Innoviva (INVA) 10-Q 4 Aug 16 2016 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Jul. 31, 2016
Document and Entity Information
Entity Registrant Name	Innoviva, Inc.
Entity Central Index Key	1,080,014
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		111,202,828
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q2

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015	[1]
Current assets:
Cash and cash equivalents	$ 112,945	$ 159,180
Short-term marketable securities	40,921	28,103
Related party receivables from collaborative arrangements	35,817	26,228
Prepaid expenses and other current assets	738	814
Total current assets	190,421	214,325
Property and equipment, net	174	221
Capitalized fees paid to a related party, net	187,456	194,368
Other assets	58	18
Total assets	378,109	408,932
Current liabilities:
Accounts payable	137	818
Accrued personnel-related expenses	1,126	1,659
Accrued interest payable	7,823	7,911
Other accrued liabilities	1,392	2,218
Non-recourse notes, due 2029, current	3,266	0
Deferred revenue	885	885
Total current liabilities	14,629	13,491
Convertible subordinated notes, due 2023, net of issuance costs	241,408	250,992
Non-recourse notes, due 2029, net of issuance costs	480,879	482,139
Other long-term liabilities	1,639	1,856
Deferred revenue	2,656	3,099
Commitments and contingencies (Note 9)
Stockholders' deficit:
Preferred stock: $0.01 par value, 230 shares authorized, no shares issued and outstanding
Common stock: $0.01 par value, 200,000 shares authorized, 111,617 and 114,933 shares issued as of June 30, 2016 and December 31, 2015, respectively	1,116	1,149
Treasury stock: 150 shares as of June 30, 2016 and December 31, 2015	(3,263)	(3,263)
Additional paid-in capital	1,312,434	1,351,898
Accumulated other comprehensive income (loss)	6	(2)
Accumulated deficit	(1,673,395)	(1,692,427)
Total stockholders' deficit	(363,102)	(342,645)
Total liabilities and stockholders' deficit	$ 378,109	$ 408,932
[1]	Condensed consolidated balance sheet as of December 31, 2015 has been derived from audited consolidated financial statements.

CONDENSED CONSOLIDATED BALANCE3

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2016	Dec. 31, 2015
CONDENSED CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	230,000	230,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	111,617,000	114,933,000
Treasury Stock, Shares	150,000	150,000

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenue:
Royalty revenue from a related party, net of amortization for capitalized fees paid to a related party of $3,456 and $3,456 for the three months ended June 30, 2016 and 2015 and $6,912 and $ 6,912 for the six months ended June 30, 2016 and 2015	$ 32,251	$ 10,434	$ 56,206	$ 17,108
Revenue from collaborative arrangements from a related party, net	221	221	442	443
Total net revenue	32,472	10,655	56,648	17,551
Operating expenses:
Research and development	370	638	762	1,350
General and administrative	6,225	4,909	12,477	10,348
Total operating expenses	6,595	5,547	13,239	11,698
Income from operations	25,877	5,108	43,409	5,853
Other income (expense), net	1,719	(16)	1,687	1,162
Interest income	157	85	249	201
Interest expense	(13,156)	(12,987)	(26,313)	(25,693)
Net income (loss)	$ 14,597	$ (7,810)	$ 19,032	$ (18,477)
Basic and diluted net income (loss) per share	$ 0.13	$ (0.07)	$ 0.17	$ (0.16)
Shares used to compute basic and diluted net income (loss) per share:
Shares used to compute basic net income (loss) per share	111,359	115,329	112,005	115,096
Shares used to compute diluted net income (loss) per share	124,316	115,329	112,531	115,096
Cash dividend declared per common share (in dollars per share)	$ 0	$ 0.25	$ 0	$ 0.50

CONDENSED CONSOLIDATED STATEME5

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Amortization of capitalized fees paid to a related party	$ 3,456	$ 3,456	$ 6,912	$ 6,912

CONDENSED CONSOLIDATED STATEME6

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net income (loss)	$ 14,597	$ (7,810)	$ 19,032	$ (18,477)
Other comprehensive income:
Unrealized gain on marketable securities, net	8	2	9	1,228
Less: realized gain on marketable securities, net	(1)	0	(1)	(1,151)
Comprehensive income (loss)	$ 14,604	$ (7,808)	$ 19,040	$ (18,400)

CONDENSED CONSOLIDATED STATEME7

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016		Jun. 30, 2015
Cash flows from operating activities
Net income (loss)	$ 19,032		$ (18,477)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	6,967		6,966
Stock-based compensation	4,705		3,755
Amortization of premium (discount) on short-term investments	(14)		392
Interest added to the principal balance of the non-recourse term notes due 2029	855		12,836
Gain on repurchase of convertible subordinated notes due 2023	(1,752)		0
Amortization of debt issuance costs	1,414		1,527
Realized gain on sale of marketable securities, net	1		(1,204)
Amortization of lease guarantee	(28)		0
Other non-cash items	0		(2)
Changes in operating assets and liabilities:
Receivables from collaborative arrangements	(9,589)		(3,447)
Prepaid expenses and other current assets	76		437
Other assets	(40)		0
Accounts payable	(681)		462
Payable to Theravance Biopharma, Inc., net	0		(906)
Accrued personnel-related expenses and other accrued liabilities	(627)		(1,709)
Accrued interest payable	(88)		374
Other long-term liabilities	(78)		(3)
Deferred revenue	(443)		(443)
Net cash provided by operating activities	19,710		558
Cash flows from investing activities
Maturities of marketable securities	44,101		59,120
Purchases of marketable securities	(59,893)		(8,457)
Sales of marketable securities	2,995		57,098
Purchases of property and equipment	(8)		(6)
Net cash (used in) provided by investing activities	(12,805)		107,755
Cash flows from financing activities
Repurchase of common stock	(44,331)		0
Repurchase of convertible subordinated notes due 2023	(8,095)		0
Payments of cash dividends to stockholders	(843)		(58,045)
Repurchase of shares to satisfy tax withholding	(597)		(2,121)
Proceeds from capped-call options	391		0
Proceeds from issuances of common stock, net	335		4,632
Net cash used in financing activities	(53,140)		(55,534)
Net (decrease) increase in cash and cash equivalents	(46,235)		52,779
Cash and cash equivalents at beginning of period	159,180	[1]	96,800
Cash and cash equivalents at end of period	112,945		149,579
Supplemental disclosure of cash flow information
Cash paid for interest	$ 24,132		$ 10,954
[1]	Condensed consolidated balance sheet as of December 31, 2015 has been derived from audited consolidated financial statements.

Description of Operations and S

Description of Operations and Summary of Significant Accounting Policies	6 Months Ended
	Jun. 30, 2016
Description of Operations and Summary of Significant Accounting Policies
Description of Operations and Summary of Significant Accounting Policies	1. Description of Operations and Summary of Significant Accounting Policies Description of Operations Innoviva, Inc. (referred to as “Innoviva”, the “Company”, or “we” and other similar pronouns) is focused on bringing compelling new medicines to patients in areas of unmet need by leveraging its significant expertise in the development, commercialization and financial management of bio-pharmaceuticals. Innoviva’s portfolio is anchored by the respiratory assets partnered with Glaxo Group Limited (“GSK”), including RELVAR ® /BREO ® ELLIPTA ® (fluticasone furoate/ vilanterol, “FF/VI”) and ANORO ® ELLIPTA ® (umeclidinium bromide/ vilanterol, “UMEC/VI”). Under the Long-Acting Beta 2 Agonist (“LABA”) Collaboration Agreement and the Strategic Alliance Agreement with GSK (referred to herein as the “GSK Agreements”), Innoviva is eligible to receive the associated royalty revenues from RELVAR ® /BREO ® ELLIPTA ® and ANORO ® ELLIPTA ® . Innoviva is also entitled to 15% of any future payments made by GSK under its agreements originally entered into with us, and since assigned to Theravance Respiratory Company, LLC (“TRC”), relating to the combination FF/UMEC/VI and the Bifunctional Muscarinic Antagonist- Beta 2 Agonist (“MABA”) program, as monotherapy and in combination with other therapeutically active components, such as an inhaled corticosteroid, and any other product or combination of products that may be discovered and developed in the future under the LABA Collaboration Agreement (“LABA Collaboration”), which has been assigned to TRC other than RELVAR ® /BREO ® ELLIPTA ® and ANORO ® ELLIPTA ® . Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In our opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of our financial position, results of operations, comprehensive income and cash flows. The interim results are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2016 or any other period. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission (“SEC”) on February 24, 2016. Variable Interest Entity We evaluate our ownership, contractual and other interest in entities to determine if they are variable interest entities (“VIE”), whether we have a variable interest in those entities and the nature and extent of those interests. Based on our evaluations, if we determine we are the primary beneficiary of such VIEs, we consolidate such entities into our financial statements. We consolidate the financial results of TRC, which we have determined to be a VIE, because we have the power to direct the economically significant activities of TRC and the obligation to absorb losses of, or the right to receive benefits from, TRC. The financial position and results of operations of TRC are not material for the periods presented. Recently Issued Accounting Pronouncements Not Yet Adopted In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases , which supersedes the lease recognition requirements in ASC Topic 840, Leases . The standard requires an entity to recognize right-of-use assets and lease liabilities arising from a lease for both financing and operating leases in the consolidated balance sheets but recognize the impact on the consolidated statement of operations and cash flows in a similar manner under current GAAP. The standard also requires additional qualitative and quantitative disclosures. The standard is effective for us beginning January 1, 2019, although early adoption is permitted. We are currently evaluating adoption methods and whether this standard will have a material impact on our consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities , which provides guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. This standard is effective for us beginning January 1, 2018. We are evaluating the effects of the adoption of this ASU to our consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , requiring an entity to recognize the amount of revenue to which it expects to be entitled to in exchange for the transfer of promised goods or services to customers. The standard will replace nearly all existing revenue recognition guidance under GAAP when it becomes effective. In July 2015, the FASB decided to defer the effective date by one year. Thus, the standard will be effective for us beginning January 1, 2018, at which time we may adopt the standard under either the full retrospective method or the modified retrospective method. Early adoption on or after January 1, 2017 would be permitted. We are currently evaluating the effect that the new standard will have on our consolidated financial statements and related disclosures. Recently Adopted Accounting Pronouncement In April 2015, the FASB issued ASU 2015-03, Interest — Imputation of Interest (“ASU 2015-03”), to simplify the presentation of debt issuance costs. This standard amended existing guidance to require the presentation of debt issuance costs associated with term loans in the balance sheet as a deduction from the carrying amount of the related debt liability instead of a deferred charge. We adopted ASU 2015-03 on January 1, 2016. Upon adoption of ASU 2015-03, we applied the guidance retrospectively to all periods presented and classified our debt issuance costs, which prior to adoption were included in other assets in the condensed consolidated financial statements, as a deduction to our respective long-term debts.

Net Income (Loss) per Share

Net Income (Loss) per Share	6 Months Ended
	Jun. 30, 2016
Net Income (Loss) per Share
Net Income (Loss) per Share	2. Net Income (Loss) per Share Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common shares outstanding. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common shares and dilutive potential common share equivalents then outstanding. Dilutive potential common share equivalents include the assumed exercise, vesting and issuance of employee stock awards using the treasury stock method, as well as common shares issuable upon assumed conversion of our convertible debt using the if-converted method. The following table shows the computation of basic and diluted net income per share for the three and six months ended June 30, 2016 and 2015: Three Months Ended June 30, Six Months Ended June 30 (In thousands except for per share amounts) 2016 (1)(2) 2015 2016 (3) 2015 Numerator: Net income (loss) attributable to common stockholders, basic $ $ ) $ $ ) Add: Interest expense on convertible subordinated notes due 2023, net of tax — — — Net income (loss) attributable to common stockholders, diluted $ $ ) $ $ ) Denominator: Weighted-average shares used to compute basic net income (loss) per share Dilutive effect of convertible subordinated notes due 2023 — — — Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan — — Weighted-average shares used to compute diluted net income (loss) per share Net income (loss) per share Basic $ $ ) $ $ ) Diluted $ $ ) $ $ ) Anti-Dilutive Securities The following common share equivalents were not included in the computation of diluted net income (loss) per share because their effect was anti-dilutive: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2016 (1) 2015 (4) 2016 (3) 2015 (5) Outstanding options and awards granted under equity incentive plan and employee stock purchase plan Shares issuable upon conversion of convertible subordinated notes — (1) Includes 2.9 million options, 0.1 million restricted stock units, and 0.1 million unvested restricted stock awards (“RSAs”) retained by former employees who were transferred to Theravance Biopharma, Inc. (“Theravance Biopharma”) in connection with the Spin-Off of Theravance Biopharma in June 2014 (the “Spin-Off”). Subsequent to the Spin-Off, stock-based compensation expense associated with the awards held by Theravance Biopharma employees granted prior to the Spin-Off is recognized by Theravance Biopharma. Stock options of 2.9 million were excluded from the diluted net income per share calculation as their effect was anti-dilutive. (2) For the three months ended June 30, 2016, the effect of assumed conversion of convertible subordinated notes due 2023 became dilutive under the if-converted method and was included in the computation of diluted net income per share. (3) Includes 3.2 million options, 0.1 million restricted stock units, and 0.3 million unvested RSAs retained by former employees who were transferred to Theravance Biopharma in connection with the Spin-Off. Subsequent to the Spin-Off, stock-based compensation expense associated with the awards held by Theravance Biopharma employees granted prior to the Spin-Off is recognized by Theravance Biopharma. Stock options for 3.2 million shares of common stock were excluded from the diluted net income per share calculation as their effect was anti-dilutive. (4) Includes 4.2 million options, 0.4 million restricted stock units, and 1.1 million unvested RSAs retained by former employees who were transferred to Theravance Biopharma in connection with the Spin-Off. All of these awards were excluded from the diluted net loss per share calculation as their effect was anti-dilutive. (5) Includes 4.4 million options, 0.5 million restricted stock units, and 1.2 million unvested RSAs retained by former employees who were transferred to Theravance Biopharma in connection with the Spin-Off. All of these awards were excluded from the diluted net loss per share calculation as their effect was anti-dilutive.

Collaborative Arrangements

Collaborative Arrangements	6 Months Ended
	Jun. 30, 2016
Collaborative Arrangements
Collaborative Arrangements	3. Collaborative Arrangements Net Revenue from Collaborative Arrangements Net revenue recognized under our GSK Agreements was as follows: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2016 2015 2016 2015 Royalties from a related party $ $ $ $ Less: amortization of capitalized fees paid to a related party ) ) ) ) Royalty revenue Strategic alliance - MABA program Total net revenue from GSK $ $ $ $ LABA Collaboration As a result of the launch and approval of RELVAR ® /BREO ® ELLIPTA ® and ANORO ® ELLIPTA ® in the U.S., Japan and Europe, we paid milestone fees to GSK totaling $220.0 million during the year ended December 31, 2014. Although we have no further milestone payment obligations to GSK pursuant to the LABA Collaboration Agreement, we continue to have ongoing development and commercialization activities under the GSK Agreements that are expected to continue over the life of the agreements. The milestone fees paid to GSK were recognized as capitalized fees paid to a related party, which are being amortized over their estimated useful lives commencing upon the commercial launch of the product. The amortization expense is recorded as a reduction to the royalties from GSK. We are entitled to receive annual royalties from GSK on sales of RELVAR ® /BREO ® ELLIPTA ® as follows: 15% on the first $3.0 billion of annual global net sales and 5% for all annual global net sales above $3.0 billion. Sales of single-agent LABA medicines and combination medicines would be combined for the purposes of this royalty calculation. For other products combined with a LABA from the LABA Collaboration, such as ANORO ® ELLIPTA ® , royalties are upward tiering and range from 6.5% to 10%. Agreements Entered into with GSK in Connection with the Spin-Off On March 3, 2014, in contemplation of the Spin-Off, we, Theravance Biopharma and GSK entered into a series of agreements, including amendments to the GSK Agreements, clarifying how the companies would implement the Spin-Off and operate following the Spin-Off. Pursuant to a three-way master agreement, by and among us, Theravance Biopharma and GSK, we agreed to sell a certain number of Theravance Biopharma shares withheld from a taxable dividend of Theravance Biopharma shares to GSK. After such Theravance Biopharma shares were sent to the transfer agent, we agreed to purchase the Theravance Biopharma shares from the transfer agent, rather than have them sold on the open market, in order to satisfy tax withholdings. GSK had a right to purchase these shares of Theravance Biopharma from us, but this right expired unexercised. During the six months ended June 30, 2015, we sold all 436,802 ordinary shares of Theravance Biopharma that we held as of December 31, 2014. Refer to Note 4 “Available-for-Sale Securities and Fair Value Measurements” for further information. GSK Contingent Payments and Revenue The potential future contingent payments receivable related to the MABA program of $363 million are not deemed substantive milestones due to the fact that the achievement of the event underlying the payment predominantly relates to GSK’s performance of future development, manufacturing and commercialization activities for product candidates after licensing the program. We are entitled to 15% of any milestone payments through our ownership interest in TRC.

Available-for-Sale Securities a

Available-for-Sale Securities and Fair Value Measurements	6 Months Ended
	Jun. 30, 2016
Available-for-Sale Securities and Fair Value Measurements
Available-for-Sale Securities and Fair Value Measurements	4. Available-for-Sale Securities and Fair Value Measurements Available-for-Sale Securities The classification of available-for-sale securities in the condensed consolidated balance sheets is as follows: (In thousands) June 30, 2016 December 31, 2015 Cash and cash equivalents $ $ Short-term marketable securities Total $ $ The estimated fair value of available-for-sale securities is based on quoted market prices for these or similar investments that were based on prices obtained from a commercial pricing service. Available-for-sale securities are summarized below: June 30, 2016 (In thousands) Amortized Cost Gross Unrealized Gains Estimated Fair Value U.S. government agencies $ $ $ U.S. commercial paper — Money market funds — Total $ $ $ December 31, 2015 (In thousands) Amortized Cost Gross Unrealized Losses Estimated Fair Value U.S. government agencies $ $ ) $ U.S. corporate notes ) U.S. commercial paper — Money market funds — Total $ $ ) $ As of June 30, 2016, all of the available-for-sale securities had contractual maturities within one year and the weighted average maturity of marketable securities was approximately four months. We have determined that the gross unrealized gains on our marketable securities as of June 30, 2016 were temporary in nature. During the six months ended June 30, 2015, we sold all of the ordinary shares of Theravance Biopharma, which resulted in a gain on sale of $1.2 million, which is included in other income (expense), net in the condensed consolidated statement of operations. Fair Value Measurements Our available-for-sale securities are measured at fair value on a recurring basis and our debt is carried at the amortized cost basis. The estimated fair values were as follows: Estimated Fair Value Measurements as of June 30, 2016 Using: Types of Instruments Quoted Price in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs (In thousands) Level 1 Level 2 Level 3 Total Assets U.S. government agencies $ — $ $ — $ U.S. commercial paper — — Money market funds — — Total assets measured at estimated fair value $ $ $ — $ Liabilities Convertible subordinated notes due 2023 $ — $ $ — $ Non-recourse notes due 2029 — — Total fair value of liabilities $ — $ $ — $ Estimated Fair Value Measurements as of December 31, 2015 Using: Types of Instruments Quoted Price in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs (In thousands) Level 1 Level 2 Level 3 Total Assets U.S. government agencies $ — $ $ — $ U.S. corporate notes — — U.S. commercial paper — — Money market funds — — Total assets measured at estimated fair value $ $ $ — $ Liabilities Convertible subordinated notes due 2023 $ — $ $ — $ Non-recourse notes due 2029 — — Total fair value of liabilities $ — $ $ — $ The fair value of our marketable securities classified within Level 2 is based upon observable inputs that 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. The fair value of our convertible subordinated notes due 2023 and non-recourse notes due 2029 is based on recent trading prices of the instruments.

Capitalized Fees Paid to a Rela

Capitalized Fees Paid to a Related Party	6 Months Ended
	Jun. 30, 2016
Capitalized Fees Paid to a Related Party
Capitalized Fees Paid to a Related Party	5. Capitalized Fees Paid to a Related Party Capitalized fees paid to a related party, which consist of registrational and launch-related milestone fees paid to GSK, were as follows: June 30, 2016 December 31, 2015 Weighted Average Remaining Amortization Gross Net Gross Net Period Carrying Accumulated Carrying Carrying Accumulated Carrying (In thousands) (Years) Value Amortization Value Value Amortization Value Approval and launch related milestone payments under the LABA Collaboration $ $ ) $ $ $ ) $ These milestone fees are being amortized over their estimated useful lives commencing upon the commercial launch of the product in their respective regions with the amortization expense recorded as a reduction in revenue from collaborative arrangements. Additional information regarding these milestone fees is included in Note 3, “Collaborative Arrangements.” Amortization expense for the three and six months ended June 30, 2016 and 2015 was $3.5 million and $6.9 million, respectively. As of June 30, 2016, the remaining estimated amortization expense is $6.9 million for 2016, $13.8 million for each of the years from 2017 to 2021, and an aggregate of $111.4 million thereafter.

Stock-Based Compensation

Stock-Based Compensation	6 Months Ended
	Jun. 30, 2016
Stock-Based Compensation
Stock-Based Compensation	6. Stock-Based Compensation Performance-Contingent RSAs and RSUs Since 2011, the Compensation Committee of our Board of Directors (the “Compensation Committee”) have approved grants of performance-contingent RSAs and RSUs to senior management and a non-executive officer. Generally, these awards have dual triggers of vesting based upon the achievement of certain performance goals by a pre-specified date, as well as a requirement for continued employment. Recognition of stock-based compensation expense begins when the performance goals are deemed probable of achievement. Included in these performance-contingent RSAs is the grant of 1,290,000 special long-term retention and incentive performance-contingent RSAs to senior management in 2011. The awards have dual triggers of vesting based upon the achievement of certain performance conditions over a six-year timeframe from 2011 through December 31, 2016 and require continued employment. In connection with the Spin-Off, our Compensation Committee approved the modification of the remaining tranches related to these awards as the performance conditions associated with the remaining portions of these awards were unlikely to be consistent with the new strategies of each company following the Spin-Off. The remaining 63,135 RSAs for which service-based vesting was not triggered at the time of the Spin-Off remain subject to new performance conditions (as well as the original service conditions). In addition, the RSAs for which both the performance and service-based conditions were not achieved prior to the Spin-Off were entitled to the pro rata dividend distribution made by Innoviva on June 2, 2014 of one ordinary share of Theravance Biopharma for every 3.5 shares of Innoviva common stock subject to their awards, which will also be subject to the same new performance and service conditions as the original RSAs to which they relate. As of June 30, 2016, we determined that the achievement of the requisite performance conditions was probable and, as a result, $1.2 million compensation cost was recognized for the remaining equity awards. On January 14, 2016, the Compensation Committee approved and granted 282,394 RSAs and 46,294 RSUs to senior management. These awards include a market condition based on Relative Total Shareholder Return (“TSR”) and a service condition that requires continued employment, collectively the “Performance Measures”. The vesting percentages of these awards are calculated based on the two-year TSR with a catch-up provision opportunity measured on January 13, 2019 for RSAs and on September 30, 2018 for RSUs. Two-thirds of amounts earned at the end of year two will vest and be distributed on February 20, 2018, while the final one-third earned after two years as well as the catch up amount earned will vest and be distributed on February 20, 2019 for RSAs and November 20, 2018 for RSUs. The actual payout of shares may range from a minimum of zero shares to a maximum of 328,688 shares granted upon the actual performance against the Performance Measures. The grant date fair value of these awards is determined using a Monte Carlo valuation model. The aggregate value of $2.0 million is recognized as compensation expense over the implied service period and will not be reversed if the market condition is not met. Stock-Based Compensation Expense Stock-based compensation expense is included in the condensed consolidated statements of operations as follows: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2016 2015 2016 2015 Research and development $ $ $ $ General and administrative Total stock-based compensation $ $ $ $ As of June 30, 2016, unrecognized compensation expense, net of expected forfeitures for awards expected to vest, including the market based awards was as follows: $1.2 million related to unvested stock options; $2.0 million related to unvested RSUs; and $11.3 million related to unvested RSAs. At the time of the Spin-Off, all outstanding stock options, RSUs and RSAs held by former employees and directors, who transferred to Theravance Biopharma, were retained by them. As the vesting of these options and awards is based on continuing employment or service with Theravance Biopharma, all stock-based compensation expense associated with these options and awards is recognized by Theravance Biopharma.

Long-Term Debt

Long-Term Debt	6 Months Ended
	Jun. 30, 2016
Long-Term Debt.
Long-Term Debt	7. Long-Term Debt Our long-term debt consists of: (In thousands) June 30, 2016 December 31, 2015 Convertible Subordinated Notes due 2023 $ $ Non-Recourse Notes Payable due 2029 Total long-term debt Unamortized debt issuance costs ) ) Current portion of long-term debt ) — Net long-term debt $ $ Convertible Subordinated Notes Due 2023 In January 2013, we completed an underwritten public offering of $287.5 million aggregate principal amount of unsecured convertible subordinated notes, which will mature on January 15, 2023 (the “2023 Notes”). The financing raised proceeds, net of issuance costs, of approximately $281.2 million, less $36.8 million to purchase two privately-negotiated capped call option transactions in connection with the issuance of the notes. The 2023 Notes bear interest at the rate of 2.125% per year that is payable semi-annually in arrears in cash on January 15 and July 15 of each year, beginning on July 15, 2013. The 2023 Notes were convertible, at the option of the holder, into shares of our common stock at an initial conversion rate of 35.9903 shares per $1,000 principal amount of the 2023 Notes, subject to adjustment in certain circumstances, which represents an initial conversion price of approximately $27.79 per share. Following the Spin-Off of Theravance Biopharma, a number of adjustments to the initial conversion rate have been made as described below. Holders of the 2023 Notes will be able to require us to repurchase some or all of their notes upon the occurrence of a fundamental change, as defined in the 2013 Notes, at 100% of the principal amount of the notes being repurchased plus accrued and unpaid interest. We may not redeem the notes prior to their stated maturity date. In connection with the offering of the 2023 Notes, we entered into two privately-negotiated capped call option transactions with a single counterparty. The capped call option transaction is an integrated instrument consisting of a call option on our common stock purchased by us with a strike price equal to the initial conversion price of $27.79 per share for the underlying number of shares and a cap price of $38.00 per share, both of which are subject to adjustments consistent with the 2023 Notes. The cap component is economically equivalent to a call option sold by us for the underlying number of shares with an initial strike price of $38.00 per share. As an integrated instrument, the settlement of the capped call coincides with the due date of the convertible debt. Upon settlement, we would receive from our hedge counterparty a number of shares of our common shares that would range from zero, if the stock price was below $27.79 per share, to a maximum of 2,779,659 shares, if the stock price is above $38.00 per share. However, if the market price of our common stock, as measured under the terms of the capped call transactions, exceeds $38.00 per share, there is no incremental anti-dilutive benefit from the capped call. In accordance with the agreement for the 2023 Notes, the conversion rate was adjusted as a result of the completion of the Spin-Off of Theravance Biopharma. The conversion rate was adjusted based on the conversion rate immediately prior to the record date for the Spin-Off and the average of the stock dividend distributed to our common stockholders and our stock prices. This resulted in an adjusted conversion rate of 46.9087 shares per $1,000 principal amount of the 2023 Notes, which represents an adjusted conversion price of approximately $21.32 per share. As a result of the conversion rate adjustment, the capped call strike price and cap price were also adjusted accordingly to $21.32 and $29.16, respectively. On July 15, 2014, certain holders of the 2023 Notes converted their notes into 1,519,402 shares of our common stock at the adjusted conversion price of $21.32 per share. In connection with the partial conversion of the 2023 Notes, we received 149,645 shares of our common stock from our capped call option counterparty and the shares of common stock received were recorded as treasury stock. In connection with the payments of the cash dividends during the years ended December 31, 2015 and 2014, the adjusted conversion rate with respect to our 2023 Notes was further adjusted in total from 46.9087 shares of our common stock per $1,000 principal amount of the 2023 Notes to 50.5818 shares of our common stock per $1,000 principal amount of the 2023 Notes, which represents an adjusted conversion price of approximately $19.77 per share. As a result of the conversion rate adjustment, the capped call strike price and cap price were also adjusted accordingly to $19.77 and $27.04. In May 2016, we retired a portion of our 2023 Notes with a face value of $10.0 million and carrying value of $9.8 million by way of purchase in the open market. The 2023 Notes were purchased for a total settlement price of $8.1 million resulting in a gain of $1.7 million, which is included in other income (expense), net in the condensed consolidated statement of operations. As a result of the partial retirement of our 2023 Notes, we entered into a partial termination agreement of the capped call option transaction described above. The partial termination agreement of the capped call option transaction enabled us to receive $0.4 million from the counterparty, which was recorded as an increase in additional paid-in capital in our condensed consolidated balance sheet as of June 30, 2016. Non-Recourse Notes Due 2029 In April 2014, we entered into certain note purchase agreements relating to the private placement of $450.0 million aggregate principal amount of non-recourse fixed rate term notes due 2029 (the “2029 Notes”) issued by our wholly-owned subsidiary. The 2029 Notes bear an annual interest rate of 9%, with interest and principal paid quarterly beginning November 15, 2014. The 2029 Notes may be redeemed at any time prior to maturity, in whole or in part, at specified redemption premiums. Prior to and including May 15, 2016, in the event that the specified portion of royalties received in a quarter was less than the interest accrued for the quarter, the principal amount of the 2029 Notes was increased by the interest shortfall amount for that period, and considered as payment in kind (“PIK”). Since issuance, $44.0 million of interest expense has been added to the principal balance of the 2029 Note, of which $0.2 million and $0.9 million was added during the three and six months ended June 30, 2016, respectively, and $6.4 million and $12.8 million was added during the three and six months ended June 30, 2015, respectively. Since the principal and interest payments on the 2029 Notes are based on royalties from product sales recorded by GSK, which will vary from quarter to quarter and are unknown to us, the 2029 Notes may be repaid prior to the final maturity date in 2029. The 2029 Notes can be prepaid subject to a prepayment premium of 2.5% until April 17, 2017, and without premium afterwards. As of June 30, 2016, the principal balance of the 2029 Notes was $494.0 million, which will be partially paid down by $3.3 million in the next quarterly payment expected to be made in August 2016. This payment is based on our royalty revenues of $35.7 million for the three months ended June 30, 2016.

Shareholders' Deficit

Shareholders' Deficit	6 Months Ended
	Jun. 30, 2016
Shareholders' Deficit
Shareholders' Deficit	8. Shareholders’ Deficit For the six months ended June 30, 2016, we repurchased 4,138,852 shares of our common stock in the open market at an average price of $10.71 per share for a total purchase price of $44.3 million, which were retired upon repurchase.

Commitments and Contingencies

Commitments and Contingencies	6 Months Ended
	Jun. 30, 2016
Commitments and Contingencies
Commitments and Contingencies	9. Commitments and Contingencies Operating Lease and Lease Guarantee Upon the Spin-Off, our facility leases in South San Francisco, California were assigned to Theravance Biopharma. However, if Theravance Biopharma were to default on its lease obligations, we would be held liable by the landlord and thus, we have in substance guaranteed the lease payments for these facilities. We would also be responsible for lease-related payments including utilities, property taxes, and common area maintenance, which may be as much as the actual lease payments. As of June 30, 2016, the total remaining lease payments, which run through May 2020, were $24.7 million. The carrying value of this lease guarantee was $1.3 million as of June 30, 2016 and is reflected in other long-term liabilities in our consolidated balance sheet. Amortization on the lease guarantee for the three and six months ended June 30, 2016 was not material. On June 10, 2016, we executed a lease for our new corporate headquarters in Brisbane, California. The term of the new lease is seven years, subject to our right to extend the lease. Minimum lease payments under the new lease are as follows as of June 30, 2016: (In thousands) Years Ending December 31: Remainder of 2016 $ 2017 2018 2019 2020 Thereafter Total $ In connection with entering into the New Lease, we terminated our Sublease by and between us and Theravance Biopharma, dated June 2, 2014 (the “Gateway Sublease”). The Gateway Sublease was set to expire on May 31, 2020. On June 10, 2016, we executed a Sublease Termination Agreement with Theravance Biopharma to terminate the Gateway Sublease (the “Gateway Sublease Termination Agreement”). No termination fee was payable to Theravance Biopharma as a result of this Gateway Sublease Termination Agreement.

Income Taxes

Income Taxes	6 Months Ended
	Jun. 30, 2016
Income Taxes
Income Taxes	10. Income Taxes The effective tax rate for the three and six months ended June 30, 2016 was 0.15%, compared to 0.00% for the same periods in 2015. Should we generate taxable income in 2016, we expect that the taxable income will be substantially offset by the utilization of net operating losses or other deferred tax assets. The difference between the consolidated effective income tax rate and the U.S. federal statutory rate is primarily attributable to a change in valuation allowance against net deferred tax assets.

Description of Operations and18

Description of Operations and Summary of Significant Accounting Policies (Policies)	6 Months Ended
	Jun. 30, 2016
Description of Operations and Summary of Significant Accounting Policies
Basis of Presentation	Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In our opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of our financial position, results of operations, comprehensive income and cash flows. The interim results are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2016 or any other period. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission (“SEC”) on February 24, 2016.
Variable Interest Entity	Variable Interest Entity We evaluate our ownership, contractual and other interest in entities to determine if they are variable interest entities (“VIE”), whether we have a variable interest in those entities and the nature and extent of those interests. Based on our evaluations, if we determine we are the primary beneficiary of such VIEs, we consolidate such entities into our financial statements. We consolidate the financial results of TRC, which we have determined to be a VIE, because we have the power to direct the economically significant activities of TRC and the obligation to absorb losses of, or the right to receive benefits from, TRC. The financial position and results of operations of TRC are not material for the periods presented.
Recently Issued Accounting Pronouncements Not Yet Adopted	Recently Issued Accounting Pronouncements Not Yet Adopted In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases , which supersedes the lease recognition requirements in ASC Topic 840, Leases . The standard requires an entity to recognize right-of-use assets and lease liabilities arising from a lease for both financing and operating leases in the consolidated balance sheets but recognize the impact on the consolidated statement of operations and cash flows in a similar manner under current GAAP. The standard also requires additional qualitative and quantitative disclosures. The standard is effective for us beginning January 1, 2019, although early adoption is permitted. We are currently evaluating adoption methods and whether this standard will have a material impact on our consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities , which provides guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. This standard is effective for us beginning January 1, 2018. We are evaluating the effects of the adoption of this ASU to our consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , requiring an entity to recognize the amount of revenue to which it expects to be entitled to in exchange for the transfer of promised goods or services to customers. The standard will replace nearly all existing revenue recognition guidance under GAAP when it becomes effective. In July 2015, the FASB decided to defer the effective date by one year. Thus, the standard will be effective for us beginning January 1, 2018, at which time we may adopt the standard under either the full retrospective method or the modified retrospective method. Early adoption on or after January 1, 2017 would be permitted. We are currently evaluating the effect that the new standard will have on our consolidated financial statements and related disclosures.
Recently Adopted Accounting Pronouncement	Recently Adopted Accounting Pronouncement In April 2015, the FASB issued ASU 2015-03, Interest — Imputation of Interest (“ASU 2015-03”), to simplify the presentation of debt issuance costs. This standard amended existing guidance to require the presentation of debt issuance costs associated with term loans in the balance sheet as a deduction from the carrying amount of the related debt liability instead of a deferred charge. We adopted ASU 2015-03 on January 1, 2016. Upon adoption of ASU 2015-03, we applied the guidance retrospectively to all periods presented and classified our debt issuance costs, which prior to adoption were included in other assets in the condensed consolidated financial statements, as a deduction to our respective long-term debts.

Net Income (Loss) per Share (Ta

Net Income (Loss) per Share (Tables)	6 Months Ended
	Jun. 30, 2016
Net Income (Loss) per Share
Schedule of computation of basic and diluted net income per share	Three Months Ended June 30, Six Months Ended June 30 (In thousands except for per share amounts) 2016 (1)(2) 2015 2016 (3) 2015 Numerator: Net income (loss) attributable to common stockholders, basic $ $ ) $ $ ) Add: Interest expense on convertible subordinated notes due 2023, net of tax — — — Net income (loss) attributable to common stockholders, diluted $ $ ) $ $ ) Denominator: Weighted-average shares used to compute basic net income (loss) per share Dilutive effect of convertible subordinated notes due 2023 — — — Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan — — Weighted-average shares used to compute diluted net income (loss) per share Net income (loss) per share Basic $ $ ) $ $ ) Diluted $ $ ) $ $ ) (1) Includes 2.9 million options, 0.1 million restricted stock units, and 0.1 million unvested restricted stock awards (“RSAs”) retained by former employees who were transferred to Theravance Biopharma, Inc. (“Theravance Biopharma”) in connection with the Spin-Off of Theravance Biopharma in June 2014 (the “Spin-Off”). Subsequent to the Spin-Off, stock-based compensation expense associated with the awards held by Theravance Biopharma employees granted prior to the Spin-Off is recognized by Theravance Biopharma. Stock options of 2.9 million were excluded from the diluted net income per share calculation as their effect was anti-dilutive. (2) For the three months ended June 30, 2016, the effect of assumed conversion of convertible subordinated notes due 2023 became dilutive under the if-converted method and was included in the computation of diluted net income per share. (3) Includes 3.2 million options, 0.1 million restricted stock units, and 0.3 million unvested RSAs retained by former employees who were transferred to Theravance Biopharma in connection with the Spin-Off. Subsequent to the Spin-Off, stock-based compensation expense associated with the awards held by Theravance Biopharma employees granted prior to the Spin-Off is recognized by Theravance Biopharma. Stock options for 3.2 million shares of common stock were excluded from the diluted net income per share calculation as their effect was anti-dilutive.
Schedule of anti-dilutive securities	Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2016 (1) 2015 (4) 2016 (3) 2015 (5) Outstanding options and awards granted under equity incentive plan and employee stock purchase plan Shares issuable upon conversion of convertible subordinated notes — (1) Includes 2.9 million options, 0.1 million restricted stock units, and 0.1 million unvested restricted stock awards (“RSAs”) retained by former employees who were transferred to Theravance Biopharma, Inc. (“Theravance Biopharma”) in connection with the Spin-Off of Theravance Biopharma in June 2014 (the “Spin-Off”). Subsequent to the Spin-Off, stock-based compensation expense associated with the awards held by Theravance Biopharma employees granted prior to the Spin-Off is recognized by Theravance Biopharma. Stock options of 2.9 million were excluded from the diluted net income per share calculation as their effect was anti-dilutive. (3) Includes 3.2 million options, 0.1 million restricted stock units, and 0.3 million unvested RSAs retained by former employees who were transferred to Theravance Biopharma in connection with the Spin-Off. Subsequent to the Spin-Off, stock-based compensation expense associated with the awards held by Theravance Biopharma employees granted prior to the Spin-Off is recognized by Theravance Biopharma. Stock options for 3.2 million shares of common stock were excluded from the diluted net income per share calculation as their effect was anti-dilutive. (4) Includes 4.2 million options, 0.4 million restricted stock units, and 1.1 million unvested RSAs retained by former employees who were transferred to Theravance Biopharma in connection with the Spin-Off. All of these awards were excluded from the diluted net loss per share calculation as their effect was anti-dilutive. (5) Includes 4.4 million options, 0.5 million restricted stock units, and 1.2 million unvested RSAs retained by former employees who were transferred to Theravance Biopharma in connection with the Spin-Off. All of these awards were excluded from the diluted net loss per share calculation as their effect was anti-dilutive.

Collaborative Arrangements (Tab

Collaborative Arrangements (Tables)	6 Months Ended
	Jun. 30, 2016
Collaborative Arrangements
Schedule of net revenue recognized under GSK Agreements	Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2016 2015 2016 2015 Royalties from a related party $ $ $ $ Less: amortization of capitalized fees paid to a related party ) ) ) ) Royalty revenue Strategic alliance - MABA program Total net revenue from GSK $ $ $ $

Available-for-Sale Securities21

Available-for-Sale Securities and Fair Value Measurements (Tables)	6 Months Ended
	Jun. 30, 2016
Available-for-Sale Securities and Fair Value Measurements
Schedule of available-for-sale securities	(In thousands) June 30, 2016 December 31, 2015 Cash and cash equivalents $ $ Short-term marketable securities Total $ $
Schedule of amortized cost and estimated fair values for available-for-sale securities	June 30, 2016 (In thousands) Amortized Cost Gross Unrealized Gains Estimated Fair Value U.S. government agencies $ $ $ U.S. commercial paper — Money market funds — Total $ $ $ December 31, 2015 (In thousands) Amortized Cost Gross Unrealized Losses Estimated Fair Value U.S. government agencies $ $ ) $ U.S. corporate notes ) U.S. commercial paper — Money market funds — Total $ $ ) $
Schedule of estimated fair values	Estimated Fair Value Measurements as of June 30, 2016 Using: Types of Instruments Quoted Price in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs (In thousands) Level 1 Level 2 Level 3 Total Assets U.S. government agencies $ — $ $ — $ U.S. commercial paper — — Money market funds — — Total assets measured at estimated fair value $ $ $ — $ Liabilities Convertible subordinated notes due 2023 $ — $ $ — $ Non-recourse notes due 2029 — — Total fair value of liabilities $ — $ $ — $ Estimated Fair Value Measurements as of December 31, 2015 Using: Types of Instruments Quoted Price in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs (In thousands) Level 1 Level 2 Level 3 Total Assets U.S. government agencies $ — $ $ — $ U.S. corporate notes — — U.S. commercial paper — — Money market funds — — Total assets measured at estimated fair value $ $ $ — $ Liabilities Convertible subordinated notes due 2023 $ — $ $ — $ Non-recourse notes due 2029 — — Total fair value of liabilities $ — $ $ — $

Capitalized Fees Paid to a Re22

Capitalized Fees Paid to a Related Party (Tables)	6 Months Ended
	Jun. 30, 2016
Capitalized Fees Paid to a Related Party
Schedule of capitalized fees paid to a related party	June 30, 2016 December 31, 2015 Weighted Average Remaining Amortization Gross Net Gross Net Period Carrying Accumulated Carrying Carrying Accumulated Carrying (In thousands) (Years) Value Amortization Value Value Amortization Value Approval and launch related milestone payments under the LABA Collaboration $ $ ) $ $ $ ) $

Stock-Based Compensation (Table

Stock-Based Compensation (Tables)	6 Months Ended
	Jun. 30, 2016
Stock-Based Compensation
Schedule of stock-based compensation expense included in the consolidated statements of operations	Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2016 2015 2016 2015 Research and development $ $ $ $ General and administrative Total stock-based compensation $ $ $ $

Long-Term Debt (Tables)

Long-Term Debt (Tables)	6 Months Ended
	Jun. 30, 2016
Long-Term Debt.
Schedule of long-term debt	(In thousands) June 30, 2016 December 31, 2015 Convertible Subordinated Notes due 2023 $ $ Non-Recourse Notes Payable due 2029 Total long-term debt Unamortized debt issuance costs ) ) Current portion of long-term debt ) — Net long-term debt $ $

Commitments and Contingencies (

Commitments and Contingencies (Tables)	6 Months Ended
	Jun. 30, 2016
Commitments and Contingencies
Schedule of minimum lease payments under non-cancelable operating lease	Minimum lease payments under the new lease are as follows as of June 30, 2016: (In thousands) Years Ending December 31: Remainder of 2016 $ 2017 2018 2019 2020 Thereafter Total $

Description of Operations and26

Description of Operations and Summary of Significant Accounting Policies (Details)	6 Months Ended
	Jun. 30, 2016
GSK | LABA collaboration and Strategic Alliance agreements
Description of operations
Percentage of economic interest in any future payments made under the agreements	15.00%

Net Income (Loss) per Share (De

Net Income (Loss) per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Numerator:
Net income (loss) attributable to common stockholders, basic	$ 14,597	$ (7,810)	$ 19,032	$ (18,477)
Add: Interest expense on convertible subordinated notes due 2013, net of tax	1,457	0	0	0
Net income (loss) attributable to common stockholders, diluted	$ 16,054	$ (7,810)	$ 19,032	$ (18,477)
Denominator:
Weighted-average shares used to compute basic net income (loss) per share	111,359	115,329	112,005	115,096
Weighted-average shares used to compute diluted net income (loss) per share	124,316	115,329	112,531	115,096
Net income (loss) per share
Basic (in dollars per share)	$ 0.13	$ (0.07)	$ 0.17	$ (0.16)
Diluted (in dollars per share)	$ 0.13	$ (0.07)	$ 0.17	$ (0.16)
Anti-dilutive securities (in shares)	4,276	19,856	17,136	20,194
Stock options
Net income (loss) per share
Anti-dilutive securities (in shares)	2,900	4,200	3,200	4,400
RSUs
Net income (loss) per share
Anti-dilutive securities (in shares)	100	400	100	500
Unvested RSAs
Net income (loss) per share
Anti-dilutive securities (in shares)	100	1,100	300	1,200
Equity incentive plans and ESPP
Denominator:
Dilutive effect of options and awards granted under equity incentive plan and employee stock purchase plan	355	0	526	0
Net income (loss) per share
Anti-dilutive securities (in shares)	4,276	7,178	4,383	7,516
Convertible subordinated notes
Denominator:
Dilutive effect of convertible subordinated notes due 2023	12,602	0	0	0
Net income (loss) per share
Anti-dilutive securities (in shares)	0	12,678	12,753	12,678

Collaborative Arrangements (Det

Collaborative Arrangements (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2014
Information related to collaborative arrangements
Less: amortization of capitalized fees paid to a related party	$ (3,456)	$ (3,456)	$ (6,912)	$ (6,912)
Royalty revenue	32,251	10,434	56,206	17,108
Revenue from collaborative arrangements	221	221	442	443
Total net revenue	32,472	10,655	56,648	$ 17,551
Common Stock | Theravance Biopharma
Information related to collaborative arrangements
Number of ordinary shares sold				436,802
GSK
Information related to collaborative arrangements
Royalties from a related party	35,707	13,890	63,118	$ 24,020
Less: amortization of capitalized fees paid to a related party	(3,456)	(3,456)	(6,912)	(6,912)
Royalty revenue	32,251	10,434	56,206	17,108
Total net revenue	32,472	10,655	56,648	17,551
GSK | MABA
Information related to collaborative arrangements
Potential future contingent payments receivable	363,000		$ 363,000
Percentage of milestone payment			15.00%
Long-acting beta agonist (LABA) collaboration | GSK
Information related to collaborative arrangements
Less: amortization of capitalized fees paid to a related party	(3,500)	(6,900)	$ (3,500)	(6,900)
Milestone fees paid					$ 220,000
Obligation for milestone payments	0		$ 0
Royalty rate for first level of annual global net sales (as a percent)			15.00%
Annual global sales level used to determine royalty rate			$ 3,000,000
Royalty rate for sales above first level of annual global net sales (as a percent)			5.00%
Long-acting beta agonist (LABA) collaboration | GSK | Minimum
Information related to collaborative arrangements
Royalty rate for combination products (as a percent)			6.50%
Long-acting beta agonist (LABA) collaboration | GSK | Maximum
Information related to collaborative arrangements
Royalty rate for combination products (as a percent)			10.00%
2004 Strategic alliance | GSK | MABA
Information related to collaborative arrangements
Revenue from collaborative arrangements	$ 221	$ 221	$ 442	$ 443

Available-for-Sale Securities29

Available-for-Sale Securities and Fair Value Measurements (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Available-for-sale securities
Amortized Cost	$ 151,143		$ 176,778
Gross Unrealized Gains	6
Gross Unrealized Losses			(2)
Estimated Fair Value	$ 151,149		176,776
Maturity period for marketable securities
Maximum contractual maturity period	1 year
Average duration	4 months
Theravance Biopharma
Maturity period for marketable securities
Gain on sale		$ 1,200
Cash and cash equivalents
Available-for-sale securities
Estimated Fair Value	$ 110,228		148,673
Short-term marketable securities
Available-for-sale securities
Estimated Fair Value	40,921		28,103
U.S. government agencies
Available-for-sale securities
Amortized Cost	19,970		14,406
Gross Unrealized Gains	6
Gross Unrealized Losses			(1)
Estimated Fair Value	19,976		14,405
U.S. corporate notes
Available-for-sale securities
Amortized Cost			2,702
Gross Unrealized Losses			(1)
Estimated Fair Value			2,701
U.S. commercial paper
Available-for-sale securities
Amortized Cost	52,535		10,997
Gross Unrealized Gains	0
Gross Unrealized Losses			0
Estimated Fair Value	52,535		10,997
Money market funds
Available-for-sale securities
Amortized Cost	78,638		148,673
Gross Unrealized Gains	0
Gross Unrealized Losses			0
Estimated Fair Value	$ 78,638		$ 148,673

Available-for-Sale Securities30

Available-for-Sale Securities and Fair Value Measurements - Schedule of estimated fair values (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	$ 151,149	$ 176,776
U.S. government agencies
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	19,976	14,405
U.S. corporate notes
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value		2,701
U.S. commercial paper
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	52,535	10,997
Money market funds
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	78,638	148,673
Recurring basis
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	151,149	176,776
Recurring basis | U.S. government agencies
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	19,976	14,405
Recurring basis | U.S. corporate notes
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value		2,701
Recurring basis | U.S. commercial paper
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	52,535	10,997
Recurring basis | Money market funds
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	78,638	148,673
Recurring basis | Quoted Prices in Active Markets for Identical Assets, Level 1
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	78,638	148,673
Recurring basis | Quoted Prices in Active Markets for Identical Assets, Level 1 | U.S. government agencies
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	0	0
Recurring basis | Quoted Prices in Active Markets for Identical Assets, Level 1 | U.S. corporate notes
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value		0
Recurring basis | Quoted Prices in Active Markets for Identical Assets, Level 1 | U.S. commercial paper
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	0	0
Recurring basis | Quoted Prices in Active Markets for Identical Assets, Level 1 | Money market funds
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	78,638	148,673
Recurring basis | Significant Other Observable Inputs, Level 2
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	72,511	28,103
Recurring basis | Significant Other Observable Inputs, Level 2 | U.S. government agencies
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	19,976	14,405
Recurring basis | Significant Other Observable Inputs, Level 2 | U.S. corporate notes
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value		2,701
Recurring basis | Significant Other Observable Inputs, Level 2 | U.S. commercial paper
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	52,535	10,997
Recurring basis | Significant Other Observable Inputs, Level 2 | Money market funds
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	0	0
Recurring basis | Significant Unobservable Inputs, Level 3
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	0	0
Recurring basis | Significant Unobservable Inputs, Level 3 | U.S. government agencies
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	0	0
Recurring basis | Significant Unobservable Inputs, Level 3 | U.S. corporate notes
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value		0
Recurring basis | Significant Unobservable Inputs, Level 3 | U.S. commercial paper
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	0	0
Recurring basis | Significant Unobservable Inputs, Level 3 | Money market funds
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	0	0
Nonrecurring basis
Estimated fair values of entity's financial assets and liabilities
Total fair value of liabilities	691,842	660,070
Nonrecurring basis | Convertible Subordinated Notes Due 2023
Estimated fair values of entity's financial assets and liabilities
Convertible subordinated notes due 2023	197,825	189,100
Nonrecurring basis | 9% fixed rate term notes due 2029
Estimated fair values of entity's financial assets and liabilities
Non-recourse notes due 2029	494,017	470,970
Nonrecurring basis | Quoted Prices in Active Markets for Identical Assets, Level 1
Estimated fair values of entity's financial assets and liabilities
Total fair value of liabilities	0	0
Nonrecurring basis | Quoted Prices in Active Markets for Identical Assets, Level 1 | Convertible Subordinated Notes Due 2023
Estimated fair values of entity's financial assets and liabilities
Convertible subordinated notes due 2023	0	0
Nonrecurring basis | Quoted Prices in Active Markets for Identical Assets, Level 1 | 9% fixed rate term notes due 2029
Estimated fair values of entity's financial assets and liabilities
Non-recourse notes due 2029	0	0
Nonrecurring basis | Significant Other Observable Inputs, Level 2
Estimated fair values of entity's financial assets and liabilities
Total fair value of liabilities	691,842	660,070
Nonrecurring basis | Significant Other Observable Inputs, Level 2 | Convertible Subordinated Notes Due 2023
Estimated fair values of entity's financial assets and liabilities
Convertible subordinated notes due 2023	197,825	189,100
Nonrecurring basis | Significant Other Observable Inputs, Level 2 | 9% fixed rate term notes due 2029
Estimated fair values of entity's financial assets and liabilities
Non-recourse notes due 2029	494,017	470,970
Nonrecurring basis | Significant Unobservable Inputs, Level 3
Estimated fair values of entity's financial assets and liabilities
Total fair value of liabilities	0	0
Nonrecurring basis | Significant Unobservable Inputs, Level 3 | Convertible Subordinated Notes Due 2023
Estimated fair values of entity's financial assets and liabilities
Convertible subordinated notes due 2023	0	0
Nonrecurring basis | Significant Unobservable Inputs, Level 3 | 9% fixed rate term notes due 2029
Estimated fair values of entity's financial assets and liabilities
Non-recourse notes due 2029	$ 0	$ 0

Capitalized Fees Paid to a Re31

Capitalized Fees Paid to a Related Party (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Capitalized Fees paid to a Related Party
Net Carrying Value	$ 187,456		$ 187,456		$ 194,368	[1]
Amortization of capitalized fees paid to a related party	3,456	$ 3,456	6,912	$ 6,912
Estimated amortization expense for the remainder of 2016	6,900		6,900
Estimated amortization expense for the year 2017	13,800		13,800
Estimated amortization expense for the year 2018	13,800		13,800
Estimated amortization expense for the year 2019	13,800		13,800
Estimated amortization expense for the year 2020	13,800		13,800
Estimated amortization expense for the year 2021	13,800		13,800
Estimated amortization expense thereafter	111,400		111,400
GSK
Capitalized Fees paid to a Related Party
Amortization of capitalized fees paid to a related party	3,456	3,456	$ 6,912	6,912
GSK | Long-acting beta agonist (LABA) collaboration
Capitalized Fees paid to a Related Party
Weighted Average Remaining Amortization Period			13 years 7 months 6 days
Gross Carrying Value	220,000		$ 220,000		220,000
Accumulated Amortization	(32,544)		(32,544)		(25,632)
Net Carrying Value	187,456		187,456		$ 194,368
Amortization of capitalized fees paid to a related party	$ 3,500	$ 6,900	$ 3,500	$ 6,900
[1]	Condensed consolidated balance sheet as of December 31, 2015 has been derived from audited consolidated financial statements.

Stock-Based Compensation - Perf

Stock-Based Compensation - Performance-Contingent RSAs and RSUs (Details) $ in Thousands	Jan. 14, 2016shares	Jun. 02, 2014	Jun. 30, 2016USD ($)shares	Jun. 30, 2015USD ($)	Jun. 30, 2016USD ($)shares	Jun. 30, 2015USD ($)	Dec. 31, 2011shares
Stock-based compensation
Number of shares of Theravance Biopharma issued for every share of Theravance		0.286
Stock-based compensation expense | $			$ 2,841	$ 1,822	$ 4,704	$ 3,755
Minimum payout of shares (in shares)					0
Maximum payout of shares (in shares)					328,688
Market condition based on relative total shareholder return (TSR) And Service condition based on Performance Measures
Stock-based compensation
Timeframe for calculation of TSR					2 years
RSAs | Vesting on February 20, 2018
Stock-based compensation
Portion of options vesting (as a percent)					66.70%
RSAs | Vesting on February 20, 2019
Stock-based compensation
Portion of options vesting (as a percent)					33.30%
RSAs | Market condition based on relative total shareholder return (TSR) And Service condition based on Performance Measures
Stock-based compensation
Granted (in shares)	282,394
RSUs | Vesting on February 20, 2018
Stock-based compensation
Portion of options vesting (as a percent)					66.70%
RSUs | Vesting on November 20, 2018
Stock-based compensation
Portion of options vesting (as a percent)					33.30%
RSUs | Market condition based on relative total shareholder return (TSR) And Service condition based on Performance Measures
Stock-based compensation
Granted (in shares)	46,294
Special Long-Term Retention and Incentive Cash Awards Program | RSAs | Performance Contingent
Stock-based compensation
Shares of common stock approved and authorized for issuance							1,290,000
Timeframe for achievement of performance conditions							6 years
Outstanding (in shares)			63,135		63,135
Stock-based compensation expense | $					$ 1,200

Stock-Based Compensation - Stoc

Stock-Based Compensation - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Stock-based compensation
Total stock-based compensation	$ 2,841	$ 1,822	$ 4,704	$ 3,755
Stock options
Stock-based compensation
Total unrecognized compensation cost related to unvested stock-based compensation	1,200		1,200
RSUs
Stock-based compensation
Total unrecognized compensation cost related to unvested stock-based compensation	2,000		2,000
Unvested RSAs
Stock-based compensation
Total unrecognized compensation cost related to unvested stock-based compensation	11,300		11,300
Research and development
Stock-based compensation
Total stock-based compensation	172	232	347	467
General and administrative
Stock-based compensation
Total stock-based compensation	$ 2,669	$ 1,590	$ 4,357	$ 3,288

Long-Term Debt (Details)

Long-Term Debt (Details) $ / shares in Units, $ in Thousands	Jul. 15, 2014$ / sharesshares	Jun. 30, 2014$ / shares$ / item	Jan. 31, 2013USD ($)item$ / shares$ / itemshares	Aug. 31, 2016USD ($)	May 31, 2016USD ($)	Jan. 31, 2013USD ($)item$ / shares$ / item	Jun. 30, 2016USD ($)$ / shares$ / item	Jun. 30, 2015USD ($)	Jun. 30, 2016USD ($)$ / shares$ / item	Jun. 30, 2015USD ($)	Jun. 30, 2016USD ($)$ / shares$ / item	Apr. 17, 2017	Dec. 31, 2015USD ($)	Apr. 30, 2014USD ($)
Debt disclosures
Total long-term debt							$ 739,126		$ 739,126		$ 739,126		$ 748,271
Unamortized debt issuance costs							(13,573)		(13,573)		(13,573)		(15,140)
Current portion of long-term debt							(3,266)		(3,266)		(3,266)		0
Net long-term debt							722,287		722,287		722,287		733,131
Settlement amount for purchase of notes									8,095	$ 0
Amount received from capped call option									391	0
Interest amount added to principal balance									855	12,836
Convertible Subordinated Notes Due 2023
Debt disclosures
Convertible Subordinated Notes due 2023							$ 245,109		$ 245,109		$ 245,109		255,109
Total long-term debt					$ 9,800
Loan amount			$ 287,500		10,000	$ 287,500
Proceeds from issuances of note payable, net of debt issuance costs			$ 281,200
Interest rate (as a percent)			2.125%			2.125%
Conversion rate of shares		46.9087				35.9903			50.5818
Conversion price of convertible notes into common stock (in dollars per share) | $ / shares		$ 21.32	$ 27.79			$ 27.79	$ 19.77		$ 19.77		$ 19.77
Percentage of principal amount at which the entity may be forced to redeem some or all notes as a result of a fundamental change (as defined)			100.00%
Settlement amount for purchase of notes					8,100
Convertible Subordinated Notes Due 2023 | Other income (expense)
Debt disclosures
Gain on repurchase of notes					$ 1,700
Convertible Subordinated Notes Due 2023 | Common Stock
Debt disclosures
Conversion price of convertible notes into common stock (in dollars per share) | $ / shares	$ 21.32
Debt Conversion, Converted Instrument, Shares Issued | shares	1,519,402
Number of common stares received | shares	149,645
Convertible Subordinated Notes Due 2023 | Privately-negotiated capped call option
Debt disclosures
Payments for capped call options			$ 36,800
Number of derivative instruments purchased | item			2			2
Strike price for the underlying number of shares (in dollars per share) | $ / shares		$ 21.32	$ 27.79						$ 19.77
Cap price for the underlying number of shares (in dollars per share) | $ / item		29.16	38			38	27.04		27.04		27.04
Amount received from capped call option									$ 400
Convertible Subordinated Notes Due 2023 | Stock prices below $27.79 per share | Maximum
Debt disclosures
Net shares settlement payable to the entity | shares			2,779,659
Convertible Subordinated Notes Due 2023 | Stock prices below $27.79 per share | Minimum
Debt disclosures
Net shares settlement payable to the entity | shares			0
Convertible Subordinated Notes Due 2023 | Stock prices above $38.00 per share
Debt disclosures
Incremental Common Shares Attributable to Capped Call Options | shares			0
9% fixed rate term notes due 2029
Debt disclosures
Non-Recourse Notes Payable due 2029							$ 494,017		494,017		$ 494,017		$ 493,162
9% fixed rate term notes due 2029 | GSK
Debt disclosures
Loan amount							494,000		494,000		494,000			$ 450,000
Interest rate (as a percent)														9.00%
Interest amount added to principal balance							$ 200	$ 6,400	$ 900	$ 12,800	$ 44,000
9% fixed rate term notes due 2029 | Future
Debt disclosures
Debt prepayment premium (as a percent)												2.50%
9% fixed rate term notes due 2029 | Future | GSK
Debt disclosures
Periodical interest payment				$ 3,300

Shareholders' Deficit (Details)

Shareholders' Deficit (Details) - October 2015 TO - Common Stock $ / shares in Units, $ in Millions	6 Months Ended
	Jun. 30, 2016USD ($)$ / sharesshares
Shareholders' Deficit
Number of shares purchased and retired | shares	4,138,852
Average repurchase price per share, including associated fees and expenses | $ / shares	$ 10.71
Share repurchase price | $	$ 44.3

Commitments and Contingencies36

Commitments and Contingencies (Details) - USD ($)	Jun. 10, 2016	Jun. 30, 2016
New Lease
Future minimum lease payments
Remainder of 2016		$ 112,000
2,017		380,000
2,018		392,000
2,019		403,000
2,020		416,000
Thereafter		1,070,000
Total lease payments		2,773,000
Lease term	7 years
Gateway Sublease Termination Agreement
Future minimum lease payments
Termination fee	$ 0
Lease payments guarantee
Future minimum lease payments
Total lease payments		24,700,000
Estimated fair value of the guarantee		$ 1,300,000

Income Taxes (Details)

Income Taxes (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Taxes
Effective tax rate (as a percent)	0.15%	0.00%	0.15%	0.00%