializing products with respect to which we have an economic interest or right to receive royalties in regard to one or more of the following:

the ability to set and collect a price believed to be reasonable for products;

the ability to set and collect a price believed to be reasonable for products;

the ability to generate revenues and achieve profitability; and

the ability to generate revenues and achieve profitability; and

the availability of capital.

the availability of capital.

47

Table of Contents

The pricing and reimbursement environment for products may change in the future and become more challenging due to, among other reasons, policies advanced by the current or new presidential administrations,administration, federal agencies, new healthcare legislation passed by Congress or fiscal challenges faced by all levels of government health administration authorities. Among policy makers and payors in the US and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality, and expanding access to healthcare. In the US, the pharmaceutical industry has been a particular focus of these efforts and has been and may in the future be significantly affected by major regulatory or legislative initiatives. For instance, while Medicare Part B paymentinitiatives, including those related to pricing of or reimbursement for most drugs has been established at the average sales price of the drug plus 6% (reduced to 4.3% as a result of sequestration), a regulatory change may alter the level of payment for someprescription drugs. In a November 20, 2020 interim final rule, Center for Medicare and Medical Services (“CMS”) established a “Most Favored Nation” demonstration model that would lower Medicare Part B reimbursement of certain drugs based on international reference prices. The rule has become subject to judicial challenges, and federal courts have enjoined the rule at this time. There is also proposed legislation pending that would establish an international reference price-based payment methodology. We expect we, our collaboration partners, or those commercializing products with respect to which we have an economic interest or right to receive royalties may experience pricing pressures in connection with the sale of drug products, due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative enactments.enactments and administrative policies.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (together the(the “Healthcare Reform Act”), is a sweeping measure intended to expand healthcare coverage within the US, primarily through the imposition of health insurance mandates on employers and individuals, the provision of subsidies to eligible individuals enrolled in plans offered on the health insurance exchanges, and expansion of the Medicaid program. This law has substantially changed the way healthcare is financed by both governmental and private insurers and has significantly impacted the pharmaceutical industry. The Healthcare Reform Act contains a number of provisions that impact our business and operations, including those governing enrollment in federal healthcare programs, reimbursement changes, benefits for patients within a coverage gap in the Medicare Part D prescription drug program (commonly known as the “donut hole”); the coverage gap will be eliminated effective 2025 under the Inflation Reduction Act and will be replaced with a new manufacturer discount program), rules regarding prescription drug benefits under the health insurance exchanges, changes to the Medicare Drug Rebate program, expansion of the Public Health Service Act’s 340B drug pricing program, fraud and abuse and enforcement. These changes have impacted previously existing government healthcare programs and have resulted in the development of new programs, including Medicare payment for performance initiatives and improvements to the physician quality reporting system and feedback program.

In particular, CMS issued final regulations to implement the changes to the Medicaid Drug Rebate program under the Healthcare Reform Act. These regulations became effective on April 1, 2016. Congress could enact additional legislation that further increases Medicaid drug rebates or other costs and charges associated with participating in the Medicaid Drug Rebate program. On December 21, 2020, CMS issued a final regulation that modified prior Medicaid Drug Rebate program regulations to permit reporting multiple best price figures with regard to value-based purchasing arrangements (beginning in 2022); provide definitions for “line extension,” “new formulation,” and related terms, with the practical effect of expanding the scope of drugs considered to be line extensions that are subject to an alternative rebate formula (beginning in 2022); and revise best price and average manufacturer price exclusions of manufacturer-sponsored patient benefit programs, specifically regarding applicability of such exclusions in the context of pharmacy benefit manager “accumulator” programs (beginning in 2023). It is currently unclear whether the Biden administration will delay or suspend implementation of this final rule. The issuance of regulations and coverage expansion by various governmental agencies relating to the Medicaid Drug Rebate program has increased and will continue to increase the costs and the complexity of compliance, has been and will be time-consuming to implement, and could have a material adverse effect on results of operations for us, our collaboration partners, or those commercializing products with respect to which we have an economic interest or right to receive royalties, particularly if CMS challenges the approach we take in our implementation of the final regulation.

Some states have elected not to expand their Medicaid programs by raising the income limit to 133% of the federal poverty level, as is permitted under the Healthcare Reform Act. For each state that does not choose to expand its Medicaid program, there may be fewer insured patients overall, which could impact the sales, business and financial condition of us, our collaboration partners, or those commercializing products with respect to which we have an economic interest or right to receive royalties. Where Medicaid patients receive insurance coverage under any of the new

48

Table of Contents

options made available through the Healthcare Reform Act, manufacturers may be required to pay Medicaid rebates on drugs used under these circumstances, which could impact manufacturer revenues.

Certain provisions of the Healthcare Reform Act have been subject to judicial challenges as well as efforts to repeal or replacemodify them or to alter their interpretation or implementation. For example, the Tax Cutsimplementation and Jobs Act enacted on December 22, 2017 (the “Tax Act”), eliminated the shared responsibility payment for individuals who fail to maintain minimum essential coverage under section 5000A of the Internal Revenue Code of 1986, commonly referred to as the individual mandate, effective January 1, 2019. Currently, the Supreme Court is considering whether the Healthcare Reform Act’s individual mandate, post-repeal of its associated tax penalty, is unconstitutional, and, if so, whether the remaining provisions of the Healthcare Reform Act are inseverable from the mandate. A ruling is expected by mid-2021 and could produce any of a number of results, including invalidation of the Healthcare Reform Act in its entirety if there is a finding of inseverability. It is unclear how the ultimate decision in this case, or other efforts to repeal, replace, or invalidate the Healthcare Reform Act or its implementing regulations, or portions thereof, will affect the Healthcare Reform Act or our business. Additionaladditional legislative changes to and regulatory

40

Table of Contents

changes under the Healthcare Reform Act remain possible, but the nature and extent of such potential additional changes are uncertain at this time. We expect that the Healthcare Reform Act, its implementation, efforts to repeal or replace,modify, or invalidate the Healthcare Reform Act, or portions thereof, or its implementation, and other healthcare reform measures including those that may be adopted in the future, could have a material adverse effect on our industry generally and on the ability of us, our collaboration partners, or those commercializing products with respect to which we have an economic interest or right to receive royalties to maintain or increase sales of existing products or to successfully commercialize product candidates, if approved.

The Bipartisan Budget Act of 2018, among other things, amended the Healthcare Reform Act to increase the point-of-sale discounts that manufacturers must agree to offer under the Medicare Part D coverage discount program from 50% to 70% off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D. Additionally,Civil monetary penalties can be applied if a manufacturer fails to provide these discounts in November 2020, the U.S. Departmentamount of Health and Human Services finalized a previously abandoned proposal to amend125 percent of the discount safe harbor regulation ofthat was due (the coverage gap has been eliminated effective 2025 under the federal anti-kickback statute in a purported effort to create incentives to manufacturers to lower their list prices, and to lower federal program beneficiary out-of-pocket costs. The rule, which takes full effect January 1, 2022, revises the discount safe harbor to exclude manufacturer rebates to Medicare Part D plans, either directly or through pharmacy benefit managers (PBMs), creates a new safe harbor for point-of-sale price reductions that are set in advance and are available to the beneficiary at the point-of-sale, and creates a new safe harbor for service fees paid by manufacturers to PBMs for services rendered to the manufacturer. It is too early to know what the effect of the rule will be on negotiations of coverage for our products with Medicare Part D plans, or whether the rule will affect our coverage arrangements with commercial insurers. It is also unclear whether the rule will have the intended effect of reducing net prices and beneficiary out-of-pocket costs without also increasing Medicare Part D premiums, which may impact the willingness of Part D plans to cover our products and the price concessions or other terms the plans or their PBMs may seek from us. There have been other proposals to modify the Medicare Part D benefit, including by imposing federally mandated rebates on all drugs dispensed to Medicare Part D enrollees or on only those drugs dispensed to certain groups of lower income beneficiaries. If any of these proposals are adopted including any that result in additional rebates, this could have a negative impact on revenues for our collaboration partners, or those commercializing products with respect to which we have an economic interest or right to receive royalties, which could impact our revenues.Inflation Reduction Act).

On August 2, 2011, theThe Budget Control Act of 2011, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals for spending reductions. The Joint Select Committee did not achieve a targeted deficit reduction, which triggered the legislation’s automatic reductions. Inand in concert with subsequent legislation, this has resulted in aggregate reductions to Medicare payments to providers of, on average, 2% per fiscal year through 2031. Sequestration is currently set at 2% and will increase to 2.25% for the first half of fiscal year 2030, (withto 3% for the exceptionsecond half of a temporary suspension from May 1, 2020fiscal year 2030, and to 4% for the remainder of the sequestration period that lasts through March 31, 2021) unless Congress takes additional action.the first six months of fiscal year 2031. As long as these cuts remain in effect, they could adversely impact payment for any products that are reimbursed under Medicare.

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “IRA”). The IRA sunsets the coverage gap discount program starting in 2025 and replaces it with a new manufacturer discount program and establishes Part B and Part D inflation rebates. The IRA also creates a Drug Price Negotiation Program under which the prices for Medicare units of certain high Medicare spend drugs and biologics without generic or biosimilar competition will be capped by reference to, among other things, a specified non-federal average manufacturer price, with negotiated prices set to take effect starting in 2026. Failure to comply with requirements under the drug price negotiation program is subject to an excise tax and/or a civil monetary penalty. Whether any of our products are selected for negotiation for a given year will depend on whether they are at least 7 years post-approval/licensure; whether they meet any of the exclusions from eligibility for selection for negotiation, such as the exclusion of certain orphan drugs; their expenditures under Medicare Part B or Part D during a statutorily specified period; and whether a generic of the product has been determined to have come to market. Ampreloxetine received an Orphan Drug Designation status from the FDA, which should mean it will not be selected for negotiation; however, our understanding of whether and when our products are likely to be subject to selection for negotiation could evolve as the Drug Price Negotiation Program is implemented. These or any other legislative change could impact the market conditions for our products. We further expect continued scrutiny on pricing from Congress, agencies, and other bodies with respect to drug pricing.

Individual states in the United StatesUS have also increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement limitations, marketing cost disclosure and transparency measures, and, in some cases, measures designed to encourage importation from other countries and bulk purchasing. For example, California has enacted a prescription drug price transparency

49

Table of Contents

law requiring prescription drug manufacturers to provide advance notice and explanation for price increases of certain drugs with prices that exceed a specified threshold, and to report new prescription drugs introduced to the market at a wholesale acquisition cost exceeding the Medicare Part D specialty drug threshold. Additionally, some individual states have begun establishing Prescription Drug Affordability Boards (or similar entities) to review high-cost drugs and, in some cases, set upper payment limits.

We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for product or additional pricing pressures for our collaboration partners, or those commercializing products with respect to which we have an economic interest or right to receive royalties, which could impact our revenues.

41

Table of Contents

If we failed to comply with our reporting and payment obligations under the Medicaid Drug Rebate program or other governmental pricing programs, we could be subject to additional reimbursement requirements, penalties, sanctions and fines, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Prior to the sale of VIBATIV to Cumberland Pharmaceuticals Inc. (“Cumberland”) in November 2018, we had certain price reporting obligations to the Medicaid Drug Rebate program and other governmental pricing programs, and we had obligations to report average sales price under the Medicare program. Following the consummation of the transaction with Cumberland, our price reporting obligations related to VIBATIV have been transitioned to Cumberland, and price reporting obligations for YUPELRI reside with Viatris. However, weWe retain liability relatedcertain obligations with respect to price reportingrecord retention for VIBATIV for historic periods.

Underthese programs. These programs included the Medicaid Drug Rebate program, a manufacturer is required to pay a rebate to each state Medicaid program for its covered outpatient drugs that are dispensed to Medicaid beneficiaries and paid for by a state Medicaid program as a condition of having federal funds being made available to the states for our drugs under Medicaid and Medicare Part B. Those rebates are based on pricing data reported by the manufacturer on a monthly and quarterly basis to CMS, the federal agency that administers the Medicaid Drug Rebate program. These data include the average manufacturer price and, in the case of innovator products, the best price for each drug which, in general, represents the lowest price available from the manufacturer to any entity in the US in any pricing structure, calculated to include all sales and associated rebates, discounts and other price concessions.following:

The Medicaid Drug Rebate program, under which a manufacturer is required to pay a rebate based on reported pricing data to each state Medicaid program for its covered outpatient drugs that are dispensed to Medicaid beneficiaries and paid for by a state Medicaid program as a condition of having federal funds made available to the states for the manufacturer’s drugs under Medicaid and Medicare Part B.

Federal law requires that any company that participates in the Medicaid Drug Rebate program also participate in the Public Health Service’s 340B drug pricing program in order for federal funds to be available for the manufacturer’s drugs under Medicaid and Medicare Part B. The 340B program requires participating manufacturers to agree to charge no more than the 340B “ceiling price” for the manufacturer’s covered outpatient drugs to a variety of community health clinics and other entities that receive health services grants from the Public Health Service, as well as hospitals that serve a disproportionate share of low-income patients. Manufacturers also are required to report their 340B ceiling prices to HRSA on a quarterly basis, and HRSA then publishes them to 340B covered entities. A final regulation regarding the calculation of the 340B ceiling price and the imposition of civil monetary penalties on manufacturers that knowingly and intentionally overcharge covered entities became effective on January 1, 2019. Moreover, under a final regulation effective January 13, 2021, HRSA newly established an administrative dispute resolution (“ADR”) process for claims by covered entities that a manufacturer has engaged in overcharging, and by manufacturers that a covered entity violated the prohibitions against diversion or duplicate discounts. Such claims are to be resolved through an ADR panel of government officials rendering a decision that could be appealed only in federal court. An ADR proceeding could subject us to onerous procedural requirements and could result in additional liability.

The 340B Program, in which manufacturers must participate in order for federal funds to be available for the manufacturer’s drugs under Medicaid and Medicare Part B. The 340B program requires participating manufacturers to agree to charge no more than the 340B “ceiling price” for the manufacturer’s covered outpatient drugs to certain entities, and that price is calculated based on the information reported under the Medicaid Drug Rebate program.

Federal law also requires that a company that participates in the Medicaid Drug Rebate program report average sales price information each quarter to CMS for certain categories of drugs that are paid under the Medicare Part B program. Manufacturers calculate the average sales price based on a statutorily defined formula as well as regulations and interpretations of the statute by CMS. CMS uses these submissions to determine payment rates for drugs under Medicare Part B.

Reporting of average sales price, which manufacturers report for certain categories of drugs that are paid under the Medicare Part B program to CMS on a quarterly basis and which CMS may use in determining payment rates for drugs under Medicare Part B.

Pricing and rebate calculations vary across products and programs, are complex, and are often subject to interpretation by the manufacturer, governmental or regulatory agencies and the courts. A manufacturer that becomes aware that its Medicaid reporting for a prior quarter was incorrect, or has changed as a result of recalculation of the pricing data, is obligated to resubmit the corrected data for up to three years after those data originally were due. Such restatements and recalculations increase the costs for complying with the laws and regulations governing the Medicaid

50

Table of Contents

Drug Rebate program and could result in an overage or underage in our rebate liability for past quarters. Price recalculations also may affect the 340B ceiling price and the average sales price. Manufacturers may need to make additional restatements beyond the three-year period.

We aremay be liable for errors associated with our submission of pricing data.data for VIBATIV for historic periods, and we may retain some liability for price reporting by Cumberland for VIBATIV sold under our labeler code. In addition to retroactive rebates and the potential for 340B program refunds, if we are found to have knowingly submitted any false price information to the government, we may be liable for significant civil monetary penalties per item of false information. If we are found to have made a misrepresentation in the reporting of our average sales price, the Medicare statute provides for significant civil monetary penalties for each misrepresentation for each day in which the misrepresentation was applied. If we are found to have charged 340B covered entities more than the statutorily mandated ceiling price, we could be subject to significant civil monetary penalties. Ourpenalties and/or such failure also could be grounds for HRSA to submitterminate a manufacturer’s agreement to participate in the 340B program, in which case covered outpatient drugs under our labeler code may no longer be eligible for federal payment under the Medicaid or Medicare Part B program. If we are found to have not submitted required price data on a timely basis, that could result in a significant civil monetary penalty per day for each day the information is late beyond the due date. Such failure also could be grounds for CMS to terminate our Medicaid drug rebate agreement, pursuant to which we participate in the Medicaid program. In the event that CMS terminates our rebate agreement, federal payments may not be available under Medicaid or Medicare Part B for our covered outpatient drugs.

In order to be eligible to have its products paid for with federal funds under the Medicaid and Medicare Part B programs and purchased by the Department of Veterans Affairs (“VA”), Department of Defense (“DoD”), Public Health Service, and Coast Guard (the “Big Four agencies”) and certain federal grantees, a manufacturer is required to participate in thelist its innovator products on a VA Federal Supply Schedule (“FSS”) pricing program, established under Section 603 of the Veterans Health Care Act of 1992. Under this program, the manufacturer is obligated to make its covered drugs available for procurement on an FSS contract and charge a price to the Big Four agencies that is no higher than the Federal Ceiling Price (“FCP”), which is a price calculated pursuant to a statutory formula. The FCP is derived from a calculated price point calledIn addition, manufactures must submit to the VA quarterly and annual “non-federal average manufacturer price” (“Non-FAMP”), which the manufacturer calculates and reports to the VA on a quarterly and annual basis. Pursuant to applicable law, knowing provision of false information in connection with a Non-FAMP filing can subject a manufacturer to significant penalties calculations for each itemNDC-11 of false information. The FSS contract also contains extensive disclosure and certification requirements.

their innovator drugs. Under Section 703 of the National Defense

42

Table of Contents

Authorization Act for FY 2008, the manufacturer is required to pay quarterly rebates to DoD on utilization of its innovator products that are dispensed through DoD’s Tricare network pharmacies to Tricare beneficiaries. The rebates are calculated as the difference between the annual Non-FAMP and FCP for the calendar year that the product was dispensed. A manufacturer that overcharges the government in connection with the FSS contract or Tricare Retail Pharmacy Rebate Program, whether due to a misstated FCP or otherwise, is required to refund the difference to the government. Failure to make necessary disclosures and/or to identify contract overcharges can result in allegations against us under the False Claims Act and other laws and regulations.

Individual states in the United States,US, as noted, have also passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including establishing Prescription Drug Affordability Boards (or similar entities) to review high-cost drugs and, in some cases, set upper payment limits and implementing marketing cost disclosure and transparency measures. Some states require the submission of reports related to pricing information, including based on the introduction of new prescription drugs, certain increases in wholesale acquisition cost of prescription drugs, marketing of prescription drugs within the state, and sales of prescription drugs in or into the state. Some states may pursue available enforcement measures, including imposition of civil monetary penalties, for a manufacturer’s failure to report such information.

The coverage and reimbursement status of new or current products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for new or current products could limit our ability to market those products and decrease our ability to generate revenue.

Market acceptance and sales of any one or more of our product candidates will depend on reimbursement policies and may be affected by future healthcare reform measures in the US. Government authorities and third-party payers, such as private health insurers and health maintenance organizations, decide which drugs they will cover and establish payment levels. We cannot be certain that reimbursement will be available for any commercialized products. Also, we cannot be certain that reimbursement policies will not reduce the demand for, or the price paid for, our products. If reimbursement is not available or is available on a limited basis, we may not be able to successfully commercialize any product candidates that we develop.

The pricing, coverage and reimbursement of our product candidates, if commercialized, must be adequate to support our commercial infrastructure. Our per-patient prices must be sufficient to recover our development and manufacturing costs and potentially achieve profitability. However, sales of any pharmaceutical product depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state, and foreign government healthcare programs, commercial insurance and managed healthcare organizations, and the level of reimbursement for such product by third-party payors. Decisions regarding the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan basis. One third-party payor’s decision to cover a product does not ensure that other payors will also provide coverage for the product. As a result, we do not have assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

In addition, third-party payors are increasingly reducing reimbursements for pharmaceutical products and services. The US government and state legislatures have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement, and requirements for substitution of generic products. Third-party payors are increasingly challenging the prices charged, examining the medical necessity, and reviewing the cost effectiveness of pharmaceutical products, in addition to questioning their safety and efficacy. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Further, such payors are increasingly challenging the price, examining the medical necessity and reviewing the cost effectiveness of medical product candidates. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit or delay sales of any of our future products. A decision by a third-party payor not to cover a product could reduce physician ordering and patient demand for any of our future products.

Our relationships with customers and third-party payors are subject to applicable anti-kickback, fraud and abuse, transparency and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, exclusion, contractual damages, reputational harm and diminished profits and future earnings.

Healthcare providers, physicians, distributors, and third-party payors play a primary role in the distribution, recommendation, and prescription of any pharmaceutical product for which we obtain marketing approval. Our arrangements with third-party payors and customers expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements through which we market, sell

43

Table of Contents

and distribute any products for which we have obtained or may obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following:

51

Table of Contents

The US federal healthcare Anti-Kickback Statute prohibits any person from, among other things, knowingly and willfully offering, paying, soliciting, or receiving remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchasing, leasing, ordering or arranging for or recommending of any good or service for which payment may be made, in whole or in part, under federal and state healthcare programs such as Medicare and Medicaid. The term “remuneration” has been broadly interpreted to include anything of value. The Anti-Kickback Statute is subject to evolving interpretation and has been applied by government enforcement officials to a number of common business arrangements in the pharmaceutical industry. The government can establish a violation of the Anti-Kickback Statute without proving that a person or entity had actual knowledge of the statute or specific intent to violate it. There are a number of statutory exemptions and regulatory safe harbors protecting some common activities from prosecution; however, those exceptions and safe harbors are drawn narrowly. Failure to meet all of the requirements of a particular statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute, but the legality of the arrangement will be evaluated on a case-by-case basis based on the totality of the facts and circumstances. We seek to comply with the available statutory exemptions and safe harbors whenever possible, but our practices may not in all cases meet all of the criteria for safe harbor protection from anti-kickback liability. Moreover, there are no safe harbors for many common practices, such as educational and research grants or patient or product assistance programs.

The US federal healthcare Anti-Kickback Statute prohibits any person from, among other things, knowingly and willfully offering, paying, soliciting, or receiving remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchasing, leasing, ordering or arranging for or recommending of any good or service for which payment may be made, in whole or in part, under federal and state healthcare programs such as Medicare and Medicaid. The term “remuneration” has been broadly interpreted to include anything of value. The Anti-Kickback Statute is subject to evolving interpretation and has been applied by government enforcement officials to a number of common business arrangements in the pharmaceutical industry. The government can establish a violation of the Anti-Kickback Statute without proving that a person or entity had actual knowledge of the statute or specific intent to violate it. There are a number of statutory exemptions and regulatory safe harbors protecting some common activities from prosecution; however, those exceptions and safe harbors are drawn narrowly. Failure to meet all of the requirements of a particular statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute, but the legality of the arrangement will be evaluated on a case-by-case basis based on the totality of the facts and circumstances. We seek to comply with the available statutory exemptions and safe harbors whenever possible, but our practices may not in all cases meet all of the criteria for safe harbor protection from anti-kickback liability. Moreover, there are no safe harbors for many common practices, such as educational and research grants or patient or product assistance programs.

The federal civil False Claims Act prohibits, among other things, knowingly presenting, or causing to be presented, claims for payment of government funds that are false or fraudulent, or knowingly making, or using or causing to be made or used, a false record or statement material to a false or fraudulent claim to avoid, decrease, or conceal an obligation to pay money to the federal government. Private individuals, commonly known as “whistleblowers,” can bring civil False Claims Act qui tam actions, on behalf of the government and such individuals and may share in amounts paid by the entity to the government in recovery or settlement. In recent years, several pharmaceutical and other healthcare companies have faced enforcement actions under the federal False Claims Act for, among other things, allegedly submitting false or misleading pricing information to government health care programs and providing free product to customers with the expectation that the customers would bill federal programs for the product. Federal enforcement agencies also have showed increased interest in pharmaceutical companies’ product and patient assistance programs, including reimbursement and co-pay support services, and a number of investigations into these programs have resulted in significant civil and criminal settlements. Other companies have faced enforcement actions for causing false claims to be submitted because of the companies’ marketing the product for unapproved, and thus non-reimbursable, uses. In addition, a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. False Claims Act liability is potentially significant in the healthcare industry because the statute provides for treble damages and significant mandatory penalties per false claim or statement for violations. Because of the potential for large monetary exposure, healthcare and pharmaceutical companies often resolve allegations without admissions of liability for significant and material amounts to avoid the uncertainty of treble damages and per claim penalties that may be awarded in litigation proceedings. As part of these resolutions, Companies may be required, however, to enter into corporate integrity agreements with the government, which may impose substantial costs on companies to ensure compliance. Criminal penalties, including imprisonment and criminal fines, are also possible for making or presenting a false, fictitious or fraudulent claim to the federal government.

HIPAA, among other things, imposes criminal and civil liability for knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party payors, and also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information. HIPAA also prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal healthcare Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation.

HIPAA, among other things, imposes criminal and civil liability for knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party payors, and also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information. HIPAA also prohibits knowingly and willfully falsifying, concealing, or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain

5244

Table of Contents

any materially false fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal healthcare Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation.

The federal Physician Payment Sunshine Act, being implemented as the Open Payments Program, requires certain manufacturers of drugs, devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the US Department of Health and Human Services, Centers for Medicare and Medicaid Services, information related to payments and other transfers of value, directly or indirectly, to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Beginning in 2022, applicable manufacturers also will be required to report information regarding payments and transfers of value provided to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse-midwives. A manufacturer’s failure to submit timely, accurately and completely the required information for all payments, transfers of value or ownership or investment interests may result in civil monetary penalties.

The federal Physician Payment Sunshine Act, implemented as the Open Payments Program, requires certain manufacturers of drugs, devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the US Department of Health and Human Services, Centers for Medicare and Medicaid Services, information related to payments and other transfers of value, directly or indirectly, to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Beginning in 2022, applicable manufacturers also will be required to report information regarding payments and transfers of value provided to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse-midwives. A manufacturer’s failure to submit timely, accurately, and completely the required information for all payments, transfers of value or ownership or investment interests may result in civil monetary penalties.

Analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payors, including private insurers or patients. Several states also require pharmaceutical companies to report expenses relating to the marketing and promotion of pharmaceutical products in those states and to report gifts and payments to individual health care providers in those states. Some of these states also prohibit certain marketing-related activities, including the provision of gifts, meals, or other items to certain health care providers, and restrict the ability of manufacturers to offer co-pay support to patients for certain prescription drugs. Some states require the posting of information relating to clinical studies and their outcomes. Some states and cities require identification or licensing of sales representatives. In addition, several states require pharmaceutical companies to implement compliance programs or marketing codes.

Analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payors, including private insurers or patients. Several states also require pharmaceutical companies to report expenses relating to the marketing and promotion of pharmaceutical products in those states and to report gifts and payments to individual health care providers in those states. Some of these states also prohibit certain marketing-related activities, including the provision of gifts, meals, or other items to certain health care providers, and restrict the ability of manufacturers to offer co-pay support to patients for certain prescription drugs. Some states require the posting of information relating to clinical studies and their outcomes. Some states and cities require identification or licensing of sales representatives. In addition, several states require pharmaceutical companies to implement compliance programs or marketing codes.

Similar restrictions are imposed on the promotion and marketing of medicinal products in the EU Member States and other countries, including restrictions prohibiting the promotion of a compound prior to its approval. Laws (including those governing promotion, marketing and anti-kickback provisions), industry regulations and professional codes of conduct often are strictly enforced. Even in those countries where we may decide not to directly promote or market our products, inappropriate activity by our international distribution partners could have implications for us.

Similar restrictions are imposed on the promotion and marketing of medicinal products in the EU Member States and other countries, including restrictions prohibiting the promotion of a compound prior to its approval. Laws (including those governing promotion, marketing and anti-kickback provisions), industry regulations and professional codes of conduct often are strictly enforced. Even in those countries where we may decide not to directly promote or market our products, inappropriate activity by our international distribution partners could have implications for us.

The shifting commercial compliance environment and the need to build and maintain robust and expandable systems to comply with different compliance or reporting requirements in multiple jurisdictions increase the possibility that we or our partners may fail to comply fully with one or more of these requirements. Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations may involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with applicable fraud and abuse or other healthcare laws and regulations or guidance. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, exclusion from government funded healthcare programs, such as Medicare and Medicaid in the US and similar programs outside the US, contractual damages, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results. If any of the physicians or other providers or entities with whom we do or expect to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could harm our financial condition and divert resources and the attention of our management from operating our business.

45

Table of Contents

Our business and operations, including the use of hazardous and biological materials may result in liabilities with respect to environmental, health and safety matters.

Our research anddrug development activities involve the controlled use of potentially hazardous substances, including chemical, biological, and radioactive materials. In addition, our operations produce hazardous waste products, including hazardous waste. Federal, state, and local laws and regulations govern the use, manufacture, management, storage, handling and disposal of hazardous materials and wastes. We may incur significant additional costs or liabilities

53

Table of Contents

to comply with, or for violations of, these and other applicable laws in the future. Also, even if we are in compliance with applicable laws, we cannot completely eliminate the risk of contamination or injury resulting from hazardous materials and we may incur liability as a result of any such contamination or injury. Further, in the event of a release of or exposure to hazardous materials, including at the sites we currently or formerly operate or at sites such as landfills where we send wastes for disposal, we could be held liable for cleanup costs or damages or subject to other costs or penalties and such liability could exceed our resources. We do not have any insurance for liabilities arising from hazardous materials or under environmental laws. Compliance with or liability under applicable environmental laws and regulations or with respect to hazardous materials may be expensive, and current or future environmental regulations may impair our research, development and production efforts, which could harm our business, which could cause the price of our securities to fall.

RISKS RELATING TO OUR ORDINARY SHARES

The market price for our shares has and may continue to fluctuate widely and may result in substantial losses for purchasers of our ordinary shares.

The market price for our shares has fluctuated and may continue to fluctuate widely and may result in substantial losses for purchasers of our ordinary shares. For example, in the year ended December 31, 2023, the last reported sales price of our ordinary shares on Nasdaq fluctuated between a low of $8.38 per share and a high of $11.92 per share. To the extent that low trading volumes for our ordinary shares continues, our stock price may fluctuate significantly more than the stock market as a whole or the stock prices of similar companies. Without a larger public float of actively traded shares, our ordinary shares are likely to be more sensitive to changes in sales volumes, market fluctuations and events or perceived events with respect to our business, than the shares of common stock of companies with broader public ownership, and as a result, the trading prices for our ordinary shares may be more volatile. Among other things, trading of a relatively small volume of ordinary shares may have a greater effect on the trading price than would be the case if our public float of actively traded shares were larger. In addition, as further described below under the risk factor entitled “—Concentration of ownership will limit your ability to influence corporate matters,” a number of shareholders hold large concentrations of our shares which, if sold to third parties within a relatively short timeframe, could cause the price of our shares to drop significantly. In addition, as a result of the exchangeable note offering by GSK, up to 9,644,792 ordinary shares held by GSK could become freely tradeable after September 1, 2020, if holders of the GSK Notes were to exchange their notes for our ordinary shares.

Market prices for securities of biotechnology and biopharmaceutical companies have been highly volatile, and we expect such volatility to continue for the foreseeable future, so that investment in our ordinary shares involves substantial risk. Additionally, the stock market from time to time has experienced significant price and volume fluctuations unrelated to the operating performance of particular companies.

The following are some of the factors that may have a significant effect on the market price of our ordinary shares:

any adverse developments or results or perceived adverse developments or results with respect to YUPELRI, including without limitation, lower than expected sales of YUPELRI, difficulties or delays encountered with regard to the FDA or other regulatory authorities in this program or any indication from clinical or non-clinical studies that YUPELRI is not safe or efficacious;

any adverse developments or results or perceived adverse developments or results with respect to YUPELRI, including without limitation, lower than expected sales of YUPELRI, difficulties or delays encountered with regard to the FDA or other regulatory authorities in this program or any indication from clinical or non-clinical studies that YUPELRI is not safe or efficacious;

any adverse developments or results or perceived adverse developments or results with respect to TRELEGY;

any adverse developments or results or perceived adverse developments or results with respect to our clinical development programs, including, without limitation, any delays in development in these programs, any halting of development in these programs, any difficulties or delays encountered with regard

any adverse developments or results or perceived adverse developments or results with respect to the GSK Partnered Respiratory Programs including, without limitation, lower than expected sales of TRELEGY, difficulties or delays encountered with regard to the FDA or other regulatory authorities in these programs or any indication from clinical or non-clinical studies that the compounds in such programs are not safe or efficacious;

any adverse developments or results or perceived adverse developments or results with respect to our key clinical development programs, for example our JAK inhibitor program or ampreloxetine, including, without limitation, any delays in development in these programs, any halting of development in these programs, any difficulties or delays encountered with regard to the FDA or other regulatory authorities in these programs (including any class-based risks that emerge as a FDA or other regulatory agency focus), or any indication from clinical or non-clinical studies that the compounds in such programs are not safe or efficacious;

5446

Table of Contents

to the FDA or other regulatory authorities in these programs, or any indication from clinical or non-clinical studies that the compounds in such programs are not safe or efficacious;

any announcements of developments with, or comments by, the FDA or other regulatory authorities with respect to products we or our partners have under development, are manufacturing or have commercialized;

any adverse developments or disagreements or perceived adverse developments or disagreements with respect to our relationship with Royalty Pharma, or the relationship of Royalty Pharma and GSK;

any adverse developments or perceived adverse developments with respect to our relationship with any of our research, development, or commercialization partners, including, without limitation, disagreements that may arise between us and any of those partners;

any adverse developments or perceived adverse developments in our programs with respect to partnering efforts or otherwise;

announcements of patent issuances or denials, technological innovations or new commercial products by us or our competitors;

publicity regarding actual or potential study results or the outcome of regulatory review relating to products under development by us, our partners, or our competitors;

regulatory developments in the US and foreign countries;

announcements with respect to governmental or private insurer reimbursement policies;

announcements of equity or debt financings;

possible impairment charges on non-marketable equity securities;

economic and other external factors beyond our control, such as the COVID-19 pandemic and fluctuations in interest rates;

loss of key personnel;

likelihood of our ordinary shares to be more sensitive to changes in sales volume, market fluctuations and events or perceived events with respect to our business due to our small public float;

low public market trading volumes for our ordinary shares;

the sale of large concentrations of our shares to third parties, which may be more likely to occur due to the concentration of ownership of our shares, such as what we experienced when our then-largest shareholder divested its holdings in 2019;

developments or disputes as to patent or other proprietary rights;

approval or introduction of competing products and technologies;

results of clinical trials;

failures or unexpected delays in timelines for our potential products in development, including the obtaining of regulatory approvals;

any adverse developments or disagreements or perceived adverse developments or disagreements with respect to our relationship with Innoviva, such as our 2019 arbitration proceeding with them or our current arbitration proceeding with them concerning their proposed use of TRC funds to make investments in private companies, or the relationship of Innoviva or TRC on the one hand and GSK on the other hand, including any such developments or disagreements resulting from or relating to the TRC LLC Agreement or to the Spin-Off;

any adverse developments or perceived adverse developments with respect to our relationship with any of our research, development or commercialization partners, including, without limitation, disagreements that may arise between us and any of those partners;

any adverse developments or perceived adverse developments in our programs with respect to partnering efforts or otherwise;

announcements of patent issuances or denials, technological innovations or new commercial products by us or our competitors;

publicity regarding actual or potential study results or the outcome of regulatory review relating to products under development by us, our partners or our competitors;

regulatory developments in the US and foreign countries;

announcements with respect to governmental or private insurer reimbursement policies;

announcements of equity or debt financings;

possible impairment charges on non-marketable equity securities;

economic and other external factors beyond our control, such as the COVID-19 pandemic and fluctuations in interest rates;

loss of key personnel;

likelihood of our ordinary shares to be more sensitive to changes in sales volume, market fluctuations and events or perceived events with respect to our business due to our small public float;

low public market trading volumes for our ordinary shares related in part to the concentration of ownership of our shares;

the sale of large concentrations of our shares, which may be more likely to occur due to the concentration of ownership of our shares, such as what we experienced when our largest shareholder, Woodford Investment Management Limited, divested its holdings in 2019 or which may occur as a result of the exchangeable note offering by GSK if holders of the GSK Notes were to exchange their notes for our ordinary shares;

developments or disputes as to patent or other proprietary rights;

approval or introduction of competing products and technologies;

results of clinical trials;

failures or unexpected delays in timelines for our potential products in development, including the obtaining of regulatory approvals;

5547

Table of Contents

delays in manufacturing adversely affecting clinical or commercial operations;

delays in manufacturing adversely affecting clinical or commercial operations;

fluctuations in our operating results;

fluctuations in our operating results;

market reaction to announcements by other biotechnology or pharmaceutical companies;

market reaction to announcements by other biotechnology or pharmaceutical companies;

initiation, termination, or modification of agreements with our collaborators or disputes or disagreements with collaborators;

initiation, termination or modification of agreements with our collaborators or disputes or disagreements with collaborators;

litigation or the threat of litigation;

litigation or the threat of litigation;

public concern as to the safety of product candidates or medicines developed by us; and

public concern as to the safety of product candidates or medicines developed by us; and

comments and expectations of results made by securities analysts or investors.

comments and expectations of results made by securities analysts or investors.

If any of these factors causes us to fail to meet the expectations of securities analysts or investors, or if adverse conditions prevail or are perceived to prevail with respect to our business, the price of the ordinary shares would likely drop significantly. AFor example, our stock price dropped significantly when we announced that izencitinib did not meet its primary endpoint in our Phase 2b/3 induction and maintenance study of izencitinib in ulcerative colitis. In addition, though none has been filed to our knowledge, a significant drop in the price of a company’s securities often leads to the filing of securities class action litigation against the company. This type of litigation against us could result in substantial costs and a diversion of management’s attention and resources.

Activist shareholders could negatively impact our business and cause disruptions.

We value constructive input from investors and regularly engage in dialogue with our shareholders regarding strategy and performance. While our board of directors and management team welcome their views and opinions with the goal of enhancing value for all shareholders, we may be subject to actions or proposals from activist shareholders that may not align with our business strategies or the best interests of all of our shareholders.

For example, in February 2023, Irenic Capital Management LP (“Irenic”) released a public letter communicating its opinions regarding actions that it believes we should take and made public statements critical of our board of directors and management. Irenic may continue to make and/or other activist shareholders may make such public communications in the future.

In the event of such shareholder activism – particularly with respect to matters which our board of directors, in exercising their fiduciary duties, disagree with or have determined not to pursue – our business could be adversely affected because responding to such actions by activist shareholders can be costly and time-consuming, disruptive to our operations and divert the attention of management, our board of directors and our employees, and our ability to execute our strategic plan could also be impaired as a result. Such an activist campaign could require us to incur substantial legal, public relations and other advisory fees and proxy solicitation expenses. Further, we may become subject to, or we may initiate, litigation as a result of proposals by activist shareholders or matters relatingthereto, which could be a further distraction to our board of directors and management and could require us to incur significant additional costs. In addition, perceived uncertainties as to our future direction, strategy, or leadership created as a consequence of activist shareholders may result in the loss of potential business opportunities, harm our ability to attract new or retain existing investors, customers, directors, employees, collaborators or other partners, harm or impair our ability to accrue patients to clinical trials because of concerns the study may be disrupted, disrupt relationships with us, and the market price of our ordinary shares could also experience periods of increased volatility as a result.

Concentration of ownership will limit your ability to influence corporate matters.

Based solely on our review of publicly available filings, as of December 31, 2020,2023, our three largest shareholders collectively owned 43.5% 45.5%of our outstanding ordinary shares. These shareholders could control the outcome of actions taken by us that require shareholder approval, including a transaction in which shareholders might receive a premium over the prevailing market price for their shares.

48

Table of Contents

Certain provisions in our constitutional and other documents may discourage our acquisition by a third-party, which could limit your opportunity to sell shares at a premium.

Our constitutional documents include provisions that could limit the ability of others to acquire control of us, modify our structure or cause us to engage in change-of-control transactions, including, among other things, provisions that:

require supermajority shareholder voting to effect certain amendments to our amended and restated memorandum and articles of association;

require supermajority shareholder voting to effect certain amendments to our amended and restated memorandum and articles of association;

maintain a classified board of directors until our annual general meeting in 2026;

establish a classified board of directors;

restrict our shareholders from calling meetings or acting by written consent in lieu of a meeting;

restrict our shareholders from calling meetings or acting by written consent in lieu of a meeting;

limit the ability of our shareholders to propose actions at duly convened meetings; and

limit the ability of our shareholders to propose actions at duly convened meetings; and

authorize our board of directors, without action by our shareholders, to issue preferred shares and additional ordinary shares.

authorize our board of directors, without action by our shareholders, to issue preferred shares and additional ordinary shares.

In addition, in May 2018, our shareholders approved a resolution authorizing our board of directors to adopt a shareholder rights plan in the future intended to deter any person from acquiring more than 19.9% of our outstanding ordinary shares without the approval of our board of directors.

These provisions could have the effect of depriving you of an opportunity to sell your ordinary shares at a premium over prevailing market prices by discouraging third parties from seeking to acquire control of us in a tender offer or similar transaction.

56

Table of Contents

Our shareholders may face difficulties in protecting their interests because we are incorporated under Cayman Islands law.

Our corporate affairs are governed by our amended and restated memorandum and articles of association, by the Companies Law (2020 Revision) of the Cayman Islands and by the common law of the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under the laws of the Cayman Islands are different from those under statutes or judicial precedent in existence in jurisdictions in the US. Therefore, you may have more difficulty in protecting your interests than would shareholders of a corporation incorporated in a jurisdiction in the US, due to the different nature of Cayman Islands law in this area.

Shareholders of Cayman Islands exempted companies such as our company have no general rights under Cayman Islands law to inspect corporate records and accounts or to obtain copies of lists of shareholders. Our directors have discretion under our amended and restated memorandum and articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

Our Cayman Islands counsel, Maples and Calder, is not aware of any reported class action having been brought in a Cayman Islands court. Derivative actions have been brought in the Cayman Islands courts, and the Cayman Islands courts have confirmed the availability for such actions. In most cases, the companyCompany will be the proper plaintiff in any claim based on a breach of duty owed to it, and a claim against (for example) our officers or directors usually may not be brought by a shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority and be applied by a court in the Cayman Islands, exceptions to the foregoing principle apply in circumstances in which:

a company is acting, or proposing to act, illegally or beyond the scope of its authority;

the act complained49

the act complained of, although not beyond the scope of the authority, could be effected if duly authorized by more than the number of votes which have actually been obtained; or

those who control the company are perpetrating a “fraud on the minority.”

those who control the company are perpetrating a “fraud on the minority.”

A shareholder may have a direct right of action against the company where the individual rights of that shareholder have been infringed or are about to be infringed.

There is uncertainty as to shareholders’ ability to enforce certain foreign civil liabilities in the Cayman Islands.

We are incorporated as an exempted company limited by shares with limited liability under the laws of the Cayman Islands. A material portion of our assets are located outside of the US. As a result, it may be difficult for our shareholders to enforce judgments against us or judgments obtained in US courts predicated upon the civil liability provisions of the federal securities laws of the US or any state of the US.

We understand that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against Theravance Biopharma judgments of courts of the US predicated upon the civil liability provisions of the securities laws of the US or any State; and (ii) in original actions brought in the Cayman Islands, to impose liabilities against Theravance Biopharma predicated upon the civil liability provisions of the securities laws of the US or any State, on the grounds that such provisions are penal in nature. However, in the case of laws that are not penal in nature, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the US, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands’ judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to

57

Table of Contents

public policy). A Cayman Islands court, including the Grand Court of the Cayman Islands, may stay proceedings if concurrent proceedings are being brought elsewhere, which would delay proceedings and make it more difficult for our shareholders to bring action against us.

If securities or industry analysts cease coverage of us or do not publish research, or publish inaccurate or unfavorable research, about our business, the price of our ordinary shares and trading volume could decline.

The trading market for our ordinary shares depends in part on the research and reports that securities or industry analysts publish about us or our business. If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, the trading price for our ordinary shares could be negatively affected. If one or more of the analysts who cover us downgrade our ordinary shares or publish inaccurate or unfavorable research about our business or if our results fail to meet the expectations of these analysts, the price of our ordinary shares would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our ordinary shares could decrease, which might cause our share price and trading volume to decline.

We do not anticipate paying any cash dividends on our capital shares in the foreseeable future; as a result, capitalCapital appreciation, if any, of our ordinary shares willmay be your sole source of gain for the foreseeable future.

We have never declared or paid cash dividends on our capital shares. We do not anticipate paying any cash dividends on ourStarting in September 2022, we undertook a capital return program of $325.3 million. As of December 31, 2023, we had repurchased $324.9 million of shares, and we repurchased the remaining $0.4 million in the foreseeablecapital return program during January 2024. There is no guarantee that we will implement another capital return program in the future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. In addition, the terms of any future debt financing arrangement may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our ordinary shares. As a result, capital appreciation, if any, of our ordinary shares willmay be your sole source of gain for the foreseeable future.

We are a smaller reporting company, and any decision on our part to comply only with reduced reporting and disclosure requirements applicable to such companies could make our ordinary shares less attractive to investors.

As of June 30, 2023, we qualified as a “smaller reporting company,” as defined in the Exchange Act. For as long as we continue to be a smaller reporting company, we may choose to take advantage of exemptions from various

50

Table of Contents

reporting requirements applicable to other public companies that are not smaller reporting companies, including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and only being required to provide two years of audited financial statements in annual reports. In addition, for so long as we remain a smaller reporting company and not classified as an “accelerated filer” or “large accelerated filer” pursuant to SEC rules, we will be exempt from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.

We will remain a smaller reporting company so long as, as of June 30 of the preceding year, (i) the market value of our ordinary shares held by non-affiliates, or our public float, is less than $250.0 million; or (ii) we have annual revenues less than $100.0 million and either we have no public float or our public float is less than $700.0 million.

If we take advantage of some or all of the reduced disclosure requirements available to smaller reporting companies, investors may find our ordinary shares less attractive, which may result in a less active trading market for our common stock and greater stock price volatility.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 1C. CYBERSECURITY

Risk Management and Strategy

We recognize the importance of maintaining the trust and confidence of our investors, patients, business partners, and employees. Our board of directors are actively involved in the oversight of our risk management program, and cybersecurity represents an important component of our overall approach to enterprise risk management (“ERM”). Our cybersecurity policies, standards, processes, and practices are fully integrated into our ERM program and are based on recognized frameworks established by the National Institute of Standards and Technology, the international organization for standardization. In general, we seek to address cybersecurity risks through a comprehensive cross-functional approach that is focused on preserving the confidentiality, security, and availability of the information that we collect and store by identifying, preventing, and mitigating cybersecurity threats and effectively responding to cybersecurity incidents when they occur.

Our cybersecurity program includes the following key elements:

Collaborative Approach

We have implemented a comprehensive cross-functional approach to identifying, preventing, and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner.

Technical Safeguards

We deploy technical safeguards that are designed to protect our information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality, and access controls, which are evaluated and improved through vulnerability assessments and cybersecurity threat intelligence.

Incident Response and Recovery Planning

We have established and maintain comprehensive incident response and recovery plans that address our response to a cybersecurity incident, and such plans are tested and evaluated on a regular basis.

Third-Party Risk Management

51

Table of Contents

We maintain a comprehensive risk-based approach to identifying and overseeing cybersecurity risks presented by third parties, including vendors, service providers, and other external users of our systems, as well as the systems of third parties that could adversely impact our business in the event of a cybersecurity incident affecting those third-party systems.

Education and Awareness

We provide regular mandatory training for employees regarding cybersecurity threats as a means to equip our employees with effective tools and education to address cybersecurity threats and to communicate our evolving information security policies, standards, processes, and practices.

Governance

One of the key functions of our board of directors is informed oversight of our ERM, including risks from cybersecurity threats. Our board of directors receive regular presentations and reports on our cybersecurity risks, which have pertained to a wide range of topics including recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends, and information security considerations arising with respect to our peers and third parties. The board of directors also receive prompt and timely information regarding any cybersecurity incident that meets reporting thresholds, as well as ongoing updates regarding any such incident until it has been addressed and resolved.

On an annual basis, the board of directors discuss our approach to cybersecurity risk management with management which includes our Chief Information Officer (“CIO”). Our CIO has overall operational responsibility for our cybersecurity risk management. To facilitate the success of our cybersecurity risk management program, we have an Infrastructure, Operations & Security Team (“IOS Team”) that is tasked with the responsibility to design, implement, and manage systems, processes, and policies to defend against cybersecurity threats and to respond to cybersecurity incidents. Working collaboratively across our Company, the IOS Team implements and maintains a program designed to protect our information systems from cybersecurity threats and to promptly respond to any cybersecurity incidents in accordance with our incident response and recovery plans.

ITEM 2. PROPERTIES

Our principal physical properties in the US consist of approximately 170,000162,000 square feet of office and laboratory space leased in two buildings in South San Francisco, California. Of this office and laboratory space, approximately 99,000 square feet was subleased as of December 31, 2023. The South San Francisco lease expires in May 2030, and our subleases expire in September 2028 and May 2030. Our Irish subsidiary operates from approximately 6,100700 square feet of leased office space in Dublin, Ireland, and the leasethat expires in April 2027. We believe our current space is sufficient for our needs.May 2024.

ITEM 3. LEGAL PROCEEDINGS

On June 10, 2020,During January 2023, we disclosedreceived notice from Accord Healthcare, Inc.; Cipla USA, Inc. and Cipla Limited; Eugia Pharma Specialties Ltd.; Lupin Inc.; Mankind Pharma Ltd.; Orbicular Pharmaceutical Technologies Private Limited; and Teva Pharmaceuticals, Inc. (collectively, the “generic companies”), that they have each filed with the FDA an abbreviated new drug application (“ANDA”), for a generic version of YUPELRI. The notices from the generic companies each included a paragraph IV certification with respect to five of our patents listed in the FDA’s Orange Book for YUPELRI on the date of our receipt of the notice. The asserted patents relate generally to polymorphic forms of and a Form 8-Kmethod of treatment using YUPELRI. In February 2023, we filed patent infringement suits against the generic companies in federal district courts, including the United States District Court for the District of New Jersey, the U.S. District Court for the District of Delaware, and the U.S. District Court for the Middle District of North Carolina. The suits in Delaware and North Carolina have been dismissed, as all generic companies have agreed to venue in New Jersey. The complaint alleges that we had formally objectedby filing the ANDAs, the generic companies have infringed five of our Orange Book listed patents. We are seeking a permanent injunction to TRC and Innoviva, asprevent the managergeneric companies from introducing a generic version of TRC, regarding their proposed plan to use TRELEGY royalties to invest in certain privately-held companies, fundsYUPELRI that would otherwise be availableinfringe its patents. As a result of this lawsuit, a stay of approval through May 2026 has been imposed by the FDA on the generic companies’ ANDAs pending any adverse court decision. Additional patents

52

Table of Contents

covering YUPELRI, granted on July 4, 2023 and January 2, 2024, were subsequently listed in FDA’s Orange Book. We filed additional patent infringement suits in the U.S. District Court for distributionthe District of New Jersey during August 2023 and January 2024. These suits have been consolidated with the above action. Further, the original complaint was amended during December 2023 to usinclude certain patents not listed in the Orange Book.

As of February 28, 2024, we have settled all litigation with Accord Healthcare, Inc.; Lupin Pharmaceuticals, Inc.; Orbicular Pharmaceutical Technologies Private Limited; and Teva Pharmaceuticals, Inc. pursuant to individual agreements in which we granted these companies a royalty-free, non-exclusive, non-sublicensable, non-transferable license to manufacture and market their respective generic versions of YUPELRI inhalation solution in the US on or after the licensed launch date of April 23, 2039, subject to certain exceptions as is customary in these type of agreements. As required by law, the settlements are subject to review by the U.S. Department of Justice and the Federal Trade Commission. The patent litigation against the three remaining generic companies, along with certain affiliates, remains pending.

Please also see “Item 1, Business – Patents and Proprietary Rights -- Patent Term Restoration, Regulatory Exclusivities, and Hatch-Waxman Litigation” for additional information. In addition, this litigation and the related risks are described in greater detail under the terms of the TRC LLC Agreement. We intend to continue to seekrisk factor “Litigation to protect or defend our interests inintellectual property or third party claims of intellectual property infringement would require us to divert resources and may prevent or delay our drug discovery and development effortsof this matter consistent with the dispute resolution procedures of the TRC LLC Agreement. In this regard, we initiated an arbitration proceeding against Innoviva and TRC in October 2020 challenging the authority of Innoviva and TRC to pursue such a business plan rather than distribute such funds to us in a manner consistent with the TRC LLC Agreement and our 85% economic interest in TRC. The arbitration hearing was held during the week of February 16, 2021, with post-hearing briefing and arguments to take place over the next few weeks. We currently anticipate a decision in those proceedings near the end of the first quarter or early in the second quarter of 2021.

Annual Report on Form 10-K.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

5853

Table of Contents

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our ordinary shares have traded on The Nasdaq Global Market under the symbol “TBPH” since June 3, 2014. As of February19, 2021, 23, 2024, there were68 43 shareholders of record of our ordinary shares. As many of our ordinary shares are held by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of underlying shareholders represented by these record holders.shareholders of record.

Dividend Policy

We currently intend to retain any future earnings to finance our research andpharmaceutical development efforts. We have never declared or paid cash dividends on our ordinary shares and do not intend to declare or pay cash dividends on our ordinary shares in the foreseeable future.

Issuer Purchases of Equity Securities

On September 19, 2022, we announced that our board of directors had approved a $250.0 million share repurchase program, and on February 27, 2023, we announced that our board of directors had authorized a $75.0 million increase to the capital return program, bringing the total capital return program to $325.0 million. As of December 31, 2023, we had repurchased $324.8 million of shares, and, as of December 31, 2023, we had approximately $0.4 million remaining in the capital return program which was completed in early January 2024.

The table below summarizes information about the Company’s purchases of its equity securities registered pursuant to Section 12 of the Exchange Act during the three months ended December 31, 2023. All shares purchased under the repurchase program were cancelled and ceased to be outstanding.

Maximum Dollar

 

Total Number of

Value of Shares

 

Shares Purchased

that May Yet Be

 

Total Number

Weighted

as Part of Publicly

Purchased Under the

 

of Shares

Average Price

Announced Plans

Plans or Programs

 

Period

    

Purchased

    

Per Share (1)

    

or Programs

(in thousands)

 

October 1, 2023 to October 31, 2023

1,021,290

$

9.089

1,021,290

$

21,098

(2)

November 1, 2023 to November 30, 2023

1,006,792

10.099

1,006,792

10,931

(2)

December 1, 2023 to December 31, 2023

987,070

10.880

987,070

444

(2)

Total

3,015,152

$

10.013

3,015,152

(1)The weighted average price paid per ordinary share does not include the cost of commissions.
(2)Gives effect to the $75.0 million increase in the size of our capital return program announced on February 27, 2023.

54

Table of Contents

Equity Compensation Plans

The following table provides certain information with respect to all of our equity compensation plans in effect as of December 31, 2020:2023:

    

    

    

Number of Securities

    

    

    

Number of Securities

Remaining Available

Remaining Available

Number of Securities

for Future Issuance

Number of Securities

for Future Issuance

to be Issued Upon

Weighted-Average

Under Equity

to be Issued Upon

Weighted-Average

Under Equity

Exercise of

Exercise Price of

Compensation Plans

Exercise of

Exercise Price of

Compensation Plans

Outstanding Options,

Outstanding Options,

(excluding securities

Outstanding Options,

Outstanding Options,

(excluding securities

Plan Category

    

Warrants and Rights (a)

    

Warrants and Rights

    

reflected in column (a))

    

Warrants and Rights (a)

    

Warrants and Rights

    

reflected in column (a))

Options

 

3,082,419

$

25.09

 

4,345,599

 

2,232,136

$

18.75

 

5,339,942

Restricted shares

 

4,993,918

 

n/a

 

n/a

 

3,995,750

 

n/a

 

n/a

Employee share purchase plan

 

n/a

 

n/a

 

2,361,457

 

n/a

 

n/a

 

2,453,502

Equity compensation plans approved by security holders

 

8,076,337

$

25.09

 

6,707,056

 

6,227,886

$

18.75

 

7,793,444

Options

 

216,760

$

17.27

 

203,261

 

73,740

$

15.64

 

346,281

Equity compensation plans not approved by security holders

 

216,760

$

17.27

 

203,261

 

73,740

$

15.64

 

346,281

Total

 

8,293,097

$

24.58

 

6,910,317

 

6,301,626

$

18.65

 

8,139,725

We have three equity compensation plans — our 2013 Equity Incentive Plan (the “2013 EIP”), as amended, our 2013 Employee Share Purchase Plan (the “2013 ESPP”), and our 2014 New Employee Equity Incentive Plan (the “2014 NEEIP”). At inception of the plans, we were authorized to issue 5,428,571 ordinary shares under the 2013 EIP and 857,142 ordinary shares under the 2013 ESPP, and 750,000 ordinary shares under the 2014 NEEIP.

The 2013 EIP provides for the issuance of share-based awards, including restricted shares, restricted share units, options, share appreciation rights (“SARs”) and other equity-based awards, to our employees, officers, directors, and consultants. As of January 1 of each year, commencing on January 1, 2015 and ending on (and including) January 1, 2023, the aggregate number of ordinary shares that may be issued under the 2013 EIP shall automatically increase by a number equal to the least of (i) 5% of the total number of ordinary shares outstanding on December 31 of the prior year; (ii) 3,428,571 ordinary shares; or (iii) a number of ordinary shares determined by our board of directors. Options may be granted with an exercise price not less than the fair market value of the ordinary shares on the grant date. Under the terms of our 2013 EIP, options granted to employees generally have a maximum term of 10 years and vest over a four-year period from the date of grant; 25% vest at the end of one year, and 75% vest monthly over the remaining three years. We may grant options with different vesting terms from time to time. Unless an employee’s termination of service is due to disability or death, upon termination of service, any unexercised vested options will generally be forfeited at the end of three months or the expiration of the option, whichever is earlier.

59

TableAt the our Annual General Meeting of ContentsShareholders on May 2, 2023, shareholders approved an amendment and restatement of the 2013 EIP to effect the following material changes to the existing plan (i) extend the term of the 2013 EIP by an additional ten years to February 14, 2033; (ii) eliminate the provision that provided for automatic annual increases in the number of shares available for issuance under the 2013 EIP; (iii) reduce the number of shares reserved for issuance by 3,808,287 shares; (iv) eliminate our ability to reprice options and share appreciation rights without first obtaining shareholder approval; and (v) remove certain provisions no longer necessary since the repeal of the exemption from the annual deduction limitation imposed by Section 162(m) of the Internal Revenue Code for performance-based compensation.

Under the 2013 ESPP, our officers and employees may purchase ordinary shares through payroll deductions at a price equal to 85% of the lower of the fair market value of the ordinary share at the beginning of the offering period or at the end of each applicable purchase period. As of January 1 of each year, commencing on January 1, 2015 and ending on (and including) January 1, 2033, the aggregate number of ordinary shares that may be issued under the 2013 ESPP shall automatically increase by a number equal to the least of (i) 1% of the total number of ordinary shares outstanding on December 31 of the prior year; (ii) 857,142 ordinary shares; or (iii) a number of ordinary shares determined by our board of directors. The ESPP generally provides for consecutive and overlapping offering periods of 24 months in duration, with each offering period generally composed of four consecutive six-month purchase periods. The purchase periods end on either May 15 or November 15. ESPP contributions are limited to a maximum of 15% of an employee’s eligible compensation.

Our 2013 ESPP also includes a feature that provides for the existing offering period to terminate

55

Table of Contents

and for participants in that offering period to automatically be enrolled in a new offering period when the fair market value of an ordinary share at the beginning of a subsequent offering period falls below the fair market value of an ordinary share on the first day of such offering period.

The 2014 NEEIP provides for the issuance of share-based awards, including restricted shares, restricted share units, non-qualified options and SARs, to our employees. Options may be granted with an exercise price not less than the fair market value of the ordinary shares on the grant date. Under the terms of our 2014 NEEIP, options granted to employees generally have a maximum term of 10 years and vest over a four-year period from the date of grant; 25% vest at the end of one year, and 75% vest monthly over the remaining three years. We may grant options with different vesting terms from time to time. Unless an employee’s termination of service is due to disability or death, upon termination of service, any unexercised vested options will generally be forfeited at the end of three months or the expiration of the option, whichever is earlier.

Additional information regarding share-based compensation is included in “Item 8, Note 1. Organization and Summary of Significant Accounting Policies,” and “Item 8, Note 11.12. Share-Based Compensation,” to the consolidated financial statements appearing in this Annual Report on Form 10-K.

Share Performance Graph

The graph set forth below compares the cumulative total shareholder return on our ordinary shares from December 31, 2015 through December 31, 2020, with the cumulative total return of (i) the Nasdaq Composite Index, (ii) the NYSE Arca Pharmaceutical Index (previously labeled as the Nasdaq Pharmaceutical Index) and (iii) the Nasdaq Biotechnology Index over the same period. This graph assumes the investment of $100 on December 31, 2015 in each of (1) our ordinary shares, (2) the Nasdaq Composite Index, (3) the NYSE Arca Pharmaceutical Index and (4) the Nasdaq Biotechnology Index, and assumes the reinvestment of dividends, if any, although dividends have never been declared on our ordinary shares.ITEM 6. [RESERVED]

The comparisons shown in the graph below are based upon historical data. We caution that the price performance shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our ordinary shares.

Notwithstanding anything to the contrary set forth in any of our previous or future filings under the Securities Act or the Exchange Act that might incorporate this Annual Report on Form 10-K or future filings made by us under those statutes, this Performance Graph section shall not be deemed filed with the SEC and shall not be deemed incorporated by reference into any of those prior filings or into any future filings made by us under those statutes.

6056

Table of Contents

Graphic

$100 Investment in TBPH Shares or Index

    

TBPH

    

Nasdaq Composite Index

 

NYSE Arca Pharmaceutical Index

Nasdaq Biotechnology Index

December 31, 2015

$

100.00

$

100.00

$

100.00

$

100.00

December 31, 2016

 

194.51

108.97

91.66

78.65

December 31, 2017

170.16

141.36

106.86

95.67

December 31, 2018

 

156.13

137.39

114.86

87.19

December 31, 2019

157.96

187.87

135.98

109.08

December 31, 2020

108.42

272.51

147.86

137.90

ITEM 6. SELECTED FINANCIAL DATA

Omitted as permitted under SEC Regulation S-K, Item 301.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Management’s Discussion and Analysis (“MD&A”) is intended to facilitate an understanding of our business and results of operations.operations, as well as our liquidity and capital resources. Additionally, it describes accounting policies and estimates that management has deemed as “critical accounting policies and estimates.” This discussion and analysisMD&A should be read in conjunction with our consolidated financial statements and notes included in this Annual Report on Form 10-K. The information contained in this discussion and analysisMD&A or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, our operating expenses, and future payments under our collaboration agreements, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Such statements are based upon current

61

Table of Contents

expectations that involve risks and uncertainties.You should review the section entitled “Risk Factors” in Item 1A of Part I above for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. See the section entitled “Special Note regarding Forward-Looking Statements” aboveon page 3 for more information.

Management Overview

Theravance Biopharma, Inc. (“we,” “our,” “Theravance Biopharma” or the “Company”) is a diversified biopharmaceutical company primarily focused on the discovery, development and commercialization of organ-selective medicines. Our purposefocus is to create transformational medicines to improve the lives of patients suffering from serious illnesses. Our research is focusedthatmake a difference® in the areas of inflammation and immunology.people’s lives.

In pursuit of our purpose, we apply insightsleverage decades of expertise, which has led to the development of the United States (“US”) Food and innovation at each stage of our business and utilize our internal capabilities and those of partners around the world. We apply organ-selective expertise to biologically compelling targets to discover and develop medicines designed to treat underserved localized diseases and to limit systemic exposure, in order to maximize patient benefit and minimize risk. These efforts leverage years of experience in developing lung-selective medicines to treat respiratory disease, including the US FDADrug Administration (the “FDA”) approved YUPELRI® (revefenacin) inhalation solution indicated for the maintenance treatment of patients with COPD. Our pipelinechronic obstructive pulmonary disease (“COPD”). Ampreloxetine, our late-stage investigational once-daily norepinephrine reuptake inhibitor in development for the treatment of internally discovered programssymptomatic neurogenic orthostatic hypotension (“nOH”) in patients with Multiple System Atrophy (“MSA”) has the potential to be a first in class therapy effective in treating a constellation of cardinal symptoms in MSA patients.

2023 Significant Developments

YUPELRI Sales Growth

In 2023, YUPELRI experienced sales growth and reached all-time high yearly net sales and profitability. Through the combined commercialization efforts with our partner Viatris Inc. (“Viatris”), total YUPELRI net sales increased by 9% to $221.0 million in 2023 compared to 2022. Hospital volumes, which we are directly responsible for, grew 46% in 2023 compared to 2022 and was a meaningful contributor to YUPELRI’s overall net sales growth for the year.

Initiation of Ampreloxetine New Phase 3 Clinical Study

In the first quarter of 2023, we initiated the ampreloxetine new Phase 3 clinical study (CYPRESS) in MSA patients with symptomatic nOH, using the Orthostatic Hypotension Symptom Assessment Scale (“OHSA”) composite score as the primary endpoint. In May 2023, we announced that the FDA granted Orphan Drug Designation status to ampreloxetine for the treatment of symptomatic nOH in patients with MSA.The study is targetedcurrently enrolling patients with 42 clinical sites open across 11 countries, as of February 26, 2024.

Capital Return Program

In 2023, we repurchased 18.63 million of our shares on the open market at a weighted average cost of $10.551 per share for an approximate aggregate cost of $196.6 million, excluding fees and expenses. Since the inception of the capital return program in September 2022 through its completion in early January 2024, we repurchased a total of 31.41

57

Table of Contents

million shares at a weighted average cost of $10.354 per share for an approximate aggregate cost of $325.3 million which reduced our shares by 37% since the inception of the capital return program.

Discontinued Investment in Research

In February 2023, we announced that we discontinued our research activities, including the inhaled Janus kinase (JAK) inhibitor program, and prioritized our R&D resources toward the ampreloxetine Phase 3 study and the completion of the YUPELRI Peak Inspiratory Flow Rate (PIFR-2) Phase 4 study. As a result of halting further investment in research activities, our headcount was reduced by approximately 17% in March 2023. We plan to address significant patient needs.seek a partnership to continue progression of our inhaled JAK inhibitor program.

Board Governance Changes

In 2023, we appointed three new independent directors reflecting our ongoing commitment to bringing new perspectives and complementary skills to the Company. In addition, we put forth a proposal to declassify the board of the directors over time which was approved at our May 2023 Annual General Meeting of Shareholders.

We have an economic interest in potential future payments from GSK pursuant to its agreements with Innoviva relating to certain programs, including TRELEGY.See “Item 1. Business” starting on page 4 for a more complete discussion of our business.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with US Generally Accepted Accounting Principles (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, and liabilities, and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods.other related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including these estimates, will depend on future developments that are highly uncertain and may be impacted by the emergence of new information concerning the COVID-19 pandemic and the actions taken to contain or treat the disease, including vaccine availability, distribution, acceptance and effectiveness.For more information, see Part I—Item 1—Business—Impact of COVID-19 Pandemic.Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies and estimates discussed below are criticalessential to understanding our historicaloperating results and future performance,financial condition, as these policies and estimates relate to the more significant areas involving management’s judgments and estimates.

Revenue Recognition

We recognize revenue under Accounting Standards Codification (“ASC”), Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, an entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.judgments.

At contract inception, onceFuture Contingent Milestone and Royalty Assets

The fair value of consideration received in connection with the contract is determinedsale of Theravance Respiratory Company, LLC (“TRC”) in July 2022 included an estimated $194.2 million in future contingent milestones and royalties that were recorded as a contingent consideration asset (“Contingent Consideration”) on our consolidated balance sheets on the transaction date. The Contingent Consideration was initially measured at fair value utilizing a Monte Carlo simulation model to calculate the present value of the risk-adjusted cash flows estimated to be withinreceived from the scopeContingent Consideration. The fair value model involved significant unobservable inputs derived using our estimates. Our estimates were based in part on external data and reflected our judgements and forecasts. The primary significant unobservable input was the estimate of ASC 606,forecasted TRELEGY ELLIPTA net revenues which is considered a Level 3 fair value input. We periodically reassess the carrying value of the Contingent Consideration when indicators of impairment are identified, and we identifywill recognize an impairment loss if the performance obligationscarrying value materially exceeds the reassessed fair value. We recognize any increases in the contract by assessing whethercarrying value of the goods or services promised within each contractContingent Consideration only when such contingent gains are distinct. realized.

Future Royalty Payment Contingency

We then recognize revenue fortreat contingent liabilities related to sale of future royalties as debt financings, amortized under the effective interest method over the estimated life of the related expected royalty stream. The contingent liabilities related to sale of future royalties and the debt amortization are based on current estimates of the amount and timing of future royalty payments, including the potential for any future funding milestones. We periodically reassess the amount and timing of estimated royalty payments based on internal sales projections and external information from market data sources, which are considered Level 3 inputs. To the extent our estimates of the transaction price that is allocated toamount and timing of future royalty payments are materially greater or less than previous estimates, we will prospectively adjust the respective performance obligation when (or as)amortization of the performance obligation is satisfied.contingent liability and effective interest rate.

6258

Table of Contents

Collaborative Arrangements under ASC 606

We enter into collaborative arrangements with partners that fall under the scope of Accounting Standards Codification, Topic 808, Collaborative Arrangements (“ASC 808”). While these arrangements are in the scope of ASC 808, we may analogize to ASC 606 for some aspects of these arrangements. We analogize to ASC 606 for certain activities within collaborative arrangements for the delivery of a good or service (i.e., a unit of account) that is part of our ongoing major or central operations. Revenue recognized by analogizing to ASC 606 is recorded as “collaboration revenue” or “licensing revenue” whereas, revenue recognized in accordance with ASC 808 is recorded on a separate collaboration revenue line on the consolidated statements of operations.

The terms of our collaborative arrangements typically include one or more of the following: (i) up-front fees; (ii) milestone payments related to the achievement of development, regulatory, or commercial goals; (iii) royalties on net sales of licensed products; (iv) reimbursements or cost-sharing of research and development expenses; and (v) profit/loss sharing arising from co-promotion arrangements. Each of these payments results in collaborationrevenues or an offset against research and development expense. Where a portion of non-refundable up-front fees or other payments received is allocated to continuing performance obligations under the terms of a collaborative arrangement, they are recorded as deferred revenue and recognized as collaboration revenue when (or as) the underlying performance obligation is satisfied.

As part of the accounting for these arrangements, we must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation which determines how the transaction price is allocated among the performance obligations. The estimation of the stand-alone selling price may include such estimates as, forecasted revenues or costs, development timelines, discount rates and probabilities of technical and regulatory success. We evaluate each performance obligation to determine if they can be satisfied at a point in time or over time, and we measure the services delivered to our collaborative partner which are periodically reviewed based on the progress of the related program. The effect of any change made to an estimated input component and, therefore revenue or expense recognized, would be recorded as a change in estimate. In addition, variable consideration (e.g., milestone payments) must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.

Up-front Fees: If a license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize collaboration revenues from the transaction price allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing collaboration revenue from the allocated transaction price. For example, when we receive up-front fees for the performance of research and development services, or when research and development services are not considered to be distinct from a license, we recognize collaboration revenue for those units of account over time using a measure of progress. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue or expense recognition as a change in estimate.

Milestone Payments: At the inception of each arrangement that includes milestone payments (variable consideration), we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our or the collaborative partner’s control, such as non-operational developmental and regulatory approvals, are generally not considered probable of being achieved until those approvals are received. At the end of each reporting period, we re-evaluate the probability of achievement of milestones that are within our or the collaborative partner’s control, such as operational developmental milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenues and earnings in the period of adjustment. Revisions to our estimate of the transaction price may also result in negative collaboration revenues and earnings in the period of adjustment.

63

Table of Contents

Royalties: For arrangements that include sales-based royalties, including commercial milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Following the sale of VIBATIV to Cumberland in November 2018, VIBATIV royalties earned from Cumberland are included within “interest and other income, net” on the consolidated statements of operations. In addition, our income earned related to TRELEGY sales is included within “income from our investment in TRC, LLC” on the consolidated statements of operations.

Reimbursement, cost-sharing and profit-sharing payments: Under certain collaborative arrangements, we have been reimbursed for a portion of our research and development expenses or participate in the cost-sharing of such research and development expenses. Such reimbursements and cost-sharing arrangements have been reflected as a reduction of research and development expense in our consolidated statements of operations, as we do not consider performing research and development services for reimbursement to be a part of our ongoing major or central operations.

Research and Development Expenses

Research and development (“R&D”) expenses are recorded in the period that services are rendered or goods are received. R&D expenses consist of salaries and benefits, laboratory supplies and facility costs, as well as fees paid to third parties that conduct certain R&D activities on our behalf, net of certain external R&D expenses reimbursed under our collaborative arrangements.

As part of the process of preparing our consolidated financial statements, we are required to estimate and accrue certain R&D expenses. This process involves the following:

identifying services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost;

estimating and accruing expenses in our consolidated financial statements as of each balance sheet date based on facts and circumstances known to us at the time; and

periodically confirming the accuracy of our estimates with selected service providers and making adjustments, if necessary.

Examples of estimated research and development expenses that we accrue include:

fees paid to clinical research organizations (“CROs”) in connection with preclinical and toxicology studies and clinical studies;

fees paid to investigative sites in connection with clinical studies;

fees paid to contract manufacturing organizations (“CMOs”) in connection with the production of product and clinical study materials; and

professional service fees for consulting and related services.

We base our expense accruals related to clinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical studies on our behalf. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts depend on factors, such as the successful enrollment of patients and the completion of clinical study milestones. Our service providers typically invoice us monthly in arrears for services performed. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If we do not identify costs that we have begun to incur or if we underestimate or

64

Table of Contents

overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates.

To date, we have not experienced significant changes in our estimates of accrued research and development expenses after a reporting period. However, due to the nature of estimates, there is no assurance that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical studies and other research activities. Such changes in estimates will be recognized as research and development expenses in the period that the change in estimate occurs.

Theravance Respiratory Company, LLC (“TRC”)

Through our 85% equity interest in TRC, the Company is entitled to receive an 85% economic interest in any future payments made by GSK under the strategic alliance agreement and under the portion of the collaboration agreement assigned to TRC (net of TRC expenses paid and the amount of cash, if any, expected to be used by TRC pursuant to the TRC LLC Agreement over the next four fiscal quarters). The primary drug program assigned to TRC is TRELEGY.

We analyzed our ownership, contractual and other interests in TRC to determine if TRC is a variable-interest entity (“VIE”), whether we have a variable interest in TRC and the nature and extent of that interest. We determined that TRC is a VIE. The party with the controlling financial interest, the primary beneficiary, is required to consolidate the entity determined to be a VIE. Therefore, we also assessed whether we are the primary beneficiary of TRC based on the power to direct its activities that most significantly impact its economic performance and our obligation to absorb its losses or the right to receive benefits from it that could potentially be significant to TRC. Based on our assessment, we determined that we are not the primary beneficiary of TRC, and, as a result, we do not consolidate TRC in our consolidated financial statements. TRC is recognized in our consolidated financial statements under the equity method of accounting. Income related to our equity ownership of TRC is reflected within our consolidated statements of operations and is classified as non-operating income. 

Income Taxes

We utilize the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are anticipated to be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Our total unrecognized tax benefits of $63.4 million and $58.8 million, as of December 31, 2020 and December 31, 2019, respectively, may reduce the effective tax rate in the period of recognition. We currently have a full valuation allowance against our deferred tax assets, which would impact the timing of the effective tax rate benefit should any of our uncertain positions be favorably settled in the future.

We assess all material positions, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is greater than 50% likely to be realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and we will determine whether the factors underlying the sustainability assertion have changed and whether the amount of the recognized tax benefit is still appropriate.

The recognition and measurement of tax benefits requires significant judgment. We have taken certain positions where we believe that our position is greater than 50% likely to be realized upon ultimate settlement and for which no reserve for uncertain tax positions has been recorded. If we do not ultimately realize the expected benefit of these positions, we will record additional income tax expenses in future periods. Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available.

65

Table of Contents

Any tax levied or credited by a governmental taxing authority that is not based on our income is outside the scope of accounting for income taxes. Therefore, we record such items as a component in our loss before income taxes.

Results of Operations

The following tables set forth our results of operations for the periods presented. Management’s commentary for the 2020 results compared to 2019 results are presented in the paragraphs below, and management’s commentary for the 2019 results2023 period compared to the 2018 results are included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission (“SEC”) on February 27, 2020.2022 period.

Revenue

Revenue,While Viatris Inc. (“Viatris”) records the total net sales of YUPELRI within its own financial statements, our implied 35% YUPELRI revenue, as compared to the prior years,year period, was as follows:

Change

Year Ended December 31, 

2020

2019

(In thousands)

    

2020

    

2019

    

2018

    

$

    

%

    

$

    

%

    

Product Sales

$

$

$

15,304

$

%  

$

(15,304)

NM

%  

Collaboration revenue

26,464

31,250

41,791

(4,786)

(15)

(10,541)

(25)

Licensing revenue

1,500

28,500

(27,000)

(95)

28,500

NM

Viatris collaboration agreement

 

43,893

 

13,664

3,275

30,229

221

10,389

317

Total revenue

$

71,857

$

73,414

$

60,370

$

(1,557)

(2)

%  

$

13,044

22

%  

Year Ended December 31, 

Change

(In thousands)

  

2023

  

2022

  

$

  

%

    

YUPELRI net sales (100% recorded by Viatris)

$

220,962

$

201,866

$

19,096

9

%  

YUPELRI net sales (Theravance Biopharma implied 35%)

77,337

70,653

6,684

9

Our recognized revenue, as compared to the prior year period, was as follows:

Year Ended December 31, 

Change

(In thousands)

  

2023

  

2022

$

  

%

    

Viatris collaboration agreement

$

57,201

$

48,624

$

8,577

18

%  

Viatris royalties (Non-US)

7

30

(23)

(77)

Collaboration revenue

216

192

24

13

Licensing revenue

2,500

(2,500)

NM

Total revenue

$

57,424

$

51,346

$

6,078

12

%  

NM: Not Meaningful

As a result of the sale of our VIBATIV business to Cumberland in November 2018, no product sales were recognized in 2020 and 2019.

Collaboration revenue was $26.5 million in 2020, which represented a $4.8 million decrease from 2019. Collaboration revenue was primarily comprised of revenue recognized related to the $100.0 million upfront payment received in 2018 pursuant to the Janssen collaboration agreement that was entered into in February 2018. The $4.8 million decrease was primarily attributed to a smaller portion of recognized revenue from the Janssen collaboration agreement in 2020.

Licensing revenue was $1.5 million in 2020, which represented a $27.0 million decrease from 2019. In 2019, we recognized $28.5 million in licensing revenue related to an $18.5 millionupfront payment (before a required tax withholding) from Viatris associated with a June 2019 amendment for the commercialization and development rights to nebulized revefenacin in China and adjacent territories (“Viatris China Amendment”) and a $10.0 million upfront payment from a Pfizer collaboration agreement for our preclinical skin-selective, locally-acting pan-JAK inhibitor program. Licensing revenue in 2020 was comprised of $1.5 million from the achievement of a milestone related to the acceptance of a clinical trial application associated with the Viatris China Amendment.

We are entitled to a share of US profits and losses (65% to Viatris; 35% to Theravance Biopharma) received in connection with commercialization of YUPELRI.YUPELRI net sales. In accordance with the applicable accounting guidance, amounts receivable from Viatris in connection with the commercialization of YUPELRI are recorded within the consolidated statements of operations as revenue from “Viatris collaboration agreement” irrespective of whether the overall collaboration is profitable. Amounts payable to Viatris in connection with the commercialization of YUPELRI, if any, are recorded within the 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 our research and development (“R&D”)&D expenses is characterized as a reduction of R&D expense, as we do not consider performing research and developmentR&D services for reimbursement to be a part of our ordinary operations.

In 20202023 and 2019,2022, we recognized $43.9$57.2 million and $13.7$48.6 million, respectively, in revenue from the Viatris collaboration agreement, which represented an increase of 18%. The increase was driven primarily by (i) an increase in net sales as YUPELRI continued to increase its share of the receivables due fromlong-acting nebulized COPD market in both the hospital and outpatient settings; and (ii) lower costs incurred by Viatris. YUPELRI continued to be profitable for us on a brand basis, and total YUPELRI net sales recorded by Viatris related to YUPELRI. Revenue fromreached an all-time high for 2023 and for the

66

Table most recent fourth quarter of Contents

Viatris collaboration agreement was $3.3$221.0 million in 2018 and represented the receivables due from Viatris during the initial channel buildout for YUPELRI in late 2018.$60.6 million, respectively.

Cost of Goods Sold

Cost of goods sold, as comparedLicensing revenue was $2.5 million in 2022 and was related to a non-recurring development milestone payment from Pfizer Inc. (“Pfizer”) for the prior years, was as follows:

Change

 

Year Ended December 31, 

2020

2019

 

(In thousands)

    

2020

    

2019

    

2018

    

$

    

%

    

$

    

%

Cost of goods sold

$

$

$

715

$

%  

$

(715)

NM

%

NM: Not Meaningful

Asfirst patient dosed in a resultPhase 1 clinical trial of the saleskin-selective pan-JAK inhibitor program. In June 2023, we received notice from Pfizer terminating the Pfizer licensing agreement, effective as of our VIBATIV businessOctober 7, 2023, at which time the skin-selective pan-JAK inhibitor program was returned to Cumberlandus. We did not recognize any licensing revenue in November 2018, no cost of goods sold was recognized in 2020 and 2019.

Reduction in Workforce

In January 2019, we announced a reduction in workforce to align with our focus on continued execution of key strategic programs and advancement of selected late-stage research programs toward clinical development. We reduced our overall headcount by 51 individuals, with the affected employees primarily focused on early research or the infrastructure in support of VIBATIV which was sold by us to Cumberland in November 2018.

The workforce reduction was substantially completed in the first quarter of 2019. We recognized and paid severance related charges totaling $3.5 million in 2019, including compensation expense made to affected employees through any minimum statutory notice periods. The severance related charges are presented on the consolidated statements of operations within research and development expenses and selling, general and administrative expenses.2023.

Research and Development

Our R&D expenses consist primarily of employee-related costs, external costs, and various allocable expenses. We budget total R&D expenses on an internal department level basis, and we manage and report our R&D activities across the following four cost categories:

1)Employee-related costs, which include salaries, wages, and benefits;

59

Table of Contents

2)Share-based compensation, which includes expenses associated with our equity plans;

3)External-related costs, which include clinical trial related expenses, other contract research fees, consulting fees, and contract manufacturing fees; and

4)Facilities and other, which include laboratory and office supplies, depreciation, and other allocated expenses, which includesuch as general and administrative support functions, insuranceoffice rent, and general supplies.insurance.

67

Table of Contents

The following table summarizes our R&D expenses incurred, net of any reimbursements from collaboration partners, as compared to the prior years:year period:

Change

Year Ended December 31, 

2020

2019

(In thousands)

    

2020

    

2019

    

2018

    

$

    

%

    

$

    

%

    

Employee-related

$

60,557

$

64,531

$

62,896

$

(3,974)

(6)

%  

$

1,635

3

%  

Share-based compensation

 

31,294

 

28,953

25,563

2,341

8

3,390

13

External-related

 

135,114

 

92,921

77,305

42,193

45

15,616

20

Facilities, depreciation and other allocated expenses

 

33,988

 

32,843

35,584

1,145

3

(2,741)

(8)

Total research & development

$

260,953

$

219,248

$

201,348

$

41,705

19

%  

$

17,900

9

%  

Year Ended December 31, 

Change

(In thousands)

  

2023

  

2022

  

$

  

%

    

Employee-related

$

12,699

$

17,924

$

(5,225)

(29)

%  

Share-based compensation

 

8,048

 

12,888

(4,840)

(38)

External-related

 

14,473

 

18,200

(3,727)

(20)

Facilities, depreciation, and other allocated expenses

 

5,401

 

14,380

(8,979)

(62)

Total research & development

$

40,621

$

63,392

$

(22,771)

(36)

%  

R&D expenses increaseddecreased by $41.7$22.8 million in 20202023, or 36%, compared to 2019.2022. The increasedecrease was due to a $42.2across all R&D categories and was primarily driven by our 2023 Strategic Actions announced in February 2023 which included the discontinuation of investment in our research activities. The $3.7 million increase in external-related expenses, a $2.3 million increase in share-based compensation expenses, a $1.2 million increase in facilities, depreciation and other allocated expenses, and partially offset by a $4.0 million decrease in employee-related expenses.

The $42.2 million increase in external-related expenses was primarily duepartially offset by increases related to the advancement of our priority programs, notably the continued progression of izencitinib,the ampreloxetine and TD-8236,Phase 3 clinical study (CYPRESS) for MSA patients with symptomatic nOH, the completion of the YUPELRI Phase 4 study (PIFR-2), and the initiationclose out of discontinued programs.

R&D expenses directly attributed to the TD-0903 program in 2020. The $2.3 million increase in share-based compensation expense was primarily due to an increase in annual grants of share-based awards to employees,2023 Strategic Actions and the $1.2 million increaserestructuring announced in facilities, depreciation2021 and other allocated expenses was primarily due to an increasecompleted during the third quarter of 2022 (the “2021 Restructuring”) are included in allocated overhead costs. The $4.0 million decrease in employee-related expenses was primarily due to lower compensation-related expensesthe Restructuring and lower travel and entertainment-related expenses.Related Expenses section below.

Under certain of our collaborative arrangements, we receive partial reimbursement of employee-related costs and external costs, which have been reflected as a reduction of R&D expenses of $10.1 million, $5.6$5.7 million and $9.1$6.7 million for 2020, 20192023 and 2018,2022, respectively. The increase in expense reimbursements in 2020 compared to 2019 was primarily due to an increase in certain study activities related to izencitinib and TD-5202 that were reimbursable by our collaboration partners.

We anticipate our future R&D expenses will decrease from the current levels over the next 12 months primarily due to the planned completion of certain priority programs.

Selling, General and Administrative

Selling, general and administrative (“SG&A”) expenses consist primarily of salaries and benefits, facilities and overhead costs, and other costs related to areas such as legal, finance, information technology, sales and marketing, and medical affairs.

SG&A expenses, as compared to the prior years,year period, were as follows:

Change

 

Year Ended December 31, 

2020

2019

 

(In thousands)

    

2020

    

2019

    

2018

    

$

    

%

    

$

    

%

Selling, general and administrative

$

108,661

$

106,081

$

97,058

$

2,580

2

%  

$

9,023

9

%

Year Ended December 31, 

Change

(In thousands)

  

2023

  

2022

  

$

  

%

    

Selling, general and administrative

$

70,095

$

67,073

$

3,022

5

%  

Selling, general and administrativeIn 2023, SG&A expenses increased by $2.6$3.0 million in 2020 compared to 2019. The increase was primarily due to a $1.6 million increase in employee-related expenses, a $1.2 million increase in external-related expenses,2022 and a $1.1 million increase in facilities, depreciation and other allocated expenses and was partially offset by a $1.6 million decrease in YUPELRI collaboration loss.

The $1.6 million increase in employee-related expenses was primarily due to an increase in compensation-related expenses which was partially offset by lower travel and entertainment-related expenses. The $1.2 million increase in external-related expenses was primarily due to increases in costs associated with ampreloxetineexternal-related expenses of $4.9 million and SG&A allocated overhead expenses of $7.4 million. External-related expenses increased by $5.0 million and was primarily attributed to professional and financial advisory services and intellectual property protection services, such as the Hatch Waxman litigation, and the increase in SG&A allocated overhead expenses was driven by the reduction in our research activities which resulted in a larger absorption of such expenses by SG&A. Our cost reduction efforts led to decreases in employee-related expenses of $1.2 million, share-based compensation expenses of $2.9 million and facilities/other expenses of $5.1 million which partially offset by decreasesthe increases in expenses primarily related to legalexternal-related and consulting services. The $1.1 million increase in facilities, depreciation and other allocated expenses was primarily due to an increase in overhead costs. The $1.6 million decrease in YUPELRI collaboration loss was due to costs incurred in early 2019 associated with the formal launch of YUPELRI.expenses.

6860

Table of Contents

Share-based compensation expense related to selling, general and administrative expenses was $31.7 million, $31.5$17.0 million and $25.8$19.8 million for 2023 and 2022, respectively.

SG&A expenses that were directly attributed to the 2023 Strategic Actions and the 2021 Restructuring are included in 2020, 2019the Restructuring and 2018, respectively.Related Expenses section below. Following our 2023 Strategic Actions, we placed approximately 42,000 square feet of vacant office and laboratory space in South San Francisco on the market for sublease in March 2023. As of December 31, 2023, we evaluated the carrying value of our operating lease assets and leasehold improvements associated with the sublease space (approximately $10.9 million) and determined that the carrying amount of these assets was fully recoverable. As a result, we did not recognize an impairment charge in 2023. However, as the sublease market continues to evolve, it is possible that we will need to adjust our assumptions and record an impairment charge (non-cash) in a future period.

Income from Investment in TRC, LLC (“TRC”)Restructuring and Related Expenses

Income from investment in TRC,Restructuring and related expenses, as compared to the prior years, wasyear period, were as follows:

Change

 

Year Ended December 31, 

2020

2019

 

(In thousands)

    

2020

    

2019

    

2018

    

$

    

%

    

$

    

%

Income from investment in TRC, LLC

$

68,438

$

33,705

$

11,182

$

34,733

103

%  

$

22,523

201

%

Year Ended December 31, 

Change

(In thousands)

  

2023

  

2022

    

$

  

%

    

Restructuring and related expenses

$

2,386

$

5,840

$

(3,454)

(59)

%  

Share-based compensation expense (non-cash)

357

6,998

(6,641)

(95)

Total restructuring and related expenses

$

2,743

$

12,838

$

(10,095)

(79)

%

The income from investmentRestructuring and related expenses of $2.7 million in TRC, LLC represents our share2023 were driven by the 2023 Strategic Actions and were primarily comprised of the royaltyone-time R&D expenses related to one-time severance payments, from GSK to TRC on the net sales of TRELEGY (net of our share of TRC expenses paidemployee-related separation costs, and the amountloss on sale of cash, ifproperty and equipment. Cash-related expenses and non-cash related expenses associated with the 2023 Strategic Actions were $1.2 million and $1.5 million in 2023, respectively. We do not expect to recognize any expected to be used by TRC pursuantadditional restructuring and related expenses related to the TRC LLC Agreement over the next four fiscal quarters).2023 Strategic Actions.

Income from investmentIn 2022, we incurred higher restructuring and related expenses of $12.8 million as a result of the much broader reduction in TRC increased by $34.7 million in 2020workforce related to the 2021 Restructuring compared to 2019. The increase was attributed to the continued sales growth of TRELEGY and an $8.5 million payment representing our share of a $10.0 million fee that GSK agreed to pay TRC upon termination of the inhaled Bifunctional Muscarinic Antagonist-Beta2 Agonist programsmaller reduction in June 2020. Our share of TRC expenses was $2.2 million and $2.7 million in 2020 and 2019, respectively, which was primarily comprised of TRC’s legal and related feesworkforce associated with the arbitration cases between Innoviva and TRC and us in both years.

2023 Strategic Actions.

In connection with the issuance of our $380.0 million net principal amount Non-Recourse 2035 Notes in February 2020, 75% of the income from our investment in TRC is available only for payment of the Non-Recourse 2035 Notes and is not available to pay other creditor obligations or claims.

On June 10, 2020, we disclosed in a Form 8-K that we had formally objected to TRC and Innoviva, as the manager of TRC, regarding their proposed plan to use TRELEGY royalties to invest in certain privately-held companies, funds that would otherwise be available for distribution to us under the terms of the TRC LLC Agreement. We intend to continue to seek to protect our interests in this matter consistent with the dispute resolution procedures of the TRC LLC Agreement. In this regard, we initiated an arbitration proceeding against Innoviva and TRC in October 2020 challenging the authority of Innoviva and TRC to pursue such a business plan rather than distribute such funds to us in a manner consistent with the TRC LLC Agreement and our 85% economic interest in TRC. The arbitration hearing was held during the week of February 16, 2021, with post-hearing briefing and arguments to take place over the next few weeks. We currently anticipate a decision in those proceedings near the end of the first quarter or early in the second quarter of 2021.See “Risk Factors – We do not control the commercialization of TRELEGY and we do not control TRC; accordingly the amount of royalties we receive will depend, among other factors, on GSK’s ability to further commercialize TRELEGY and TRC’s decisions concerning use of cash in accordance with the TRC LLC Agreement” for additional information.

Interest Expense

Interest expense, primarily consisted of interest payments due on the Convertible Senior 2023 Notes, the redeemed Non-Recourse 2033 Notes, and the Non-Recourse 2035 Notes, as well as, the amortization of the associated debt issuance costs. Interest expense, as compared to the comparable periods in the prior year period, was as follows:

Change

 

Year Ended December 31, 

2020

2019

 

Year Ended December 31, 

Change

(In thousands)

    

2020

    

2019

    

2018

    

$

    

%

    

$

    

%

  

  

2023

  

2022

    

$

  

%

    

Interest expense

$

(44,585)

$

(31,862)

$

(10,482)

$

(12,723)

40

%  

$

(21,380)

204

%

Ampreloxetine royalty contingency (non-cash)

$

(2,350)

$

(974)

$

(1,376)

141

%  

3.25% Convertible senior notes due 2023

(5,395)

5,395

NM

Total interest expense

$

(2,350)

$

(6,369)

$

4,019

(63)

%  

NM: Not Meaningful

Interest expense was $2.4 million in 2023 compared to $6.4 million in 2022. The $4.0 million decrease in interest expense was due to the retirement of our 3.25% convertible senior notes in 2022. The interest expense in 2023 was non-cash interest expense associated with $25.0 million received from Royalty Pharma in July 2022 to fund the ampreloxetine Phase 3 clinical study (CYPRESS). We do not anticipate having any cash interest expense in the foreseeable future.

Interest expense increased by $12.7 million in 2020 compared to 2019. The increase was attributed to additional interest expense related to the issuance of the Non-Recourse 2035 Notes in February 2020. As of December 31, 2020,

6961

Table of Contents

the net principal amount outstanding under the Non-Recourse 2035 Notes was $397.6 million at an interest rate of 9.5% compared to the retired Non-Recourse 2033 Notes which had an original net principal amount of $237.5 million and an interest rate of 9.0%.

Loss on Extinguishment of Debt

Loss on extinguishment of debt, as compared to the comparable periods in the prior year period, was as follows:

Change

 

Year Ended December 31, 

2020

2019

 

Year Ended December 31, 

Change

(In thousands)

    

2020

    

2019

    

2018

    

$

    

%

    

$

    

%

  

2023

  

2022

  

$

  

%

    

Loss on extinguishment of debt

$

(15,464)

$

$

$

(15,464)

NM

%  

$

%

$

$

(3,034)

$

3,034

NM

%  

NM: Not Meaningful

In 2020,2022, we recognizedincurred a $15.5$3.0 million loss on the extinguishment of debt related to the issuance of the Non-Recourse 2035 Notes in February 2020. A portion of the proceeds from the Non-Recourse 2035 Notes were used to repay the outstanding balance of the Non-Recourse 2033 Notes that were issued in November 2018.our 3.25% convertible senior notes. The $15.5$3.0 million loss was comprised of a redemption premiumtransaction costs related to the early repayment of the Non-Recourse 2033 Notesextinguishment and the write-off of the previously deferredremaining debt issuance costs related to the portion of the Non-Recourse 2033 Notes that was considered extinguished.cost. We no longer have any long-term debt.

Interest Income and Other Income (Expense), net

Interest and other income (expense), net, as compared to the prior years,year period, was as follows:

Change

 

Year Ended December 31, 

2020

2019

 

(In thousands)

    

2020

    

2019

    

2018

    

$

    

%

    

$

    

%

Interest and other income, net

$

4,441

$

8,395

$

11,966

$

(3,954)

(47)

%  

$

(3,571)

(30)

%

Costs related to GSK offering

(1,610)

(1,610)

NM

Total interest and other income, net

$

2,831

$

8,395

$

11,966

$

(5,564)

(66)

%

$

(3,571)

(30)

%

Year Ended December 31, 

Change

(In thousands)

  

2023

  

2022

  

$

  

%

    

Interest income and other income (expense), net

$

9,116

$

8,545

$

571

7

%  

NM: Not Meaningful

Interest income and other income (expense), net, decreasedincreased slightly by $4.0$0.6 million in 20202023 compared 2019.2022. The decrease$0.6 million increase was primarily attributeddue to lower(i) higher interest income earnedrelated to an increase in 2020investment yields and (ii) higher investment balances resulting from lower investment yields on our portfolio of marketable securities compared to 2019.

In June 2020, GSK completed its offering of $300.0 million of exchangeable senior notes due 2023, $280.3 million of which are exchangeable into our ordinary shares that are held by a subsidiary of GSK. We will not be issuing any new ordinary shares in connection with the GSK offering, and we did not receive anycash proceeds received from the GSK offering. We incurred $1.6 millionTRELEGY Royalty Transaction in costs, primarily comprised of financial advisory, accounting and legal-related costs.July 2022.

Provision for Income Tax (Expense) BenefitExpense – Continuing Operations

The provision for income tax expense related to continuing operations, as compared to the prior years,year period, was as follows:

Change

 

Year Ended December 31, 

2020

2019

 

Year Ended December 31, 

Change

(In thousands)

    

2020

    

2019

    

2018

    

$

    

%

    

$

    

%

  

2023

  

2022

  

$

  

%

    

Provision for income tax benefit

$

8,520

$

5,222

$

10,561

$

3,298

63

%  

$

(5,339)

(51)

%

Provision for income tax expense - Continuing operations

$

(5,924)

$

(9)

$

(5,915)

NM

%  

NM: Not Meaningful

In 2022, the provision for income tax expense was largely attributable to the sale of TRC, which was reported as part of discontinued operations (see discussion below). This sale was a non-recurring item, and therefore, all of the provision for income tax expense was recorded in continuing operations in 2023. As a result of the TRC sale in 2022, we released our entire valuation allowance against our federal deferred tax assets as of December 31, 2022. In 2023, this resulted in an increased provision for income tax expense as any changes in deferred tax expense or FIN48 positions were no longer sheltered by the valuation allowance.

Net Income from Discontinued Operations (After tax)

Net income from discontinued operations, after tax, as compared to the prior year period, was as follows:

Year Ended December 31, 

Change

(In thousands)

  

2023

  

2022

  

$

  

%

    

Net income from discontinued operations

$

$

964,956

$

(964,956)

NM

%  

NM: Not Meaningful

In 2022, the sale of TRC resulted in (i) income from our investment in TRC; (ii) interest expense related to our Non-Recourse 2035 Notes; and (iii) the net gain from the sale of our equity interests in TRC to be reclassified as net income from discontinued operations for 2022.

7062

Table of Contents

The 2020$965.0 million in net income from discontinued operations for 2022 was primarily attributed to the $1,141.1 million net realized gain from the sale of our equity interests in TRC. This net gain was partially offset by a $24.0 million loss on the extinguishment of our Non-Recourse 2035 Notes and 2019 benefitsa $179.0 million provision for income taxes of $8.5 million and $5.2 million, respectively, weretax expense in 2022. The income tax expense was primarily dueattributed to the reversalsnet gain from the sale of previously accrued contingentour equity interests in TRC and was partially offset by the release of our valuation allowance on our US federal deferred tax liabilities for uncertain tax positions due to a lapse of the statute of limitations.assets.

We did not recognize any net income from discontinued operations in 2023.

Liquidity and Capital Resources

To date, we have financed our operations primarily through public offering of equity and debt securities, private placements of equity and debt, revenue from collaboration and licensing arrangements and, to a lesser extent, revenue from product sales. As of December 31, 2020,2023, we had approximately $292.9$102.4 million in cash, cash equivalents, and investments in marketable securities (excluding restricted cash). Also, as and no long-term debt. In January 2024, we repurchased $0.4 million of December 31, 2020,our shares to complete our capital return program. Since the inception of the capital return program in September 2022, we had outstanding (i) $230.0successfully returned $325.3 million in principal Convertible Senior 2023 Notes and (ii) $397.6 million in principal Non-Recourse 2035 Notes which are stated net of a 5.0% retention by us in compliance with Regulation RR — Credit Risk Retention (17 C.F.R. Part 246).to our shareholders.

The Non-Recourse 2035 Notes were issued on February 28, 2020 and are secured by all of the Triple Royalty Sub II LLC’s (the “Issuer II”) rights, title and interest as a holder of the Issuer II Class C Units in TRC. The primary source of funds to make payments on the Non-Recourse 2035 Notes is the 63.75% economic interest of the Issuer (evidenced by the Issuer II Class C Units) in any future payments that may be made by GSK to TRC under theOur strategic alliance agreement and under the portion of the collaboration agreement assigned to TRC by Innoviva (net of TRC expenses paid and the amount of cash, if any, expected to be used by TRC pursuant to the TRC LLC Agreement over the next four fiscal quarters) relating to the GSK-Partnered Respiratory Programs, including the Trelegy program. As a result, the holders of the Non-Recourse 2035 Notes have no recourse against Theravance Biopharma even if the TRELEGY payments are insufficient to cover the principal and interest payments for the Non-Recourse 2035 Notes. Prior to and including the December 5, 2024 payment date, in the event that the distributions received by the Issuer II from TRC in a quarter is less than the interest accrued for that quarter, the principal amount of the Non-Recourse 2035 Notes will increase by the interest shortfall amount for that quarter. While the holders of the Non-Recourse 2035 Notes have no recourse against Theravance Biopharma, the terms of the Non-Recourse 2035 Notes also provide that Theravance Biopharma, at its option, may satisfy the quarterly interest payment obligations by making a capital contribution to the Issuer II.

A portion of the proceeds from the Non-Recourse 2035 Notes issuance were used to repay, in full, the remaining outstanding balance of the Non-Recourse 2033 Notes, as well as, a 5% premium on the early redemption of the Non-Recourse 2033 Notes. The Non-Recourse 2033 Notes were issued in November 2018 and were structured similarly to the Non-Recourse 2035 Notes.

On February 14, 2020, we sold 5,500,000 ordinary shares at a price to the public of $27.00 per share (the “Shares”). The gross proceeds from the offering were $148.5 million, before deducting underwriting discounts and commissions and estimated offering expenses. The Shares were issued pursuant to our currently effective shelf registration statement on Form S-3, which became effective automatically on December 3, 2019, and a prospectus supplement filed with the SEC in connection with the offering.

We expect to continue to incur net losses over at least the next several years due to significant expenditures relating to our continuing drug discovery efforts, preclinical and clinical development of our current product candidates and commercialization costs relating to YUPELRI. In particular, to the extent we advance our product candidates into and through later-stage clinical studies without a partner, we will incur substantial expenses. We expect the clinical development of our key development programs will require significant investment in order to continue to advance in clinical development. In addition, we expect to invest strategically in our research efforts to continue to grow our development pipeline. In the past, we have received a number of significant payments from collaboration agreements and other significant transactions. In the future, we may continue to receive potential substantial payments from future collaboration transactions if the drug candidates in our pipeline achieve positive clinical or regulatory outcomes or if our product candidates are approved and meet certain milestones. Our current business plan is subject to significant uncertainties and risks as a result of, among other factors, the COVID-19 pandemic, clinical program outcomes, expenses being higher than anticipated, the sales levels of YUPERLI, whether, when and on what terms we are able to enter into new collaboration arrangements, expenses being higher than anticipated, the sales levels of any approved products, unplanned expenses, cash receipts being lower than anticipated, and the need to satisfy contingent liabilities, including tax, litigation matters and indemnification obligations.

71

Table of Contents

Adequacy of cash resources to meet future needs

We expect our cash, and cash equivalents and marketable securities will be sufficient to fund our operations for at least the next 12twelve months from the issuance date of theseour consolidated financial statements based on current operating plans and financial forecasts.

We may seek to obtain additional financing in the form of public or private equity offerings, debt financing or additional collaborations and licensing arrangements. However, future financing may not be available in amounts or on terms acceptable to us.

Without adequate financial resources to fund our operations as presently conducted, we may be required to relinquish rights to our technologies, product candidates or territories, or grant licenses on terms that are not favorable to us, in order to raise additional funds through collaborations or licensing arrangements. We may also have to sequence preclinical and clinical studies as opposed to conducting them concomitantly in order to conserve resources, or delay, reduce or eliminate one or more of our research or development programs and reduce overall overhead expenses. In addition, we may have to make reductions in our workforce and may be prevented from continuing our discovery, development and commercialization efforts and exploiting other corporate opportunities.

Cash Flows

Cash flows, as compared to the prior years,year period, were as follows:

Year Ended December 31, 

Change

Year Ended December 31, 

(In thousands)

    

2020

    

2019

    

2018

    

2020

2019

    

2023

    

2022

    

Change

Net cash used in operating activities

$

(250,403)

$

(238,197)

$

(112,867)

$

(12,206)

$

(125,330)

$

(26,997)

$

(186,991)

$

159,994

Net cash provided by (used in) investing activities

 

10,721

 

(83,051)

176,708

 

93,772

(259,759)

Net cash provided by financing activities

 

263,085

 

1,291

225,200

 

261,794

(223,909)

Net cash (used in) provided by investing activities

 

(32,697)

 

1,154,009

 

(1,186,706)

Net cash used in financing activities

 

(198,933)

 

(758,806)

 

559,873

Net cash flows used in operating activities

Net cash used in operating activities was $250.4$27.0 million in 2020,2023, consisting primarily of a net loss of $278.0$55.2 million, a net increase in cash resulting from adjustments for total non-cash and other reconciling items of $67.1$36.5 million and a net decrease in cash resulting from changes in operating assets and liabilities of $39.5$8.3 million.

Net cash used in operating activities was $238.2$187.0 million in 2019, consisting primarily2022, of awhich $2.4 million was used in continuing operations and $184.6 million was used in discontinued operations, and consisted of net lossincome of $236.5$872.1 million, a net increase in cash resulting from adjustments for total non-cash expenses and other reconciling items of $43.7($1,098.8) million, primarily related to the net gain from the sale of our equity interests in TRC, and a net decreaseincrease in cash resulting from changes in operating assets and liabilities of $45.4$39.7 million.

Net cash flows (used in) provided by (used in) investing activities

Net cash used in investing activities was $32.7 million in 2023, consisting primarily of cash outflows from the net purchase and maturities of marketable securities of $31.7 million and cash outflows from the net purchase and sale of property and equipment of $1.0 million.

Net cash provided by investing activities was $10.7$1,154.0 million in 20202022, of which $58.9 million was from continuing operations and $1,095.1 million was primarily attributed the proceeds from the sales of marketable securities of $19.9 million which was partially offset by (i) $6.6 million related to the purchase of propertydiscontinued operations, and equipment and (ii) $2.7 million in cash outflows resulting from net purchases and maturities of marketable securities.

Net cash used in investing activities was $83.1 million in 2019 and was primarily attributed to cash outflows resulting from net purchases and maturities of marketable securities of $84.9 million.

Net cash flows provided by financing activities

Net cash provided by financing activities was $263.1 million in 2020, consistingconsisted primarily of the sale of 5,500,000 ordinary shares for total net proceeds of $139.9 million and the issuance of our Non-Recourse 2035 Notes for total net proceeds of $374.7 million. A portion of the of the Non-Recourse 2035 Notes proceeds were used to repay, in full, the remaining $235.3 million outstanding balance of our Non-Recourse 2033 Notes and an $11.5$54.9 million

7263

Table of Contents

redemption premiumin net cash inflow from the purchase and maturities of marketable securities and $1,095.1 million in net proceeds related to the payoffsale of the Non-Recourse 2033 Notes. In addition to the above, netour equity interests in TRC.

Net cash provided byflows used in financing activities

Net cash used in financing activities was partially offset by the repurchase of shares to satisfy tax withholding obligations in the amount of $9.7 million.

Net cash provided by financing activities was $1.3$198.9 million in 2019,2023, consisting primarily of $6.6$197.1 million of cash inflows from employee share plan purchase proceeds and share option exercises which was partially offset by $3.2 million of net cash outflows related to the repurchase of ordinary shares to satisfy tax withholding obligationsas part of our capital return program.

Net cash used in financing activities was $758.8 million in 2022, of which $738.6 million was used in continuing operations and $2.1$20.2 million was used in discontinued operations, and consisted primarily of neta $128.8 million cash outflowsoutflow related to the principal paydownrepurchase of ordinary shares, a $631.6 million cash outflow related to the extinguishment of our Non-Recourse 2033debt, and a $20.2 million cash outflow related to the debt redemption premium associated with our previous non-recourse 2035 Notes. These cash outflows were partially offset by a $24.5 million cash inflow related to the funding of an additional Phase 3 study for the ampreloxetine program.

Contractual Obligations and Commercial Commitments

In the table below, we set forth our significant contractual obligations, and future commitments, as well as obligations related to all contracts that we are likely to continue, regardless of the fact that theysome were cancelable as of December 31, 2020.2023. Some of the figuresamounts that we includeare included in this table are based on management’s estimateestimates and assumptions aboutregarding these obligations, including their duration. Because these estimates and assumptions are necessarily subjective, the amount of the obligations that we will actually pay in future periods may vary from those reflected in the table.

Years

(In thousands)

    

Total

    

Within 1

    

Over 1 to 3

    

Over 3 to 5

    

After 5

3.25% Convertible senior notes due 2023 - principal

$

230,000

$

$

230,000

$

$

3.25% Convertible senior notes due 2023 - interest

21,200

7,475

13,725

9.5% Non-recourse notes due 2035 - net principal *

397,643

 

*

 

*

 

*

 

*

Facility operating leases (1)

 

99,683

 

9,522

19,852

21,000

49,309

Purchase obligations (2)

 

311,181

 

152,881

84,611

64,876

8,813

Total

$

1,059,707

$

169,878

$

348,188

$

85,876

$

58,122

Years

(In thousands)

    

Total

    

Within 1

    

1 to 3

    

3 to 5

    

After 5

Facility operating leases

$

66,090

$

3,897

$

22,138

$

23,218

$

16,837

Purchase obligations (1)

 

36,507

 

24,347

12,160

Total

$

102,597

$

28,244

$

34,298

$

23,218

$

16,837

*

The Non-Recourse 2035 Notes are secured by the Issuer II’s right, title, and interest in TRC. The primary source of funds to make payments on the Non-Recourse 2035 Notes is the 63.75% economic interest of the Issuer II in any future payments made by GSK under the collaboration agreement, dated as of November 14, 2002, by and between Innoviva and GSK relating to the Trelegy program. In addition, prior to December 5, 2024, in the event that the distributions received by the Issuer II from TRC in a quarter is less than the interest accrued for the quarter, the principal amount of the Non-Recourse 2035 Notes will increase by the interest shortfall amount for that period. Since the timing of the principal and interest payments on the Non-Recourse 2035 Notes are ultimately based on royalties from TRELEGY product sales, which will vary from quarter to quarter and are unknown to us, only the total net principal payment amount at issuance is included in the above table. See “Item 8, Note 7. Debt" of the accompanying consolidated financial statements for further information.

(1)

As security for performance of certain obligations under the operating leases for our principal physical properties, we issued a letter of credit in the amount of $0.8 million, collateralized by an equal amount of restricted cash.

(2)

Substantially all of this amount was subject tocomprised of open purchase orders, as of December 31, 2020,2023, that were issued under existing contracts. This amount does not represent any minimum contract termination liabilities forrelated to our existing contracts.

Commitments and Contingencies

We indemnify our officers and directors for certain events or occurrences, subject to certain limits. WeWe maintain insurance policies that may limit our exposure, and therefore, we believe the fair value of these indemnification agreements is minimal. Accordingly, we have not recognized any liabilities relating to these agreements as of December 31, 2020.

73

2023. However, nTable of Contents

Performance-Contingent Awards

In 2016, we granted long-term retention and incentive restricted share awards (“RSAs”) and restricted share units (“RSUs”) to members of senior management and long-term retention and incentive cash bonus awards to certain employees. The vesting and payout of such awards is dependent on meeting certain operating goals and objectives duringo assurances can be given regarding the five-year period from 2016 to December 31, 2020. These goals are strategically important for us, and we believe the goals should increase shareholder value. The awards have dual triggers of vesting based upon the achievement of these goals and continued employment, and they are broken into three separate tranches. We recognize compensation expense relating to awards subject to performance conditions if it is considered probableamounts that the performance goals willmay ultimately be achieved. The probability of achievement is reassessed at each quarter-end reporting period. Previously recognized expense is reversed in the period in which it becomes probable that the requisite service period will not be rendered.

We determined that achievement of the requisite performance conditions for the first tranche was completed in June 2018, and the expense associated with this first tranche was fully recognized in 2018. We determined that achievement of the requisite performance conditions for the second tranche were completed in February 2019, and the expense associated with this second tranche was fully recognized as of March 31, 2020. For the year ended December 31, 2020, we recognized $0.4 million and $0.5 million of share-based compensation expense and cash bonus expense, respectively, related to the second tranche of these awards.

In February 2020, we determined that the requisite performance conditions for the third tranche were completed. For the year ended December 31, 2020, we recognized $2.6 million and $2.8 million of share-based compensation expense and cash bonus expense, respectively, related to the third tranche of these awards. As of December 31, 2020, the maximum remaining share-based compensation expense and cash bonus expense associated with the third tranche was $0.4 million each.

Separate from the performance-contingent awards described above, we periodically grant performance-contingent RSUs to individual employees. For the year ended December 31, 2020, we recognized $1.0 million of share-based compensation expense related to such awards. As of December 31, 2020, there were 70,000 shares of these performance-contingent RSUs outstanding that have a maximum remaining share-based compensation expense of $0.5 million with performance expiration dates through June 2022.

Off-Balance Sheet Arrangements

Our equity interest in TRC constitutes an off-balance sheet arrangement. Under the agreement governing TRC, the manager of TRC may request quarterly capital contributions from us to fund the operating costs of TRC; however, we are not obligated to make such contributions. Our equity interest in TRC entitles us to an 85% economic interest in any future payments, which includes royalties and milestone payments, made by GSK under the strategic alliance agreement and under the portion of the collaboration agreement assigned to TRC by Innoviva (the “GSK Agreements”). We have determined TRC to be a variable interest entity that is not consolidated in our financial statements. The potential importance of TRC to our future financial condition and results of operations is dependent upon the progression of drug candidates covered by the GSK Agreements through development to commercializationinsurers, and the ratewe may incur substantial liabilities because of commercialization for approved drugs covered by the GSK Agreements.We rely on publicly available information about those drug candidates as we do not have access to confidential information regarding their progression or status.these indemnification obligations.

Recent Accounting Pronouncements

The information required by this item is included in “Item 8, Note 1. Organization and Summary of Significant Accounting Policies,” in our consolidated financial statements included in this Annual Report on Form 10-K.

74

Table of Contents

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks in the ordinary courseAs a “smaller reporting company,” as defined by Item 10 of our business. These risks primarily include risk related to interest rate sensitivities.

Interest Rate Sensitivity

We have invested primarily in money market funds, federal agency notes, corporate debt securities, commercial papers and US treasury notes. To reduce the volatility relating to these exposures,Regulation S-K, we have put investment and risk management policies and procedures in place. The securities in our investment portfolio are not leveraged and are classified as available-for-sale duerequired to their short-term nature. We currently do not engage in hedging activities.

We performed a sensitivity analysis to determine the impact a change in interest rates would have on the value of our investment portfolio. As of December 31, 2020 and 2019, we have estimated that a hypothetical 100 basis point increase in interest rates would have resulted in a decrease in the fair market value of our investment portfolio of $0.5 million and $0.8 million, respectively. Such losses would only be realized if we sold the investments prior to maturity.

We are also subject to interest rate sensitivity on our outstanding Convertible Senior 2023 Notes that were issued in November 2016 and our Non-Recourse 2035 Notes that were issued in February 2020. Increases in interest rates would result in a decrease in the fair value of our outstanding debt and decreases in interest rates would result in an increase in the fair value of our outstanding debt. These decreases or increases in the fair value of our outstanding debt would be partially offset by corresponding decreases or increases in our fixed income investment portfolio. The Convertible Senior 2023 Notes pay interest semi-annually, and the $230.0 million of principal is scheduled to be repaid in 2023. The Non-Recourse 2035 Notes pay interest and principal quarterly, and the remaining net principal of $397.6million is due by 2035.provide this information.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K. An index of those financial statements can be found in Item 15, Exhibits and Financial Statement Schedules,” of this Annual Report on Form 10-K.

7564

Table of Contents

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

We conducted an evaluation required by paragraph (d) of Rule 13a-15 of the Exchange Act as of December 31, 2023, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Rule 13a-15(e) of the Exchange Act), which are controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. In connection with the preparation of this Annual Report, our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2023 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO criteria”). Based on its assessment, our management concluded that our internal control over financial reporting was effective as of December 31, 2023.

As a “smaller reporting company” and “non-accelerated filer” as defined under the rules and regulations of the SEC, we are not required to include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.

Limitations on the Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Theravance Biopharma have been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 of the Exchange Act, which occurred during the fourth quarter of the year ended December 31, 2023 which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal control over financial reporting despite the fact that many of our employees are working remotely.

ITEM 9B. OTHER INFORMATION

None.

65

Table of Contents

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

66

Table of Contents

PART III

ITEM 8.10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

For the information required by this Item, see “Questions and Answers About Procedural Matters”, “Election of Directors”, “Nominees”, “Audit Committee”, “Meetings of the Board of Directors”, “Code of Conduct”, “Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement to be filed with the SEC, which sections are incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

For the information required by this Item, see “Director Compensation”, “Executive Compensation” and “Compensation Committee Interlocks and Insider Participation” in the Proxy Statement to be filed with the SEC, which sections are incorporated herein by reference.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

For the information required by this Item, see “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the Proxy Statement to be filed with the SEC, which sections are incorporated herein by reference.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

For the information required by this Item, see “Director Independence” and “Policies and Procedures for Related Party Transactions” in the Proxy Statement to be filed with the SEC, which sections are incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

For the information required by this Item, see “Ratification of the Appointment of Independent Registered Public Accounting Firm” and “Pre-Approval of Audit and Non-Audit Services” in the Proxy Statement to be filed with the SEC, which sections are incorporated herein by reference.

67

Table of Contents

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS AND SUPPLEMENTARY DATASTATEMENT SCHEDULES

(a)

The following documents are filed as part of this Annual Report on Form 10-K:

1.Financial Statements:

The following financial statements and schedules of the Registrant have been appended to this Annual Report on Form 10-K:

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)

77

F-2

Consolidated Balance Sheets as of December 31, 20202023 and 20192022

79

F-4

Consolidated Statements of Operations for each of the threetwo years in the period ended December 31, 20202023

80

F-5

Consolidated Statements of Comprehensive LossIncome (Loss) for each of the threetwo years in the period ended December 31, 20202023

81

F-6

Consolidated Statements of Shareholders’ DeficitEquity for each of the threetwo years in the period ended December 31, 20202023

82

F-7

Consolidated Statements of Cash Flows for each of the threetwo years in the period ended December 31, 20202023

83

F-8

Notes to Consolidated Financial Statements

84

F-9

Supplementary Financial Data (unaudited)

117

F-42

2.Financial Statement Schedules:

All schedules have been omitted because of the absence of conditions under which they are required or because the required information, where material, is shown in the financial statements, financial notes or supplementary financial information.

(b)

Exhibits required by Item 601 of Regulation S-K

The information required by this Item is set forth on the exhibit index that precedes the signature page of this report.

68

Table of Contents

Exhibit Index

Incorporated by Reference

Exhibit Number

Description

Form

Filing
Date/Period
End Date

2.1

Separation and Distribution Agreement by and between Theravance Biopharma, Inc. and Innoviva, Inc., dated June 1, 2014

8-K

June 3, 2014

2.2**

Equity Purchase and Funding Agreement, dated as of July 13, 2022, by and between Theravance Biopharma, Inc. and Royalty Pharma Investments 2019 ICAV

8-K

July 14, 2022

3.1

Amended and Restated Memorandum and Articles of Association

8-K

May 3, 2023

4.1

Specimen Share Certificate

10-12B

April 30, 2014

4.2

Registration Rights Agreement, dated March 3, 2014

10-12B

April 8, 2014

4.3

Shelf Rights Plan Resolution

DEF 14A

March 21, 2018

4.4

Sales Agreement between Theravance Biopharma, Inc. and Cowen and Company, LLC dated December 3, 2019

S-3

December 3, 2019

4.5

Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

10-K

December 31, 2019

4.6

Registration Rights Agreement among Theravance Biopharma, Inc., GSK Finance (No.3) plc and GlaxoSmithKline plc dated June 22, 2020.

8-K

June 25, 2020

4.7

Waiver and Assignment of Registration Rights and Voting Agreement among GSK Finance (No.3) plc, Glaxo Group Limited and Theravance Biopharma, Inc. dated as of June 22, 2020.

8-K

June 25, 2020

10.1

Transition Services Agreement by and between Theravance Biopharma, Inc. and Innoviva, Inc., dated June 2, 2014

8-K

June 3, 2014

10.2

Tax Matters Agreement by and between Theravance Biopharma, Inc. and Innoviva, Inc., dated June 2, 2014

8-K

June 3, 2014

10.3

Employee Matters Agreement by and between Theravance Biopharma, Inc. and Innoviva, Inc., dated June 1, 2014

8-K

June 3, 2014

10.4+

Amended and Restated 2013 Equity Incentive Plan

8-K

May 3, 2023

10.5+

UK Addendum to the 2013 Equity Incentive Plan

10-Q

August 14, 2014

10.6+

2014 New Employee Equity Incentive Plan

S-8

November 14, 2014

10.7+

2013 Employee Share Purchase Plan, as amended

S-8

Aug. 18, 2014

10.8+

Forms of award agreements under the 2013 Equity Incentive Plan and 2014 New Employee Equity Incentive Plan

10-Q

May 10, 2016

10.9+

Forms of Equity Award Amendment

10-12B

May 7, 2014

10.10+

Form of Acknowledgment for Irish Non-Employee Directors

10-K

March 11, 2016

10.11+

Irish Addendum to the 2013 Equity Incentive Plan

10-K

March 11, 2016

10.12+

Irish Addendum to the 2014 New Employee Equity Incentive Plan

10-K

March 11, 2016

10.13+

UK and Irish Addendums to the 2013 Employee Share Purchase Plan

10-K

March 11, 2016

10.14+

Theravance Biopharma, Inc. Performance Incentive Plan

8-K

May 6, 2016

10.15+

Form of Notice of Option Grant and Option Agreement under the Company’s Performance Incentive Plan

10-Q

November 8, 2017

10.16+

Form of Notice of Performance Restricted Share Unit Award and Restricted Share Unit Agreement under the Company’s Performance Incentive Plan

10-Q

November 8, 2017

10.17+

Form of Notice of Restricted Share Unit Award

10-Q

May 10, 2023

10.18+

Change in Control Severance Plan

10-12B

April 8, 2014

10.19+

Cash Bonus Program

10-12B

November 22, 2013

10.20+

Form of Indemnity Agreement

10-12B

April 30, 2014

69

Table of Contents

Incorporated by Reference

Exhibit Number

Description

Form

Filing
Date/Period
End Date

10.21

Amended and Restated Lease Agreement, 951 Gateway Boulevard, between Innoviva, Inc. and HMS Gateway Office L.P., dated January 1, 2001

10-12B

August 1, 2013

10.22

First Amendment to Lease for 951 Gateway Boulevard effective as of June 1, 2010 between Innoviva, Inc. and ARE-901/951 Gateway Boulevard, LLC

10-12B

August 1, 2013

10.23

Lease Agreement, 901 Gateway Boulevard, between Innoviva, Inc. and HMS Gateway Office L.P., dated January 1, 2001

10-12B

August 1, 2013

10.24

First Amendment to Lease for 901 Gateway Boulevard effective as of June 1, 2010 between Innoviva, Inc. and ARE-901/951 Gateway Boulevard, LLC

10-12B

August 1, 2013

10.25

Consent to Assignment by and among ARE-901/951 Gateway Boulevard, LLC, Innoviva, Inc. and Theravance Biopharma, Inc. and Assignment and Assumption of Lease for 901 Gateway Blvd.

10-Q

August 14, 2014

10.26

Consent to Assignment by and among ARE-901/951 Gateway Boulevard, LLC, Innoviva, Inc. and Theravance Biopharma, Inc. and Assignment and Assumption of Lease for 951 Gateway Blvd.

10-Q

August 14, 2014

10.27

Theravance Respiratory Company, LLC Limited Liability Company Agreement, dated May 31, 2014

8-K

June 3, 2014

10.28

Collaboration Agreement between Innoviva, Inc. and Glaxo Group Limited, dated November 14, 2002 (1)

10.29

Strategic Alliance Agreement by and between Innoviva, Inc. and Glaxo Group Limited, dated March 30, 2004 (2)

10.30

Amendment to Strategic Alliance Agreement by and between Innoviva, Inc. and Glaxo Group Limited, dated October 3, 2011 (3)

10.31

Collaboration Agreement Amendment by and between Innoviva, Inc. and Glaxo Group Limited dated, March 3, 2014 (4)

10.32

Strategic Alliance Agreement Amendment by and between Innoviva, Inc. and Glaxo Group Limited dated, March 3, 2014 (4)

10.33

Master Agreement by and between Innoviva, Inc., Theravance Biopharma, Inc. and Glaxo Group Limited, dated March 3, 2014 (4)

10.34

Extension Agreement by and between the Company and Glaxo Group Limited, dated March 3, 2014

10-12B

April 8, 2014

10.35+

Amended Offer Letter with Rick E Winningham dated August 5, 2014

10-Q

November 12, 2014

10.36+

Offer Letter with Richard Graham, Ph.D. dated August 12, 2015

10-Q

September 30, 2020

10.37+

Offer Letter with Brett Grimaud dated May 12, 2014

10-Q

May 10, 2023

10.38+

Offer Letter with Aziz Sawaf dated June 16, 2014

10-Q

May 10, 2023

10.39+

Offer Letter with Rhonda Farnum dated July 9, 1018

10.40**

Development and Commercialization Agreement by and between Theravance Biopharma R&D, Inc. and Mylan Ireland Limited, dated January 30, 2015

10-K

December 31, 2020

10.41

Sale and Contribution Agreement, dated as of February 28, 2020, among Theravance Biopharma R&D, Inc., as the transferor, Triple Royalty Sub II LLC, as the transferee, and Theravance Biopharma, Inc.

8-K

March 04, 2020

10.42

Amended and Restated Limited Liability Company Agreement of Triple Royalty Sub II LLC, dated February 28, 2020, by Theravance Biopharma R&D, Inc., as the initial sole equity member

8-K

March 04, 2020

10.43

Annex A - Rules of Construction and Defined Terms of the Amended and Restated Limited Liability Company Agreement of Triple Royalty Sub II LLC, dated February 28, 2020

8-K

March 04, 2020

10.44

Amendments to Lease for 901 Gateway Boulevard between Theravance Biopharma US, Inc. and ARE-901/951 Gateway Boulevard, LLC

10-Q

August 2, 2018

10.45

Amendments to Lease for 951 Gateway Boulevard between Theravance Biopharma US, Inc. and ARE-901/951 Gateway Boulevard, LLC

10-Q

August 2, 2018

70

Table of Contents

Incorporated by Reference

Exhibit Number

Description

Form

Filing
Date/Period
End Date

10.46*

Amendment No. 1 to the Development and Commercialization Agreement by and between Theravance Biopharma Ireland Limited and Mylan Ireland Limited, dated June 12, 2019

10-Q

August 5, 2019

10.47

Cooperation Agreement among Theravance Biopharma, Inc., GSK Finance (No.3) plc and GlaxoSmithKline plc, dated June 22, 2020

8-K

June 25, 2020

10.49**

Master Consent, dated as of July 13, 2022, by and among Glaxo Group Limited, Theravance Biopharma, Inc. and Royalty Pharma Investments 2019 ICAV

8-K

July 14, 2022

10.50

Release Agreement, dated as of July 13, 2022, by and among Innoviva, Inc., Innoviva TRC Holdings LLC, Royalty Pharma Investments 2019 ICAV, Theravance Respiratory Company, LLC, Theravance Biopharma, Inc., Theravance Biopharma US Holdings, Inc. and Triple Royalty Sub II LLC

8-K

July 14, 2022

10.51+**

First Amendment to the Theravance Biopharma, Inc. Change in Control Severance Plan

10-Q

November, 9, 2022

10.52

Cooperation Agreement, dated as of December 21, 2023, by and among Theravance Biopharma, Inc., a Cayman Islands exempted company, Irenic Capital Management LP, a Delaware limited partnership, Irenic Capital Management GP LLC, a Delaware limited liability company, Irenic Capital Evergreen Master Fund LP, a Cayman Islands limited partnership, and Irenic Capital Evergreen Fund GP LLC, a Delaware limited liability company

8-K

December 21, 2023

21.1

Subsidiaries of Theravance Biopharma, Inc.

23.1

Consent of Independent Registered Public Accounting Firm

24.1

Power of Attorney (see signature page to this Annual Report on Form 10-K)

31.1

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934

31.2

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934

32

Certifications Pursuant to 18 U.S.C. Section 1350

97.1

Theravance Biopharma, Inc. Policy for the Recovery of Erroneously Awarded Compensation

101

The following materials from Registrant’s Annual Report on Form 10-K for the year ended December 31, 2023, formatted in Inline Extensible Business Reporting Language (iXBRL) includes: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.

104

Cover Page Interactive Data File (Formatted as Inline XBRL and contained in Exhibit 101).

+

Management contract or compensatory plan or arrangement required to be filed pursuant to Item 15(b) of Form 10-K.

*

Portions of this exhibit have been omitted and the omitted information has been filed separately with the Securities and Exchange Commission pursuant to an order granting confidential treatment.

**

Portions of this exhibit have been omitted pursuant to Items 601(a)(5), Item 601(b)(2)(ii) or 601(b)(10)(iv) of Regulation S-K.

(1)

Incorporated by reference to an exhibit filed with the quarterly report on Form 10-Q of Innoviva, Inc., filed with the Securities and Exchange Commission on August 7, 2014.

71

Table of Contents

(2)

Incorporated by reference to an exhibit filed with the annual report on Form 10-K of Innoviva, Inc., filed with the Commission on March 3, 2014.

(3)

Incorporated by reference to an exhibit filed with the annual report on Form 10-K of Innoviva, Inc., filed with the Commission on February 27, 2012.

(4)

Incorporated by reference to an exhibit filed with the current report on Form 8-K/A of Innoviva, Inc., filed with the Commission on March 6, 2014.

Item 16. Form 10-K Summary

Not Applicable.

72

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

THERAVANCE BIOPHARMA, INC.

Date: March 1, 2024

By:

/s/ Rick E Winningham

Rick E Winningham

Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Rick E Winningham as their true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to the annual report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Rick E Winningham

Rick E Winningham

Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

March 1, 2024

/s/ Aziz Sawaf

Aziz Sawaf

Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

March 1, 2024

/s/ Laurie S. Alsup, M.D.

Laurie S. Alsup, M.D.

Director

March 1, 2024

/s/ Eran Broshy

Eran Broshy

Director

March 1, 2024

/s/ Jeremy T. Grant

Jeremy T. Grant

Director

March 1, 2024

/s/ Susannah Gray

Susannah Gray

Director

March 1, 2024

/s/ Jim Kelly

Jim Kelly

Director

March 1, 2024

7673

Table of Contents

Signature

Title

Date

/s/ Burton G. Malkiel, Ph.D.

Burton G. Malkiel, Ph.D.

Director

March 1, 2024

/s/ Dean J. Mitchell

Dean J. Mitchell

Director

March 1, 2024

/s/ Donal O’Connor

Donal O’Connor

Director

March 1, 2024

/s/ Deepika R. Pakianathan, Ph.D.

Deepika R. Pakianathan, Ph.D.

Director

March 1, 2024

74

Table of Contents

F

Theravance Biopharma, Inc.

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)

F-2

Consolidated Balance Sheets as of December 31, 2023 and 2022

F-4

Consolidated Statements of Operations for each of the two years in the period ended December 31, 2023

F-5

Consolidated Statements of Comprehensive Income (Loss) for each of the two years in the period ended December 31, 2023

F-6

Consolidated Statements of Shareholders’ Equity for each of the two years in the period ended December 31, 2023

F-7

Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2023

F-8

Notes to Consolidated Financial Statements

F-9

Supplementary Financial Data (unaudited)

F-42

F-1

Table of Contents

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Theravance Biopharma, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Theravance Biopharma, Inc. (the “Company”)Company) as of December 31, 20202023 and 2019,2022, the related consolidated statements of operations, comprehensive loss, shareholders’ deficit,income (loss), shareholders' equity and cash flows for each of the threetwo years in the period ended December 31, 2020,2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20202023 and 2019,2022, and the results of its operations and its cash flows for each of the threetwo years in the period ended December 31, 2020,2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 26, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOBPublic Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidatedfinancial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accountsaccount or disclosuresdisclosure to which it relates.

Revenue from collaborative and licensing arrangements

Description of the Matter

The Company recognized revenue from collaboration and licensing agreements of $71.9 million for the year ended December 31, 2020. As described in Note 1, collaboration payment structures may include many elements such as up-front fees, milestones, royalties, expense reimbursement, and/or profit sharing. Furthermore, collaborations may include the delivery of various goods or services to the collaborative partner such as licenses to intellectual property or research and development services. In some circumstances, management is required to use judgment to determine whether analogies to the revenue accounting literature are appropriate for elements of collaboration

77F-2

Table of Contents

arrangements. Of

Management’s Estimates of the $71.9Amount and Timing of Ampreloxetine Royalties

Description of the Matter

As more fully described in Note 10 to the consolidated financial statements, during 2022 the Company received $25 million recognizedfrom Royalty Pharma Investments (RPI) in exchange for royalties on future sales of ampreloxetine (“ampreloxetine funding”).

The ampreloxetine funding is accounted for as collaboration revenue, $26.4 million was recognized for research and development services under the agreement with Janssen Biotech, Inc. (the “Janssen Agreement”)a contingent liability that is accreted based on a measuremanagement’s estimates of the Company’s efforts toward satisfying performance obligations relativeamount and timing of future royalty payments to RPI.  On a periodic basis, the Company reviews the significant inputs used to estimate the ampreloxetine liability to assess whether there are indicators that suggest changes to the total expected efforts or inputsamount and timing of future royalty payments to satisfyRPI are required. Any such performance obligations (e.g., costs incurred comparedchanges are accounted for prospectively.

Auditing management’s assessment of whether changes to total budget).

Auditing the Company’s accounting for revenues from collaboration arrangementsamount and timing of future royalty payments to RPI are required was especially challengingcomplex due to the complex and highly judgmentalsubjective nature of evaluating the termsfactors that can influence future sales of ampreloxetine, a number of which are not within the Company’s control. Management’s royalty forecast involves significant unobservable inputs including forecasted ampreloxetine revenues, the expected term of the related agreements, identifying performance obligations, evaluating whether analogies toroyalty stream, as well as the revenue accounting guidance are appropriate, determining and allocating the transaction price to the performance obligations, evaluating estimatesoverall probability of the expected efforts to complete performance obligations and measuring efforts toward satisfying those performance obligations, especially as such measuring of efforts relates to the Janssen Agreement.ampreloxetine’s clinical trial success.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s processes for assessing the accounting treatment of any new collaboration agreements or modifications to existing collaboration agreements, establishing an estimated budget of costs, assessing the effort to satisfy performance obligations, and recording actual costs incurred including controls over the completeness and accuracy of data used in the underlying analysis.

To test the accounting for revenue from collaboration arrangements we tested and evaluated, among other things, the performance obligations identified, the estimates and assumptions used to determine transaction price, and the allocation of transaction price to performance obligations. We assessed whether management’s analogies to the revenue literature were a consistent and rational application of accounting policy. To test the measurement of efforts toward satisfying performance obligations, our audit procedures included, among others, reviewing management’s analysis for accuracy and completeness by agreeing data to underlying agreements and inspecting communications with collaboration partners. Our audit procedures specific to the recognition of revenue under the Janssen Agreement focused on evaluating the measure of progress based on costs incurred including performing corroborative inquiries with those outside of the finance department, performing sensitivity analyses of key inputs, evaluating the historical accuracy of management’s budgeted cost estimates, and inspecting evidence of actual costs incurred.

We gained an understanding of and tested management’s identification of the factors that significantly influence the amount and timing of royalties payable to RPI. We assessed management’s process for appropriateness by (i) performing inquiries of internal personnel responsible for commercial forecasting and clinical operations overseeing the ampreloxetine phase 3 clinical trial, (ii) corroborating assumptions against external market research and industry data, and (iii) evaluating whether assumptions were consistent with evidence obtained in other areas of the audit. We also reviewed press releases and other relevant third-party data for evidence indicating whether a material change in future royalty forecasts was necessary. Lastly, we performed sensitivity analyses to quantify the impact of any such changes.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2013.

Redwood City,San Mateo, California

February 26, 2021March 1, 2024

78F-3

Table of Contents

THERAVANCE BIOPHARMA, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

December 31, 

December 31, 

December 31, 

December 31, 

    

2020

    

2019

    

2023

    

2022

Assets

Current assets:

Cash and cash equivalents

$

81,467

$

58,064

$

39,545

$

298,172

Short-term marketable securities

 

211,474

 

222,767

 

62,881

 

29,312

Receivables from collaborative arrangements

 

15,868

 

11,996

 

17,474

 

16,785

Receivables from licensing arrangements

10,000

Amounts due from TRC, LLC

53,799

28,574

Prepaid clinical and development services

20,374

2,736

2,038

1,513

Other prepaid and current assets

10,359

4,351

11,603

7,682

Total current assets

 

393,341

 

338,488

 

133,541

 

353,464

Property and equipment, net

 

16,422

 

12,644

 

9,068

 

11,875

Long-term marketable securities

 

 

4,985

Operating lease assets

43,260

46,604

36,287

40,126

Equity in net assets of TRC, LLC

12,750

Tax receivable

3,682

Future contingent milestone and royalty assets

194,200

194,200

Restricted cash

 

833

 

833

 

836

 

836

Other assets

2,451

1,590

8,067

6,899

Total assets

$

469,057

$

408,826

$

381,999

$

607,400

Liabilities and Shareholders' Deficit

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable

$

6,775

$

4,758

$

1,524

$

1,554

Accrued personnel-related expenses

 

35,238

 

28,180

 

6,443

 

10,314

Accrued clinical and development expenses

 

28,799

 

17,587

 

2,246

 

4,932

Accrued general and administrative expenses

6,048

4,394

2,900

4,020

Accrued interest payable

3,974

5,659

Current portion of non-recourse notes due 2035, net

19,334

Current portion of non-recourse notes due 2033, net

9,851

Operating lease liabilities

9,867

7,762

3,923

6,753

Deferred revenue

 

11,523

 

31,575

Tenant improvement payable to sublessee

6,490

Other accrued liabilities

 

2,013

 

1,937

 

1,241

 

1,142

Total current liabilities

 

123,571

 

111,703

 

24,767

 

28,715

Convertible senior notes due 2023, net

226,963

225,890

Non-recourse notes due 2035, net

372,873

Non-recourse notes due 2033, net

219,300

Long-term operating lease liabilities

47,220

47,725

45,236

45,407

Future royalty payment contingency

27,788

25,438

Long-term deferred revenue

348

6,761

192

Unrecognized tax benefits

65,294

64,191

Other long-term liabilities

1,833

21,287

5,919

1,657

Commitments and contingencies

Shareholders’ Deficit

Preferred shares, $0.00001 par value: 230 shares authorized, 0 shares issued or outstanding

 

Ordinary shares, $0.00001 par value: 200,000 shares authorized; 64,328 and 57,015 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively

 

1

1

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; 48,091 and 65,227 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively

 

1

Additional paid-in capital

 

1,222,818

1,024,614

 

1,122,164

1,295,725

Accumulated other comprehensive income

 

47

 

145

Accumulated other comprehensive loss

 

(65)

 

(15)

Accumulated deficit

 

(1,526,617)

 

(1,248,600)

 

(909,104)

 

(853,911)

Total shareholders’ deficit

 

(303,751)

 

(223,840)

Total liabilities and shareholders’ deficit

$

469,057

$

408,826

Total shareholders’ equity

 

212,995

 

441,800

Total liabilities and shareholders’ equity

$

381,999

$

607,400

See accompanying notes to consolidated financial statements

79F-4

Table of Contents

THERAVANCE BIOPHARMA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

Year Ended December 31, 

    

2020

    

2019

2018

Revenue:

Product sales

$

$

$

15,304

Collaboration revenue

26,464

31,250

41,791

Licensing revenue

1,500

28,500

Viatris collaboration agreement

 

43,893

 

13,664

 

3,275

Total revenue

 

71,857

 

73,414

 

60,370

Costs and expenses:

Cost of goods sold

715

Research and development (1)

260,953

219,248

201,348

Selling, general and administrative (1)

108,661

106,081

97,058

Total costs and expenses

 

369,614

 

325,329

 

299,121

Loss from operations

 

(297,757)

 

(251,915)

 

(238,751)

Income from investment in TRC, LLC

68,438

33,705

11,182

Interest expense

(44,585)

(31,862)

(10,482)

Loss on extinguishment of debt

(15,464)

Interest and other income, net

2,831

8,395

11,966

Loss before income taxes

 

(286,537)

 

(241,677)

 

(226,085)

Provision for income tax benefit

8,520

5,222

10,561

Net loss

$

(278,017)

$

(236,455)

$

(215,524)

Net loss per share:

Basic and diluted net loss per share

$

(4.46)

$

(4.25)

$

(3.99)

Shares used to compute basic and diluted net loss per share

 

62,345

 

55,610

 

53,969

Year Ended December 31, 

    

2023

    

2022

Revenue:

Viatris collaboration agreement

$

57,201

$

48,624

Viatris royalties (Non-US)

7

30

Collaboration revenue

216

192

Licensing revenue

2,500

Total revenue

 

57,424

 

51,346

Expenses:

Research and development (1)

40,621

63,392

Selling, general and administrative (1)

70,095

67,073

Restructuring and related expenses (1)

2,743

12,838

Total expenses

 

113,459

 

143,303

Loss from operations

 

(56,035)

 

(91,957)

Interest expense (2)

(2,350)

(6,369)

Loss on extinguishment of debt

(3,034)

Interest income and other income (expense), net

9,116

8,545

Loss from continuing operations before income taxes

 

(49,269)

 

(92,815)

Provision for income tax expense

(5,924)

(9)

Net loss from continuing operations

(55,193)

(92,824)

Income from discontinued operations before income taxes

1,143,930

Provision for income tax expense

(178,974)

Net income from discontinued operations

964,956

Net income (loss)

$

(55,193)

$

872,132

Net income (loss) per share:

Continuing operations - basic and diluted

$

(1.00)

$

(1.26)

Discontinued operations - basic and diluted

$

$

13.11

Net income (loss) - basic and diluted

$

(1.00)

$

11.85

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

 

55,303

 

73,591

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

Year Ended December 31,

(In thousands)

    

2020

    

2019

2018

Research and development

$

31,294

$

28,953

$

25,563

Selling, general and administrative

 

31,682

 

31,497

 

25,750

Total share-based compensation expense

$

62,976

$

60,450

$

51,313

See accompanying notes to consolidated financial statements.

80

Table of Contents

THERAVANCE BIOPHARMA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

Year Ended December 31, 

    

2020

    

2019

    

2018

Net loss

$

(278,017)

$

(236,455)

$

(215,524)

Other comprehensive income (loss):

Net unrealized gain (loss) on available-for-sale investments, net of tax

 

(98)

 

311

 

567

Comprehensive loss

$

(278,115)

$

(236,144)

$

(214,957)

Year Ended December 31, 

(In thousands)

    

2023

    

2022

Research and development

$

8,048

$

12,888

Selling, general and administrative

 

16,966

 

19,848

Restructuring and related expenses

357

6,998

Total share-based compensation expense

$

25,371

$

39,734

(2)Interest expense for the year ended December 31, 2023 was comprised of non-cash interest expense only.

See accompanying notes to consolidated financial statements.

81F-5

Table of Contents

THERAVANCE BIOPHARMA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

Year Ended December 31, 

    

2023

    

2022

Net income (loss)

$

(55,193)

$

872,132

Other comprehensive loss:

Net unrealized loss on available-for-sale investments, net of tax

 

(50)

 

(15)

Comprehensive income (loss)

$

(55,243)

$

872,117

See accompanying notes to consolidated financial statements.

F-6

Table of Contents

THERAVANCE BIOPHARMA, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICITEQUITY

(In thousands)

Accumulated

Accumulated

Additional

Other

Total

Additional

Other

Total

Ordinary Shares

Paid-In

Comprehensive

Accumulated

Shareholders'

Ordinary Shares

Paid-In

Comprehensive

Accumulated

Shareholders'

   

Shares

   

Amount

   

Capital

   

Income (Loss)

   

Deficit

   

Deficit

Shares

   

Amount

   

Capital

   

Loss

   

Deficit

   

Equity

Balances at December 31, 2017

54,381

$

1

$

913,650

$

(733)

$

(797,740)

$

115,178

Balances at December 31, 2021

74,435

$

1

$

1,387,469

$

$

(1,726,043)

$

(338,573)

Repurchase of ordinary shares, net of transaction costs

(12,739)

(128,830)

(128,830)

Proceeds from ESPP purchases

204

4,173

4,173

118

802

802

Employee share-based compensation expense

51,313

51,313

39,734

39,734

Issuance of restricted shares

1,168

3,764

Option exercises

75

1,393

1,393

Cumulative effect upon the adoption of ASC 606

1,119

1,119

Repurchase of shares to satisfy tax withholding

(147)

(9,808)

(9,808)

(351)

(3,450)

(3,450)

Net unrealized gain on marketable securities

567

567

Net loss

(215,524)

(215,524)

Balances at December 31, 2018

55,681

$

1

$

960,721

$

(166)

$

(1,012,145)

$

(51,589)

Net unrealized loss on marketable securities

(15)

(15)

Net income

872,132

872,132

Balances at December 31, 2022

65,227

$

1

$

1,295,725

$

(15)

$

(853,911)

$

441,800

Accumulated

Accumulated

Additional

Other

Total

Additional

Other

Total

Ordinary Shares

Paid-In

Comprehensive

Accumulated

Shareholders'

Ordinary Shares

Paid-In

Comprehensive

Accumulated

Shareholders'

   

Shares

   

Amount

   

Capital

   

Income (Loss)

   

Deficit

   

Deficit

Shares

   

Amount

   

Capital

   

Loss

   

Deficit

   

Equity

Balances at December 31, 2018

55,681

$

1

$

960,721

$

(166)

$

(1,012,145)

$

(51,589)

Balances at December 31, 2022

65,227

$

1

$

1,295,725

$

(15)

$

(853,911)

$

441,800

Repurchase of ordinary shares, net of transaction costs

(18,634)

(1)

(197,051)

(197,052)

Proceeds from ESPP purchases

203

3,474

3,474

86

619

619

Employee share-based compensation expense

60,450

60,450

25,371

25,371

Issuance of restricted shares

1,105

1,651

Option exercises

164

3,142

3,142

Repurchase of shares to satisfy tax withholding

(138)

(3,173)

(3,173)

Net unrealized gain on marketable securities

311

311

Net loss

(236,455)

(236,455)

Balances at December 31, 2019

57,015

$

1

$

1,024,614

$

145

$

(1,248,600)

$

(223,840)

Accumulated

Additional

Other

Total

Ordinary Shares

Paid-In

Comprehensive

Accumulated

Shareholders'

Shares

   

Amount

   

Capital

   

Income (Loss)

   

Deficit

   

Deficit

Balances at December 31, 2019

57,015

$

1

$

1,024,614

$

145

$

(1,248,600)

$

(223,840)

Net proceeds from sale of ordinary shares

5,500

139,915

139,915

Proceeds from ESPP purchases

245

3,701

3,701

Employee share-based compensation expense

62,976

62,976

Issuance of restricted shares

1,907

Option exercises

68

1,361

1,361

Repurchase of shares to satisfy tax withholding

(407)

(9,749)

(9,749)

(239)

(2,500)

(2,500)

Net unrealized loss on marketable securities

(98)

(98)

(50)

(50)

Net loss

(278,017)

(278,017)

(55,193)

(55,193)

Balances at December 31, 2020

64,328

$

1

$

1,222,818

$

47

$

(1,526,617)

$

(303,751)

Balances at December 31, 2023

48,091

$

$

1,122,164

$

(65)

$

(909,104)

$

212,995

See accompanying notes to consolidated financial statements.

82F-7

Table of Contents

THERAVANCE BIOPHARMA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended December 31, 

    

2020

    

2019

    

2018

Operating activities

Net loss

$

(278,017)

$

(236,455)

$

(215,524)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

 

6,798

 

6,441

4,481

Amortization and accretion income, net

(1,079)

(3,451)

(1,315)

Share-based compensation

 

62,976

 

60,450

51,313

Net gain from the sale of VIBATIV business

(6,056)

Amortization of right-of-use assets

3,344

3,224

Undistributed earnings from TRC, LLC

(37,975)

(23,152)

(5,152)

Interest shortfall on 2035 notes, net

17,643

Loss on extinguishment of debt

15,464

Other

(95)

146

(43)

Changes in operating assets and liabilities:

Accounts receivable

 

 

620

1,633

Receivables from collaborative and licensing arrangements

 

6,128

 

(11,943)

(2,944)

Prepaid clinical and development services

(17,638)

(561)

(2,175)

Other prepaid and current assets

(2,327)

(73)

(225)

Inventory

(1,629)

Tax receivable

(258)

(3,700)

8,191

Other assets

(852)

(358)

45

Accounts payable

 

3,658

 

(4,274)

3,575

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

 

5,983

 

10,626

(12,357)

Accrued interest payable

(1,685)

2,573

1,841

Deferred rent

4,308

Deferred revenue

(26,465)

(31,245)

69,224

Operating lease liabilities

1,600

(2,317)

Other long-term liabilities

 

(7,606)

 

(4,748)

(10,058)

Net cash used in operating activities

 

(250,403)

 

(238,197)

(112,867)

Investing activities

Purchases of property and equipment

 

(6,616)

 

(3,176)

(7,240)

Purchases of marketable securities

 

(401,987)

 

(423,898)

(183,261)

Maturities of marketable securities

 

399,318

 

339,018

347,192

Proceeds from the sale of marketable securities

19,942

Proceeds from the sale of property and equipment

64

5

17

Proceeds from the sale of VIBATIV business, net

 

 

5,000

20,000

Net cash provided by (used in) investing activities

 

10,721

 

(83,051)

 

176,708

Financing activities

Proceeds from the sale of ordinary shares, net

139,915

Proceeds from issuance of 2035 notes, net

380,000

Payment of issuance costs on 2035 notes

(5,326)

Proceeds from issuance of 2033 notes, net

229,441

Payment of redemption premium on 2033 notes

(11,470)

Principal payment on 2033 notes

(235,347)

(2,152)

Proceeds from ESPP purchases

3,701

3,474

4,173

Proceeds from option exercises

1,361

3,142

1,393

Repurchase of shares to satisfy tax withholding

(9,749)

(3,173)

(9,807)

Net cash provided by financing activities

 

263,085

 

1,291

 

225,200

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

 

23,403

 

(319,957)

289,041

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

 

58,897

 

378,854

89,813

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

$

82,300

$

58,897

$

378,854

Supplemental disclosure of cash flow information

Cash paid for interest

$

24,024

$

26,178

$

7,475

Cash paid (received) for income taxes, net

$

14

$

22

$

(7,316)

Right-of-use assets obtained in exchange for lease obligations (1)

$

$

49,847

$

(1)Amounts for the year ended December 31, 2019 include the transition adjustment for the adoption of ASC 842, Leases.

Year Ended December 31, 

    

2023

    

2022

Operating activities

Net (loss) income

$

(55,193)

$

872,132

Less: Net income from discontinued operations

(964,956)

Net loss from continuing operations

(55,193)

(92,824)

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

Depreciation and amortization

 

2,001

 

3,716

Amortization and accretion income, net

(1,897)

(681)

Future royalty payment contingency interest accretion

2,350

974

Share-based compensation

 

25,371

 

39,734

Gain on sale of Velusetrag

(2,709)

(Gain) loss on disposal of property and equipment

1,352

(8)

Amortization of right-of-use assets

4,152

3,989

Deferred income taxes

3,207

Loss on extinguishment of debt

3,034

Changes in operating assets and liabilities:

Receivables from collaborative and licensing arrangements

 

(689)

 

(2,720)

Prepaid clinical and development services

(526)

8,733

Other prepaid and current assets

(3,921)

(704)

Right-of-use lease assets

(314)

(4,424)

Other assets

(1,233)

(3,802)

Accounts payable

 

6

 

(1,612)

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

 

(7,095)

 

(14,086)

Accrued interest payable

(1,246)

Deferred revenue

(216)

(192)

Operating lease liabilities

(3,001)

(1,024)

Unrecognized tax benefits

1,102

63,952

Other long-term liabilities

 

7,547

 

(525)

Net cash used in operating activities - continuing operations

(26,997)

(2,425)

Net cash used in operating activities - discontinued operations

(184,566)

Net cash used in operating activities

 

(26,997)

 

(186,991)

Investing activities

Purchases of property and equipment

 

(2,488)

 

(572)

Purchases of marketable securities

 

(134,534)

 

(103,145)

Maturities of marketable securities

 

31,435

 

158,000

Sale of short-term investments and marketable securities

71,377

17

Proceeds from the sale of Velusetrag

2,709

Proceeds from the sale of property and equipment

1,513

1,866

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

(32,697)

58,875

Net cash provided by investing activities - discontinued operations

1,095,134

Net cash (used in) provided by investing activities

 

(32,697)

 

1,154,009

Financing activities

Ordinary share repurchases

(197,051)

(128,830)

Proceeds from ampreloxetine funding, net

24,464

Principal payment on 2035 notes

(399,998)

Principal payment on 2023 notes

(231,605)

Proceeds from ESPP purchases

618

802

Repurchase of shares to satisfy tax withholding

(2,500)

(3,450)

Net cash used in financing activities - continuing operations

(198,933)

(738,617)

Net cash used in financing activities - discontinued operations

(20,189)

Net cash used in financing activities

 

(198,933)

 

(758,806)

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

 

(258,627)

 

208,212

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

 

299,008

 

90,796

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

$

40,381

$

299,008

Supplemental disclosure of cash flow information

Cash paid for interest

$

$

22,244

Cash paid for income taxes, net

$

24

$

117,966

Supplemental disclosure of non-cash investing and financing activities

Recognition of tenant improvement allowance assigned to sublease

$

6,490

$

See accompanying notes to consolidated financial statements.

83F-8

Table of Contents

THERAVANCE BIOPHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies

Theravance Biopharma, Inc. (“Theravance Biopharma” or the “Company”) is a diversified biopharmaceutical company primarily focused on the discovery, development, and commercialization of organ-selective medicines. The Company’s core purpose is to create transformational medicines to improve the lives of patients suffering from serious illnesses. The Company’s research is focusedthat make a difference® in the areas of inflammation and immunology.people's lives.

Basis of Presentation

The Company’s consolidated financial statements as of December 31, 20202023 and 2019,2022, and for the year ended December 31, 2020, 2019,2023 and 20182022 have been prepared in conformity with United States (“US”) Generally Accepted Accounting Principles ("GAAP"), and the US Securities and Exchange (“SEC”) regulations for annual reporting.

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 9. Sale of Equity Interests in Theravance Respiratory Company, LLC and Discontinued Operations”). In accordance with GAAP, the transaction was accounted for as a sale of a financial asset, and the results of the sale were included as discontinued operations on these consolidated financial statements.

Certain prior period amounts in the “Notes to Consolidated Financial Statements” have been reclassified. The reclassifications had no impact on previously reported aggregate financial position, results of operations, cash flows, or disclosures.

Principles of Consolidation

The consolidated financial statements include the accounts of Theravance Biopharma and its wholly-owned subsidiaries, all of which are denominated in US dollars. All intercompany balances and transactions have been eliminated in consolidation.

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 consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. ActualDue to the inherent uncertainty in making estimates, actual results in future periods could differ materially from those estimates.

Segment Reporting

The Company operates in a single segment, whichhas determined that its chief executive officer is the discovery (research), development and commercialization of human therapeutics.chief operating decision maker (“CODM”). A single management team reports to the CODM who comprehensively manages the entire business. The Company’s business offerings have similar economics and other characteristics, including the nature of products, and manufacturing processes, types of customers, distribution methods, and regulatory environment. TheAs a result, the Company has concluded that it operates in a single segment which is comprehensively managed as 1 business segment by the Company’s Chief Executive Officerdevelopment and the management team. Product sales, if any, are attributed to regions based on ship-to location and revenue from collaborative arrangements, including royalty revenue, are attributed to regions based on the locationcommercialization of the collaboration partner. Revenue from profit sharing-type arrangements is attributed to the geographic market in which the products are sold. Capitalized property and equipment is predominantly located in the US.human therapeutics.

Cash and Cash Equivalents

The Company considers all highly-liquid investments purchased with a maturity of three months or less on the date of purchase to be cash equivalents. Cash equivalents are carried at cost which approximates fair value.value due to their short-term nature.

F-9

Table of Contents

Restricted Cash

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 Company may also maintain restricted cash for debt servicing of its non-recourse notes. See “Note 5. Cash, Cash Equivalents, and Restricted Cash” for more information.

Investments in Marketable Securities

The Company invests in marketable securities, primarily commercial paper, corporate notes, US government bonds and US government agency bonds. Marketable debt securities with original maturities of greater than three months and remaining maturities of less than 12 months are considered short-term investments. Marketable debt securities with maturities greater than 12 months are considered long-term investments. The Company determines the appropriate classification of the marketable securities at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date. The Company classifies its marketable securities as available-for-sale securities and reports them at fair value in cash and cash equivalents or marketable securities on the consolidated balance sheets with related unrealizedsheets.

84

Table of Contents

Unrealized gains and losses are included as a component of accumulated other comprehensive income (loss) in shareholders’ deficit.equity of the consolidated balance sheets and as a component of total comprehensive income (loss) in the consolidated statements of operations and comprehensive income (loss). The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included inas a component of interest and other income (loss) on the consolidated statements of operations. operations and comprehensive income (loss).

The cost of securities sold is based on the specific identification method. Realized gains and losses and interest and dividends on securities are included in interest and other income (loss).

The Company accounts for credit losses on available-for-sale debt securities in accordance with Accounting Standards Codification (“ASC”), Topic 326, Financial Instruments – Credit Losses (“ASC 326”). Under ASC 326, the Company regularly reviews its investments for declines in estimated fair value below amortized cost. The factors considered in determining whether a credit loss exists include the creditworthiness of the security issuers, the number of securities in unrealized loss positions, the severity and duration of the unrealized losses, whether the Company has the intent to sell the securities and whether it is more likely than not that the Company will be required to sell the securities before the recovery of the security’s amortized cost basis.

In circumstances where the Company intends to sell, or is more likely than not required to sell, the security before it recovers its amortized cost basis, the difference between fair value and amortized cost is recognized as a loss in the consolidated statements of operations, with a corresponding write-down of the security's amortized cost. In circumstances where neither condition exists,

The Company accounts for credit losses on available-for-sale debt securities in accordance with Accounting Standards Codification (“ASC”), Topic 326, Financial Instruments – Credit Losses (“ASC 326”). Under ASC 326, the Company then evaluatesregularly reviews its debt securities in an unrealized loss position to determine if the unrealized loss was credit-related or noncredit-related. The factors considered in determining whether a decline is duecredit losses exist include, but are not limited to, credit-related factors. To determine the portion of a decline in fair value that is credit-related, the Company compares the present value of the expected cash flowscreditworthiness of the security discounted atissuers, the security's effective interest rateseverity and duration of the unrealized losses, any adverse conditions specifically related to the security, an industry, or geographic area, and whether the Company has the intent to sell the securities and whether it is more likely than not that the Company will be required to sell the securities before the recovery of the security’s amortized cost basis ofbasis. The Company did not recognize any credit losses on available-for-sale debt securities for either the security. A credit-related impairment is limited to the difference between fair value and amortized cost and recognized as an allowance for credit loss on the consolidated balance sheets with a corresponding adjustment to net income (loss). Any remaining decline in fair value that is non-credit related is recognized in other comprehensive loss, net of tax. Improvements in expected cash flows due to improvements in credit are recognized through reversal of the credit loss and corresponding reduction in the allowance for credit loss.year ended December 31, 2023 or 2022.

Fair Value of Financial Instruments

The Company defines fair value as the exchange price that would be received forto sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants onat the measurementreporting date.

The Company’s valuation techniques are ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”) establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on observablemarket data (observable inputs) and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect the Company’s market assumptions.own assumptions (unobservable inputs). The Company classifies these inputs into the following hierarchy:hierarchy consists of three levels:

Level 1 QuotedUnadjusted quoted prices for identical instruments in active markets.markets;

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.observable (e.g., interest rates, yield curves, etc.); and

Level 3 — Unobservable inputs and little, if any, market activity forwhich require the assets.Company to develop its own assumptions.

F-10

Table of Contents

FinancialThe Company’s financial instruments include cash equivalents, marketable securities, accounts receivable,receivables from collaborative arrangements, accounts payable, and accrued liabilities and debt. The Company’s cashliabilities. Cash equivalents and marketable securities are carried at estimated fair value and remeasured on a recurring basis. The carrying value of accounts receivable, receivables from collaborative arrangements, accounts payable, and accrued liabilities approximate their estimated fair value due to the relatively short-term nature of these instruments. The fair value of the Company's debt is classified as a level 2 financial instrument and is disclosed in “Note 7. Debt”.

Accounts ReceivableReceivables from Collaborative Arrangements

For the periods presented, the Company’s accounts receivable primarilyreceivables from collaborative arrangements relate to amounts due arising from its collaboration and licensing(and licensing) agreements. When appropriate, the Company provides for an allowance for specifically

85

Table of Contents

identified doubtful accounts.credit losses. The Company performs periodic credit evaluations of its customers and generally does not require collateral. For the periods presented, the Company did not have any material write-offs of accounts receivablereceivables from collaborative arrangements.

Concentration of Credit Risks

The Company invests in a variety of financial instruments and, based on its policy, limits the amount of credit exposure with any one issuer, industry, or geographic area for investments other than instruments backed by the US federal government.

The Company’s future contingent milestone and royalty assets and receivables primarily relate to amounts due under its collaboration and licensingother agreements. Accordingly, the Company may be exposed to credit risk generally associated with pharmaceutical companies or specific to its collaboration agreements. The Company performs periodic evaluations of its customers and generally does not require collateral. For the year ended December 31, 2020, 2019,2023 and 2018,2022, the Company did not experience any material losses related to its receivables.

Property and Equipment

Property, equipment, and leasehold improvements are stated at cost, net of accumulated depreciation, and amortizedare depreciated using the straight-line method over the estimated useful lives as follows:presented in the table below. Upon retirement or sale, the cost of the disposed assets and the related accumulated depreciation are removed from the consolidated balance sheet and any resulting gain or loss is reflected in the consolidated statement of operations in the period realized.

Leasehold improvements

    

Shorter of remaining lease terms or useful life

Equipment, furniture and fixtures

5 - 7 years

Software and computer equipment

3 - 5 years

Leases

The Company determines whether a contract is or contains a lease at inception of the arrangement. In evaluating whether a contract is indicative of a lease, the Company considers all relevant facts and circumstances to assess whether the arrangement has extended to the Company the right to both (i) obtain substantially all the economic benefits from use of an identified asset and (ii) direct the use of the identified asset. To the extent that the Company determines a contract represents a lease, the arrangement is classified as either an operating lease or a finance lease, with the classification affecting the presentation and pattern of expense recognition in the consolidated statements of operations. The Company did not have any finance leases at either December 31, 20202023 or 2019.2022.

Operating lease assets represent the Company’s right to use an underlying asset forover the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the leasing arrangement. The Company records operating leases on the consolidated balance sheets through an operating lease asset and a corresponding short-term and long-term operating lease liability, as applicable. Lease liabilities are measured based on the present value of lease payments over the lease term discounted at the implicit interest rate at the commencement date of the leasing arrangement, when readily available or using the Company’s incremental borrowing rate, if the implicit rate is not determinable. The incremental borrowing rate is considered the estimated rate of interest

F-11

Table of Contents

that the Company would have to pay to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. The Company measures its operating lease assets based on the corresponding operating lease liabilities adjusted for (i) prepayments made to the lessor at or before the commencement date, (ii) any initial direct costs incurred, and (iii) tenant incentives granted under the lease contract.

In calculating operating lease assets and liabilities, the Company may elect to combine lease and non-lease components based on the asset type. When combining lease and non-lease components, the Company would account for the lease and non-lease components as a single lease component. The Company’s lease terms may include options to extend the lease only when it is reasonably certain that such options will be exercised, and the Company recognizes lease expense on a straight-line basis over the lease term.

Operating lease assets and operating lease liabilities are remeasured upon reassessment events and modifications to leases using the present value of remaining lease payments and incremental borrowing rate at the time of remeasurement, as applicable. Operating lease assets are evaluated for possible impairment in accordance with the Company’s long-lived assets policy.

The Company doesrecognizes variable lease payments as operating expenses in the period in which the obligation for those payments is incurred. Variable lease payments primarily include common area maintenance, utilities, real estate taxes, insurance, and other operating costs that are passed on from the lessor in proportion to the space leased by the Company.

The Company has elected to not recognize operating lease assets or liabilities for leases that have a lease term of 12 months or less at commencement date, and the lease expense related to these short-term lease arrangements is recognized on a straight-line basis over the term of the lease.

Future Contingent Milestone and Royalty Assets

The fair value of consideration received in connection with TRC Transaction in July 2022 (see “Note 9. Sale of Equity Interests in Theravance Respiratory Company, LLC and Discontinued Operations”) included an estimated $194.2 million in future contingent milestones and royalties that were recorded as a contingent consideration asset (“Contingent Consideration”) on the Company’s consolidated balance sheets on the TRC Transaction date. The Contingent Consideration was initially measured at fair value utilizing a Monte Carlo simulation model to calculate the present value of the risk-adjusted cash flows estimated to be received from the Contingent Consideration. The fair value model involved significant unobservable inputs derived using Company estimates. The Company’s estimates were based in part on external data and reflected its judgements and forecasts. The primary significant unobservable input was the estimate of forecasted TRELEGY net revenues which is considered a Level 3 fair value input. The Company periodically reassesses the carrying value of the Contingent Consideration when indicators of impairment are identified, and the Company will recognize an impairment loss if the carrying value materially exceeds the reassessed fair value. The Company recognizes any increases in the carrying value of the Contingent Consideration only when such contingent gains are realized.

Future Royalty Payment Contingency

The Company treats contingent liabilities related to sale of future royalties (see “Note 10. Ampreloxetine Funding”) as debt financings, amortized under the effective interest method over the estimated life of the related expected royalty stream. The contingent liabilities related to sale of future royalties and the debt amortization are based on current estimates of the amount and timing of future royalty payments, including the potential for any future funding milestones. The Company periodically reassesses the amount and timing of estimated royalty payments based on internal sales projections and external information from market data sources, which are considered Level 3 inputs. To the extent the Company’s estimates of the amount and timing of future royalty payments are materially greater or less than previous estimates, the Company will prospectively adjust the amortization of the contingent liability and effective interest rate.

86F-12

Table of Contents

Capitalized Software

The Company capitalizes certain costs related to direct material and service costs for software obtained for internal use. Upon being placed in service, these costs and other future capitalizable costs related to the internal use software system integration are depreciated over five years. There were 0 material capitalized software costs recorded for the year ended December 31, 2020 or 2019.

Impairment of Long-Lived Assets

The Company’sCompany regularly reviews long-lived assets, consists of property and equipment,including operating lease assets, and other assets. The carrying valueto determine whether indicators of long-lived assets is reviewed for impairment whenever events or changes in circumstances indicate thatmay exist. If indications of impairment exist, the asset may not be recoverable. An impairment loss is recognized whenCompany performs a test of recoverability by comparing the total of estimated undiscounted future cash flows expected to result from the use of the asset andover its eventual disposition is less than itsuseful life to the carrying amount. There were 0 impairmentsvalue of the long-lived asset. If the carrying value of the long-lived asset exceeds such estimated undiscounted cash flows, the Company would determine the estimated fair value of the long-lived assets recordedgenerally using the estimated discounted future cash flows to recognize an impairment loss on the long-lived asset. The Company did not recognize any impairment losses related to its long-lived assets for either the year ended December 31, 2020, 20192023 or 2018.2022.

Revenue Recognition

The Company recognizes revenue under ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, an entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company identifies the performance obligations in the contract by assessing whether the goods or services promised within each contract are distinct. The Company then recognizes revenue for the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Collaborative Arrangements under ASC 606

The Company enters into collaborative arrangements with partners that fall under the scope of ASC Topic 808, Collaborative Arrangements (“ASC 808”). While these arrangements are in the scope of ASC 808, the Company may analogize to ASC 606 for some aspects of these arrangements. The Company analogizes to ASC 606 for certain activities within collaborative arrangements for the delivery of a good or service (i.e., a unit of account) that is part of its ongoing major or central operations. Revenue recognized by analogizing to ASC 606 is recorded as “collaboration revenue” or “licensing revenue” whereas, revenue recognized in accordance with ASC 808 is recorded on a separate collaboration revenue line on the consolidated statements of operations.

The terms of the Company’s collaborative arrangements typically include one or more of the following: (i) up-front fees; (ii) milestone payments related to the achievement of development, regulatory, or commercial goals; (iii) royalties on net sales of licensed products; (iv) reimbursements or cost-sharing of research and development expenses; and (v) profit/loss sharing arising from co-promotion arrangements. Each of these payments results in collaboration revenues or an offset against research and development expense. Where a portion of non-refundable up-front fees or other payments received is allocated to continuing performance obligations under the terms of a collaborative arrangement, they are recorded as deferred revenue and recognized as collaboration revenue when (or as) the underlying performance obligation is satisfied.

As part of the accounting for these arrangements, the Company must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation which determines how the transaction price is allocated among the performance obligations. The estimation of the stand-alone selling price may include such estimates as, forecasted revenues or costs, development timelines, discount rates, and probabilities of technical and regulatory success. The Company evaluates each performance obligation to determine if they can be satisfied at a point in time or over time, and it measures the services delivered to the collaborative partner which are periodically reviewed based on the progress of the related program. The effect of any change made to an

87

Table of Contents

estimated input component and, therefore revenue or expense recognized, would be recorded as a change in estimate. In addition, variable consideration (e.g., milestone payments) must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.

F-13

Table of Contents

Up-front Fees: If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes collaboration revenues from the transaction price allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing collaboration revenue from the allocated transaction price. For example, when the Company receives up-front fees for the performance of research and development services, or when research and development services are not considered to be distinct from a license, the Company recognizes collaboration revenue for those units of account over time using a measure of progress. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue or expense recognition as a change in estimate.

Milestone Payments: At the inception of each arrangement that includes milestone payments (variable consideration), the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s or the collaborative partner’s control, such as non-operational developmental and regulatory approvals, are generally not considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re-evaluates the probability of achievement of milestones that are within its or the collaborative partner’s control, such as operational developmental milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenues and earnings in the period of adjustment. Revisions to the Company’s estimate of the transaction price may also result in negative collaboration revenues and earnings in the period of adjustment.

Royalties: For arrangements that include sales-based royalties, including commercial milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Following the sale of VIBATIV to Cumberland Pharmaceuticals Inc. (“Cumberland”) in November 2018, VIBATIV royalties earned from Cumberland are included within “interest and other income, net” on the consolidated statements of operations. In addition, the Company’s income earned related to TRELEGY sales is included within “income from investment in TRC, LLC” on the consolidated statements of operations.

Reimbursement, cost-sharing and profit-sharing payments: Under certain collaborative arrangements, the Company has been reimbursed for a portion of its research and development expenses or participates in the cost-sharing of such research and development expenses. Such reimbursements and cost-sharing arrangements have been reflected as a reduction of research and development expense in the Company’s consolidated statements of operations, as the Company does not consider performing research and development services for reimbursement to be a part of its ongoing major or central operations.

Product Sales

In November 2018, the Company completed the sale of its assets related to the manufacture, marketing and sale of the VIBATIV product to Cumberland. Up until that date, the Company sold VIBATIV in the US market by making the drug product available through a limited number of distributors, who sold VIBATIV to healthcare providers. Title and risk of loss transferred upon receipt by these distributors. The Company recognized VIBATIV product sales and related cost of product sales when the distributors obtained control of the drug product, which was at the time title transferred to the distributors.

88

Table of Contents

The Company recorded sales on a net sales basis which included estimates of variable consideration. The variable consideration resulted from sales discounts, government-mandated rebates and chargebacks, distribution fees, estimated product returns and other deductions for sales made by the Company prior to the November 2018 sale to Cumberland. The Company reflected such reductions in revenue as either an allowance to the related account receivable from the distributor, or as an accrued liability, depending on the nature of the sales deduction. Sales deductions were based on management’s estimates that considered payor mix in target markets, industry benchmarks and historical experience. In general, these estimates took into consideration a range of possible outcomes which were probability-weighted in accordance with the expected value method in ASC 606. The Company monitored inventory levels in the distribution channel, as well as sales by distributors to healthcare providers, using product-specific data provided by the distributors. Product return allowances were based on amounts owed or to be claimed on related sales. These estimates took into consideration the terms of the Company’s agreements with customers, historical product returns, rebates or discounts taken, estimated levels of inventory in the distribution channel, the shelf life of the product and specific known market events, such as competitive pricing and new product introductions. The Company updated its estimates and assumptions each quarter and if actual future results varied from its estimates, the Company adjusted these estimates, which could have had an effect on product sales and earnings in the period of adjustment.

Research and Development Expenses

Research and development (“R&D”) expenses are recorded in the period that services are rendered or goods are received. R&D expenses consist of salaries and benefits laboratory supplies and facility costs, as well asand fees paid to third parties that conduct certain R&Dclinical study activities on behalf of the Company, net of certain external R&D expenses reimbursed under the Company’s collaborative arrangements.

As part of the process of preparing its consolidated financial statements, the Company is required to estimate and accrue certain R&D expenses. This process involves the following:

identifying services that have been performed on the Company’s behalf and estimating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of actual cost;

estimating and accruing expenses in the Company’s consolidated financial statements as of each balance sheet date based on facts and circumstances known to it at the time; and

F-14

Table of Contents

periodically confirming the accuracy of the Company’s estimates with selected service providers and making adjustments, if necessary.

Examples of estimated research and developmentR&D expenses that the Company accruesmay accrue include:

fees paid to clinical research organizations (“CROs”) in connection with preclinical and toxicology studies and clinical studies;

fees paid to investigative sites in connection with clinical studies;

fees paid to contract manufacturing organizations (“CMOs”) in connection with the production of product and clinical study materials; and

professional service fees for consulting and related services.

The Company bases its expense accruals related to clinical studies on its estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical studies on the Company’s behalf. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts depend on factors, such as the successful enrollment of patients and the completion of clinical study milestones. The Company’s service providers typically invoice it

89

Table of Contents

monthly in arrears for services performed. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the Company does not identify costs that it has begun to incur or if it underestimates or overestimates the level of services performed or the costs of these services, the Company’s actual expenses could differ from its estimates.

To date, the Company has not experienced significant changes in its estimates of accrued research and developmentR&D expenses after a reporting period. However, due to the nature of estimates, there is no assurance that the Company will not make changes to its estimates in the future as it becomes aware of additional information about the status or conduct of its clinical studies and other researchR&D activities. Such changes in estimates will be recognized as research and developmentR&D expenses in the period that the change in estimate occurs.

AdvertisingSelling, General and Administrative Expenses

The CompanySelling, general and administrative (“SG&A”) expenses are recorded in the period that services are rendered or goods are received. SG&A expenses consist primarily of salaries and benefits, facilities and overhead costs, of advertising,and other costs related to areas such as legal, finance, information technology, sales and marketing, and medical affairs.

Advertising expenses within selling, general and administrative expenses, including promotional expenses, as incurred. Advertising expenses were $6.3 million, $2.4$5.1 million and $1.9$8.0 million for the year ended December 31, 2020, 20192023 and 2018,2022, respectively.

Fair ValueShare-Based Compensation

The Company issues share-based awards to employees and non-employees, generally in the form of Share-Based Compensation Awardsshare options and restricted share units (“RSUs”). Share-based compensation expense is calculated based on awards ultimately expected to vest and is reduced for actual forfeitures as they occur. The Company expenses these share-based awards over the requisite service period on a straight-line basis, based on the grant date fair value of the awards.

The Company determines the fair value of RSUs to be the closing market price of the Company's common shares on the day of grant. The Company uses the Black-Scholes-Merton option pricing model to estimate the fair value of share options granted under its equity incentive plans and rights to acquire shares granted under its employee share purchase plan (“ESPP”). The Black-Scholes-Merton option valuationpricing model requires the use of assumptions, includingincluding: (i) the expected term of the awardoptions and ESPP purchases; (ii) the share’s expected dividend yield; (iii) the expected share price volatility.volatility; and (iv) the risk-free interest rate. The expected share price volatility is based on the historical volatility, and the risk-free interest rate is based on the US Treasury rate commensurate with the expected term of the associated award. The Company usespreviously used the “simplified” method as described in Staff Accounting Bulletin No. 107, Share-Based Payment, to estimate the expected option term.

Share-based compensation expense is calculated based on awards ultimately expected to vest and is reduced for actual forfeitures as they occur. Compensation expense for purchases under the ESPP is recognized based on the fair value of the award on the date of offering.

Debt Instruments

Coupon interest on the Company’s debt instruments is accrued using the effective interest rate method over the estimated period the debt will be repaid. Debt issuance costs are capitalized as deferred financing costs and presented as a reduction of the carrying value of the financial liability on the Company’s consolidated balance sheets. Debt issuance costs subsequently are amortized to interest expense over the estimated life of the related debt based on the effective interest method. The Company considers whether there are any embedded features in its debt instruments that require bifurcation and separate accounting as derivative financial instruments pursuant to ASC Topic 815, Derivatives and Hedging. As of December 31, 2020 and 2019, the Company’s debt instruments did not include any features that require bifurcation and separate derivative accounting.

Theravance Respiratory Company, LLC (“TRC”)

Through the Company’s 85% equity interest in TRC, However, during 2023, the Company is entitled to receive an 85% economic interest in any future payments made by Glaxo Group or one of its affiliates (“GSK”) under the strategic alliance agreement and under the portion of the collaboration agreement assigned to TRC (net of TRC expenses paid and the amount of cash, if any, expected to be used by TRC pursuant to the TRC LLC Agreement over the next four fiscal quarters). The primary drug program assigned to TRC is Trelegy.

The Company analyzed its ownership, contractual and other interests in TRC to determine if TRC is a variable-interest entity (“VIE”), whether the Company has a variable interest in TRC and the nature and extent of that interest. The Company determined that TRC is a VIE. The party with the controlling financial interest, the primary beneficiary, is required to consolidate the entity determined to be a VIE. Therefore, the Company also assessed whether the Company is the primary beneficiary of TRC based on the power to direct its activities that most significantly impact its economic performance and the Company’s obligation to absorb its losses or the right to receive benefits from it that could potentially be significant to TRC. Based on the Company’s assessment, it determinedconcluded that it is not the primary beneficiary of TRC, and, as a result, the Company does not consolidate TRC in its consolidated financial statements.had sufficient

90F-15

Table of Contents

TRC is recognizedexercise data and transitioned to estimating the expected option term based on its historical option exercise behavior. The change in expected term methodology did not have a material impact to the financial statements.

The Company may also issue performance-contingent RSUs that settle in the Company’s consolidated financial statements underordinary shares. The fair value of the equityperformance-contingent RSUs is determined on the day of grant using the number of shares expected to bevested and the ending market value of the shares on the grant date. The number of shares expected to vest is determined by assessing the probability that the performance criteria will be met and the associated targeted payout level that is forecasted will be achieved. For performance-contingent RSUs, the Company recognizes share-based compensation expense over the requisite service period using the accelerated attribution method when achievement of accounting. Income related tothe performance criteria is considered probable based on the Company’s equity ownershipbest estimate at the end of TRCeach reporting period.

The Company may also issue market-based RSUs that settle in the Company’s ordinary shares. Market-based RSUs vest upon the Company’s shares meeting certain market-based price targets followed by a service period. The fair value of the market-based RSUs is reflected within its consolidated statementsdetermined using a Monte-Carlo valuation model. Share-based compensation expense is recognized over the requisite service period regardless of operationswhether or not the market-based price targets are deemed probable, and the share-based compensation expense is classified as non-operating income. not reversed solely because the market-based price target is not achieved.

Income Taxes

The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are anticipated to be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The Company’s total gross unrecognized tax benefits associated with uncertain tax positions of $63.479.5 million and $58.8$76.0 million, as of December 31, 20202023 and December 31, 2019,2022, respectively, may reduce the effective tax rate in the period of recognition. The Company currently has a fullreleased its federal valuation allowance against its deferredas of December 31, 2022. As a result, the statutes of limitations have started on the Company’s federal unrecognized tax assets, which would impact thebenefits. The timing of the effective tax rate benefit shouldis dependent on the expiration of these statutes of limitations, as well as any favorable settlement of the Company’s uncertain positions be favorably settled in the future.

The Company assesses all material positions, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is greater than 50% likely to be realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and the Company will determine whether the factors underlying the sustainability assertion have changed and whether the amount of the recognized tax benefit is still appropriate.

The recognition and measurement of tax benefits requires significant judgment. The Company has taken certain positions where it believes that its position is greater than 50% likely to be realized upon ultimate settlement and for which no reserve for uncertain tax positions has been recorded. If the Company does not ultimately realize the expected benefit of these positions, it will record additional income tax expenses in future periods. Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available.

Any tax levied or credited by a governmental taxing authority that is not based on the Company’s income is outside the scope of accounting for income taxes. Therefore, the Company records such items as a component of its loss before income taxes.

Net LossIncome (Loss) per Share and Anti-dilutive Securities

Basic net lossincome (loss) per share is computed by dividing net lossincome (loss) by the weighted-average number of shares outstanding less ordinary shares subject to forfeiture.during the period. Diluted net lossincome (loss) per share is computed by dividing net loss byincreasing 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.

Year Ended December 31, 

(In thousands, except per share data)

    

2020

    

2019

2018

Numerator:

Net loss

$

(278,017)

$

(236,455)

$

(215,524)

Denominator:

 

Weighted-average ordinary shares outstanding

62,808

56,452

55,076

Less: weighted-average ordinary shares subject to forfeiture

(463)

(842)

(1,107)

Weighted-average ordinary shares used to compute basic and diluted net loss per share

62,345

55,610

53,969

Basic and diluted net loss per share

$

(4.46)

$

(4.25)

$

(3.99)

For the year ended December 31, 2020, 2019 and 2018, diluted and basic net loss per share were identical since potential ordinary shares were excluded from the calculation, as their effect was anti-dilutive.weighted-

91F-16

Table of Contents

average number of shares outstanding for the dilutive effect of potential ordinary shares determined using the treasury stock method. Potential ordinary shares include outstanding share options, ordinary shares expected to be issued under the Company’s ESPP, RSUs, and performance-contingent RSUs for which the performance or market vesting conditions have been deemed probable. Performance-contingent RSUs with performance or marketing vesting conditions that have been deemed not probable as of the end of the period are not included in the diluted net income (loss) per share computation.

Year Ended December 31, 

(In thousands, except per share data)

    

2023

    

2022

Numerator:

Net loss from continuing operations

$

(55,193)

$

(92,824)

Net income from discontinued operations

964,956

Net income (loss)

(55,193)

872,132

Denominator:

 

Weighted-average ordinary shares outstanding

55,303

73,591

Less: weighted-average ordinary shares subject to forfeiture

Weighted-average ordinary shares outstanding - basic and diluted

55,303

73,591

Net income (loss) per share:

Continuing operations - basic and diluted

$

(1.00)

$

(1.26)

Discontinued operations - basic and diluted

$

$

13.11

Net income (loss) per share - basic and diluted

$

(1.00)

$

11.85

In accordance with ASC 260, Anti-dilutive SecuritiesEarnings Per Share

The, if a company incurred a net loss related to its continuing operations, then potential ordinary shares are considered anti-dilutive for the periods in which the net loss was recognized. For the year ended December 31, 2023 and 2022, the Company recognized net losses from continuing operations. As a result, the following potential ordinary equivalent shares were not included in the computation of diluted net loss per share for both continuing operations and discontinuing operations because their effect was anti-dilutive:including them would have had an anti-dilutive effect:

Year Ended December 31, 

(In thousands)

    

2020

    

2019

2018

Share issuances under equity incentive plans and ESPP 

6,553

6,577

3,492

Restricted shares

2

Share issuances upon the conversion of convertible senior notes

6,676

6,676

6,676

Total

 

13,229

13,253

10,170

In addition, there were 414,000 and 978,750 shares subject to performance-based vesting criteria which have been excluded from the ordinary equivalent shares table above for the year ended December 31, 2019 and 2018, respectively. There were 0 such shares excluded as of December 31, 2020.

Year Ended December 31, 

(In thousands)

    

2023

    

2022

Options

2,348

2,601

Restricted shares

1,523

2,851

Employee share purchase plan

45

35

Total

 

3,916

5,487

Comprehensive LossIncome (Loss)

Comprehensive lossincome (loss) is comprised of net lossincome (loss) and changes in unrealized gains and losses on the Company’s available-for-sale investments.

Related Parties

GSK owned 15.0% of the Company’s ordinary shares outstanding as of December 31, 2020. On June 22, 2020, GSK Finance (No.3) plc (“GSK Finance”), a wholly-owned subsidiary of GSK, issued $280,336,000 of exchangeable senior notes due 2023 (the “GSK Notes”), initially exchangeable into 9,644,792 ordinary shares of Theravance Biopharma held by GSK and its affiliates. The GSK Notes are guaranteed by GSK and are exchangeable at the option of noteholders on any business day on or after September 1, 2020. The GSK Notes will mature on June 22, 2023 and do not bear interest. The GSK Notes were offered at an issue price 108.5% of their principal amount. The initial exchange rate is 34.4044 shares of Theravance Biopharma ordinary shares per $1,000 principal amount of GSK Notes, which is equivalent to an initial exchange price of approximately $29.066 per share, representing a premium of 35% over the volume weighted-average price of Theravance Biopharma’s ordinary shares on June 17, 2020.

Upon exchange of the GSK Notes, GSK Finance is expected to deliver its ordinary shares of Theravance Biopharma, but may at its option under certain circumstances, deliver cash or a combination of Theravance Biopharma ordinary shares and cash to noteholders. The GSK offering involves the expected exchange of substantially all of the 9,644,807 ordinary shares of Theravance Biopharma held by GSK and its affiliates. Theravance Biopharma will not be issuing any new ordinary shares in connection with the GSK offering, and Theravance Biopharma did not receive any proceeds from the GSK offering.

Robert V. Gunderson, Jr. is a member of the Company’s board of directors. The Company has engaged Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, of which Mr. Gunderson is a partner, as its primary legal counsel. Fees incurred for services provided by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP were $0.5 million, $0.4 million and $0.5 million for the year ended December 31, 2020, 2019 and 2018, respectively.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13"). This guidance requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect collectability. ASU 2016-13 also eliminates the concept of “other-than-temporary” impairment when evaluating available-for-sale debt securities and instead focuses on determining whether any impairment is a result of a credit loss or other factors. An entity will recognize an allowance for credit losses on

92

Table of Contents

available-for-sale debt securities rather than an other-than-temporary impairment that reduces the cost basis of the investment. ASU 2016-13 became effective on January 1, 2020, and the adoption did not have a material impact on the Company’s consolidated financial statements and related disclosures primarily due to the high credit quality and short-term maturities of the Company’s marketable securities.

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

In November 2018, the FASB issued ASU 2018-18, Collaboration Arrangements: Clarifying the Interaction between Topic 808 and Topic 606 (“ASU 2018-18”). The issuance of Topic 606 raised questions about the interaction between the guidance on collaborative arrangements and revenue recognition. ASU 2018-18 addresses this uncertainty by: (i) clarifying that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaboration arrangement participant is a customer; (ii) adding unit of account guidance to assess whether the collaboration arrangement or a part of the arrangement is with a customer; and (iii) precluding a company from presenting transactions with collaboration arrangement participants that are not directly related to sales to third parties together with revenue from contracts with customers. ASU 2018-18 became effective on January 1, 2020, and the Company elected to adopt ASU 2018-18 retrospectively, only for contracts that were not completed as of January 1, 2020. The adoption of ASU 2018-18 did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019,2023, the FASB issued ASU 2019-12,2023-09, Income Taxes (Topic 740): Simplifying the Accounting forImprovements to Income TaxesTax Disclosures (“ASU 2019-12”2023-09”) as part of its overall simplification initiative. ASU 2023-09requires entities to reduce costsprovide additional information in their tax rate reconciliation and complexity of applying accounting standards.additional disclosures about income taxes paid by jurisdiction. ASU 2019-12 removes certain exceptions from Topic 740, Income Taxes, including (i) the exception to the incremental approach for intra period tax allocation when there is a loss from continuing operations and income or a gain from other items such as discontinued operations or other comprehensive income; (ii) the exception to accounting for outside basis differences of equity method investments and foreign subsidiaries; and (iii) the exception to limit tax benefit recognized in interim periods in cases when the year-to-date losses exceed anticipated losses. ASU 2019-12 also simplifies GAAP in several other areas of Topic 740 such as (i) franchise taxes and other taxes partially based on income; (ii) step-up in tax basis goodwill considered part of a business combination in which the book goodwill was originally recognized or should be considered a separate transaction; (iii) separate financial statements of entities not subject to tax; and (iv) interim recognition of enactment of tax laws or rate changes. ASU 2019-122023-09 is effective on a prospective basis for annual reporting periods and interim periods within those years beginning after December 15, 2020. The2024. Early adoption of ASU 2019-12 is not expected to have a material impact on the Company’s consolidatedalso permitted for annual financial statements and related disclosures.

In August 2020, the FASBthat have not yet been issued ASU 2020-06, Debt - Debt with Conversion and other Options (Subtopic 470-20) and Derivatives and Hedging: Contracts in Entity’s Own Equity (Subtopic 815-10) (“ASU 2020-06”). ASU 2020-06or made available for issuance. simplifies the complexity associated with applying US GAAP for certain financial instruments with characteristics of liabilities and equity by removing certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. The standard also enhances the consistency of earnings-per-share calculations by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in diluted earnings-per-share calculations. ASU 2020-06 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2021, and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2020-062023-09 on its consolidated financial statements and relatedincome tax disclosures.

93

Table of Contents

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 consolidated financial statements and related disclosures.

F-17

Table of Contents

2. Revenue

Revenues from Collaborative Arrangements

The Company recognized revenues from its collaborative arrangements as follows:

Year Ended December 31, 

(In thousands)

    

2020

    

2019

2018

Janssen

$

26,426

$

31,096

$

31,053

Alfasigma

14

125

10,678

Other

24

29

60

Total collaboration revenue

$

26,464

$

31,250

$

41,791

Changes in Deferred Revenue Balances

Changes in deferred revenue balances arose as a result of the Company recognizing the following revenue from collaborative arrangements during the periods below:

Year Ended December 31, 

(In thousands)

2020

2019

2018

Collaboration revenue recognized in the period from:

Amounts included in deferred revenue at the beginning of the period

$

26,464

$

31,245

$

130

Performance obligations satisfied in previous period

Janssen Biotech

In February 2018, the Company entered into a global co-development and commercialization agreement with Janssen Biotech, Inc. (“Janssen”) for izencitinib (formerly known as TD-1473) and related back-up compounds for inflammatory intestinal diseases, including ulcerative colitis and Crohn’s disease (the “Janssen Agreement”). Under the terms of the Janssen Agreement, the Company received an upfront payment of $100.0 million. The Company is conducting a Phase 2 (DIONE) study of izencitinib in Crohn’s disease and a Phase 2b/3 (RHEA) induction and maintenance study of izencitinib in ulcerative colitis.Following the initial Phase 2 development period, including the completion of the Phase 2 Crohn’s study and the Phase 2b induction portion of the ulcerative colitis study, Janssen can elect to obtain an exclusive license to develop and commercialize izencitinib and certain related back-up compounds by paying the Company a fee of $200.0 million. Upon any such election, the Company and Janssen will jointly develop and commercialize izencitinib in inflammatory intestinal diseases and share profits in the US and expenses related to Phase 3 development and registration activities (67% to Janssen; 33% to Theravance Biopharma). The Company would receive royalties on ex-US sales at double-digit tiered percentage royalty rates, and the Company would be eligible to receive up to an additional $700.0 million in development and commercialization milestone payments from Janssen.

The Janssen Agreement is considered to be within the scope of Accounting Standards Codification, Topic 808, Collaborative Arrangements (“ASC 808”), as the parties are active participants and exposed to the risks and rewards of the collaborative activity. The Company evaluated the terms of the Janssen Agreement and determined it is partially within the scope of Accounting Standards Codification, Topic 606, Revenue from Contracts with Customers (“ASC 606”) as the research and development activities to be performed through the initial Phase 2 development period of the collaborative arrangement are considered to be part of the Company’s ordinary activities. The Company has identified research and development activities as its only performance obligation. The Company further determined that the transaction price under the arrangement was the $100.0 million upfront payment which was allocated to the single performance obligation.

The $900.0 million in future potential payments, inclusive of the $200.0 million opt-in fee and $700.0 million future development and commercialization milestones, is considered variable consideration if Janssen elects to remain in the collaboration arrangement following completion of the initial Phase 2 development period, as described above and,

94

Table of Contents

as such, was not included in the transaction price, as the potential payments were all determined to be fully constrained under ASC 606. As part of the Company’s evaluation of this variable consideration constraint, it determined that the potential payments are contingent upon developmental and regulatory milestones that are uncertain and are highly susceptible to factors outside of its control. The Company expects that any consideration related to royalties and sales-based milestones will be recognized when the subsequent sales occur.

For the year ended December 31, 2020, 2019 and 2018, the Company recognized $26.4 million, $31.1 million, and $31.1 million as revenue from collaboration arrangements related to the Janssen Agreement. The remaining transaction price of $11.4 million, related to the $100.0 million upfront payment, was recorded in deferred revenue on the consolidated balance sheets and is expected to be recognized as collaboration revenue as the research and development services are delivered over the initial Phase 2 development period. Collaboration revenue is recognized for the research and development services based on a measure of the Company’s efforts toward satisfying the performance obligation relative to the total expected efforts or inputs to satisfy the performance obligation (e.g., costs incurred compared to total budget). Consequently, delays in trial activity and/or changes to the total budget will impact the timing and amount of revenue recognized in any given reporting period. For the year ended December 31, 2020, 2019 and 2018, the Company incurred $38.5 million, $39.9 million and $38.6 million, respectively, in research and development costs related to the Janssen Agreement. In future reporting periods, the Company will reevaluate the estimates related to its efforts towards satisfying the performance obligation and may record a change in estimate if deemed necessary.

Viatris

In January 2015, the Company and Viatris Inc. (formerly, Mylan Ireland Limited) (“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 hospitalacute 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”).

UnderIn the US, Viatris Agreement, Viatris paidis leading the commercialization of YUPELRI, and the Company an upfront fee of $15.0 millionco-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 the delivery of the revefenacin license in 2015development and in 2016, Viatris paidcommercialization and will pay the Company a milestone paymenttiered 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 the Hong Kong SAR, the Macau SAR, and Taiwan, and the Company is eligible to receive low double-digit tiered royalties on net sales of $15.0 millionnebulized revefenacin in this region, if approved. Viatris is responsible for the achievementall aspects of 50% enrollmentdevelopment and commercialization in the related Phase 3 twelve-month safety study.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 consolidated financial statements.

As of December 31, 2020, excluding the aggregate $30.0 million payment noted above,2023, the Company is eligible to receive from Viatris potential global (ex-China and adjacent territories)development, regulatory and sales milestone payments totaling(excluding China and adjacent territories) 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 US 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 up to $52.5 million related to Viatris’ development and commercialization of nebulized revefenacin in China and adjacent territories with $45.0 million associated with YUPELRI monotherapy and $7.5 million associated with future potential combination productsproducts. Of the $45.0 million associated with monotherapy, $37.5 million relates solely to developmentsales milestones based on achieving certain levels of net sales and $7.5 million relates to regulatory actions.approval in China.

The Viatris Agreement is considered to be within the scope of ASC 808, and partially within the scope of ASC 606,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 2018,2018; thereafter, R&D expenses are shared. Performing R&D services for reimbursement is considered to be a collaborative activity under the scope of ASC 808. Reimbursable program costs are recognized proportionately with the performance of the underlying services and accounted for as reductions to R&D expense. For this unit of account, the Company did not recognize revenue or analogize to ASC 606, Revenue Recognition, and, as such, the reimbursable program costs are excluded from the original 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. The joint steering committee participation was also determined to be a performance obligation for which the Company analogized to ASC 606 to recognize revenue. Using the concepts from ASC 606, the Company further determined that the transaction price under the arrangement was comprised of the following: (1) $15.0 million upfront license fee received in 2015; (2) $4.2 million premium received in 2015 related to an ordinary share purchase agreement with Viatris; and (3) $15.0 million milestone for 50% enrollment in the Phase 3 twelve-month safety study received in 2016. The total transaction price of $34.2 million was allocated to

95

Table of Contents

the 2 performance obligations based on the Company’s best estimate of the relative stand-alone selling prices. For the delivery of the license, the Company based the stand-alone selling price on a discounted cash flow approach and considered several factors including, but not limited to: discount rate, development timeline, regulatory risks, estimated market demand and future revenue potential. For the committee participation, the Company based the stand-alone selling price on the average compensation of its committee members estimated to be incurred over the performance period. The Company expects to recognize collaboration revenue from the committee participation ratably over the performance period of approximately seventeen years.

The future potential milestone amounts for the 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. The Company will re-evaluate the transaction price each quarter and as uncertain events are resolved or other changes in circumstances occur.

As of December 31, 2020, $0.3 million was recorded in deferred revenue on the consolidated balance sheets related to the Viatris Agreement. This amount reflects revenue allocated to joint steering committee participation which will be recognized as collaboration revenue over the course of the remaining performance period of approximately eleven years.

The Company is also entitled to a share of US profits and losses (65% to Viatris; 35% to Theravance Biopharma) received in connection with commercialization of YUPELRI, and the Company is entitled to low double-digit tiered royalties on ex-US net sales. Viatris is the principal in the sales transactions, and as a result, the Company does not reflect the product sales in its consolidated financial statements.

Following the US Food and Drug Administration (“FDA”)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

F-18

Table of Contents

accordance with the applicable accounting guidance, amounts receivable from Viatris in connection with the commercialization of YUPELRI are recorded within the 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 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 year ended December 31, 2023 and 2022, YUPELRI continued to be profitable for the Company.

The following YUPELRI-related amounts were recognized within revenue and selling, general and administrative expensein the Company’s consolidated statements of operations:

Year Ended December 31, 

Year Ended December 31, 

(In thousands)

2020

2019

2018

2023

2022

Viatris collaboration agreement - Amounts receivable from Viatris

$

43,893

$

13,664

$

3,275

Collaboration loss - Amounts payable to Viatris

$

$

1,582

$

2,997

Viatris collaboration agreement – Amounts receivable from Viatris

$

57,201

$

48,624

Viatris royalties (Non-US)

7

30

Total

$

57,208

$

48,654

Prior to the FDA approval of YUPELRI in late 2018, the Company recognized its 35% share of expenses within R&D expense and selling, general and administrative expense on its consolidated statements of operations.

While Viatris records the total YUPELRI net sales of YUPELRI within its own consolidated financial statements, Viatris collaboration agreement revenue includeson the Company’s consolidated statements of operations included the Company’s implied 35% share of total YUPELRI net sales, of YUPELRI for the year ended December 31, 2020, 2019, and 2018 of $50.0 million, $19.3 million, $3.7 million, respectively.before deducting shared expenses, as presented below:

Year Ended December 31, 

(In thousands)

  

2023

  

2022

YUPELRI net sales (Theravance Biopharma implied 35%)

$

77,337

$

70,653

96

Alfasigma

Under an October 2012 development and collaboration agreement for velusetrag, the Company and Alfasigma S.p.A (“Alfasigma”) agreed to collaborate in the execution of a two-part Phase 2 program to test the efficacy, safety and tolerability of velusetrag in the treatment of patients with gastroparesis (a medical condition consisting of a paresis (partial paralysis) of the stomach, resulting in food remaining in the stomach for a longer time than normal) (the “Alfasigma Agreement”). As part of the Alfasigma Agreement, Alfasigma funded the majority of the costs associated with the Phase 2 gastroparesis program, which consisted of a Phase 2 study focused on gastric emptying and a Phase 2 study focused on symptoms. Alfasigma had an exclusive option to develop and commercialize velusetrag in the EU, Russia, China, Mexico and certain other countries, while the Company retained full rights to velusetrag in the US, Canada, Japan and certain other countries.

In April 2018, Alfasigma exercised its exclusive option to develop and commercialize velusetrag, and the Company elected not to pursue further development of velusetrag. As a result, the Companyis transferring global rights for velusetrag to Alfasigma under the terms of the existing collaboration agreement. The Company received a $10.0 million option exercise fee and a $1.0 million non-refundable reimbursement from Alfasigma, and the Company is eligible to receive future potential development, regulatory and sales milestone payments of up to $26.8 million and tiered royalties on global net sales ranging from high single digits to the mid-teens.Other Collaborative Arrangement Revenues

The Alfasigma Agreement is considered to be within the scope of ASC 808, as the parties are active participants and exposed to the risks and rewards of theCompany’s other collaborative activity. The Company has historically received reimbursements related to R&D services performed under the Alfasigma Agreement. Performing R&D services for reimbursement is considered to be a collaborative activity under the scope of ASC 808. Reimbursable program costs are accounted for as reductions to R&D expense. For this unit of account, the Company does not recognize revenue or analogize to ASC 606 and, as such, the reimbursable program costs are excluded from the transaction price.arrangement revenues consisted of:

As a result of Alfasigma’s election to exercise its exclusive option to develop and commercialize velusetrag in April 2018, Alfasigma paid the Company a total of $11.0 million, comprised of the $10.0 million option exercise fee and the $1.0 million non-refundable reimbursement. The Company analogized to ASC 606 for the delivery of the following identified performance obligations: (i) delivery of the velusetrag license; (ii) transfer of technical know-how; (iii) delivery of clinical study reports (“CSRs”); (iv) delivery of registration batches, including drug substances; and (v) joint steering committee participation. The Company determined that all of the 5 performance obligations were distinct, and it allocated the transaction price based on the estimated stand-alone selling prices of each of the performance obligations. The stand-alone selling price of the license was based on a discounted cash flow approach and considered several factors including, but not limited to: discount rate, development timeline, regulatory risks, estimated market demand and future revenue potential.

Year Ended December 31, 

(In thousands)

    

2023

    

2022

Viatris

$

216

$

24

Other

168

Total collaboration revenue

$

216

$

192

The Company determined that any potential development or regulatory milestones were to be fully constrained as prescribed under ASC 606. As part of its evaluation of this variable consideration constraint, the Company determined that the potential payments are contingent upon developmental and regulatory milestones that are uncertain and are highly susceptible to factors outsideAll of the recognized revenues from the Company’s control. In addition,other collaborative arrangements presented in the Company expects that any consideration related to sales-based milestones would be recognized when the subsequent sales occur.

For the year ended December 31, 2019, and 2018, the Company recognized $0.1 million and $10.7 million, respectively, as revenue from collaboration arrangements related to the Alfasigma Agreement. There was a minimal amount of collaboration revenue recognized related to the Alfasigma Agreement for the year ended December 31, 2020, and as of December 31, 2020, $0.2 million remainstable above were included in deferred revenue onat the consolidated balance sheets and is expected to be recognized as collaboration revenue over approximatelybeginning of the next six years.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

97

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:

Year Ended December 31, 

Year Ended December 31, 

(In thousands)

    

2020

    

2019

2018

    

2023

    

2022

Janssen

$

8,554

$

5,129

$

1,597

Viatris

1,524

460

7,515

$

5,723

$

6,682

Total reduction to R&D expense, net

$

10,078

$

5,589

$

9,112

F-19

Revenue from Licensing Arrangements

Viatris

In June 2019, the Company announced the expansion of the Viatris Agreement (the “Viatris Amendment”) to grant Viatris exclusive development and commercialization rights to nebulized revefenacin in China and adjacent territories. In exchange, the Company received an upfront payment of $18.5 million (before a required tax withholding) and will be eligible to receive potential development and sales milestones totaling $54.0 million and low double-digit tiered royalties on net sales of nebulized revefenacin, if approved. Of the $54.0 million in potential milestones, $9.0 million is associated with the development of YUPELRI monotherapy, $7.5 million associated with the development of future potential combination products, and $37.5 million is associated with sales milestones. Viatris is responsible for all aspects of development and commercialization in the partnered regions, including pre- and post-launch activities and product registration and all associated costs.

The Viatris Amendment is accounted for under ASC 606 as a separate contract from the original Viatris Agreement that was entered into in January 2015. The Company identified a single performance obligation comprising of the delivery of the license to develop and commercialize revefenacin in China and adjacent territories. The transaction price was determined to be the upfront payment of $18.5 millionwhich the Company recognized as licensing revenue following the completion of the performance obligation in June 2019.

The future potential milestone amounts forthe Viatris Amendment were not included in the transaction price, as they were all determined to be fully constrained following the concepts of ASC 606. As part of the Company’s evaluation of the development milestones constraint, the Company determined that the achievement of such milestones is contingent upon success in future clinical trials and regulatory approvals which are not within its control and uncertain at this stage. The Company expects that the sales-based milestone payments and royalty arrangements will be recognized when the sales occur or the milestone is achieved. The Company will re-evaluate the transaction price each quarter and as uncertain events are resolved or other changes in circumstances occur.

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

Pfizer

In December 2019, the Company entered into a global license agreement with Pfizer Inc. (“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 hashad an exclusive license to develop, manufacture and commercialize certain compounds for all uses other than gastrointestinal, ophthalmic, and respiratory applications. Under the terms of the Pfizer Agreement, theThe Company received an upfront cash payment of $10.0 million and is eligible to receive up to an additional $240.0 million in development2019, and sales milestone payments from Pfizer. In addition, the Company will be eligible to receive a tiered royalty on worldwide net sales of any potential products under the license at percentage royalty rates ranging from middle single-digits to low double-digits.

98

The Pfizer Agreement is accounted for under ASC 606. The Company identified 2 performance obligations primarily comprised of the delivery of the license and samples of tangible materials which was completed in December 2019. The transaction price was determined to be the upfront payment of $10.0 million which the Company recognized as licensing revenue in December 2019.

The future potential milestones payable under the Pfizer Amendment were not included in the transaction price, as they were all determined to be fully constrained following the concepts of ASC 606. As part of the Company’s evaluation of the development milestones constraint, the Company determined that the achievement of such milestones is contingent upon success in future clinical trials and regulatory approvals which are not within its control and uncertain at this stage. The Company expects that the sales-based milestone payments will be recognized when the sales occur or the milestone is achieved. The Company will re-evaluate the transaction price each quarter and as uncertain events are resolved or other changes in circumstances occur.

3. Sale of VIBATIV

On November 12, 2018, the Company completed the sale of its assets related to the manufacture, marketing and sale of VIBATIV to Cumberland pursuant to the Asset Purchase Agreement dated November 1, 2018 (the “APA”). Under the APA, Cumberland paid the Company $20.0 million at the closing of the transaction and $5.0 million in April 2019. In addition, Cumberland pays the Company tiered royalties of up to 20% of US net sales of VIBATIV until such time as royalties cumulatively total $100.0 million.

In connection with the closing of the transaction, Cumberland acquired, among other things, (i) intellectual property rights relating to VIBATIV; (ii) active pharmaceutical ingredient for VIBATIV, work-in-process and finished drug product; (iii) the US marketing authorization for VIBATIV; (iv) certain assigned contracts relating to the manufacture and commercialization of VIBATIV; and (v) books and records related to VIBATIV. Cumberland also assumed certain clinical study obligations related to VIBATIV and certain post-closing liabilities and obligations as described in the APA.

The Company retained financial responsibility for any liabilities relating to products sold prior to the closing of the transaction, and Cumberland assumed financial responsibility for any liabilities relating to products sold on or after the closing of the transaction. The Company agreed to provide transition services to Cumberland for limited periods of time following the closing of the transaction. The Company has also agreed for a limited period not to engage in specified activities that would compete with the manufacture, marketing and sale of VIBATIV.

The Company recognized a net gain of $6.1 million upon the sale of VIBATIV within “Interest and other income, net” in the consolidated statements of operations for the year ended December 31, 2018. Transition-related costs2022, the Company recognized $2.5 million in licensing revenue related to a development milestone payment from Pfizer for the dosing of $1.1 million were recognized concurrently and includedthe first patient in the Phase 1 clinical trial. In June 2023, the Company received notice from Pfizer terminating the Pfizer Agreement, effective as a reductionof October 7, 2023, at which time the skin-selective pan-JAK inhibitor program was returned to the net gain on the sale. The Company records the royalties receivable from US net sales by Cumberland within the same “Interest and other income, net”.Company.

4.3. Segment Information

The Company operates in a single segment, which is the discovery (research), development and commercialization of human therapeutics. The following table summarizes total revenue by geographic region:region based on the location of the Company’s customers or collaboration partners:

Year Ended December 31, 

Year Ended December 31, 

(In thousands)

    

2020

    

2019

    

2018

    

2023

    

2022

US

$

70,319

$

54,760

$

49,239

$

57,201

$

51,124

Europe

 

1,538

18,654

 

11,117

 

223

222

Asia

14

Total revenue

$

71,857

$

73,414

$

60,370

$

57,424

$

51,346

99

The following table summarizes total revenue from each of the Company’s customers or collaboration partners who individually accounted for 10% or more of total revenue (as a percentage of total revenues) during the most recent three years:

Year Ended December 31, 

Year Ended December 31, 

(% of total revenue)

    

2020

    

2019

    

2018

    

2023

    

2022

    

Viatris

63

%  

44

%  

0

100

%  

95

%  

Janssen

37

%  

42

%  

51

%  

Pfizer

0

14

%  

0

Alfasigma

0

0

18

%  

Viatris accounted for 100% of the Company’s receivable from collaborative arrangements as of December 31, 2023 and 2022.

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 (the “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.

F-20

At the time of the sale, the velusetrag assets had no remaining book value on the Company’s records, and all of the velusetrag assets were delivered to Alfasigma. For year ended December 31, 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, 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 consolidated balance sheets that sum to the total of the same such amounts shown on the consolidated statements of cash flows.

December 31, 

December 31, 

(In thousands)

2020

2019

2018

2023

2022

Cash and cash equivalents

$

81,467

$

58,064

$

378,021

$

39,545

$

298,172

Restricted cash

833

833

833

836

836

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

$

82,300

$

58,897

$

378,854

$

40,381

$

299,008

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. As of December 31, 2020, the Company also maintained 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 short and long-term marketable securities that are reported separately on the consolidated balance sheets.

The Company periodically engages in foreign exchange transactions as a part of its operations. The Company recognized net realized and unrealized foreign currency gains of $0.06 million for the year ended December 31, 2023 and net realized and unrealized foreign currency losses of $0.9 million for the year ended December 31, 2022. These amounts are included in the Company’s consolidated statements of operations within “Interest income and other income, net”.

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 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:

December 31, 2023

    

    

    

Gross

    

Gross

    

Amortized

Unrealized

Unrealized

Estimated

(In thousands)

Cost

Gains

Losses

Fair Value

US government securities

Level 1

$

29,848

$

$

(29)

$

29,819

US government agency securities

Level 2

 

4,428

(8)

 

4,420

Corporate notes

Level 2

 

28,670

4

(32)

 

28,642

Marketable securities

62,946

4

(69)

62,881

Money market funds

Level 1

26,179

26,179

Total

$

89,125

$

4

$

(69)

$

89,060

100F-21

Available-for-sale securities are summarized below:

December 31, 2020

    

    

    

Gross

    

Gross

    

Amortized

Unrealized

Unrealized

Estimated

(In thousands)

Cost

Gains

Losses

Fair Value

US government securities

Level 1

$

75,036

$

34

$

$

75,070

US government agency securities

Level 2

 

74,971

18

 

74,989

Corporate notes

Level 2

 

5,046

(1)

 

5,045

Commercial paper

Level 2

56,374

1

(5)

56,370

Marketable securities

211,427

53

(6)

211,474

Money market funds

Level 1

Total

$

211,427

$

53

$

(6)

$

211,474

December 31, 2019

December 31, 2022

    

    

    

Gross

    

Gross

    

    

    

    

Gross

    

Gross

    

Amortized

Unrealized

Unrealized

Estimated

Amortized

Unrealized

Unrealized

Estimated

(In thousands)

Cost

Gains

Losses

Fair Value

Cost

Gains

Losses

Fair Value

US government securities

Level 1

$

100,746

$

108

$

$

100,854

Level 1

$

24,873

$

8

$

$

24,881

Corporate notes

Level 2

 

25,466

 

9

 

(1)

 

25,474

US government agency securities

Level 2

 

20,869

 

4

 

 

20,873

Commercial paper

Level 2

112,066

31

(2)

112,095

Level 2

37,307

(27)

37,280

Marketable securities

238,278

148

(3)

238,423

83,049

12

(27)

83,034

Money market funds

Level 1

35,736

35,736

Level 1

220,508

220,508

Total

$

274,014

$

148

$

(3)

$

274,159

$

303,557

$

12

$

(27)

$

303,542

As of December 31, 2020,2023, all of the Company’s available-for-sale securities had contractual maturities within 8six months, and the weighted-average maturity of marketable securities was approximately 3less than two months. There were 0 no transfers between Level 1 and Level 2 during the periods presented, and there have been no material changes to the Company’s valuation techniques during the year ended December 31, 20202023 or 2019.2022.

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

December 31, 2020

December 31, 2023

Less than 12 Months

Greater than 12 Months

Total

Less than 12 Months

Greater than 12 Months

Total

    

    

Gross

    

Gross

    

Gross

    

    

Gross

    

Gross

    

Gross

Estimated

Unrealized

Estimated

Unrealized

Estimated

Unrealized

Estimated

Unrealized

Estimated

Unrealized

Estimated

Unrealized

(In thousands)

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

US government securities

$

29,819

$

(29)

$

$

$

29,819

$

(29)

US government agency securities

4,420

(8)

4,420

(8)

Corporate notes

$

5,045

$

(1)

$

$

$

5,045

$

(1)

23,641

(32)

23,641

(32)

Commercial paper

39,375

(5)

39,375

(5)

Total

$

44,420

$

(6)

$

$

$

44,420

$

(6)

$

57,880

$

(69)

$

$

$

57,880

$

(69)

December 31, 2019

December 31, 2022

Less than 12 Months

Greater than 12 Months

Total

Less than 12 Months

Greater than 12 Months

Total

    

    

Gross

    

Gross

    

Gross

    

    

Gross

    

Gross

    

Gross

Estimated

Unrealized

Estimated

Unrealized

Estimated

Unrealized

Estimated

Unrealized

Estimated

Unrealized

Estimated

Unrealized

(In thousands)

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

Corporate notes

$

5,507

$

(1)

$

$

$

5,507

$

(1)

Commercial paper

28,137

(2)

28,137

(2)

$

37,280

$

(27)

$

$

$

37,280

$

(27)

Total

$

33,644

$

(3)

$

$

$

33,644

$

(3)

$

37,280

$

(27)

$

$

$

37,280

$

(27)

The Company invests primarily in high credit quality and short-term maturity debt securities with the intent to hold such securities until maturity at par value. The Company does not intend to sell the investments that are currently in an unrealized loss position, and it is unlikely that it will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity. The Company reviewed its available-for-sale debt securities and determined that there were 0no credit-related losses to be recognized as of December 31, 2020.2023, and there were no individual securities that were in a significant unrealized loss position as of December 31, 2023.

For the year ended December 31, 2023, the Company sold marketable securities for total proceeds of $71.4 million. The sales were based on the specific identification method, and the realized net gain from the sale was immaterial. For the year ended December 31, 2022, the Company did not sell any marketable securities.

101F-22

As of December 31, 2020, the Company’s accumulated other comprehensive income on its consolidated balance sheets consisted of net unrealized gains or losses on available-for-sale investments. For the year ended December 31, 2020, the Company sold marketable securities for total proceeds of $19.9 million and recognized minimal net realized gains from the sales based on the specific identification method. For the year ended December 31, 2019 and 2018, the Company did not sell any of its marketable securities.

7.Property and Equipment

Property and equipment are held predominantly in the US and consisted of the following:

December 31, 

(In thousands)

    

2023

    

2022

Computer equipment

$

1,883

$

1,921

Software

762

1,088

Furniture and fixtures

1,738

1,674

Laboratory equipment

60

15,445

Leasehold improvements

26,207

24,583

Subtotal

30,650

44,711

Less: accumulated depreciation

(21,582)

(32,836)

Property and equipment, net

$

9,068

$

11,875

For the year ended December 31, 2023 and 2022, depreciation expense for property and equipment was $1.9 million and $2.6 million, respectively.

As a result of strategic actions announced in February 2023 (see “Note 16. 2021 Restructuring and 2023 Strategic Actions”), the Company completed an auction of certain R&D laboratory equipment in 2023 with a carrying value of $2.7 million. The Company received net proceeds of $1.5 million and recognized a non-cash loss of $1.2 million resulting from the auction.

8. Leases

South San Francisco Lease and Subleases

As of December 31, 2023, the Company leased approximately 162,000 square feet of office and laboratory space in two buildings in South San Francisco, California, under a non-cancelable operating lease that ends in May 2030 (“SSF Lease”). The lease includes a tenant improvement allowance that expires in November 2024 and had a remaining balance of $6.8 million and $8.9 million, as of December 31, 2023 and 2022, respectively.

In June 2022, the Company entered into a non-cancelable agreement under which it subleased approximately 78,000 square feet of its South San Francisco office and laboratory space to an unaffiliated company. The sublease term continues through May 2030, consistent with the remaining lease term of the SSF Lease, and the subtenant has no option to extend the sublease. Under the terms of the sublease, the Company is entitled to receive an initial monthly base rent of $0.5 million which will be subject to annual increases of 3%, as well as the subtenant’s proportionate share of the property’s operating expenses. As part of the sublease terms, the subtenant was allocated $6.5 million of the Company’s $8.9 million remaining tenant improvement allowance in June 2022. The Company expects to receive a total of $51.7 million in base rent over the sublease term which represents a $13.5 million premium (before sublease execution-related costs) over its proportionate lease payment obligations under the SSF Lease. Under the terms of the SSF Lease, 50% of the sublease premium, equal to approximately $6.7million, shall be shared with the landlord and 50% shall be retained by the Company.

In July 2021, the Company entered into a non-cancelable agreement under which it subleased approximately 21,000 square feet of its South San Francisco office and laboratory space to another unaffiliated company. Under the terms of the sublease agreement, the sublease term continues through September 2028, and the parties have no option to extend the sublease. Either the Company or the subtenant may terminate the sublease by giving the other party ten days prior written notice. The Company is entitled to receive an initial monthly base rent of $0.1 million, with annual base rent increases of 3% and the subtenant’s proportionate share of the building’s operating expenses. The Company expects to receive a total of $13.1 million over the sublease term which represents a $4.2 million premium (before sublease execution-related costs) over its proportionate lease payment obligations under the SSF Lease. Under the terms of the head SSF Lease, 50% of the sublease premium, equal to $2.1million, shall be shared with the landlord and 50% shall be retained by the Company.

F-23

7. Debt

Debt consistedThe Company recognizes the sublease income on a straight-line basis over the term of its two subleases which is reflected as a reduction of R&D expense and selling, general and administrative expenses in the following liability components:

December 31, 

(In thousands)

    

2020

    

2019

9.5% Non-Recourse 2035 Notes:

Principal amount

$

418,572

$

Less: 5% retained by the Company

(20,929)

Unamortized debt issuance costs - 9.5% Non-Recourse 2035 Notes

 

(3,847)

Unamortized debt issuance costs - Modified 9.0% Non-Recourse 2033 Notes

(1,589)

3.25% Convertible 2023 Notes:

Principal amount

230,000

230,000

Unamortized debt issuance costs

(3,037)

(4,110)

9.0% Non-Recourse 2033 Notes:

 

 

Principal amount

247,734

Less: 5% retained by the Company

(12,387)

Unamortized debt issuance costs

(6,196)

Total debt

$

619,170

$

455,041

Debt interest expense consistsconsolidated statements of operations. No lease modification was deemed to have occurred by entering into the following components:sublease agreements because the Company was not released, either fully or in part, from its obligations under the SSF Lease.

Year Ended December 31,

(In thousands)

    

2020

    

2019

2018

Stated coupon interest

$

42,625

$

28,811

$

9,316

Amortization of debt issuance costs

1,960

3,051

1,166

Total debt interest expense

$

44,585

$

31,862

$

10,482

9.5% Non-Recourse Notes Due 2035See Note 16. 2021 Corporate Restructuring Completion and 2023 Strategic Actions” for information regarding the impairment evaluation related to additional South San Francisco office and laboratory space that is available for sublease as of December 31, 2023.

Dublin Lease

On February 21, 2020, Theravance Biopharma R&D, Inc. (“Theravance R&D”), a wholly-owned subsidiary ofIn April 2017, the Company and Triple Royalty Sub II LLC (the “Issuer II” or “Triple II”), a wholly-owned subsidiary of Theravance Biopharma R&D, entered into certain note purchase agreements (“Note Purchase Agreements”) with certain note purchasers (“Note Purchasers”), relating to the private placement by Issuer II of $400.0 million 9.5% Fixed Rate Term Notes due on or before 2035 (the “Non-Recourse 2035 Notes”). NaN percent of the Non-Recourse 2035 Notes were sold to the Note Purchasers pursuant to the Note Purchase Agreements. The remaining 5% of the Non-Recourse 2035 Notes (the “Retained Notes”) were retained by the Company to comply with Regulation RR — Credit Risk Retention (17 C.F.R. Part 246). The Retained Notes are eliminated in the Company’s consolidated financial statements. The transaction closed on February 28, 2020.

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

The source of principal and interest payments for the Non-Recourse 2035 Notes are the future royalty payments generated from the TRELEGY program, and as a result, the holders of the Non-Recourse 2035 Notes have no recourse against the Company even if the TRELEGY payments are insufficient to cover the principal and interest payments for

102

the Non-Recourse 2035 Notes. Prior to and including the December 5, 2024 payment date, in the event that the distributions received by the Issuer II from TRC in a quarter is less than the interest accrued for that quarter, the principal amount of the Non-Recourse 2035 Notes will increase by the interest shortfall amount for that quarter. The net principal amount of the Non-Recourse 2035 Notes increased by $17.6 million which represented the shortfall between the distributions received from TRC and the total interest payments due during the year ended December 31, 2020. While the holders of the Non-Recourse 2035 Notes have no recourse against the Company, the terms of the Non-Recourse 2035 Notes also provide that the Company, at its option, may satisfy the quarterly interest payment obligations by making a capital contribution to the Issuer II.

The Non-Recourse 2035 Notes are not convertible into Company equity and have no security interest in nor rights under any agreement with Glaxo Group Limited or one of its affiliates (“GSK”). See “Note 9. Theravance Respiratory Company, LLC” for further information regarding GSK. The Non-Recourse 2035 Notes may be redeemed by Issuer II on and after February 28, 2022, in whole or in part, at specified redemption premiums. The Non-Recourse 2035 Notes bear an annual interest rate of 9.5%, with interest and principal paid quarterly beginning June 5, 2020. Since the principal and interest payments on the Non-Recourse 2035 Notes are ultimately based on royalties from TRELEGY product sales, which will vary from quarter to quarter, the Non-Recourse 2035 Notes may be repaid prior to the final maturity date in 2035. Following the redemption or repayment of the Non-Recourse 2035 Notes, all TRELEGY-related pledged cash flows will revert back to the Company.

The portion of the Non-Recourse 2035 Notes classified as a current liability, if any, is based on the amount of royalties received, or receivable, as of December 31, 2020, that are expected to be used to make a principal repayment on the Non-Recourse 2035 Notes within the next 12 months.

As of December 31, 2020, the net principal and estimated fair value of the Non-Recourse 2035 Notes were $397.6 million and $399.6 million, respectively. The inputs to determine fair value of the Non-Recourse 2035 Notes are categorized as Level 2 inputs. Level 2 inputs include quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

9.0% Non-Recourse Notes Due 2033

In November 2018, the Company entered into note purchase agreements relating to the private placement of $250.0 million aggregate principal amount of 9.0% non-recourse notes, due on or before 2033 (the “Non-Recourse 2033 Notes”) issued by the Company’s wholly-owned subsidiary, Triple Royalty Sub LLC (the “Issuer”). On February 28, 2020, the Company refinanced the Non-Recourse 2033 Notes by issuing the Non-Recourse 2035 Notes and a portion of those proceeds were used to repay, in full, the remaining outstanding balance of the Company’s Non-Recourse 2033 Notes. Pursuant to the terms of the Non-Recourse 2033 Notes, the Company paid a debt redemption premium of 5% of the outstanding principal as of the refinancing date.

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

103

For debt determined to be extinguished, the total unamortized deferred financing costs and the associated redemption premium of $15.5 million were expensed as “Loss on extinguishment of debt” within the consolidated statements of operations for the year ended December 31, 2020. In addition, $0.3 million of new third-party costs were expensed, and $4.4 million of new creditor fees were capitalized as debt discount. For debt determined to be modified, $0.5 million of new creditor fees were expensed, and the related unamortized deferred financing costs of $1.8 million, as of February 28, 2020, will continue to be amortized through the remaining term of the Non-Recourse 2035 Notes.

3.25% Convertible Senior Notes Due 2023

In November 2016, the Company completed an underwritten public offering of $230.0 million of 3.25% convertible senior notes, due 2023 (the "Convertible Senior 2023 Notes") for net proceeds of $222.5 million. The Company incurred $7.5 million in debt issuance costs, which are being amortized to interest expense over the estimated life of the Convertible Senior 2023 Notes. The Convertible Senior 2023 Notes bear an annual interest rate of 3.25%, payable semi-annually in arrears, on November 1 and May 1 of each year.

The Convertible Senior 2023 Notes are senior unsecured obligations and rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the Convertible Senior 2023 Notes; equal in right of payment to any of the Company’s indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries.

The Convertible Senior 2023 Notes will mature on November 1, 2023, unless earlier redeemed or repurchased by the Company or converted. Holders may convert their Convertible Senior 2023 Notes into ordinary shares at an initial conversion rate of 29.0276 shares for each $1,000 principal amount of Convertible Senior 2023 Notes, which is equivalent to an initial conversion price of approximately $34.45 per share, subject to adjustment, in certain circumstances (including upon the occurrence of a fundamental change), at any time prior to the close of business on the second business day immediately preceding the maturity date. Upon the occurrence of a fundamental change involving the Company, holders of the Convertible Senior 2023 Notes may require the Company to repurchase all or a portion of their Convertible Senior 2023 Notes for cash at a redemption price equal to 100% of the principal amount of the Convertible Senior 2023 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, in some circumstances, the conversion rate of the Convertible Senior 2023 Notes will increase with a make whole premium for conversions in connection with certain fundamental changes.

The debt issuance costs related to the Convertible Senior 2023 Notes offering were capitalized as deferred financing costs and presented as a reduction of the carrying value of the financial liability on the Company’s consolidated balance sheets at December 31, 2020 and 2019.

The estimated fair value of the Convertible Senior 2023 Notes was $217.9 million and $236.0 million at December 31, 2020 and 2019, respectively. The estimated fair value was primarily based upon the underlying price of Theravance Biopharma’s publicly traded shares and other observable inputs as of December 31, 2020 and 2019. The inputs to determine fair value of the Convertible Senior 2023 Notes are categorized as Level 2 inputs. Level 2 inputs include quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

8. Leases

The Company leases approximately 170,000 square feet of office and laboratory space in 2 buildings in South San Francisco, California, under a non-cancelable operating lease that ends in May 2030 (“SSF Lease”). This lease includes a tenant improvement allowance that expires in May 2022 and had a remaining balance of $12.1million and $15.6 million, as of December 31, 2020 and 2019, respectively. The Company’s Irish subsidiary leasesleased approximately 6,100 square feet of office space in Dublin, Ireland, under a non-cancelable operating lease that expires in April 2027 (“Dublin Lease”). In May 2022, the Company entered into an agreement under which it assigned the Dublin Lease (“Lease Assignment”) to an unaffiliated company. The Company determined that the Lease Assignment would be accounted for as a lease modification under ASC 842, Leases. As a result of the lease modification, the Company reduced the value of its operating lease assets and liabilities in the consolidated balance sheets by $1.4 million and $1.5 million, respectively, in the second quarter of 2022. Under the Lease Assignment, the Company sold furniture and equipment located in the Dublin office to the unaffiliated company and recognized a net loss of $0.1 million from the sale.

Following the execution of the Lease Assignment, in May 2022, the Company entered into a new operating lease agreement for approximately700 square feet of office space in Dublin, Ireland, effective June 2022. The lease has a two-year term ending in May 2024, and the Company may terminate the lease by providing three months prior written notice. Under the new lease, the Company will incur total base rent expense of approximately $0.4 million (or $0.2 million annually) which is recognized on a straight-line basis over the two-year lease term. The Company’s annual straight-line base rent for its previous Dublin Lease was approximately $0.4 million.

The Company has evaluated its existing leases and determined that they were all operating leases. The present values of the remaining lease payments and corresponding right-of-use assets were as follows, and the difference between the right-of-use assets and lease liabilities was primarily due to office-related deferred rent payments that are payable in future periods and tenant improvement reimbursements.

(In thousands)

Classification

    

December 31, 2023

    

December 31, 2022

Assets

Operating lease assets

Operating lease assets

$

36,287

$

40,126

Liabilities

Current:

Operating lease liabilities

Operating lease liabilities

$

3,923

$

6,753

Non-current:

Operating lease liabilities

Long-term operating lease liabilities

 

45,236

 

45,407

Total operating lease liabilities

$

49,159

$

52,160

In 2023, the Company recognized an increase to other assets and other current liabilities of $6.5 million for lessor tenant improvement allowances that have been assigned to its sublessees. The assigned tenant improvement allowance recorded as other assets is amortized over the lease term, and the assigned tenant improvement allowance recorded as a current liability will expire in November 2024.

104F-24

Lease”). In addition, the Company leases equipment for clinical research studies with an estimated lease term ending in August 2022.

The SSF Lease contains 2 options to extend the term of the lease for successive periods of five years each, and the Dublin Lease contains a lease termination option in April 2024 at the Company’s discretion. The equipment lease has undergone extensions to the initial lease term due to delays in patient enrollment in the clinical trial, which the Company has characterized as lease modifications. The equipment lease contains options to terminate the agreements at the Company’s discretion. The two options to extend the SSF Lease and the options to terminate the Dublin Lease and equipment lease were not recognized in the determination of the Company’s right-of-use assets and lease liabilities below.

The Company has evaluated its leases and determined that they were all operating leases. The present values of the remaining lease payments and corresponding right-of-use assets were as follows, and the difference between the right-of-use assets and lease liabilities was due to office-related deferred rent payments that are payable in future periods.

(In thousands)

Classification

    

December 31, 2020

    

December 31, 2019

Assets

Operating lease assets

Operating lease assets

$

43,260

$

46,604

Liabilities

Current:

Operating lease liabilities

Operating lease liabilities

$

9,867

$

7,762

Non-current:

Operating lease liabilities

Long-term operating lease liabilities

 

47,220

 

47,725

Total operating lease liabilities

$

57,087

$

55,487

Lease expense wasand sublease income were included within operating expenses in the consolidated statements of operations as follows:

Year Ended

Year Ended

Year Ended

Year Ended

Year Ended

(In thousands)

Classification

    

December 31, 2020

    

December 31, 2019

    

December 31, 2018

Classification

    

December 31, 2023

    

December 31, 2022

    

Operating lease expense(1)

Selling, general and administrative expense

$

7,974

$

7,959

$

7,985

Selling, general and administrative expense

$

8,548

$

8,314

Operating lease expense

Research and development expense

758

164

Total operating lease expense (1)

$

8,732

$

8,123

$

7,985

Year Ended

Year Ended

(In thousands)

Classification

    

December 31, 2023

    

December 31, 2022

    

Operating sublease income

Selling, general and administrative expense

$

8,361

$

5,420

(1)Represents operating lease expense before sublease income. Excludes short-term leases which were immaterialnot material and office lease service-related charges.

Cash paidSupplemental information related to leases for amounts included in the measurement of lease liabilitiesperiods reported was as follows:

Year Ended

Year Ended

(In thousands)

    

December 31, 2020

    

December 31, 2019

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases

$

3,804

$

7,210

105

As of December 31, 2020, the maturities of the Company’s lease liabilities were as follows:

Year Ended

Year Ended

(In thousands, except weighted average amounts)

    

December 31, 2023

    

December 31, 2022

Operating cash flows from operating leases

$

9,966

$

9,312

Weighted average remaining lease term

6.4 years

7.4 years

Weighted average discount rate

8.64

%

8.63

%

(In thousands)

Year ending December 31:

    

2021

$

10,330

2022

10,345

2023

10,134

2024

10,351

2025

10,649

Thereafter

49,309

Total operating lease payments

$

101,118

Less: Estimated tenant improvement allowance

(12,053)

Less: Imputed interest

(31,978)

Present value of operating lease liabilities

$

57,087

AsThe Company determined that an implicit interest rate of December 31, 2020, the weighted-average remaining lease term was 9.1 years,its leases were not determinable and, the weighted-average discounttherefore, used an incremental borrowing rate used to determine the present value of its lease liabilities was 8.64%.liabilities. The Company’s discountincremental borrowing rate was primarily derived from the 9.0% interest rate on its previously issued Non-Recourse 2033 Notes in November 2018 and did not involve any significant assumptions.

As of December 31, 2023, the maturities of the Company’s lease liabilities were as follows:

(In thousands)

Year ending December 31:

    

2024

$

3,897

2025

10,940

2026

11,198

2027

11,479

2028

11,739

Thereafter

16,837

Total operating lease payments

$

66,090

Less: Estimated tenant improvement allowance

(6,838)

Less: Imputed interest

(10,093)

Present value of operating lease liabilities

$

49,159

As of December 31, 2023, the undiscounted cash flows to be received related to the Company’s subleases were as follows:

(In thousands)

Year ending December 31:

    

2024

$

7,944

2025

8,181

2026

8,425

2027

8,675

2028

8,412

Thereafter

10,089

Total operating sublease receipts

$

51,726

F-25

9. Sale of Equity Interests in Theravance Respiratory Company, LLC and Discontinued Operations

Background

In May 2014, the Company entered into the TRC LLC Agreement with Innoviva, Inc. (“Innoviva”) that governed the operation of Theravance Respiratory Company, LLC (“TRC”). Under the TRC LLC Agreement, Innoviva was the manager of TRC, and the business and affairs of TRC were managed exclusively by the manager, including (i) day to day management of the drug programs in accordance with the existing GSK agreements; (ii) preparing an annual operating plan for TRC; and (iii) taking all actions necessary to ensure that the formation, structure and operation of TRC complied with applicable law and partner agreements. The Company was responsible for its proportionate share of TRC’s administrative expenses incurred as communicated to the Company, by Innoviva.

Through the Company’s 85% equity interest in TRC, the Company iswas entitled to receive an 85% economic interest in any future payments made by GSK under the strategic alliance agreement and under the portion of the collaboration agreement assigned to TRC (net of TRC expenses paid and the amount of cash, if any, expected to be used by TRC pursuant to the TRC LLC Agreement over the next 4four fiscal quarters). The primary drug program assigned to TRC is Trelegy.

In May 2014,Sale of Equity Interests in TRC

On July 20, 2022, the Company completed the sale of its 2,125 Class B Units and 6,375 Class C Units (collectively, the “Issuer II Units”) of TRC to, and entered into a sale of future royalties from sales of ampreloxetine (see “Note 10. Ampreloxetine Funding”) with, Royalty Pharma Investments 2019 ICAV, an Irish collective asset-management vehicle (“Royalty Pharma”), pursuant to the Equity Purchase and Funding Agreement, dated as of July 13, 2022 (including the schedules and exhibits thereto, the “Purchase Agreement”), by and between the Company and Royalty Pharma (collectively with the other transactions contemplated by the Purchase Agreement, the “TRC Transaction”). The Issuer II Units represent the right to receive 85% of the royalty payments on worldwide net sales of Assigned Collaboration Products (as defined in the Purchase Agreement) pursuant to the terms of that certain Collaboration Agreement, dated as of November 14, 2002, by and between Innoviva, Inc. (formerly known as Theravance, Inc.), a Delaware corporation (“Innoviva”), and Glaxo Group Limited, a private company limited by shares registered under the laws of England and Wales (“GSK”) (as amended, the “Collaboration Agreement”). Assigned Collaboration Products is primarily comprised of Trelegy ELLIPTA (“TRELEGY”). Total consideration payable by Royalty Pharma under the terms of the TRC LLC AgreementTransaction included initial consideration with Innoviva, Inc. (“Innoviva”) that governsa fair value of $1,326.6 million plus the operationright to receive additional payments as further described below.

At the closing of TRC. Under the TRC LLC Agreement, Innoviva isTransaction (the “Closing”), the manager of TRC,Company received approximately $1.1 billion in cash. From and the business and affairs of TRC are managed exclusively by the manager, including (i) day to day management of the drug programs in accordanceafter January 1, 2023, for any calendar year starting with the existing GSK agreements; (ii) preparing an annual operating planyear ended December 31, 2023 and ending with the year December 31, 2026, upon certain milestone minimum royalty amounts for TRC; and (iii) taking all actions necessarythe Assigned Collaboration Products being met, Royalty Pharma is obligated to ensure that the formation, structure and operation of TRC complies with applicable law and partner agreements. The Company is responsible for its proportionate share of TRC’s administrative expenses incurred, and communicatedmake certain cash payments to the Company by Innoviva.(the “Milestone Payments”), which are not to exceed $250.0 million in aggregate. For the year ended December 31, 2023, the minimum royalty amount was not achieved, and the remaining aggregate Milestone Payments available to the Company is $200.0 million.

Additionally, the Company will receive from Royalty Pharma 85% of the royalty payments on the Assigned Collaboration Products payable (a) for sales or other activities occurring on and after January 1, 2031 related to the Assigned Collaboration Products in the US, and (b) for sales or other activities occurring on and after July 1, 2029 related to the Assigned Collaboration Products outside of the US.

The Purchase Agreement contained customary representations and warranties of the Company and Royalty Pharma, including with respect to organization, authorization, intellectual property matters and tax matters, and certain covenants with respect to confidentiality, taxes and actions and conduct relating to preservation of TRC prior to the Closing. The Company and Royalty Pharma will each indemnify the other against damages arising from breaches of representations, warranties, and covenants under the Purchase Agreement.

Effective as of the Closing, the Company consented to certain amendments to the Collaboration Agreement and the Extension Agreement, dated as of March 3, 2014, by and between the Company and GSK, as well as the termination

F-26

of the Master Agreement, dated as of March 3, 2014, by and between Innoviva, the Company and GSK, and further released Innoviva, Innoviva TRC Holdings LLC, a Delaware limited liability company, Royalty Pharma and TRC for claims relating to TRC or the ownership of TRC by the Company or Innoviva prior to the Closing.

The Company evaluated the TRC Transaction under ASC 860, Transfers and Servicing of Financial Assets, (“ASC 860”) and determined that the future potential Milestone Payments and royalty payments are considered a form of continuing involvement between the Company and Royalty Pharma. The Company further evaluated the TRC Transaction under ASC 860 and concluded that (i) the equity interests in TRC have been isolated from the Company (even in the event of bankruptcy or other receivership); (ii) Royalty Pharma has the right to pledge or exchange the TRC assets it received from the Company without constraint; and (iii) the Company had surrendered control over its equity interests in TRC to Royalty Pharma. Based on the Company’s evaluation under ASC 860, the TRC Transaction was treated as a sale, and the Company recognized a gain from the sale of its equity interests in TRC of $1,141.1 million in 2022 based on the excess of the total net consideration allocated to the sale of the Company’s equity interests (based on relative fair value) of $1,301.6 million over the carrying value of the equity interests sold of $136.7 million, less transaction costs of $23.8 million. The total net consideration of $1,301.6 million included upfront cash of $1,107.4 million, plus an estimated $194.2 million representing the fair value of the future Milestone Payments and royalties (collectively, “Contingent Consideration”).

The Contingent Consideration was initially measured at fair value utilizing a Monte Carlo simulation model to calculate the present value of the risk-adjusted cash flows estimated to be received from the Contingent Consideration. The discount rate utilized in the valuation model was 7.83%. The fair value model involved significant unobservable inputs derived using management’s estimates. Management’s estimates were based in part on external data and reflected management’s judgements and forecasts. The primary significant unobservable input was the estimate of forecasted TRELEGY net revenues which is considered a Level 3 fair value input. The Company reassesses the carrying value of the Contingent Consideration when indicators of impairment are identified and will recognize any increases in the carrying value of the asset when such contingent gains are realized. As of December 31, 2023, there have been no changes to the carrying value of the Contingent Consideration since its initial measurement date in July 2022.

The Contingent Consideration is subject to counterparty credit risk, and the carrying value of the Contingent Consideration represents the maximum amount of potential loss due to credit risk. To date, the Company has not recorded any credit losses related to the Contingent Consideration. The Contingent Consideration is presented on the consolidated balance sheets as future contingent milestone and royalty assets.

Discontinued Operations

The TRC Transaction represented a monetization of a significant equity method investment that had a major effect on the Company’s financial results. In accordance with GAAP, the TRC Transaction was accounted for as a sale of a financial asset. For all periods presented, balances and the results related to TRC have been classified as discontinued operations on the Company’s consolidated financial statements.

The results of discontinued operations consisted of the following:

Year Ended

December 31,

(In thousands)

    

2022

Income from investments in TRC, LLC

$

53,237

Transaction-related legal expenses (prior to July 20, 2022)

(5,057)

Interest expense on 9.5% Non-recourse notes due 2035

(21,312)

Loss on extinguishment of debt

(24,022)

Net gain from sale of equity interests in TRC, LLC

1,141,084

Provision for income tax expense

(178,974)

Net income from discontinued operations

$

964,956

F-27

TRC Financial Information

Prior to the TRC Transaction, the Company analyzed its ownership, contractual and other interests in TRC to determine if it iswas a variable-interest entity (“VIE”), whether the Company hashad a variable interest in TRC and the nature and extent of that interest. The Company determined that TRC iswas a VIE. The party with the controlling financial interest, the primary beneficiary, is required to consolidate the entity determined to be a VIE. Therefore, the Company also assessed whether it iswas the primary beneficiary of TRC based on the power to direct TRC’s activities that most significantly impact TRC’s economic performance and its obligation to absorb TRC’s losses or the right to receive benefits from TRC that could potentially be significant to TRC. Based on the Company’s assessment, the Company determined that it iswas not the primary beneficiary of TRC, and, as a result, the Company doesdid not consolidate TRC in its consolidated financial statements. The Company’s maximum exposure to loss, as a result of its involvement with TRC, iswere the amounts recorded in the consolidated balance sheets within “Amounts due from TRC, LLC” and “Equity in net assets of TRC, LLC”.TRC was recognized in the Company’s consolidated financial statements under the equity method of accounting.

For the year ended December 31, 2020, 2019, and 2018,2022, the Company recognized net royalty income of $68.4 million, $33.7 million, and $11.2 million, respectively, within the consolidated statements of operations within “Income from its investment in TRC LLC”. These amounts were recorded netof $53.2 million. As noted above, TRC is being recognized as discontinued operations as a result of the Company’s share of TRC’s expenses of $2.2 million, $2.7 million for the year ended December 31, 2020 and 2019, respectively. There were minimal TRC expenses for the year ended December 31, 2018. The Company’s share of TRC expenses for 2020 and 2019 was primarily comprised of TRC legal and related fees associated with the arbitration between Innoviva, TRC and the Company.Transaction.

TRC’s balance sheet as of July 20, 2022 and TRC’s statement of income for the period from January 1, 2022 to July 20, 2022, including the portion of equity interest that the Company did not own, were as follows:

(In thousands)

    

July 20, 2022

Assets

Cash and cash equivalents

$

29,309

Related party receivables from collaborative arrangements

42,720

Total assets

$

72,029

Liabilities and LLC Members' Equity

Accrued liabilities

LLC members' equity

72,029

Total liabilities and LLC members' equity

$

72,029

Period Ended

(In thousands)

July 20, 2022

Royalty revenue and gross profit

$

72,029

General and administrative expenses

(332)

Other income, net

10

Realized loss on equity and long-term investments

(39,385)

Changes in fair value of equity and long-term investments, net

(8,884)

Net Income

$

23,438

10. Ampreloxetine Funding

Under the terms of the Purchase Agreement (see “Note 9. Sale of Equity Interests in Theravance Respiratory Company, LLC and Discontinued Operations”), the Company received $25.0 million in cash from Royalty Pharma in exchange for certain royalty rights to ampreloxetine and is entitled to receive an additional $15.0 million upon the first regulatory approval of any pharmaceutical product that contains ampreloxetine as an active pharmaceutical ingredient by either (a) the FDA or (b) the first of (i) the European Medicines Agency or (ii) all four of Germany, France, Italy and Spain. In exchange for the $25.0 million and potential $15.0 million in cash (the “Ampreloxetine Funding”), the Company will make quarterly royalty payments to Royalty Pharma equal to the amount of Ampreloxetine Net Sales (as defined in the Purchase Agreement) recognized during the applicable quarter multiplied by 2.5% for the first $500.0 million in Ampreloxetine Net Sales and 4.5% for Ampreloxetine Net Sales in excess of $500.0 million. These royalty payments from the Company to Royalty Pharma will continue until, on a country by country and product by product basis, the later of (a) the expiration of all valid and enforceable claims of any patent, or pending claim of a good faith patent application during the five (5) years from the initial filing of such application, that cover the applicable

106F-28

ampreloxetine product or the manufacture or use thereof in the applicable country and (b) the expiration of regulatory exclusivity granted by the FDA or equivalent organization in the applicable country. As the Ampreloxetine Funding and the TRC Transaction were part of December 31, 2020, the same Purchase Agreement, the Company evaluated the total consideration received from Royalty Pharma and determined that the consideration received for each of the individual transactions approximated their relative fair values.

The Company accounted for the Ampreloxetine Funding received from Royalty Pharma as a contingent liability because the Company has significant continuing involvement in generating the future revenue stream from which the contingent liability would be repaid to Royalty Pharma. If the regulatory approval milestone is achieved, the Company will recognize the $15.0 million milestone payment as an increase to the accumulated liability. If and when ampreloxetine obtains regulatory approval and is commercially launched, the Company will recognize the royalties paid to Royalty Pharma as a decrease to the accumulated liability due to Royalty Pharma and a corresponding reduction in cash. If ampreloxetine regulatory approval is not achieved or if ampreloxetine sales are never recognized, the contingent liability recognized would be extinguished as the Company would not be obligated to repay any of the funding amounts duereceived from TRC were $53.8Royalty Pharma.

The carrying amount of the contingent liability for the future royalty payment was based on the upfront $25.0 million which were primarily comprisedreceived and management’s estimate of (i) net royalty income payments for the period from the first quarter of 2020 through the fourth quarter of 2020risk-adjusted future contingent $15.0 million milestone; and (ii) $8.5the amount and timing of royalties to be paid to Royalty Pharma and then discounted over the life of the arrangement using an imputed rate of interest. The excess of future estimated royalty payments over the amount of cash funding received will be recognized as interest expense using the effective interest method. The balance associated with the contingent liability was initially recorded as $25.0 million, representingnet of allocated transaction costs, in July 2022 and was reported on the consolidated balance sheets as future royalty payment contingency.

The Company periodically reassesses the amount and timing of estimated royalty payments. To the extent such payments are materially greater or less than the Company’s shareprevious estimates, the Company will prospectively adjust the amortization of the one-time fee that GSK paid to TRC upon terminationcontingent liability and the effective interest rate. The imputed effective rate of interest on the unamortized portion of the inhaled Bifunctional Muscarinic Antagonist-Beta2 Agonist (“MABA”) program in June 2020. The total amounts due,contingent liability was approximately 8.8% as of December 31, 2020, were net of a $2.5 million payment received from Innoviva in the fourth quarter of 2020 and have been recorded as a current asset in the consolidated balance sheets within “Amounts due from TRC, LLC”. In January 2021, the Company received an additional $21.3 million payment from Innoviva related to the receivable balance as of December 31, 2020.2023.

TRC’s summary financial informationThere are a number of factors that could materially affect the amount and timing of the contingent $15.0 million milestone and royalty payments, some of whichare not within the Company’s control. Such factors include, but are not limited to, changes in the projected market size, the introduction of competing products, patent protection matters, and regulatory product approval. The contingent liability was recognized using significant unobservable inputs. These inputs were derived using internal management estimates and reflect management’s judgements and forecasts. The significant unobservable inputs include the forecasted revenues, the probability and timing of the regulatory milestone, and the expected term of the royalty stream, as well as the overall probability of ampreloxetine’s success. These estimates are considered Level 3 fair value inputs. A significant change in unobservable inputs could result in a material increase or decrease to the effective interest rate of the contingent liability.

Changes to the contingent liability for sale of future royalties were as follows as of or for the year ended December 31:31, 2023:

(In thousands)

    

2020

    

2019

2018

Current assets

$

63,027

$

36,737

Non-current assets

16,959

Current liabilities

508

3,069

Royalty revenue for the year ended

73,089

42,790

$

13,379

Revenue from collaborative arrangements for the year ended

10,000

Income from continuing operations and net income for the year ended

$

81,662

$

39,653

$

13,261

On June 10, 2020, the Company disclosed in a Form 8-K that it had formally objected to TRC and Innoviva, as the manager of TRC, regarding their proposed plan to use TRELEGY royalties to invest in certain privately-held companies, funds that would otherwise be available for distribution to the Company under the terms of the TRC LLC Agreement. In October 2020, Innoviva announced that TRC had invested $15.0 million of TRELEGY royalties in the equity securities of a privately held biopharmaceutical company. Consequently, the Company’s share of this investment of $12.8 million has been recorded as a long-term asset in the consolidated balance sheets under “Equity in net assets of TRC, LLC”. However, in October 2020, the Company initiated an arbitration proceeding against Innoviva and TRC challenging the authority of Innoviva and TRC to pursue such a business plan rather than distribute such funds to the Company in a manner consistent with the TRC LLC Agreement and the Company’s 85% economic interest in TRC. The arbitration hearing was held during the week of February 16, 2021, with post-hearing briefing and arguments to take place over the next few weeks. The Company currently anticipates a decision in those proceedings near the end of the first quarter or early in the second quarter of 2021.

(In thousands)

    

Balance at December 31, 2022

$

25,438

Non-cash interest expense accretion

 

2,350

Balance at December 31, 2023

$

27,788

10.Property and Equipment

Property and equipment are held predominantly in the US and consisted11. Extinguishment of the following:Debt

9.5% Non-Recourse Notes Due 2035

December 31, 

(In thousands)

    

2020

    

2019

Computer equipment

$

2,314

$

2,119

Software

2,076

1,718

Furniture and fixtures

3,812

3,665

Laboratory equipment

29,753

30,546

Leasehold improvements

24,275

22,164

Subtotal

62,230

60,212

Less: accumulated depreciation

(45,808)

(47,568)

Property and equipment, net

$

16,422

$

12,644

For the year ended December 31, 2020, 2019 and 2018, depreciation expense for property and equipment was $3.3 million, $3.3 million and $3.0 million, respectively.

In February 2020, Theravance Biopharma R&D, Inc. (“Theravance R&D”), a wholly-owned subsidiary of the Company, and Triple Royalty Sub II LLC (the “Issuer II”), a wholly-owned subsidiary of Theravance Biopharma R&D, entered into certain note purchase agreements (“Note Purchase Agreements”) with certain note purchasers (“Note Purchasers”), relating to the private placement by Issuer II of $400.0 million 9.5% Fixed Rate Term Notes due on or

107F-29

before 2035 (the “Non-Recourse 2035 Notes”). The Non-Recourse 2035 Notes were secured by all of Issuer II’s right, title and interest as a holder of certain membership interests in TRC. TRC held the right to receive upward-tiering royalties ranging from 6.5% to 10% on worldwide net sales of TRELEGY, and, prior to the closing of the TRC Transaction (see “Note 9. Sale of Equity Interests in Theravance Respiratory Company, LLC and Discontinued Operations”).

In connection with the TRC Transaction, the Company redeemed the outstanding Non-Recourse 2035 Notes on July 20, 2022 and paid certain other fees and expenses in conjunction with that redemption. The total repayment was comprised of $400.0 million of net principal, $4.7 million of accrued interest, an early redemption premium fee of $20.0 million, and $0.2 million of transaction costs. The $400.0 million of net principal included $30.7 million of issuance-to-date net interest shortfall. The repayments resulted in a net loss on extinguishment of debt of $24.0 million, which was included within discontinued operations in the accompanying consolidated statements of operations for the year ended December 31, 2022. The loss on extinguishment of debt was calculated as the difference between the carrying amount of the Non-Recourse 2035 Notes and the amounts paid to redeem the Non-Recourse 2035 Notes.

3.25% Convertible Senior Notes Due 2023

In November 2016, the Company completed an underwritten public offering of $230.0 million of 3.25% convertible senior notes, due 2023 (the "Convertible Senior 2023 Notes") for net proceeds of $222.5 million. The Company incurred $7.5 million in debt issuance costs, which were being amortized to interest expense over the estimated life of the Convertible Senior 2023 Notes. The Convertible Senior 2023 Notes bore an annual interest rate of 3.25%, payable semi-annually in arrears, on November 1 and May 1 of each year.

On July 26, 2022, subsequent to the closing of the TRC Transaction, the Company launched a tender offer to retire the Convertible Senior 2023 Notes (the “2023 Notes Tender Offer”). Pursuant to the terms of the 2023 Notes Tender Offer, the Company paid all accrued and unpaid interest on the purchased Convertible Senior 2023 Notes from and including the last interest payment date of May 1, 2022 up to, but not including, the settlement date for the 2023 Notes Tender Offer. The 2023 Notes Tender Offer expired on August 23, 2022 (the “Expiration Time”). As of the Expiration Time, $230.0 million in aggregate principal amount of the Convertible Senior 2023 Notes, representing 100% of the outstanding Convertible Senior 2023 Notes, were validly tendered and not validly withdrawn pursuant to the 2023 Notes Tender Offer. The Company accepted for purchase all of the Convertible Senior 2023 Notes and settled the 2023 Notes Tender Offer on August 25, 2022.

Total payments made by the Company under the 2023 Notes Tender Offer included $230.0 million of principal, $2.4 million of accrued interest, and $1.6 million of transaction costs. The repayments resulted in a net loss on extinguishment of debt of $3.0 million, which is included within “loss on extinguishment of debt” in the accompanying consolidated statements of operations for the year ended December 31, 2022. The loss on extinguishment of debt was calculated as the difference between the carrying amount of the Convertible Senior 2023 Notes and the amounts paid to settle the Convertible Senior 2023 Notes.

As December 31, 2023, the Company did not have any long-term debt.

11.12. Share-Based Compensation

Theravance Biopharma Equity Plans

The Company has 3three equity compensation plans — itsthe 2013 Equity Incentive Plan (the “2013 EIP”), itsthe 2013 Employee Share Purchase Plan (the “2013 ESPP”) and itsthe 2014 New Employee Equity Incentive Plan (the “2014 NEEIP”). At inception, the Company was authorized to issue 5,428,571 ordinary shares under the 2013 EIP, 857,142 ordinary shares under the 2013 ESPP, and 750,000 ordinary shares under the 2014 NEEIP.

The 2013 EIP provides for the issuance of share-based awards, including restricted shares, restricted share units (“RSUs), options, share appreciation rights (“SARs”) and other equity-based awards, to Company employees, officers, directors, and consultants. As of January 1 of each year, commencing on January 1, 2015 and ending on (and including) January 1, 2023, the aggregate number of ordinary shares that may be issued under the 2013 EIP shall automatically increase by a number equal to the least of 5% of the total number of ordinary shares outstanding on December 31 of the prior year, 3,428,571 ordinary shares, or a number of ordinary shares determined by the Company’s board of directors. Options may be granted with an exercise price not less than the fair market value of the ordinary shares on the grant date. Under the terms of the Company’s 2013 EIP, options granted to employees generally have a maximum term of 10 years and vest over a four-year period from the date of grant; 25% vest at the end of one year, and 75% vest monthly over the remaining three years. The Company may grant options with different vesting terms from

F-30

time to time. Unless an employee’s termination of service is due to disability or death, upon termination of service, any unexercised vested options will generally be forfeited at the end of three months or the expiration of the option, whichever is earlier.

At the Company’s Annual General Meeting of Shareholders on May 2, 2023, the Company’s shareholders approved an amendment and restatement of the 2013 EIP to effect the following material changes to the existing plan: (i) extend the term of the 2013 EIP by an additional ten years; (ii) eliminate the provision that provided for automatic annual increases in the number of shares available for issuance under the 2013 EIP; (iii) reduce the number of shares reserved for issuance by 3,808,287 shares; (iv) eliminate the Company’s ability to reprice options and share appreciation rights without first obtaining shareholder approval; and (v) remove certain provisions no longer necessary since the repeal of the exemption from the annual deduction limitation imposed by Section 162(m) of the Internal Revenue Code for performance-based compensation.

Under the 2013 ESPP, the Company’s officers and employees may purchase ordinary shares through payroll deductions at a price equal to 85% of the lower of the fair market value of the ordinary share at the beginning of the offering period or at the end of each applicable purchase period. As of January 1 of each year, commencing on January 1, 2015 and ending on (and including) January 1, 2033, the aggregate number of ordinary shares that may be issued under the 2013 ESPP shall automatically increase by a number equal to the least of 1% of the total number of ordinary shares outstanding on December 31 of the prior year, 571,428 ordinary shares or a number of ordinary shares determined by the Company’s board of directors. The ESPP generally provides for consecutive and overlapping offering periods of 24 months in duration, with each offering period generally composed of 4four consecutive six-month purchase periods. The purchase periods end on either May 15 or November 15. ESPP contributions are limited to a maximum of 15% of an employee’s eligible compensation.compensation, up to applicable regulatory limits. The 2013 ESPP also includes a feature that provides for the existing offering period to terminate and for participants in that offering period to automatically be enrolled in a new offering period when the fair market value of an ordinary share at the beginning of a subsequent offering period falls below the fair market value of an ordinary share on the first day of such offering period.

The 2014 NEEIP provides for the issuance of share-based awards, including restricted shares, restricted share units,RSUs, non-qualified options and SARs to the Company’s employees. Options may be granted with an exercise price not less than the fair market value of the ordinary shares on the grant date. Under the terms of the 2014 NEEIP, options granted to employees generally have a maximum term of 10 years and vest over a four-year period from the date of grant; 25% vest at the end of one year, and 75% vest monthly over the remaining three years. The Company may grant options with different vesting terms from time to time. Unless an employee’s termination of service is due to disability or death, upon termination of service, any unexercised vested options will generally be forfeited at the end of three months or the expiration of the option, whichever is earlier.

Innoviva’s Equity Plans

Prior to the spin-off from its former parent company, Innoviva, in 2014 (“Spin-Off”), the Company’s employees may have received Innoviva stock-based compensation awards, and, therefore, the following disclosures include information regarding stock-based compensation expense allocated to Theravance Biopharma that relates to Innoviva stock-based equity awards.

At the time of the Spin-Off, Innoviva had 1 active stock-based incentive plan under which it granted stock-based awards to employees, officers and consultants, the 2012 Equity Incentive Plan. All outstanding stock options and restricted stock units (“RSUs”) held by (i) Innoviva employees who became the Company’s employees; and (ii) members of the board of directors of Innoviva who became members of the Company’s board of directors, in

108

connection with the Spin-Off were adjusted for the Spin-Off. Such awards, along with outstanding restricted stock awards (“RSAs”) held by Innoviva employees who became the Company’s employees in connection with the Spin-Off, will continue to vest and remain outstanding based on continuing employment or service with the Company.

The 2012 Equity Incentive Plan provided for the grant of incentive stock options, non-statutory stock options, restricted stock awards, stock unit awards and SARs to employees, non-employee directors and consultants. Stock options were granted with an exercise price not less than the fair market value of the common stock on the grant date. Stock options granted to employees generally have a maximum term of 10 years and vest over a four-year period from the date of grant; 25% vest at the end of one year, and 75% vest monthly over the remaining three years. However, Innoviva granted options with different vesting terms from time to time. Unless an employee’s termination of service is due to disability or death, upon termination of service, any unexercised vested options will be forfeited at the end of three months or the expiration of the option, whichever is earlier.

Performance-Contingent Awards

In 2016, the Compensation Committee of the Company’s board of directors (“Compensation Committee”) approved the grant of 1,575,000 performance-contingent restricted share awards (“RSAs”) and 135,000 performance-contingent restricted share units (“RSUs”) to senior management. The vesting of such awards is dependent on the Company meeting its critical operating goals and objectives during the five-year period from 2016 to December 31, 2020, as well as, continued employment. The goals that must be met in order for the performance-contingent RSAs and RSUs to vest are strategically important for the Company, and the Compensation Committee believes the goals should increase shareholder value. The awards have dual triggers of vesting based upon the achievement of these goals and continued employment.

Expense associated with these awards may be recognized during the years 2016 to 2020 depending on the probability of meeting certain performance conditions. Compensation expense relating to awards subject to performance conditions is recognized if it is considered probable that the performance goals will be achieved. The probability of achievement is reassessed at each quarter-end reporting period. Previously recognized expense is reversed in the period in which it becomes probable that the requisite service period will not be rendered. The awards are broken into three separate tranches and comprised of a share-based award component and a cash bonus award component. See “Note 13. Commitments and Contingencies” for information related to the cash bonus award component.

As of December 31, 2020, there were 414,0002023, the total number of these performance-contingent RSAs and 54,000shares available for future issuance under each of these performance-contingent RSUs outstanding, and as of December 31, 2019, there were 776,250 of these performance-contingent RSAs and 101,250 of these performance-contingent RSUs outstanding. The performance conditions associated with the first tranche of these awards were completed in the second quarter of 2018, and the Company recognized $1.7 million of share-based compensation expense for the year ended December 31, 2018 associated with the first tranche of these awards.plans were:

2013 EIP

5,339,942

2013 ESPP

2,453,502

2014 NEEIP

346,281

Total

8,139,725

Market and Performance-Contingent Awards

The performance conditions associated with the second tranche of theseCompany periodically grants market-based share awards were completed in the first quarter of 2019, and the expense associated with this second tranche was fully recognized in the first quarter of 2020.to employees. For the year ended December 31, 2020, 2019 and 2018,2023, the Company granted 165,000 market-based restricted share units (“RSUs”). The 165,000 RSUs had a fair value of $1.4 million on the grant date that vest upon the Company’s ordinary shares meeting certain market-based price targets followed by a service period. The fair value of these market-based RSUs is being recognized through February 2027. For the year ended December 31, 2023, the Company recognized $0.4$0.7 million $1.9 million and $2.6 million, respectively, of share-based compensation expense related to the second tranche of these awards.

In the first quarter of 2020, the performance conditions associated with the remaining third tranche There were completed and, as a result, the Company recognized $2.6 million in share-based compensation expense related to these awardsno market-based RSUs granted or expensed for the year ended December 31, 2020. As of December 31, 2020, the maximum remaining expense associated with the third tranche was $0.4 million (allocated as $0.1 million for research and development expense and $0.3 million for selling, general and administrative expense) and will be amortized through the first quarter of 2021.2022.

Separate from the performance-contingent awards described above, the Company periodically grants performance-contingent RSUs to individual employees. For the year ended December 31, 2020 and 2019, the Company recognized $1.0 million of share-based compensation expense related to such awards in each year. As of December 31, 2020, there were 70,000 shares of these performance-contingent RSUs outstanding that have a maximum remaining share-based compensation expense of $0.5 million with performance expiration dates through June 2022.

109F-31

Separate from the market-based RSUs described above, the Company granted 367,000 and 43,000 of performance-contingent RSUs for the year ended December 31, 2023 and 2022, respectively. The 367,000 and 43,000 RSUs had a fair value of $3.7 million and $0.4 million, respectively, on grant date with performance vesting dates through February 2026. As of December 31, 2023, the Company concluded that 59,000 of the RSUs were probable of achievement, and as a result, the Company recognized $0.4 million of cumulative catch-up share-based compensation expense for the year ended December 31, 2023.

Share-Based Compensation Modifications

As a result of the Company’s corporate restructuring announcement in September 2021, the Board of Directors’ Compensation Committee approved the acceleration of certain equity awards for employees affected by the restructuring. The Company accounted for this acceleration as a Type III modification (improbable to probable). In 2022, the Company completed the 2021 restructuring that resulted in an equity award Type III modification fair value of $2.5 million which was recorded in “Restructuring and related expenses” within the consolidated statements of operations for the year ended December 31, 2022. The total cumulative compensation cost previously recognized for these modified awards of $0.8 million was reversed in the year ended December 31, 2022 within “Research and development” and “Selling, general and administrative” expenses. The acceleration resulted in a net incremental share-based compensation expense of $1.7 million for the year ended December 31, 2022 and impacted approximately 40 terminated employees that met the conditions of the acceleration.

Share-Based Compensation Expense

Share-based compensation expense included in the consolidated statements of operations was recognized as follows:

Year Ended December 31,

Year Ended December 31, 

(In thousands)

    

2020

    

2019

2018

    

2023

    

2022

Research and development

$

31,294

$

28,953

$

25,563

$

8,048

$

12,888

Selling, general and administrative

 

31,682

 

31,497

 

25,750

 

16,966

 

19,848

Restructuring and related expenses

357

6,998

Total share-based compensation expense

$

62,976

$

60,450

$

51,313

$

25,371

$

39,734

Share-based compensation expense included in the consolidated statements of operations by award type was as follows:

Year Ended December 31, 

Year Ended December 31, 

(In thousands)

    

2020

    

2019

    

2018

    

2023

    

2022

Innoviva equity:

Options

$

$

$

280

$

2,294

$

2,998

RSUs

 

21,817

35,726

RSAs

 

64

457

Performance RSAs

 

Theravance Biopharma equity:

Options

 

6,536

6,381

8,441

RSUs

49,803

39,520

34,077

Performance RSAs and RSUs

3,943

12,717

4,707

Performance RSUs

1,087

237

ESPP

 

2,694

1,768

3,351

 

173

773

Total share-based compensation expense

62,976

$

60,450

$

51,313

25,371

$

39,734

Total share-based compensation expense capitalized to inventory, in the period from January 1, 2018 to the disposition of the Company’s VIBATIV business in late 2018, was not material for the year ended December 31, 2018.

As of December 31, 2020, the unrecognized share-based compensation cost, net of actual forfeitures, and the estimated weighted-average amortization period, using the straight-line attribution method, was as follows:

 

Unrecognized

WeightedAverage

 

Compensation

Amortization Period

(In thousands, except amortization period)

    

Cost

    

(Years)

Theravance Biopharma equity:

Options

$

11,513

2.62

RSUs

101,588

2.53

Performance RSAs and RSUs (1)

502

0.21

ESPP

1,122

0.62

Total

$

114,725

(1)Represents unrecognized share-based compensation cost associated with the Company’s performance-contingent awards described above that are probable of vesting.

110F-32

As of December 31, 2023, the unrecognized share-based compensation cost, net of actual forfeitures, and the estimated weighted-average amortization period, using the straight-line attribution method, was as follows:

 

Unrecognized

WeightedAverage

 

Compensation

Amortization Period

(In thousands, except amortization period)

    

Cost

    

(Years)

Options

$

2,600

1.88

RSUs

30,404

2.36

Performance RSUs (1)

849

1.26

ESPP

504

1.05

Total

$

34,357

(1)Represents unrecognized share-based compensation cost associated with the Company’s market-based and performance-contingent awards described above that are probable of vesting.

Compensation Awards

The following table summarizes option activity under the 2013 EIP and 2014 NEEIP for the year ended December 31, 2020:2023:

    

Number of Shares 

   

Weighted-Average

Weighted-Average

Subject

Exercise Price

    

Number of Shares 

Weighted-Average

Exercise Price of

Aggregate

to Outstanding Options

of Outstanding Options

Subject to

Remaining Contractual

Outstanding Options

Intrinsic Value

Outstanding at December 31, 2019

2,950,472

$

24.75

Outstanding Options

Term (Years)

(in dollars)

(in thousands)

Outstanding at December 31, 2022

2,411,893

$

19.53

Granted

600,300

22.58

262,386

10.84

Exercised

(68,171)

19.96

-

Forfeited

(183,422)

22.49

(368,403)

18.85

Outstanding at December 31, 2020

3,299,179

$

24.58

Outstanding at December 31, 2023

2,305,876

5.32

18.65

$

859

Exercisable at December 31, 2023

4.48

487

Vested and expected to vest at December 31, 2023

5.32

859

As of December 31, 2020,The following table summarizes additional information for options under the aggregate intrinsic value of the options outstanding was $1.2 million. As of December 31, 2020, the aggregate intrinsic value of the options exercisable was $0.8 million. The total estimated fair value of options vested (excluding vested options that have expired) was $6.4 million in 2020.2013 EIP and 2014 NEEIP.

2023

    

2022

Weighted average fair value of options (in dollars)

$

5.74

$

5.33

Total intrinsic value of options exercised (in thousands)

$

$

The following table summarizes total RSU and RSA activity (including performance RSUsmarket-based and RSAs)performance-contingent RSUs) for the year ended December 31, 2020:2023:

    

Number of Shares

    

Number of Shares

Subject to

Outstanding Subject to

Outstanding RSUs

Performance Conditions (RSAs)

Outstanding at December 31, 2019

4,939,774

 

776,250

Granted

2,576,326

 

0

Released

(1,907,307)

(362,250)

Forfeited

(614,875)

 

0

Outstanding at December 31, 2020

4,993,918

 

414,000

Number of Shares

Number of Shares

Subject to

Outstanding Subject to

Outstanding RSUs

Performance Conditions (RSAs)

Outstanding at December 31, 2022

4,109,847

Granted

2,228,184

Released

(1,651,141)

Forfeited

(691,140)

Outstanding at December 31, 2023

3,995,750

As of December 31, 2020, the aggregate intrinsic value of the RSUs and RSAs outstanding was $88.7 million and $7.4 million, respectively. The total estimated fair value of RSUs vested was $46.8$17.3 million and $32.4$37.2 million in 20202023 and 2019,2022, respectively.

F-33

Valuation Assumptions

The range of assumptions used to estimate the fair value of options granted and rights granted under the 2013 ESPP was as follows:

Year Ended December 31, 

Year Ended December 31, 

    

2020

    

2019

    

2018

    

2023

    

2022

Options

Risk-free interest rate

 

0.3% - 1.7%

1.6% - 2.5%

2.3% - 3.0%

 

3.46% - 4.18%

1.5% - 3.8%

Expected term (in years)

 

5.2 - 6.1

6.0

6.0

 

5.3 - 6.5

5.3 - 6.1

Volatility

 

50% - 53%

51% - 53%

53% - 54%

 

53% - 55%

55% - 70%

Dividend yield

 

 

Weighted-average estimated fair value

$

11.03

$

10.20

$

14.32

$

5.74

$

5.33

2013 ESPP

Risk-free interest rate

0.1% - 0.2%

1.5% - 2.4%

2.1% - 2.8%

4.06% - 5.39%

1.5% - 4.57%

Expected term (in years)

0.5 - 2.0

0.5 - 2.0

0.5 - 2.0

0.5 - 2.0

0.5 - 2.0

Volatility

53% - 76%

40% - 48%

42% - 53%

32% - 58%

41% - 72%

Dividend yield

Weighted-average estimated fair value

$

8.04

$

6.17

$

9.13

$

3.46

$

3.86

13. Defined Contribution Plan

The Company sponsors a 401(k) retirement plan for eligible employees. Employees may contribute a percentage of their annual compensation to the plan, subject to statutory limitations. The Company makes matching contributions equal to 100% of the employee’s contribution up to $5,000 of their annual compensation. For the year ended December 31, 2023 and 2022, the Company recognized $0.5 million and $0.6 million, respectively, in compensation expense associated with its contributions to the 401(k) retirement plan.

14. Income Taxes

Theravance Biopharma was incorporated in the Cayman Islands in July 2013 under the name Theravance Biopharma, Inc. as a wholly-owned subsidiary of Innoviva and began operations subsequent to a spin-off with wholly-owned subsidiaries in the Cayman Islands, US, United Kingdom, and Ireland. Effective July 1, 2015, Theravance Biopharma became an Irish tax resident, therefore, the income (loss) before income taxes of Theravance Biopharma, the parent company, were included in Ireland in the tables below.

The components of the loss before income taxes from continuing operations were as follows:

Year Ended December 31, 

(In thousands)

    

2023

    

2022

    

Income (loss) before provision for income taxes:

  

  

United States

$

1,151

$

(40,556)

Ireland

(50,420)

(52,168)

United Kingdom

(91)

Total

$

(49,269)

$

(92,815)

111F-34

12. Income Taxes

Theravance Biopharma was incorporated in the Cayman Islands in July 2013 under the name Theravance Biopharma, Inc. as a wholly-owned subsidiary of Innoviva and began operations subsequent to the Spin-Off with wholly-owned subsidiaries in the Cayman Islands, US, United Kingdom, and Ireland. Effective July 1, 2015, Theravance Biopharma became an Irish tax resident, therefore, the loss before income taxes of Theravance Biopharma, the parent company, are included in Ireland in the tables below.

The components of the loss before income taxes were as follows:

Year Ended December 31, 

(In thousands)

    

2020

    

2019

    

2018

Income (loss) before provision for income taxes:

  

  

Cayman Islands

$

37,567

$

11,779

$

14,838

United States

(46,500)

(99,225)

(69,695)

Ireland

(277,105)

(154,217)

(171,134)

United Kingdom

(499)

(14)

(94)

Total

$

(286,537)

$

(241,677)

$

(226,085)

The components of provision for income tax benefit (expense)expense from continuing operations were as follows:

Year Ended December 31, 

Year Ended December 31, 

(In thousands)

    

2020

    

2019

    

2018

    

2023

    

2022

    

Provision for income tax benefit (expense):

Provision for income tax (expense) benefit:

Current:

Cayman Islands

$

$

$

United States

8,545

5,210

10,563

$

(2,881)

$

Ireland

(13)

(8)

United Kingdom

(12)

12

(2)

164

(1)

Subtotal

8,520

5,222

10,561

(2,717)

(9)

Deferred

Deferred:

United States

(3,207)

Subtotal

(3,207)

Total

$

8,520

$

5,222

$

10,561

$

(5,924)

$

(9)

Effective tax rate

2.97

%  

2.16

%  

4.67

%

12.02

%  

(0.01)

%  

The provision for income tax benefit (expense)expense was $8.5 million, $5.2$5.9 million and $10.6 million$9,000 for the year ended December 31, 2020, 20192023 and 20182022, respectively.

The 2020 net income tax benefitexpense for the year ended December 31, 2023 was primarily attributed to the Company’s profitability in the US jurisdiction which no longer had a reversal of previously accrued contingentvaluation allowance offset for federal tax liabilities for uncertain tax positions due to a lapse of the statute of limitations and their related interest accruals. The 2019 net income tax benefit was primarilypurposes due to the reversal of previously accrued contingentvaluation allowance’s release in 2022. We expect to have an immaterial federal cash tax liabilitiesexpense for uncertain tax positions due tothe year ended December 31, 2023 which will be offset with a lapse of the statute of limitations and currentprior year US research and development credits.overpayment.

Income tax expense related to discontinued operations for the year ended December 31, 2022 of $179.0 million was a result of the Company’s gain from the TRC Transaction, which was recognized as a discontinued operation.

NaN

No provision for income taxes has been recognized on undistributed earnings of the Company’s foreign subsidiaries because it considers such earnings to be indefinitely reinvested. In the event of a distribution of these earnings in the form of dividends or otherwise, the Company may be liable for income taxes, subject to an adjustment, if any, for foreign tax credits and foreign withholdings taxes payable to certain foreign tax authorities. As of December 31, 2020,2023, there were 0no undistributed earnings.

As a result of the Company becoming an Irish tax resident effective July 1, 2015, the tax rates reflect the Irish statutory rate of 25%. The differences between the Irish statutory income tax rate for non-trading incomeand the Company’s effective tax rates from continuing operations were as follows:

Year Ended December 31, 

    

2023

    

2022

    

Provision at statutory income tax rate

25.00

%  

25.00

%

Foreign rate differential

(8.28)

 

(6.80)

 

Share-based compensation

(3.00)

(3.28)

Non-deductible executive compensation

(4.45)

(2.79)

Uncertain tax positions

(7.31)

(7.10)

Research and development tax credit carryforwards

3.34

2.65

Change in valuation allowance

(16.00)

 

(1.01)

 

Other

(1.32)

 

(6.68)

 

Effective tax rate

(12.02)

%  

(0.01)

%  

112F-35

As a result of the Company becoming an Irish tax resident effective July 1, 2015, the tax rates reflect the Irish statutory rate of 25%. The differences between the Irish statutory income tax rate and the Company’s effective tax rates were as follows:

Year Ended December 31, 

    

2020

    

2019

    

2018

Provision at statutory income tax rate

25.00

%  

25.00

%  

25.00

%

Foreign rate differential

(11.49)

 

(6.96)

 

(7.51)

Share-based compensation

0.75

(1.17)

0.28

Non-deductible executive compensation

(0.63)

(0.51)

(0.72)

Uncertain tax positions

(1.26)

(0.63)

(4.00)

Research and development tax credit carryforwards

1.83

2.50

1.79

Foreign exchange loss

8.52

Intangible asset

10.01

Change in valuation allowance

(20.56)

 

(14.90)

 

(18.82)

Other

(0.68)

 

(1.17)

 

0.13

Effective tax rate

2.97

%  

2.16

%  

4.67

%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities were as follows:

December 31, 

December 31, 

(In thousands)

    

2020

    

2019

    

2023

    

2022

Deferred tax assets:

Net operating loss carryforwards

 

$

82,821

$

58,161

 

$

153,225

$

141,674

Capital loss carryforwards

 

19,409

 

19,409

 

21,482

 

19,409

Research and development tax credit carryforwards

 

24,075

 

15,723

 

16,910

 

16,176

Fixed assets and intangibles

310,187

285,341

235,381

245,822

Share-based compensation

15,087

15,480

3,431

4,298

Accruals

8,145

8,245

1,186

1,795

Operating lease liabilities

11,662

11,358

10,946

11,239

Prepaid assets

(248)

304

Other

 

346

 

7

 

4,982

 

30

Subtotal

471,732

413,724

447,295

440,747

Valuation allowance

 

(462,711)

 

(403,836)

 

(429,850)

 

(422,325)

Total deferred tax assets

9,021

9,888

17,445

18,422

Deferred tax liabilities:

Operating lease assets

(8,680)

(9,429)

(8,076)

(8,634)

Prepaid assets

(341)

(459)

Future contingent milestone and royalty assets

(14,512)

(11,725)

Total deferred tax liabilities

(9,021)

(9,888)

(22,588)

(20,359)

Net deferred tax assets (liabilities)

$

$

Net deferred tax liabilities

$

(5,143)

$

(1,937)

The Company follows the accounting guidance related to accounting for income taxes which requires that a company reducereduces its deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of its deferred tax assets will not be realized. During the year ended December 31, 2022, the Company concluded that the valuation allowance related to its US federal assets was no longer needed primarily due to the gain and forecasted future taxable income from the TRC Transaction, and as a result, the Company released its valuation allowance against deferred tax assets for US federal tax purposes in 2022 as it was more like than not able to fully utilize such attributes. As of December 31, 2020,2023, the Company’sCompany continues to maintain its position that a valuation allowance against deferred tax assets were offsetfor US federal tax purposes is not needed, as it is more like than not able to fully utilize such attributes. As of December 31, 2023, the Company continues to maintain a full valuation allowance in full by a valuation allowance.other jurisdictions.

The valuation allowance increased from $422.3 million, as of December 31, 2020 increased from $403.82022, to $429.9 million (the valuation allowance as of December 31, 2019) to $462.7 million,2023, primarily as a result of additionalactivity in the foreign deferred tax loss generated in various jurisdictionsassets, as well as the state deferred tax assets during the current year and the intercompany transfer of intangible assets eligible for tax amortization.2023. Valuation allowances require an assessment of both positive and negative evidence when determining whether it is more likely than not that the deferred tax assets are recoverable. As required, the Company prepares its assessment of the realizability of deferred tax assets on a jurisdiction-by-jurisdictionjurisdiction-by jurisdiction basis.

As of December 31, 2023, the Company has utilized all available US federal net operating loss carryforwards and federal research and development tax credit carryforwards. As of December 31, 2023, the Company had state net operating loss carryforwards of $103.8 million which generally begin to expire in 2034 and state research and development credit carryforwards of $25.9 million to be carried forward indefinitely.

As of December 31, 2023, the Company had Irish net operating loss carryforwards of $1.16 billion with no expiration date and capital loss carryforwards of $65.1 million to be carried forward indefinitely. The Company has additional Irish tax attributes of $1.04 billion which primarily consist of unused capital allowances. Net operating losses and capital allowances can be used to offset future income from Irish entities and income related to intellectual property.

113F-36

As of December 31, 2020, the Company had $209.8 million of US federal net operating loss carryforwards and $21.1 millionUtilization of federal research and development tax credit carryforwards which expire beginning in 2035. After the enactment of the Tax Cut and Jobs Act (the “Tax Act”) in December 2017, the operating losses generated had an indefinite carryforward life, but was limited to 80% of taxable income when utilized. As of December 31, 2020, this amount was $164.9 million. The Company had state net operating loss carryforwards of $70.9 million which generally begin to expire in 2034 and state research and development credit carryforwards of $21.2 million to be carried forward indefinitely.

The Company also had Irish net operating loss carryforwards of $565.8 million with no expiration date and capital loss carryforwards of $58.8 million to be carried forward indefinitely.

Utilization of net operating loss and tax credit carryforwards may be subject to an annual limitation due to ownership change limitations provided by the Internal Revenue Code and similar state provisions. Annual limitations may result in expiration of net operating loss and tax credit carryforwards before some or all of such amounts have been utilized.

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The amount of tax expense related to interest or penalties was immaterial for the year ended December 31, 2020 and 2019.

Uncertain Tax Positions

A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits were as follows:

(In thousands)

    

    

Unrecognized tax benefits as of December 31, 2018

$

52,404

Unrecognized tax benefits as of December 31, 2021

$

75,023

Gross decrease in tax positions for prior years

(2,010)

(7,395)

Gross increase in tax positions for current year

8,369

8,371

Unrecognized tax benefits as of December 31, 2019

58,763

Unrecognized tax benefits as of December 31, 2022

75,999

Gross decrease in tax positions for prior years

(8,059)

(632)

Gross increase in tax positions for current year

12,743

4,103

Unrecognized tax benefits as of December 31, 2020

$

63,447

Unrecognized tax benefits as of December 31, 2023

$

79,470

The total unrecognized tax benefits of $79.5 million and $76.0 million, as of December 31, 2023 and December 31, 2022, respectively, would reduce the effective tax rate in the period of recognition. As of December 31, 2023, the Company does not believe that it is reasonably possible that its unrecognized tax benefit will significantly increase or decrease in the next twelve months. The Company is not currently under Internal Revenue Service (“IRS”) examination.

The Company records liabilities related to uncertain tax positions in accordance with the income tax guidance which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements by prescribing a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Resolution of one or more of these uncertain tax positions in any period may have a material impact on the results of operations for that period. The Company includes any applicable interest and penalties within the provision for income taxes in the consolidated statements of operations.

The totalCompany's policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The amount of tax expense related to interest or penalties was $0.6 million for the year ended December 31, 2023 and was not material for the year ended December 31, 2022. The Company will continue to accrue interest on the respective uncertain tax positions in accordance with applicable rules.

The Company’s $65.3 million net liability for unrecognized tax benefits of $63.4 million and $58.8 million,relating to uncertain tax positions, as of December 31, 2020 and December 31, 2019, respectively, may reduce2023, can be relieved only if (i) the effective tax rate incontingency becomes legally extinguished through either payment to the periodtaxing authority or expiration of recognition. However, carryforward tax attributes that were generated in years beginning onthe statute of limitations; (ii) the recognition of the benefits associated with the position meets the more likely than not threshold; or before January 1, 2018 may still be adjusted upon(iii) the liability becomes effectively settled through the examination by tax authorities since the attributes are not yet utilized.process. The Company does not expectconsiders matters to record any other material reductions inbe effectively settled once the measurementtaxing authority has completed all of its required or expected examination procedures, including all appeals and administrative reviews. The Company also accrues for potential interest and penalties related to unrecognized tax benefits within the next twelve months. The Company currently has a full valuation allowance againstin its deferredincome tax assets, which would impact the timing of the effective tax rate benefit should any of these uncertain positions be favorably settled in the future.expense (benefit) calculation.

The Company is subject to taxation in Ireland, the US, and various other jurisdictions. The tax years 20172015 and forward remain open to examination in Ireland, tax years 20182015 and forward remain open to examination in the US, and the tax years 20152012 and forward remain open to examination in other jurisdictions.

114

The Company is currently under Internal Revenue Service (“IRS”) examination for the tax year ended December 31, 2018. The Company believes that an adequate provision has been made for any material adjustments that may result from the tax examination. The Company concluded its IRS examination for the tax year ended December 31, 2017 in December 2020 with no adjustments required.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), that features significant tax provision and other measures to assist individuals and businesses impacted by the economic effects of the COVID-19 pandemic, was signed into law. Tax relief measures for businesses include a five-year net operating loss carryback (including a related technical correction to the 2017 Tax Reform Act), a change in Section 163(j) interest deduction limitations, accelerated alternative minimum tax refunds, payroll tax relief, a temporary suspension of certain aviation excise taxes, a tax credit for employers who retain employees, and a ‘qualified improvement property’ technical correction to the 2017 Tax Reform Act. The Company has considered the corporate income tax provisions of the CARES Act and related initial guidance as part of its income tax expense and concluded that these provisions did not have a material impact on the Company’s 2020 income tax expense.

The Company’s future income tax expense may be affected by such factors as changes in tax laws, regulations, its business, regulations, tax rates, interpretation of existing laws or regulations, the impact of accounting for share-based compensation, the impact of accounting for business combinations and other transactions, its international organization, shifts in the amount of income before tax earned in the US as compared with other regions in the world, and changes in overall levels of income before tax.

F-37

13. Commitments and Contingencies15. Capital Return Program

Performance-Contingent Awards

In 2016,September 2022, the Compensation Committee granted long-term retention RSAs and RSUs to membersCompany’s board of senior management and incentive cash bonus awards to certain employees. The vesting and payoutdirectors authorized a $250.0 million capital return program consisting of such awards is dependent on the Company meeting its critical operating goals and objectives during a five-year period from 2016 to December 31, 2020. These goals are strategically important for the Company, and it believes the goals, if achieved, should increase shareholder value. The awards have dual triggers of vesting based upon the achievement of these goals and continued employment.three elements as described below.

Expense associated with these awards may be recognized duringGSK Share Repurchase

On September 20, 2022, the years 2016Company repurchased 9,644,807 ordinary shares, par value $0.00001 per share, of the Company from GSK Finance (No.3) plc (“GSK Finance”), representing all of the ordinary shares of the Company owned by GSK Finance or its affiliates. The purchase price under the Share Repurchase Agreement was $9.75 per share, resulting in a total consideration of $94.0 million. The repurchased shares were accounted for as authorized shares that are no longer issued and outstanding upon the settlement date of the repurchase transaction.

Modified Dutch Auction Tender Offer

On September 28, 2022, the Company announced a “modified Dutch auction” tender offer (the “Offer”) to 2020 dependingpurchase up to $95.0 million of its ordinary shares. Upon the terms and subject to the conditions set forth in the Company's Offer to Purchase, dated September 28, 2022 (the "Offer to Purchase"), and the related Letter of Transmittal, the Company offered to purchase up to $95.0 million of its ordinary shares, at a purchase price not greater than $10.50 nor less than $9.75 per share, in cash, less any applicable withholding taxes and without interest. The Offer expired at midnight, New York City time, at the end of the day on November 17, 2022.

A "modified Dutch auction" tender offer allows shareholders to indicate how many shares and at what price or within the range described above they wish to tender their shares. Based on the probabilitynumber of meeting certain performance conditions. Compensation expenseshares tendered and the prices specified by the tendering shareholders, the Company determined the lowest per-share price that enabled it to purchase up to $95.0 million of all shares that were validly tendered and not validly withdrawn. All shares accepted in the Offer were purchased at the same price even if tendered at a lower price.

On November 22, 2022, the Company completed the Offer and purchased a total of 115,967 ordinary shares at a price of $10.50 per share, for an aggregate cost of $1.2 million, excluding fees and expenses relating to awards subjectthe Offer. The total of 115,967 shares that were accepted for purchase represented approximately 0.2% of the total number of shares outstanding as of November 21, 2022. The purchased shares were cancelled and ceased to performance conditionsbe outstanding. The Company used the unused portion of the Offer to enlarge its previously announced, planned open market share repurchase plan which is recognized if it is considered probable thatdescribed below.

Open Market Share Repurchase Plan

In December 2022, the performance goals will be achieved. The probabilityCompany initiated its open market repurchase plan to repurchase ordinary shares, and in February 2023, the Company’s board of achievement is reassessed at each quarter-end reporting period. Previously recognized expense is reversed in the period in which it becomes probable that the requisite service period will not be rendered. The awards are broken into three separate tranches and comprised ofdirectors authorized a share-based award component and a cash bonus award component. See “Note 11. Share-Based Compensation” for information related$75.0 million increase to the share-based award component.$250.0 million capital return program bringing the total capital return program to $325.0 million.

The performance conditions associated withtable below summarizes the first trancheshare repurchases under the Company’s open market repurchase plan for the following periods:

Year Ended December 31, 

(In thousands, except per share amounts)

  

2023

  

2022

Shares repurchased

18,634

2,978

Amount repurchased (excluding fees and expenses)

$

196,608

$

32,946

Weighted average cost per share (excluding fees and expenses)

$

10.551

$

11.062

In January 2024, the Company repurchased an additional 38,462 shares on the open market at an weighted average cost of $11.551 per share for an approximate aggregate cost of $0.4 million, excluding fees and expenses, to compete its capital return program. Since the initiation of the cash bonus awards werecapital return program in September 2022 through January 2024, the Company repurchased 31.41 million of shares at a weighted average price of $10.354 per share for an approximate aggregate cost of $325.3 million, excluding fees and expenses.

F-38

16. 2021 Corporate Restructuring Completion and 2023 Strategic Actions

2021 Corporate Restructuring

In September 2021, the Company announced a strategic update and corporate restructuring (the “2021 Restructuring”) to focus on leveraging its expertise in developing and commercializing respiratory therapeutics. As part of the 2021 Restructuring, the Company initiated an approximate 75% reduction in workforce. A majority of the reduction in workforce occurred in November 2021,and the remainder was completed in February 2022.

For the second quarter of 2018, andyear ended December 31, 2022, the Company recognized $3.5incurred restructuring and related expenses of $12.8 million of cash bonus expensewhich $5.9 million were related to R&D expenses and $6.9 million were related to selling, general and administrative expenses. Of the total $12.8 million recognized for the year ended December 31, 2018 associated with2022, cash-related expenses were $5.8 million and non-cash expenses were $7.0 million which were primarily related to the first tranchemodification of these awards.equity-based awards for employees affected by the 2021 Restructuring and certain related awards for other employees.

The performance conditions associated withSince the second tranche2021 Restructuring was announced and through its completion in September 2022, the Company incurred total restructuring and related expenses of these awards$33.0 million of which $16.5 million was each related to R&D expenses and selling, general and administrative expenses. Of the total $33.0 million, cash-related expenses were completed in$17.4 million and non-cash expenses were $15.6 million. As of December 31, 2022, all of the first quarter of 20192021 Restructuring and the expense associated with this second tranche wasrelated expenses were fully recognized inby the first quarter of 2020. For year ended December 31, 2020, 2019 and 2018, the Company recognized $0.5 million, $2.4 million and $1.9 million, respectively, of cash bonus expense related to the second tranche of these awards.Company.

2023 Strategic Actions

In the fourth quarter of 2019,February 2023, the Company determinedannounced new strategic actions (the “2023 Strategic Actions”) that included the remaining third tranche was probablediscontinuation of vesting,its research activities, including the inhaled Janus kinase (JAK) inhibitor program, resulting in a 17% reduction in headcount in March 2023. In order to support the timely progression of the ampreloxetine Phase 3 study (CYPRESS) and in the first quarterrecently completed of 2020, the performance conditions associated withYUPELRI Peak Inspiratory Flow Rate (PIFR-2) Phase 4 study, the third tranche were completed. Company prioritized its R&D resource allocation to these two programs.

As a result of the Company’s discontinued investment in research activities, the Company recognized $2.8incurred restructuring and related expenses of $2.7 million and $11.8 million in cash bonus expense related to these awards for the year ended December 31, 2020 and 2019, respectively. As of2023, primarily related to R&D expenses. Of the total $2.7 million incurred for the year ended December 31, 2020,2023, cash-related expenses were $1.2 million and non-cash expenses were $1.5 million which was primarily related to the maximum remainingloss on the sale of R&D laboratory equipment and the modification of equity-based awards for employees affected by the reduction in headcount. The R&D laboratory equipment sold had a carrying value of $2.7 million, and the sale generated net cash bonus expenseproceeds of $1.5 million. The Company does not expect to recognize any additional employee-related expenses, including share-based compensation, related to the 2023 Strategic Actions.

Selected information relating to accrued cash-related restructuring expenses from the 2023 Strategic Actions was as follows:

(In thousands)

Balance at December 31, 2022

$

Net accruals

1,188

Cash paid

(1,188)

Balance at December 31, 2023

$

The Company also evaluated the impact of the 2023 Strategic Actions on the carrying value of its long-lived assets, such as property and equipment and operating lease assets, and in March 2023, the Company placed approximately 42,000 square feet of its vacant office and laboratory space in South San Francisco (“Sublease Assets”) on the market for sublease. The Company’s impairment evaluation process for the Sublease Assets consisted of comparing the estimated undiscounted future sublease income of the Sublease Assets to its carrying value. The Company estimated the sublease income using market participant assumptions, including the length of time to enter into a sublease and sublease payments, which the Company evaluated using recent sublease negotiations and current local subleasing trends. While the Company has not yet completed a new sublease, based on its evaluation, the Company determined that

115F-39

associatedthe estimated undiscounted future sublease income exceeds the Sublease Assets’ carrying value, and as a result, the Company did not recognize an impairment charge as of December 31, 2023. The Company will continue to update its sublease cash flow estimates based on changes in market conditions, and the Company may record a non-cash impairment charge in future periods as these estimates change.

17. Commitments and Contingencies

Contract Obligations

In the ordinary course of business, the Company may enter into agreements with service providers to assist in the third tranche was $0.4 million (allocated as $0.3 million for researchperformance of its clinical trials and development expenseother operational activities. Subject to required notice periods and $0.1 million for selling, general and administrative expense) and will be amortized throughother varying provisions regarding termination, the first quarter of 2021.Company can elect to terminate such agreements at any time.

GuaranteesLease Commitments

The Company leases certain office and laboratory space. See “Note 8.Leases,” for further information on the terms of these non-cancelable lease agreements.

Indemnifications

The Company indemnifies its officersdirectors and directorsofficers for certain events or occurrences, subject to certain limits.limits, that may arise by reason of their status or service as directors or officers to the extent permissible under applicable law. The Company maintains director and officer liability insurance policies that may limit its exposure. Assuming the applicability of insurance coverage, and subject to certain retention, loss limits, and other policy provisions, the Company believes that the fair value of these indemnification agreementsobligations is minimal. Accordingly, the Company has 0tnot recognized any liabilities relating to these agreementsindemnification obligations as of either December 31, 2023 or 2022. However, no assurances can be given regarding the amounts that may ultimately be covered by the insurers, and it is possible that the Company may incur substantial liabilities in the future resulting from these indemnification obligations.

Legal Proceedings

In the ordinary course of business, the Company may be subject to legal claims and regulatory actions that could have a material adverse effect on its business or financial position. The Company assesses it potential liability in such situations by analyzing the possible outcomes of various litigation, regulatory, and settlement strategies. If the Company determines that a material loss is probable and its amount can be reasonably estimated, it will accrue an amount equal to the estimated loss. As of December 31, 2020 and 2019.

14. Public Offering of Ordinary Shares

On February 14, 2020,2023, the Company sold 5,500,000 ordinary shares at a pricedid not accrue any estimated losses related to the public of $27.00 per share (the “Shares”). The gross proceeds to the Company from the offering were $148.5 million, before deducting underwriting discounts and commissions and offering expenses. The Shares were issued pursuant to the Company’s currently effective shelf registration statement on Form S-3 and an accompanying prospectus (File No. 333-235339) filed with the SEC, which became effective automatically on December 3, 2019, and a prospectus supplement filed with the SEC in connection with the offering.its ongoing legal proceedings.

15. Reduction in WorkforceLitigation – Patent Infringement

InDuring January 2019,2023, the Company announcedreceived notice from Accord Healthcare, Inc.; Cipla USA, Inc. and Cipla Limited; Eugia Pharma Specialties Ltd.; Lupin Inc.; Mankind Pharma Ltd.; Orbicular Pharmaceutical Technologies Private Limited; and Teva Pharmaceuticals, Inc. (collectively, the “generic companies”), that they have each filed with FDA an abbreviated new drug application (“ANDA”), for a reductiongeneric version of YUPELRI. The notices from the generic companies each included a paragraph IV certification with respect to five of the Company’s patents listed in workforceFDA’s Orange Book for YUPELRI on the date of the Company’s receipt of the notice. The asserted patents relate generally to align with its focus on continued executionpolymorphic forms of key strategic programs and advancementa method of selected late-stage research programs toward clinical development.treatment using YUPELRI. In February 2023, the Company filed patent infringement suits against the generic companies in federal district court, including the United States District Court for the District of New Jersey, the U.S. District Court for the District of Delaware, and the U.S. District Court for the Middle District of North Carolina. The suits in Delaware and North Carolina have been dismissed, as all generic companies have agreed to venue in New Jersey. The complaint alleges that by filing the ANDAs, the generic companies have infringed five of the Company’s Orange Book listed patents. The Company reducedis seeking a permanent injunction to prevent the generic companies from introducing a generic version of YUPELRI that would infringe its overall headcount by 51 individuals, with the affected employees primarily focused on early research or the infrastructure in supportpatents. As a result of VIBATIV, which was soldthis lawsuit, a stay of approval through May 2026 has been imposed by the FDA on the generic companies’ ANDAs pending any adverse court decision. Additional patents covering YUPELRI granted on July 4, 2023 and January 2, 2024 were subsequently listed in FDA’s Orange Book. The Company filed additional patent infringement suits in the U.S. District Court for the District of New Jersey during August 2023 and January 2024. These suits have been consolidated with the

F-40

above action. Further, the original complaint was amended during December 2023 to Cumberlandinclude certain patents not listed in November 2018.the Orange Book.

As a result of the reduction in workforce,February 28, 2024, the Company recognizedhas settled all litigation with Accord Healthcare, Inc.; Lupin Pharmaceuticals, Inc.; Orbicular Pharmaceutical Technologies Private Limited; and paid severance related charges totaling $3.5 million forTeva Pharmaceuticals, Inc. pursuant to individual agreements in which the year ended December 31, 2019, including compensation expense madeCompany granted these companies a royalty-free, non-exclusive, non-sublicensable, non-transferable license to affected employees through any minimum statutory notice periods.manufacture and market their respective generic versions of YUPELRI inhalation solution in the US on or after the licensed launch date of April 23, 2039, subject to certain exceptions as is customary in these type of agreements. As required by law, the settlements are subject to review by the U.S. Department of Justice and the Federal Trade Commission. The severance related charges are presented onpatent litigation against the consolidated statements of operations within research and development expenses and selling, general and administrative expenses.three remaining generic companies, along with certain affiliates, remains pending.

116F-41

SUPPLEMENTARY FINANCIAL DATA

(UNAUDITED)

(In thousands, except per share data)

The following table presents certain unaudited consolidated quarterly financial information for the eight quarters in the periods ended December 31, 20202023 and 2019.2022. This information has been prepared on the same basis as the audited consolidated financial statements and includes all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the unaudited quarterly results of operations set forth herein. For all periods prior to the quarter ended September 30, 2022, the information below has been retroactively adjusted for discontinued operations presentation.

For the Quarter Ended

    

March 31, 

    

June 30, 

    

September 30, 

    

December 31, 

2020

Total revenue

$

19,862

$

15,008

$

18,257

$

18,730

Costs and expenses

 

92,338

 

87,184

 

94,872

 

95,220

Loss from operations

 

(72,476)

 

(72,176)

 

(76,615)

 

(76,490)

Net loss

 

(83,053)

 

(62,887)

 

(73,643)

 

(58,434)

Basic and diluted net loss per share

$

(1.40)

$

(1.00)

$

(1.16)

$

(0.92)

2019

Total revenue

$

5,338

$

26,150

$

12,427

$

29,499

Costs and expenses

 

79,004

 

68,626

 

77,628

 

100,071

Loss from operations

 

(73,666)

 

(42,476)

 

(65,201)

 

(70,572)

Net loss

 

(72,580)

 

(39,838)

 

(58,431)

 

(65,606)

Basic and diluted net loss per share

$

(1.32)

$

(0.72)

$

(1.05)

$

(1.17)

Share of Total YUPELRI Net Sales (1)

For the Quarter Ended

March 31, 

    

June 30, 

    

September 30, 

    

December 31, 

2020

$

12,880

$

10,589

$

12,960

$

13,550

2019

$

1

$

3,184

$

5,763

$

10,352

For the Quarter Ended

    

March 31, 

    

June 30, 

    

September 30, 

    

December 31, 

2023

Total revenue

$

10,417

$

13,749

$

15,693

$

17,565

Costs and expenses

 

35,329

 

29,872

 

24,453

 

23,805

Loss from operations

 

(24,912)

 

(16,123)

 

(8,760)

 

(6,240)

Net loss from continuing operations

(22,088)

(15,645)

(8,950)

(8,510)

Net income from discontinued operations

Net income (loss)

 

(22,088)

 

(15,645)

 

(8,950)

 

(8,510)

Net loss from continuing operations - basic and diluted per share

(0.35)

(0.28)

(0.17)

(0.17)

Net income from discontinued operations - basis and diluted per share

-

Net income (loss) - basis and diluted per share

$

(0.35)

$

(0.28)

$

(0.17)

$

(0.17)

2022

Total revenue

$

13,196

$

11,050

$

12,451

$

14,649

Costs and expenses

 

51,698

 

37,929

 

21,595

 

32,081

Loss from operations

 

(38,502)

 

(26,879)

 

(9,144)

 

(17,432)

Net loss from continuing operations

(41,538)

(26,570)

(10,460)

(14,256)

Net income from discontinued operations

15,592

18,379

927,091

3,894

Net income (loss)

 

(25,946)

 

(8,191)

 

916,631

 

(10,362)

Net loss from continuing operations - basic and diluted per share

(0.55)

(0.35)

(0.21)

(0.21)

Net income from discontinued operations - basis and diluted per share

0.21

0.24

12.35

0.06

Net income (loss) - basis and diluted per share

$

(0.34)

(0.11)

12.14

(0.15)

Share of Total YUPELRI Net Sales (1)

For the Quarter Ended

March 31, 

    

June 30, 

    

September 30, 

    

December 31, 

2023

$

16,434

$

19,263

$

20,414

$

21,225

2022

$

15,283

$

17,177

$

18,698

$

19,495

(1)The Company co-promotes YUPELRI in the US under a profit and loss sharing arrangement with Viatris (65% to Viatris; 35% to Theravance Biopharma). The amounts represent the Company’s implied 35% share of the total net sales of YUPELRI that were recognized within Viatris’ financial statements for the periods presented.

117F-42

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

We conducted an evaluation required by paragraph (d) of Rule 13a-15 of the Exchange Act as of December 31, 2020, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Rule 13a-15(e) of the Exchange Act), which are controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. In connection with the preparation of this Annual Report, our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2020 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO criteria”). Based on its assessment, our management concluded that our internal control over financial reporting was effective as of December 31, 2020.

The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Limitations on the Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Theravance Biopharma have been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 of the Exchange Act, which occurred during the fourth quarter of the year ended December 31, 2020 which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal control over financial reporting despite the fact that many of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the potential impact of COVID-19 on our internal controls to minimize the impact on their design and operating effectiveness.

118

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Theravance Biopharma, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Theravance Biopharma, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Theravance Biopharma, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2020 consolidated financial statements of the Company and our report dated February 26, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. 

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Redwood City, California

February 26, 2021

119

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

For the information required by this Item, see “Questions and Answers About Procedural Matters”, “Election of Directors”, “Nominees”, “Audit Committee”, “Meetings of the Board of Directors”, “Code of Conduct”, “Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement to be filed with the SEC, which sections are incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

For the information required by this Item, see “Director Compensation”, “Executive Compensation” and “Compensation Committee Interlocks and Insider Participation” in the Proxy Statement to be filed with the SEC, which sections are incorporated herein by reference.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

For the information required by this Item, see “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the Proxy Statement to be filed with the SEC, which sections are incorporated herein by reference.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

For the information required by this Item, see “Director Independence” and “Policies and Procedures for Related Party Transactions” in the Proxy Statement to be filed with the SEC, which sections are incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

For the information required by this Item, see “Ratification of the Appointment of Independent Registered Public Accounting Firm” and “Pre-Approval of Audit and Non-Audit Services” in the Proxy Statement to be filed with the SEC, which sections are incorporated herein by reference.

120

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)

The following documents are filed as part of this Annual Report on Form 10-K:

1.Financial Statements:

The following financial statements and schedules of the Registrant are contained in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K:

Report of Independent Registered Public Accounting Firm

77

Consolidated Balance Sheets as of December 31, 2020 and 2019

79

Consolidated Statements of Operations for each of the three years in the period ended December 31, 2020

80

Consolidated Statements of Comprehensive Loss for each of the three years in the period ended December 31, 2020

81

Consolidated Statements of Shareholders’ Deficit for each of the three years in the period ended December 31, 2020

82

Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2020

83

Notes to Consolidated Financial Statements

84

Supplementary Financial Data (unaudited)

117

2.Financial Statement Schedules:

All schedules have been omitted because of the absence of conditions under which they are required or because the required information, where material, is shown in the financial statements, financial notes or supplementary financial information.

(b)

Exhibits required by Item 601 of Regulation S-K

The information required by this Item is set forth on the exhibit index that precedes the signature page of this report.

121

Exhibit Index

Incorporated by Reference

Exhibit Number

Description

Form

Filing
Date/Period
End Date

2.1

Separation and Distribution Agreement by and between Theravance Biopharma, Inc. and Innoviva, Inc., dated June 1, 2014

8-K

June 3, 2014

2.2*

Asset Purchase Agreement, dated as of November 1, 2018, by and among Cumberland Pharmaceuticals Inc. on the one hand, and Theravance Biopharma Ireland Limited and Theravance Biopharma US, Inc. on the other hand.

8-K

November 16, 2018

3.1

Amended and Restated Memorandum and Articles of Association

10-12B

April 30, 2014

4.1

Specimen Share Certificate

10-12B

April 30, 2014

4.2

Registration Rights Agreement, dated March 3, 2014

10-12B

April 8, 2014

4.3

First Amendment of Registration Rights Agreement, dated February 10, 2020 by and between Theravance Biopharma, Inc. and Glaxo Group Limited

10-Q

March 31, 2020

4.4

Shelf Rights Plan Resolution

DEF 14A

March 21, 2018

4.5

Sales Agreement between Theravance Biopharma, Inc. and Cowen and Company, LLC dated December 3, 2019

S-3

December 3, 2019

4.6

Indenture, dated as of November 2, 2016, between Theravance Biopharma, Inc. and Wells Fargo Bank, National Association, as trustee

8-K

November 2, 2016

4.7

First Supplemental Indenture, dated as of November 2, 2016, between Theravance Biopharma, Inc. and Wells Fargo Bank, National Association, as trustee

8-K

November 2, 2016

4.8

Form of 3.25% Convertible Senior Note due 2023 (included in Exhibit 4.6)

8-K

November 2, 2016

4.9

Indenture, dated as of February 28, 2020, by and among Triple Royalty Sub II LLC, as issuer, U.S. Bank National Association, as initial trustee, transfer agent, paying agent, registrar and calculation agent and, solely with respect to Section 2.11(o) and Section 2.11(p) Theravance Biopharma, Inc.

8-K

March 04, 2020

4.10

Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

10-K

December 31, 2019

4.11

Registration Rights Agreement among Theravance Biopharma, Inc., GSK Finance (No.3) plc and GlaxoSmithKline plc dated June 22, 2020.

8-K

June 25, 2020

4.12

Waiver and Assignment of Registration Rights and Voting Agreement among GSK Finance (No.3) plc, Glaxo Group Limited and Theravance Biopharma, Inc. dated as of June 22, 2020.

8-K

June 25, 2020

10.1

Transition Services Agreement by and between Theravance Biopharma, Inc. and Innoviva, Inc., dated June 2, 2014

8-K

June 3, 2014

10.2

Tax Matters Agreement by and between Theravance Biopharma, Inc. and Innoviva, Inc., dated June 2, 2014

8-K

June 3, 2014

10.3

Employee Matters Agreement by and between Theravance Biopharma, Inc. and Innoviva, Inc., dated June 1, 2014

8-K

June 3, 2014

10.4+

2013 Equity Incentive Plan

S-8

August 18, 2014

10.5+

UK Addendum to the 2013 Equity Incentive Plan

10-Q

August 14, 2014

10.6+

2014 New Employee Equity Incentive Plan

S-8

November 14, 2014

10.7+

2013 Employee Share Purchase Plan, as amended

S-8

Aug. 18, 2014

10.8+

Forms of award agreements under the 2013 Equity Incentive Plan and 2014 New Employee Equity Incentive Plan

10-Q

May 10, 2016

10.9+

Forms of Equity Award Amendment

10-12B

May 7, 2014

10.10+

Form of TFIO Cash Award Amendment

10-12B

May 7, 2014

10.11+

Form of Acknowledgment for Irish Non-Employee Directors

10-K

March 11, 2016

122

Incorporated by Reference

Exhibit Number

Description

Form

Filing
Date/Period
End Date

10.12+

Irish Addendum to the 2013 Equity Incentive Plan

10-K

March 11, 2016

10.13+

Irish Addendum to the 2014 New Employee Equity Incentive Plan

10-K

March 11, 2016

10.14+

UK and Irish Addendums to the 2013 Employee Share Purchase Plan

10-K

March 11, 2016

10.15+

Theravance Biopharma, Inc. Performance Incentive Plan

8-K

May 6, 2016

10.16+

Form of Notice of Option Grant and Option Agreement under the Company’s Performance Incentive Plan

10-Q

November 8, 2017

10.17+

Form of Notice of Performance Restricted Share Unit Award and Restricted Share Unit Agreement under the Company’s Performance Incentive Plan

10-Q

November 8, 2017

10.18+

Change in Control Severance Plan

10-12B

April 8, 2014

10.19+

Cash Bonus Program

10-12B

November 22, 2013

10.20+

Form of Indemnity Agreement

10-12B

April 30, 2014

10.21

Amended and Restated Lease Agreement, 951 Gateway Boulevard, between Innoviva, Inc. and HMS Gateway Office L.P., dated January 1, 2001

10-12B

August 1, 2013

10.22

First Amendment to Lease for 951 Gateway Boulevard effective as of June 1, 2010 between Innoviva, Inc. and ARE-901/951 Gateway Boulevard, LLC

10-12B

August 1, 2013

10.23

Lease Agreement, 901 Gateway Boulevard, between Innoviva, Inc. and HMS Gateway Office L.P., dated January 1, 2001

10-12B

August 1, 2013

10.24

First Amendment to Lease for 901 Gateway Boulevard effective as of June 1, 2010 between Innoviva, Inc. and ARE-901/951 Gateway Boulevard, LLC

10-12B

August 1, 2013

10.25

Consent to Assignment by and among ARE-901/951 Gateway Boulevard, LLC, Innoviva, Inc. and Theravance Biopharma, Inc. and Assignment and Assumption of Lease for 901 Gateway Blvd.

10-Q

August 14, 2014

10.26

Consent to Assignment by and among ARE-901/951 Gateway Boulevard, LLC, Innoviva, Inc. and Theravance Biopharma, Inc. and Assignment and Assumption of Lease for 951 Gateway Blvd.

10-Q

August 14, 2014

10.27

Theravance Respiratory Company, LLC Limited Liability Company Agreement, dated May 31, 2014

8-K

June 3, 2014

10.28*

Technology Transfer and Supply Agreement, dated as of May 22, 2012 between Innoviva, Inc. and Hospira Worldwide, Inc.

10-12B

May 7, 2014

10.29*

First Amendment to the Technology Transfer and Supply Agreement by and between Innoviva, Inc. and Hospira Worldwide, Inc., dated May 16, 2013

10-Q

November 9, 2016

10.30*

Second Amendment to the Technology Transfer and Supply Agreement by and between Theravance Biopharma Antibiotics, Inc. and Hospira Worldwide, Inc., dated October 17, 2014

10-Q

November 9, 2016

10.31*

Third Amendment to the Technology Transfer and Supply Agreement by and between Theravance Biopharma Ireland Limited and Hospira Worldwide, Inc., dated April 14, 2016

10-Q

November 9, 2016

10.32*

Fourth Amendment to the Technology Transfer and Supply Agreement by and between Theravance Biopharma Ireland Limited and Pfizer CentreOne group of Pfizer, Inc., dated September 29, 2016

10-Q

November 9, 2016

10.33

Amendment No. 1 to the License, Development, and Commercialization Agreement by and between Theravance Biopharma Ireland Limited and Clinigen Group PLC dated August 4, 2016

10-Q

August 9, 2016

10.34

License Agreement with Janssen Pharmaceutica, dated as of May 14, 2002

10-Q

August 14, 2014

10.35

Collaboration Agreement between Innoviva, Inc. and Glaxo Group Limited, dated November 14, 2002 (1)

10.36

Strategic Alliance Agreement by and between Innoviva, Inc. and Glaxo Group Limited, dated March 30, 2004 (2)

10.37

Amendment to Strategic Alliance Agreement by and between Innoviva, Inc. and Glaxo Group Limited, dated October 3, 2011 (3)

123

Incorporated by Reference

Exhibit Number

Description

Form

Filing
Date/Period
End Date

10.38

Collaboration Agreement Amendment by and between Innoviva, Inc. and Glaxo Group Limited dated, March 3, 2014 (4)

10.39

Strategic Alliance Agreement Amendment by and between Innoviva, Inc. and Glaxo Group Limited dated, March 3, 2014 (4)

10.40

Master Agreement by and between Innoviva, Inc., Theravance Biopharma, Inc. and Glaxo Group Limited, dated March 3, 2014 (4)

10.41

Extension Agreement by and between the Company and Glaxo Group Limited, dated March 3, 2014

10-12B

April 8, 2014

10.42+

Amended Offer Letter with Rick E Winningham dated August 5, 2014

10-Q

November 12, 2014

10.43+

Offer Letter with Frank Pasqualone May 12, 2014

10-Q

August 14, 2014

10.44+

Offer Letter with Brett K. Haumann dated May 12, 2014

10-Q

August 14, 2014

10.46+

Offer Letter with Brad Shafer dated August 20, 2014

10-Q

November 12, 2014

10.48+

Offer Letter with Ken Pitzer September 15, 2014

10-Q

May 10, 2016

10.49+

Offer Letter with Phil Worboys September 9, 2014

10-Q

May 10, 2016

10.50+

Offer Letter with Richard Graham, Ph.D. dated August 12, 2015

10-Q

September 30, 2020

10.51**

Development and Commercialization Agreement by and between Theravance Biopharma R&D, Inc. and Mylan Ireland Limited, dated January 30, 2015

10.52*

License and Collaboration Agreement by and between Theravance Biopharma Ireland Limited and Millennium Pharmaceuticals, Inc. dated June 8, 2016

10-Q

August 9, 2016

10.53

Form of Note Purchase Agreement, dated February 21, 2020 by and among Theravance Biopharma R&D, Inc., Triple Royalty Sub II LLC, and the Purchasers

10-K

December 31, 2019

10.54

Sale and Contribution Agreement, dated as of February 28, 2020, among Theravance Biopharma R&D, Inc., as the transferor, Triple Royalty Sub II LLC, as the transferee, and Theravance Biopharma, Inc.

8-K

March 04, 2020

10.55

Pledge and Security Agreement, dated as of February 28, 2020, between Theravance Biopharma R&D, Inc., as the equity holder, and U.S. Bank National Association, as the trustee

8-K

March 04, 2020

10.56

Servicing Agreement, dated as of February 28, 2020, between Triple Royalty Sub II LLC and Theravance Biopharma US, Inc.

8-K

March 04, 2020

10.57

Account Control Agreement, dated as of February 28, 2020, among Triple Royalty Sub II LLC, as the grantor, Theravance Biopharma US, Inc., as the servicer, U.S. Bank National Association, as the secured party, and U.S. Bank National Association, as the financial institution

8-K

March 04, 2020

10.58

Amended and Restated Limited Liability Company Agreement of Triple Royalty Sub II LLC, dated February 28, 2020, by Theravance Biopharma R&D, Inc., as the initial sole equity member

8-K

March 04, 2020

10.59

Annex A - Rules of Construction and Defined Terms of the Amended and Restated Limited Liability Company Agreement of Triple Royalty Sub II LLC, dated February 28, 2020

8-K

March 04, 2020

10.60**

License and Collaboration Agreement by and between Theravance Biopharma Ireland Limited and Janssen Biotech, Inc. dated as of February 5, 2018

10.61+

Memorandum to Brett K. Haumann regarding Transfer to Transfer to Theravance Biopharma UK Limited, executed April 1, 2020

10-Q

March 31, 2020

10.62

Amendments to Lease for 901 Gateway Boulevard between Theravance Biopharma US, Inc. and ARE-901/951 Gateway Boulevard, LLC

10-Q

August 2, 2018

10.63

Amendments to Lease for 951 Gateway Boulevard between Theravance Biopharma US, Inc. and ARE-901/951 Gateway Boulevard, LLC

10-Q

August 2, 2018

10.64

Agreement and General Release between Theravance Biopharma US, Inc. and Shehnaaz Suliman, dated March 1, 2019

10-Q

May 10, 2019

10.65

Offer Letter with Andrew Hindman dated May 30, 2019

10-Q

August 5, 2019

124

Incorporated by Reference

Exhibit Number

Description

Form

Filing
Date/Period
End Date

10.66*

Amendment No. 1 to the Development and Commercialization Agreement by and between Theravance Biopharma Ireland Limited and Mylan Ireland Limited, dated June 12, 2019

10-Q

August 5, 2019

10.67**

License Agreement by and between Theravance Biopharma Ireland Limited and Pfizer Inc. dated December 21, 2019

10-K

December 31, 2019

10.68+

Service Agreement by and between Brett K. Haumann and Theravance Biopharma UK Limited, dated April 1, 2020

10-Q

March 31, 2020

10.69

Cooperation Agreement among Theravance Biopharma, Inc., GSK Finance (No.3) plc and GlaxoSmithKline plc dated June 22, 2020

8-K

June 25, 2020

21.1

Subsidiaries of Theravance Biopharma, Inc.

23.1

Consent of Independent Registered Public Accounting Firm

24.1

Power of Attorney (see signature page to this Annual Report on Form 10-K)

31.1

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934

31.2

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934

32

Certifications Pursuant to 18 U.S.C. Section 1350

101

The following materials from Registrant’s Annual Report on Form 10-K for the year ended December 31, 2020, formatted in Inline Extensible Business Reporting Language (iXBRL) includes: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Loss, (iv) Consolidated Statements of Shareholders’ Deficit, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.

104

Cover Page Interactive Data File (Formatted as Inline XBRL and contained in Exhibit 101).

+

Management contract or compensatory plan or arrangement required to be filed pursuant to Item 15(b) of Form 10-K.

*

Portions of this exhibit have been omitted and the omitted information has been filed separately with the Securities and Exchange Commission pursuant to an order granting confidential treatment.

**

Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.

(1)

Incorporated by reference to an exhibit filed with the quarterly report on Form 10-Q of Innoviva, Inc., filed with the Securities and Exchange Commission on August 7, 2014.

(2)

Incorporated by reference to an exhibit filed with the annual report on Form 10-K of Innoviva, Inc., filed with the Commission on March 3, 2014.

(3)

Incorporated by reference to an exhibit filed with the annual report on Form 10-K of Innoviva, Inc., filed with the Commission on February 27, 2012.

(4) Incorporated by reference to an exhibit filed with the current report on Form 8-K/A of Innoviva, Inc., filed with the Commission on March 6, 2014.

125

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

THERAVANCE BIOPHARMA, INC.

Date: February26, 2021

By:

/s/ Rick E Winningham

Rick E Winningham

Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Rick E Winningham as their true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to the annual report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Rick E Winningham

Rick E Winningham

Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

February 26, 2021

/s/ Andrew Hindman

Andrew Hindman

Senior Vice President and Chief Financial Officer (Principal Financial Officer)

February 26, 2021

/s/ Laurie Smaldone Alsup, M.D.

Laurie Smaldone Alsup, M.D.

Director

February 26, 2021

/s/ Eran Broshy

Eran Broshy

Director

February 26, 2021

/s/ Robert V. Gunderson, Jr.

Robert V. Gunderson, Jr.

Director

February 26, 2021

/s/ Donal O’Connor

Donal O’Connor

Director

February 26, 2021

/s/ Burton G. Malkiel, Ph.D.

Burton G. Malkiel, Ph.D.

Director

February 26, 2021

126

Signature

Title

Date

/s/ Dean J. Mitchell

Dean J. Mitchell

Director

February 26, 2021

/s/ Susan M. Molineaux, Ph.D.

Susan M. Molineaux, Ph.D.

Director

February 26, 2021

/s/ Deepika R. Pakianathan, Ph.D.

Deepika R. Pakianathan, Ph.D.

Director

February 26, 2021

/s/ George M. Whitesides, Ph.D.

George M. Whitesides, Ph.D.

Director

February 26, 2021

/s/ William D. Young

William D. Young

Director

February 26, 2021

127