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Theravance Inc. Reports Operating Results (10-K)

February 28, 2011 | About:
Tarn P Crowe

10qk

18 followers
Theravance Inc. (THRX) filed Annual Report for the period ended 2010-12-31.

Theravance Inc. has a market cap of $1.69 billion; its shares were traded at around $22.84 with and P/S ratio of 69.76. Hedge Fund Gurus that owns THRX: Seth Klarman of The Baupost Group, Julian Robertson of Tiger Management, John Griffin of Blue Ridge Capital, Wilbur Ross of Invesco Private Capital, Inc., Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors. Mutual Fund and Other Gurus that owns THRX: David Swensen of Yale University, Jean-Marie Eveillard of First Eagle Investment Management, LLC, Jeremy Grantham of GMO LLC.

Highlight of Business Operations:

The aggregate market value of the voting and non-voting common equity (consisting of Common Stock, $0.01 par value and Class A Common Stock, $0.01 par value) held by non-affiliates of the registrant based upon the closing price of the Common Stock on the Nasdaq Global Market on June 30, 2010 was $592,759,166.

In total, our research and development expenses, including stock-based compensation expense, incurred for all of our therapeutic programs in 2010, 2009, and 2008 were $75.1 million, $77.5 million and $82.0 million, respectively.

In November 2002, we entered into our LABA collaboration with GSK to develop and commercialize once-daily LABA products for the treatment of COPD and asthma. For the treatment of COPD, the collaboration is developing combination products, RELOVAIR and the LAMA/LABA '719/VI. For the treatment of asthma, the collaboration is developing RELOVAIR. RELOVAIR is an investigational once-daily combination medicine consisting of a LABA, vilanterol (VI), previously referred to as GW642444 or '444, and an ICS, fluticasone furoate (FF). The LAMA/LABA '719/VI is an investigational once-daily combination medicine consisting of the LAMA, '719, and the LABA, VI. The RELOVAIR program is aimed at developing a next generation respiratory product to succeed GSK's Advair®/Seretide® (salmeterol and fluticasone as a combination) franchise, which had reported 2010 sales of approximately $7.97 billion, and to compete with Symbicort® (formoterol and budesonide as a combination), which had reported 2010 sales of approximately $2.75 billion. '719/VI, which is also a combination product, is targeted as an alternative treatment option to Spiriva® (tiotropium), a once-daily, single-mechanism bronchodilator, which had reported 2009 sales of approximately $3.35 billion.

In connection with the LABA collaboration, in 2002, we received from GSK an upfront payment of $10.0 million and sold to an affiliate of GSK shares of our Series E preferred stock for an aggregate purchase price of $40.0 million. Through December 31, 2010, we have received a total of $60.0 million in upfront and development milestone payments, and we do not currently expect to be eligible for any additional milestones under this collaboration.

Upon GSK's decision to license a program, GSK is responsible for funding all future development, manufacturing and commercialization activities for product candidates in that program. In addition, GSK is obligated to use diligent efforts to develop and commercialize product candidates from any program that it licenses. Consistent with our strategy, we are obligated to use diligent efforts at our sole cost to discover two structurally different product candidates for any programs on which GSK has an option under the alliance. If these programs are successfully advanced through development by GSK, we are entitled to receive clinical, regulatory and commercial milestone payments and royalties on any sales of medicines developed from these programs. For any programs licensed under this agreement, the royalty structure for a product containing one of our compounds as a single active ingredient would result in an average percentage royalty rate in the low double digits. For single-agent MABA products, we are entitled to receive royalties from GSK of between 10% and 20% of annual global net sales up to $3.5 billion, and 7.5% for all annual global net sales above $3.5 billion. For combination products, such as a MABA/ICS, the royalty rate is 70% of the rate applicable to sales of single-agent MABA medicines. If a product is successfully commercialized, in addition to any royalty revenue that we receive, the total upfront and milestone payments that we could receive in any given program that GSK licenses range from $130.0 million to $162.0 million for programs with single-agent medicines and up to $252.0 million for programs with both a single-agent and a combination medicine. If GSK chooses not to license a program, we retain all rights to the program and may continue the program alone or with a third party. To date, GSK has licensed our two COPD programs: LAMA and MABA. We received $5.0 million payments from GSK in connection with its license of each of our LAMA and MABA programs in August 2004 and March 2005, respectively. In 2009, GSK returned the LAMA program to us because the formulation of the lead product candidate was incompatible with GSK's proprietary inhaler device. GSK has chosen not to license our antibacterial, anesthesia, 5-HT4 and PµMA programs. There can be no assurance that GSK will license either of the two remaining programs under the alliance agreement, which could have an adverse effect on our business and financial condition.

In May 2004, GSK purchased through an affiliate 6,387,096 shares of our Class A common stock for an aggregate purchase price of $108.9 million and, upon the closing of our initial public offering on October 8, 2004, GSK purchased through an affiliate an additional 433,757 shares of Class A common stock for an aggregate purchase price of $6.9 million. In addition, on November 29, 2010, GSK purchased through an affiliate in a private placement 5,750,000 shares of our common stock for an aggregate purchase price of $129.4 million. GSK's ownership position of our outstanding stock was approximately 18.3% as of February 14, 2011.

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