THERAVANCE BIOPHARMA, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

Forward-Looking Statements

You should read the following discussion in conjunction with our condensed
consolidated financial statements (unaudited) and related notes included
elsewhere in this report. This report includes "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"), that involve risks and uncertainties. All
statements in this report, other than statements of historical facts, including
statements regarding our strategy, future operations, future financial position,
future revenues, projected costs, prospects, plans, intentions, expectations and
objectives are forward-looking statements. The words "anticipate," "assume,"
"believe," "contemplate," "continue," "could," "designed," "developed," "drive,"
"estimate," "expect," "forecast," "goal," "intend," "may," "mission,"
"opportunities," "plan," "potential," "predict," "project," "pursue," "seek,"
"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," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and elsewhere in this report and
in our Annual Report on Form 10-K for the year ended December 31, 2020. Our
forward-looking statements in this report 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, including new variants 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,
vaccination levels, 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.



Management Overview



Theravance Biopharma, Inc. ("we," "our," "Theravance Biopharma" or the
"Company") is a biopharmaceutical company primarily focused on the discovery,
development and commercialization of respiratory medicines. Our core purpose is
to create medicines that help improve the lives of patients suffering from

respiratory illness.

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In pursuit of its purpose, we leverage decades of respiratory expertise to
discover and develop transformational medicines that make a difference. These
efforts have led to the development of FDA-approved YUPELRI® (revefenacin)
inhalation solution indicated for the maintenance treatment of patients with
chronic obstructive pulmonary disease ("COPD"). Our respiratory pipeline of
internally discovered programs is targeted to address significant patient
respiratory needs.



We have an economic interest in potential future payments from Glaxo Group or
one of its affiliates ("GSK") pursuant to our agreements with Innoviva, Inc.
("Innoviva") relating to certain programs, including TRELEGY.

Strategic Actions to Focus on Respiratory Diseases

Given recent clinical results from our late-stage development programs which are
further discussed in the Non-Respiratory Program Highlights section below, in
September 2021, our board of directors approved a plan to focus our resources on
our most promising respiratory programs and reduce the size of the Company in
order to maximize shareholder value. The corporate restructuring (the
"Restructuring") will result in us reducing headcount by approximately 75%, an
estimated 270 positions, through a reduction in our workforce. Approximately 75%
of the total reduction in force will take place by November 2021, and the
remainder will be completed in February 2022.



As a result of the Restructuring, we expect to realize estimated annualized
operating expense savings of approximately $165.0 million in the year ending
December 31, 2022 (excluding share-based compensation and any one-time costs
related to strategic actions), and we estimate that we will incur cash expenses
of approximately $18.0 million to $20.0 million related to the Restructuring.
The majority of the Restructuring expenses will be incurred by the first quarter
of 2022 and are primarily comprised of severance and other related costs. These
estimates are subject to a number of assumptions, and actual amounts may differ.
We may also incur additional costs not currently contemplated due to events that
may occur as a result of, or that are associated with, the Restructuring.



The go-forward organization will leverage our expertise in developing and
commercializing respiratory therapeutics. We intend to significantly narrow our
R&D focus on our core respiratory assets, including a clinical study with
Viatris Inc. ("Viatris") intended to provide data to support a possible label
update for YUPELRI, which would capture more of YUPELRI's addressable market and
further strengthen its competitive advantage, and investment in our inhaled
Janus kinase inhibitor portfolio, with focus on our most advanced clinical
candidate, nezulcitinib, initially targeting acute lung injury. We will also
continue to explore strategic partnerships for both core and non-core assets to
unlock value. All of these actions drive towards our goal to maximize
shareholder value.



By implementing these strategic actions, we expect the Company to become
sustainably cash flow positive beginning in the second half of 2022, and as our
financial flexibility increases, we will work to optimize our capital structure
in order to maximize total shareholder returns.



Impact of COVID-19 Pandemic



The effects of the COVID-19 pandemic and the related actions by governments,
companies, and individuals around the world in an attempt to contain the spread
of the virus (including new variants of COVID-19) continue to present a
substantial public health and economic challenge and are 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.



As part of our response to the ongoing COVID-19 pandemic, we have taken steps to
identify and 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

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implementing a work from home policy for all employees, with the exception of
key operations and lab personnel, since early March 2020. We have limited
non-essential business travel, and we expect to continue to implement measures
as may be required or recommended by government authorities or as we 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.

Respiratory Program Highlights

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, YUPELRI was approved by the FDA for the maintenance treatment
of patients with COPD. Following shipments into commercial channel in late 2018,
we and our collaboration partner, Viatris formally launched our sales and
marketing efforts in early 2019. YUPELRI has maintained profitability on a brand
basis since the second half of 2020. However, YUPELRI's growth trajectory was
impacted by the COVID-19 pandemic, and we continue to observe increased
volatility in YUPELRI sales through 2021. 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 YUPELRI, but it
is possible the pandemic may continue to put downward pressure on our sales. As
a result, the observed sales volatility may continue for the remainder of 2021
and into 2022.

We and Viatris continue to supply YUPELRI to our patients and currently do not
anticipate any interruptions in supply. In addition, we are tracking several key
performance metrics to gauge success in building market acceptance, including
formulary success and market access.



In August 2021, we announced that in collaboration with our partner Viatris, we
are initiating a Phase 4 study comparing improvements in lung function in adults
with severe to very severe COPD and suboptimal inspiratory flow rate following
once-daily treatment with either YUPELRI delivered via standard jet nebulizer or
tiotropium delivered via a dry powder inhaler (Spiriva® HandiHaler®). This study
is aimed at helping to better inform decisions when physicians are designing a
personalized COPD treatment plan with patients and is intended to support a
possible label update for YUPELRI, which would capture more of YUPELRI's
addressable market and further strengthen its competitive advantage. We expect
the study to initiate in December or January 2022.



Viatris Collaboration



In January 2015, we and Viatris 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.



Under the terms of the Viatris Development and Commercialization Agreement (the
"Viatris Agreement"), Viatris and Theravance Biopharma 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 are shared. With YUPELRI
approved in the US, Viatris is leading commercialization, and we co-promote the
product in the US under a profit and loss sharing arrangement (65% to Viatris;
35% to Theravance Biopharma). Outside the US, 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.



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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.



Under the Viatris Agreement, as of September 30, 2021, we are eligible to
receive from Viatris potential global development, regulatory and sales
milestone payments totaling up to $257.5 million in the aggregate with
$205.0 million associated with YUPELRI monotherapy and $52.5 million associated
with future potential combination products. Of the $205.0 million associated
with monotherapy, $187.5 million relates to sales milestones based on achieving
certain levels of net sales and $17.5 million relates to global development and
regulatory actions. The $52.5 million associated with future potential
combination products relates solely to global development and regulatory
actions.

Lung-selective, Nebulized Pan-Janus Kinase (JAK) Inhibitor (Nezulcitinib)

Nezulcitinib (formerly known as TD-0903) is a lung-selective, nebulized JAK
inhibitor, in clinical development for the potential treatment of hospitalized
patients with Acute Lung Injury ("ALI") caused by COVID-19. We discovered
nezulcitinib, and it has been shown in experimental murine models to have
potent, broad inhibition of JAK-STAT signaling in the airways following
challenges with multiple cytokines. Preclinical studies suggest that
nezulcitinib has a high lung to plasma ratio and rapid metabolic clearance
resulting in low systemic exposure, compatible with its lung selectivity.
Nezulcitinib is administered via nebulized inhalation solution, which further
enhances its lung selectivity. Preclinical pharmacodynamic studies indicate that
nezulcitinib has an extended duration of action that should enable once daily
dosing in humans.



We believe nezulcitinib has the potential to inhibit the cytokine storm
associated with ALI and prevent progression to Acute Respiratory Distress
Syndrome ("ARDS"). The first healthy volunteer was dosed in a Phase 1 study of
nezulcitinib in April 2020, and in June 2020, we completed Phase 1 and entered a
two-part Phase 2 study. Phase 2 was designed to evaluate the efficacy, safety,
and tolerability of nezulcitinib in subjects with confirmed symptomatic COVID-19
hospitalized for symptomatic respiratory insufficiency. This study also
evaluated the PK of nezulcitinib in these subjects. To expedite enrollment, we
opened additional sites in other regions including Europe, the US, and South
America.

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
nezulcitinib versus placebo. Data showed that inhaled administration of
nebulized nezulcitinib, once daily over seven days, was generally well-tolerated
and showed a numerical trend towards improved clinical status, reduced hospital
stay and resulted in fewer deaths compared to placebo during a 28-day
observation period. Nezulcitinib 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.



Phase 2 Dose Finding study was a randomized, double-blind, parallel-group study
evaluating efficacy and safety of one dose (3 mg) of nezulcitinib (selected
based on the data from Part 1) as compared with placebo in 200 patients. In June
2021, we announced top-line results from our Phase 2 study of 3 mg once-daily
nezulcitinib compared to placebo, each in combination with standard of care,
which generally included steroids. The study did not meet the primary endpoint
of number of Respiratory Failure-Free Days from randomization through Day 28 in
the intent-to-treat population. The study also did not meet secondary endpoints,
with no difference shown in change from baseline at Day 7 in SaO2/FiO2 ratio,
proportion of patients in each category of the eight-point Clinical Status
scale, or proportion of patients alive and respiratory failure-free at Day 28.
However, nezulcitinib demonstrated a favorable trend in improvement when
compared to placebo for 28-day all-cause mortality. In addition, in a post-hoc
analysis of patients with C-reactive protein ("CRP") <150 mg/L, there was an
improvement in those treated with nezulcitinib when compared to placebo in
28-day all-cause mortality and in time to recovery while there was no difference
in these outcomes in patients with CRP >150 mg/L. Nezulcitinib was generally
well-tolerated, and we intend to further investigate its therapeutic potential
as part of our newly focused respiratory portfolio.

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Lung-selective Pan-JAK Inhibitor Program

TD-8236, an inhaled lung-selective pan-JAK inhibitor, demonstrated a high
affinity for each of the JAK family of enzymes (JAK1, JAK2, JAK3 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 was 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, an investigational,
inhaled lung-selective pan-JAK inhibitor that has demonstrated a high affinity
for each of the JAK family of enzymes (JAK1, JAK2, JAK3 and TYK2) that play a
key role in cytokine signaling. 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 compound in its current
form and apply our learnings to refining and expanding molecules in our
portfolio of inhaled JAK inhibitors. We expect to proceed into the clinic with
the next generation compound after securing a strategic partnership.



The robust body of scientific evidence from TD-8236 and nezulcitinib 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.



Non-Core Asset Highlights

The key operational activities for all izencitinib and ampreloxetine studies will be completed by the end of the first quarter of 2022.

Ampreloxetine (TD-9855)



Ampreloxetine is an investigational, once-daily norepinephrine reuptake
inhibitor ("NRI") that we were developing for the treatment of 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 compound has high affinity for binding
to norepinephrine transporters. By blocking the action of these transporters,
ampreloxetine causes an increase in extracellular concentrations of
norepinephrine. Ampreloxetine is wholly owned by Theravance Biopharma.



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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 consists of two pivotal studies and one non-pivotal
study. The first pivotal study (SEQUOIA), a four-week, randomized double-blind,
placebo-controlled study, was designed to evaluate the efficacy and safety of
ampreloxetine in patients with symptomatic nOH. The second pivotal study
(REDWOOD), a four-month open label study followed by a six-week randomized
withdrawal phase was designed to evaluate the durability of patient response of
ampreloxetine. The third, non-pivotal study (OAK), was designed to allow
patients who completed REDWOOD to have continued access to ampreloxetine for up
to three and half years.

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 severity. Serious adverse events occurred in two patients on placebo
and four on ampreloxetine and none were considered related to the study drug. No
deaths were reported, and there was no signal for supine hypertension. Study
activities for the ampreloxetine Phase 3 program will be completed by the end of
the first quarter of 2022. We plan to share top-line results from REDWOOD and
present the data from the Phase 3 programs at future scientific forums.

Gut-selective Pan-JAK Inhibitor Program (Izencitinib)

JAK inhibitors function by inhibiting the activity of one or more of the Janus
kinase family of enzymes (JAK1, JAK2, JAK3, 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. JAK inhibitors are currently approved for the
treatment of rheumatoid arthritis, myelofibrosis, atopic dermatitis, and
ulcerative colitis and have demonstrated therapeutic benefit for patients with
Crohn's disease. However, these products are known to have side effects based on
their systemic exposure. With izencitinib, our goal was 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.



Based on positive results from a Phase 1b exploratory study in ulcerative
colitis and following dialogues with 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 was 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 was 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.



In August 2021, we reported that the Phase 2b/3 (RHEA) study did not meet its
primary endpoint of change in the total Mayo score or the key secondary endpoint
of clinical remission at week 8, relative to placebo. There was a small
dose-dependent increase in clinical response measured by the adapted Mayo score,
which was driven by a reduction in rectal

bleeding.

At all doses, izencitinib was well-tolerated when administered orally once daily
for 8 weeks; adverse event rates were similar among patients receiving
izencitinib and placebo. There were no instances of perforation, opportunistic
infection, major cardiovascular or thromboembolic event, complicated zoster, or
non-melanoma skin cancer in patients receiving izencitinib. There were no
notable changes in lab values including creatine phosphokinase and lipids in

patients receiving izencitinib relative to placebo. Plasma exposure of
izencitinib was low, consistent with expectations for a gut-selective medicine.
We plan to present the study results at a future scientific forum. The Phase 2
study in Crohn's disease with izencitinib has completed enrollment with top-line
results expected in the first quarter of 2022. We plan to share top-line results
and present the data from this program at a future scientific forum.

Irreversible JAK3 Inhibitor (TD-5202)

TD-5202 is an investigational, orally administered, gut-selective, irreversible
JAK3 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

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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.

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 were 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, we announced a global co-development and commercialization
agreement with Janssen for izencitinib and related back-up compounds for
inflammatory intestinal diseases, including ulcerative colitis and Crohn's
disease. 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 disease study and the Phase 2b induction
portion of the ulcerative colitis study. At that time, Janssen can elect to
obtain an exclusive license to develop and commercialize izencitinib and certain
related compounds by paying us a fee of $200.0 million. Considering recent
unfavorable Phase 2b ulcerative colitis study results, we have excluded the
$200.0 million opt-in payment in our assumptions and forecasts.

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
consist 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.



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.

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, 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.



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 of asthma in adults.
The FDA approved the asthma sNDA in September 2020 making

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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 exceeding $3.0 billion annually.

Theravance Respiratory Company, LLC

Prior to the June 2014 spin-off from Innoviva, 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 GSK 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 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). TRELEGY is currently the only commercial product arising out
of the GSK agreements assigned by Innoviva to TRC. Royalty payments from GSK to
TRC arising from the net sales of Trelegy are presented in our condensed
consolidated statements of operations within "Income from investment in TRC,
LLC" and is classified as non-operating income. In June 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 agreed to pay TRC upon termination of the
inhaled Bifunctional Muscarinic Antagonist-Beta2 Agonist ("MABA") program.
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 for payment of
the $400.0 million original 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 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. In this regard, we initiated an arbitration proceeding in October
2020 against Innoviva and TRC, challenging the authority of Innoviva and TRC to
pursue such a business plan rather than distribute such funds to us in a manner
that we believe is 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 taking place over the
following few weeks.



On March 30, 2021, the arbitrator ruled that, at its current levels of
investment, Innoviva and TRC had not breached the LLC Agreement. The arbitrator
further ruled that Innoviva and TRC had not breached the implied covenant of
good faith and fair dealing; or their fiduciary duties. The arbitrator also
ruled that (i) Innoviva is entitled to indemnification from TRC for all legal
fees and expenses reasonably incurred in the arbitration and (ii) we are
entitled to indemnification from TRC for legal fees and costs incurred in
defending an action Innoviva brought against us in the Delaware Court of
Chancery. The arbitrator noted in the ruling that although we failed to show
that Innoviva's investment activities, at the current levels of investment, have
or will have a material and adverse effect on our economic interest in TRC, this
does not mean that any future investments or actions will not require our
consent. The arbitrator noted in the ruling that we may, in the future, have a
consent right over the decision to continue this investment strategy or whether
to make a particular investment if, for example, Innoviva develops a track
record of poor investments, over allocates royalties to these investment
activities, or fails to distribute sufficient investment returns, and such facts
cause the strategy or investment to have a material adverse effect on our
economic interest in TRC.



Pursuant to the terms of the LLC Agreement, Innoviva is required to deliver to
us a draft quarterly financial plan 30 days prior to the end of each fiscal
quarter covering the next fiscal quarter. While the LLC Agreement provides

that
Innoviva

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must consider in good faith any comments the Company provides, an applicable
financial plan becomes effective 30 days after the draft plan is provided to the
Company. If TRC identifies and consummates investments and incurs associated
fees identified in a TRC quarterly plan, even over the Company's objections,
distributions by TRC to its members in subsequent quarters will be reduced.



Our objections with regard to a draft TRC quarterly plan or other actions by TRC
could result in additional legal proceedings between us, TRC and Innoviva, as
was the case when we initiated arbitration proceedings against Innoviva and TRC
in May 2019 and again in October 2020. 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. If such proceedings were pursued, there
can be no assurance that they would result in us receiving additional
distributions from TRC. An adverse result could materially and adversely affect
the funds that our affiliates would otherwise expect to receive from TRC in the
future. 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 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" for additional information.

Other Economic Interests

Selective 5-HT4 Agonist (TD-8954)

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 projects leverage years of experience in developing lung-selective
medicines to address the needs of patients suffering from respiratory illness.
As a result of our strategic restructuring announced in September 2021, we
intend to streamline and narrow our R&D focus on our highest value core
respiratory opportunities. This would include the peak inspiratory flow rate
("PIFR") clinical study, in partnership with Viatris, to support the label
update of YUPELRI and continued investment in our investigational inhaled Janus
kinase inhibitor portfolio, with focus on the most advanced clinical candidate,
nezulcitinib, initially targeting acute lung injury. In order to implement this
plan, we will halt the development of

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all non-respiratory disease related programs except that we will close out the
izencitinib Phase 2 Crohn's disease study and the ampreloxetine Phase 3 REDWOOD
study.

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 assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, as well as the reported revenue generated and
expenses incurred during the reporting periods. 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, revenue
recognition and clinical trial expenses 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, 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. There have been no
material changes to the critical accounting policies and estimates discussed in
our Annual Report on Form 10-K for the year ended December 31, 2020.



Results of Operations



Revenue



Revenue, as compared to the comparable periods in the prior year, was as
follows:




                                    Three Months Ended                             Nine Months Ended
                                      September 30,             Change              September 30,             Change
(In thousands)                       2021         2020         $        %           2021        2020         $         %
Collaboration revenue             $     2,797   $  7,261   $ (4,464)   (61) %    $    8,649   $ 19,381   $ (10,732)   (55) %
Licensing revenue                           -          -           -      -               -      1,500      (1,500)     NM
Viatris collaboration agreement        10,397     10,996       (599)    (5)

         31,716     32,246        (530)    (2)
Total revenue                     $    13,194   $ 18,257   $ (5,063)   (28) %    $   40,365   $ 53,127   $ (12,762)   (24) %


NM: Not Meaningful



Collaboration revenue decreased by $4.5 million and $10.7 million for the three
and nine months ended September 30, 2021 compared to the same periods in 2020.
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. Janssen
collaboration revenue is recognized for the research and development services we
performed during the period based on a measure of our 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
budgeted costs). The $4.5 million and $10.7 million decreases in collaboration
revenue compared to the prior year periods reflect the reduction of costs
incurred to satisfy the remaining performance obligation related to the recently
completed izencitinib Phase 2 study for ulcerative colitis and the expected
completion of the izencitinib Phase 2 study for Crohn's disease in the first
quarter of 2022.



Licensing revenue decreased by $1.5 million for the nine months ended September
30, 2021 compared to the same period in 2020. The $1.5 million recognized in the
prior year period represented the achievement of a non-recurring milestone
related to the acceptance of a clinical trial application associated with our
Viatris agreement for the commercialization and development rights of nebulized
revefenacin in China and adjacent territories.



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.
In accordance with the applicable accounting guidance, amounts receivable from
Viatris in connection with the commercialization of YUPELRI are recorded within
the condensed consolidated

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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 condensed 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") expenses is characterized as a reduction of R&D expense,
as we do not consider performing research and development services for
reimbursement to be a part of our ordinary operations.



For the three and nine months ended September 30, 2021, we recognized $10.4
million and $31.7 million, respectively, in revenue from the Viatris
collaboration agreement for YUPELRI which represented the receivables due from
Viatris during the periods. While Viatris records the total net sales of YUPELRI
within its financial statements, Viatris collaboration agreement revenue
includes our implied 35% share of net sales of YUPELRI for the three and nine
months ended September 30, 2021 of $13.8 million and $41.3 million,
respectively. Demand doses for YUPELRI increased 1% in the third quarter of 2021
compared to the second quarter 2021 and increased 21% in the third quarter of
2021 compared to the third quarter of 2020. While institutions in some parts of
the country are allowing more in-person access, in-person engagements remain
below pre-pandemic levels. Total prescription volumes continue to grow across
most specialties with volumes heading toward parity with 2020. However,
prescription volumes in pulmonology remain below pre-pandemic levels.



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;

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

Facilities and other, which include laboratory and office supplies,

4) depreciation and other allocated expenses, which include general and

    administrative support functions, insurance and general supplies.




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




                                Three Months Ended                              Nine Months Ended
                                  September 30,             Change               September 30,             Change
(In thousands)                   2021         2020         $         %          2021        2020          $         %
Employee-related              $     7,506   $ 15,979   $  (8,473)   (53) %    $  39,521   $  45,285   $  (5,764)   (13) %
Share-based compensation            6,956      7,761        (805)   (10)         22,192      23,724      (1,532)    (6)
External-related                   23,693     35,759     (12,066)   (34)         78,551     101,556     (23,005)   (23)
Facilities, depreciation
and other allocated
expenses                            5,584      7,872      (2,288)   (29)         22,167      25,223      (3,056)   (12)
Total research &
development                   $    43,739   $ 67,371   $ (23,632)   (35) % 

$ 162,431   $ 195,788   $ (33,357)   (17) %

R&D expenses decreased by $23.6 million and $33.4 million for the three and nine
months ended September 30, 2021, respectively, compared to the same periods in
2020, and the decreases were across all R&D categories. External-related
expenses decreased by $12.1 million and $23.0 million for three and nine months
ended September 30, 2021, respectively, and was the largest contributor to the
total R&D expense decrease. The decreases in external-related expenses were
primarily due to the completion, or-near completion, of expenses related to our
priority programs. The decreases across the remaining R&D categories were
primarily due to the Restructuring announced in September 2021 which included a
significant reduction in employee-related expenses of $8.5 million and $5.8
million for the respective three and nine month periods and

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was primarily related to the reversal of the annual corporate bonus. Severance
and other costs that were directly attributed to the Restructuring are included
in the Restructuring 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 $3.3 million and $6.0 million for
three and nine months ended September 30, 2021, respectively, and $1.4 million
and $5.8 million for the three and nine months ended September 30, 2020,
respectively.

As a result of the Restructuring, we expect our R&D expenses to significantly decrease over the next 12 months.

Selling, General and Administrative

Selling, general and administrative expenses, as compared to the comparable periods in the prior year, were as follows:

                                        Three Months Ended                             Nine Months Ended
                                          September 30,             Change              September 30,           Change
(In thousands)                           2021         2020         $        %           2021        2020        $       %

Selling, general and administrative $ 21,299 $ 27,501 $ (6,202) (23) % $ 77,780 $ 78,606 $ (826) (1) %

Selling, general and administrative expenses decreased by $6.2 million and $0.8
million for the three and nine months ended September 30, 2021, respectively,
compared to the same periods in 2020. The $6.2 million decrease for the three
months ended September 30, 2021, was primarily attributed to a reduction in
employee-related expenses resulting from the reversal of the annual corporate
bonus due to the Restructuring and a reduction in external-related services.
Although the $0.8 million decrease for the nine month period ended September 30,
2021 also included a reduction in employee-related expenses resulting from the
annual corporate bonus reversal, the reduction was offset by an increase in
external-related expenses primarily due to legal costs related to the TRC
arbitration. Severance and other costs that were directly attributed to the
Restructuring are included in the Restructuring Expenses section below.



Share-based compensation expense related to selling, general and administrative
expenses was $7.4 million and $23.0 million for the three and nine months ended
September 30, 2021, respectively, and $7.8 million and $23.7 million for the
three and nine months ended September 30, 2020, respectively.



We lease approximately 170,000 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. In July 2021, we terminated approximately 8,000
square feet of office space in one of the buildings and returned the space to
the building's landlord for their use. We determined that the termination would
be accounted for as a lease modification under the applicable accounting
guidance. As a result of the modification, we adjusted the value of our
operating lease assets and liabilities in our condensed consolidated balance
sheets, as of September 30, 2021, resulting in a gain of $1.9 million. The $1.9
million gain was offset against facility expenses during the three and nine
months ended September 30, 2021 and included within selling, general and
administrative expenses and partially allocated to R&D expenses above.

As a result of the Restructuring, we expect our selling, general and administrative expenses to significantly decrease over the next 12 months.

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Restructuring and Related Expenses

We incurred the following Restructuring charges consisting of one-time severance
payments and other employee- related separation costs which are being recognized
ratably over the future service period:




                                        Three Months Ended                             Nine Months Ended
                                          September 30,            Change               September 30,             Change
(In thousands)                           2021          2020        $       %           2021           2020        $       %

Restructuring and related expenses $ 1,771 $ - $ 1,771 NM % $ 1,771 $ - $ 1,771 NM %

We estimate that we will incur total cash expenses of approximately $18.0
million to $20.0 million related to the Restructuring. These expenses are
primarily comprised of employee-related severance and other related costs, and
the majority of these expenses are expected to be incurred and paid through the
first quarter of 2022. We will also incur non-cash charges relating to the
acceleration of equity-awards during the fourth quarter of 2021 and the first
quarter of 2022 for employees affected by the Restructuring.



We are also in the process of evaluating the impact of the Restructuring on the
carrying value of our long-lived assets, such as property and equipment and
operating lease assets. This process includes evaluating the estimated remaining
lives, significant changes in the use, and potential impairment charges related
to our long-lived assets which will be impacted by decisions to be finalized
late in the fourth quarter of 2021. As of September 30, 2021, we did not
recognize any impairment charges related to its long-lived assets as those
amounts were deemed immaterial. We may also incur additional costs not currently
contemplated due to events that may occur because of, or that are associated
with, the Restructuring.

Income from Investment in TRC, LLC

Income from investment in TRC, as compared to the comparable periods in the
prior year, was as follows:




                                       Three Months Ended                          Nine Months Ended
                                         September 30,            Change            September 30,           Change
(In thousands)                          2021         2020        $        %

2021 2020 $ % Income from investment in TRC, LLC $ 30,208 $ 13,403 $ 16,805 125 % $ 68,681 $ 48,299 $ 20,382 42 %

The income from investment in TRC, LLC represented our share of the royalty payments from GSK to TRC on the net sales of TRELEGY (net of our share 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).

Income from investment in TRC, LLC increased by $16.8 million and $20.4 million
for the three and nine months ended September 30, 2021, respectively, compared
to the same periods in 2020 which included $8.5 million representing our share
of the one-time fee that GSK paid to TRC upon termination of the MABA program in
June 2020.



The $30.2 million and $68.7 million of TRC income for the three and nine months
ended September 30, 2021, respectively, were recorded net of our share of TRC
expenses of $0.2 million and $3.2 million, respectively. Our share of TRC
expenses for the nine months ended September 30, 2021 was primarily comprised of
TRC's legal and related expenses associated with the arbitration between
Innoviva and TRC and us. Our share of TRC expenses was $0.5 million and $1.2
million for the three and nine months ended September 30, 2020, respectively.



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.



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 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" for
additional information regarding our economic interest in TRC, LLC.



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Interest Expense



Interest expense primarily consisted of interest payments due on the Convertible
Senior 2023 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, was as follows:




                                 Three Months Ended                           Nine Months Ended
                                   September 30,            Change             September 30,             Change
(In thousands)                    2021         2020         $      %          2021         2020          $       %
9.5% Non-recourse notes due
2035                           $  (9,606)   $  (9,437)   $ (169)    2  %   $ (28,817)   $ (26,495)   $ (2,322)    9 %
3.25% Convertible senior
notes due 2023                    (2,136)      (2,136)         -    -         (6,410)      (6,410)           -    -
Total interest expense         $ (11,742)   $ (11,573)   $ (169)    1 %    $ (35,227)   $ (32,905)   $ (2,322)    7 %




Interest expense increased by $2.3 million for the nine months ended September
30, 2021 and was relatively unchanged for the three months ended September 30,
2021, compared to the same periods in 2020. The $2.3 million increase was
primarily attributed to additional interest expense incurred in the current year
related to an increase in principal balance of the Non-Recourse 2035 Notes. The
increase in principal balance resulted from the February 2020 re-financing of
the Non-Recourse 2033 Notes and interest payment shortfalls added to the
principal balance as of the applicable interest payment dates.

Loss on Extinguishment of Debt

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




                                    Three Months Ended                       Nine Months Ended
                                      September 30,          Change            September 30,            Change
(In thousands)                     2021           2020        $     %     2021          2020            $       %

Loss on extinguishment of debt $ - $ - $ - - % $

  -    $      (15,464)   $ 15,464   NM %


NM: Not Meaningful



For the nine months ended September 30, 2020, the $15.5 million loss on
extinguishment of debt was 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. The $15.5 million loss was comprised of a
redemption premium related to the early repayment of the Non-Recourse 2033 Notes
and the write-off of the previously deferred debt issuance costs related to the
portion of the Non-Recourse 2033 Notes that was considered extinguished.

Interest and Other Income (Expense), net

Interest and other income (expense), net, as compared to the comparable periods in the prior year, was as follows:

                                   Three Months Ended                             Nine Months Ended
                                     September 30,             Change              September 30,             Change
(In thousands)                      2021         2020         $         %        2021         2020          $        %
Interest and other income
(expense), net                   $    (166)    $  1,109   $ (1,275)   (115) %   $   771    $    3,643   $ (2,872)   (79) %

Costs related to GSK offering             -         126       (126)      NM

          -       (1,610)       1,610     NM
Total interest and other
income (expense), net            $    (166)    $  1,235   $ (1,401)     113 %   $   771    $    2,033   $ (1,262)   (62) %


NM: Not Meaningful



Interest and other income (expense), net, decreased by $1.3 million and $2.9
million for the three and nine months ended September 30, 2021, respectively,
compared to the same periods in 2020. The decreases were primarily due to higher
investment balances in the prior year period following the issuance of the
Non-Recourse 2035 Notes in February 2020, lower investment yields in the current
periods, and an increase in foreign currency losses in the current periods.

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In addition, $1.6 million of costs related to the GSK offering in the second
quarter of 2020 were incurred during the nine months ended September 30, 2020.
On June 22, 2020, GSK completed its previously announced offering of $300
million of exchangeable senior notes due 2023, $280.3 million of which are
exchangeable into ordinary shares of our Company that are held by GSK and its
affiliates for investment purposes. The $1.6 million in costs were primarily
comprised of financial advisory and legal-related costs.

Provision for Income Tax Benefit (Expense)

The provision for income tax benefit (expense), as compared to the comparable periods in the prior year, was as follows:

                                         Three Months Ended                             Nine Months Ended
                                           September 30,             Change               September 30,            Change

(In thousands)                         2021           2020          $       %         2021          2020          $       %
Provision for income tax benefit
(expense)                            $      7     $        (93)   $ 100   (108) %    $     -    $       (279)   $ 279   (100) %




For the three and nine months ended September 30, 2021, the provision for income
tax expense decreased by $0.1 million and $0.3 million, respectively, compared
to the same periods in 2020. Although we incurred operating losses on a
consolidated basis for each reporting period, we did not record a provision for
income taxes for the nine months ended September 30, 2021 due to our lower
estimate of the uncertain tax positions taken with respect to transfer pricing
and tax credits in comparison to the nine months ended September 30, 2020. Our
provision for income tax expense differs from the expected statutory rate due to
the valuation allowance on deferred tax assets



We are currently under Internal Revenue Service ("IRS") examination for the tax
year ended December 31, 2018. We believe that an adequate provision has been
made for any adjustments that may result from the tax examination.

Liquidity and Capital Resources

To date, we have financed our operations primarily through public offerings of
equity securities, private placements of equity and debt, revenue from
collaboration and licensing arrangements and, to a lesser extent, revenue from
product sales. As of September 30, 2021, we had $216.2 million in cash, cash
equivalents, and investments in marketable securities (excluding restricted
cash). Also, as of September 30, 2021, we had outstanding (i) $230.0 million in
principal Convertible Senior 2023 Notes and (ii) $392.6 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).



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 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. 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.

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On June 29, 2021, we sold 6,700,000 ordinary shares at a price to the public of
$15.00 per share (the "Shares"). Under the terms of the underwriting agreement,
on June 29, 2021, the underwriters also exercised a 30-day option to purchase an
additional 1,005,000 ordinary shares for a total of 7,705,000 ordinary shares
sold. The total gross proceeds from the offering were approximately $115.6
million, before deducting underwriting discounts and commissions and estimated
offering expenses. The Shares were issued pursuant to the Company's 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.



In September 2021, we announced the Restructuring to focus capital resources on
our respiratory programs, resulting in an approximate 75% reduction in workforce
to significantly reduce operational costs and preserve capital. Approximately
75% of the total reduction in workforce will take place by November 2021, and
the remainder will be completed in February 2022. We expect to incur a one-time
Restructuring charge of approximately $18.0 million to $20.0 million which will
include severance and other-related cash payments. The majority of the
Restructuring charge will be paid by the first quarter of 2022.



As a result of the Restructuring, we expect to realize estimated annualized
operating expense savings of approximately $165.0 million in the year ending
December 31, 2022 (excluding share-based compensation and any one-time costs
related to strategic actions), and we expect to be sustainably cash flow
positive beginning in the second half of 2022 primarily achieved through our
reduced cash expenditures in light of the Restructuring and the focus on our
respiratory assets. These estimates are subject to a number of assumptions, and
actual results may differ. We may also incur additional costs not currently
contemplated due to events that may occur because of, or that are associated
with, the Restructuring.



Despite the Restructuring, we may continue to incur net losses over the next
several years due to expenditures relating to our continuing respiratory drug
discovery efforts, preclinical and clinical development of our current
respiratory product candidates and commercialization costs relating to YUPELRI.
In particular, to the extent we advance our respiratory product candidates into
and through later-stage clinical studies without a partner, we may incur
substantial expenses. In addition, we may invest strategically in our research
efforts to continue to grow our respiratory 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 new strategic business plan is subject to significant uncertainties and
risks as a result of, among other factors, the COVID-19 pandemic, clinical
program outcomes, 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
litigation matters and indemnification obligations.

Adequacy of cash resources to meet future needs

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

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 expected future operations, 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, as we have
recently announced in September 2021, we may need to delay, reduce or eliminate
one or more of our research or development programs and

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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 comparable period in the prior year, were as
follows:




                                                             Nine Months Ended
                                                               September 30,
(In thousands)                                              2021           2020          Change
Net cash used in operating activities                    $ (165,424)    $ (185,478)    $    20,054
Net cash provided by (used in) investing activities          113,670       (41,647)        155,317
Net cash provided by financing activities                     91,711       

262,342      (170,631)

Cash flows used in operating activities

Net cash used in operating activities was $165.4 million for the nine months
ended September 30, 2021, consisting of a net loss of $167.4 million, a net
increase in cash resulting from adjustments for non-cash and other reconciling
items of $34.0 million and a net decrease in cash resulting from changes in
operating assets and liabilities of $32.0 million.



Net cash used in operating activities was $185.5 million for the nine months
ended September 30, 2020, consisting of a net loss of $219.6 million, a net
increase in cash resulting from adjustments for non-cash and other reconciling
items of $59.2 million and a net decrease in cash resulting from changes in
operating assets and liabilities of $25.1 million.

Cash flows provided by (used in) investing activities

Net cash provided by investing activities was $113.7 million for the nine months
ended September 30, 2021, consisting primarily of cash inflows from the net
purchase and maturities of marketable securities of $116.6 million and partially
offset by $3.0 million used for the purchase of property and equipment.



Net cash used in investing activities was $41.6 million for the nine months
ended September 30, 2020, consisting primarily of cash outflows from the net
purchase and maturities of marketable securities of $56.2 million and $5.4
million related to the purchase of property and equipment. The net cash outflow
amounts above were partially offset by a $19.9 million cash inflow from the sale
of marketable securities during the nine months ended September 20, 2020.

Cash flows provided by financing activities

Net cash provided by financing activities was $91.7 million for the nine months
ended September 30, 2021, consisting of the sale of 7,705,000 ordinary shares
for total net proceeds of $108.2 million and $2.8 million in proceeds from ESPP
and share option purchases. These proceeds were partially offset by $10.7
million in principal payments on the Non-Recourse 2035 Notes and $8.6 million
related to the repurchase of shares to satisfy tax withholding obligations.



Net cash provided by financing activities was $262.3 million for the nine months
ended September 30, 2020, consisting 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 million redemption premium related to the payoff of the Non-Recourse
2033 Notes. In addition to the above, net cash provided by financing activities
was partially offset by the repurchase of shares to satisfy tax withholding
obligations in the amount of $8.9 million.

Commitments and Contingencies

We indemnify our officers and directors for certain events or occurrences, subject to certain limits. We believe the fair value of these indemnification agreements is minimal. Accordingly, we have not recognized any liabilities relating to these agreements as of September 30, 2021.

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Performance-Contingent Awards



We periodically grant performance-contingent awards to our employees. For the
nine months ended September 30, 2021, we recognized $0.7 million of aggregate
share-based compensation expense and cash bonus expense related to these types
of awards. As of September 30, 2021, the maximum remaining expense related to
outstanding performance-contingent awards was $0.5 million which had performance
expiration dates through June 2022.

Off-Balance Sheet Arrangements

There have been no material changes in our off-balance sheet arrangements from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 26, 2021.

Contractual Obligations and Commercial Commitments

There have been no material changes in our contractual obligations and
commercial commitments from those set forth in our Annual Report on Form 10-K
for the year ended December 31, 2020, filed with the SEC on February 26, 2021.
However, as a result of the Restructuring, we anticipate that our future
contractual obligations and commercial commitments will decrease significantly,
and we will disclose updated information in our upcoming Annual Report on Form
10-K for the year ending December 31, 2021.

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