Theravance Reports Second Quarter 2008 Financial Results

SOURCE:

Theravance, Inc.

2008-07-24 15:05:00

Theravance Reports Second Quarter 2008 Financial Results

SOUTH SAN FRANCISCO, CA–(EMWNews – July 24, 2008) – Theravance, Inc. (NASDAQ: THRX)

reported today its financial results for the quarter ended June 30, 2008.

Net loss for the second quarter of 2008 was $27.0 million, compared with

$45.1 million for the same period of 2007, a decrease of $18.1 million. Net

loss per share was $0.44 for the second quarter 2008 compared with a net

loss per share of $0.75 for the second quarter 2007.

“Theravance continued to make progress across our key clinical programs

this quarter,” said Rick E Winningham, Chief Executive Officer. “Recently,

we announced positive news from our bifunctional muscarinic

antagonist-beta2 agonist program with GSK, which successfully completed a

proof-of-concept Phase 2 study in COPD patients. Our Horizon program, in

collaboration with GSK, completed enrollment in the mild and the severe

asthma Phase 2b studies of inhaled corticosteroid ‘698. We expect to

complete enrollment in the third quarter of 2008 in the asthma study with

the long-acting beta agonist ‘444. We expect results from a study of ‘698

in moderate asthmatic patients in early 2009. Earlier this week, we

announced that the FDA has not yet made a decision regarding the NDA for

telavancin for the treatment of complicated skin and skin structure

infections. We are working diligently with the FDA to complete its review

of the skin application and are planning to submit the telavancin HAP NDA

in the fourth quarter of 2008.”

Program Highlights

Respiratory Programs

Horizon

We expect completion of enrollment in the Phase 2b asthma dose-ranging

study with GW642444 (‘444) in the third quarter 2008. The Phase 2b

dose-ranging studies with the lead inhaled corticosteroid (ICS) GW685698

(‘698) for patients with mild asthma and for patients with severe asthma

have recently completed enrollment. The Phase 2b study with ‘698 for

patients with moderate asthma continues to enroll patients with results now

expected in early 2009.

Enrollment remains on track for the large Phase 2b chronic obstructive

pulmonary disease (COPD) dose-ranging study with the lead long-acting beta

agonist (LABA), ‘444. We expect to report top-line data from this study in

the first half of 2009.

Inhaled Bifunctional Muscarinic Antagonist-Beta2 Agonist (MABA) Program

We recently reported positive clinical results from our Phase 2 study in

the MABA program with our lead investigational compound, GSK961081 (‘081),

for the treatment of COPD. ‘081 administered once daily to COPD patients

demonstrated 24-hour bronchodilation on day 14 that was statistically

greater than placebo, and comparable to a combination therapy active

control of salmeterol dosed twice daily plus tiotropium dosed once daily.

‘081 was generally well tolerated throughout the 14-day study. In

conjunction with the successful achievement of proof-of-concept in this

Phase 2 clinical study, we earned a milestone payment of $10 million from

GlaxoSmithKline (GSK).

Inhaled Long-Acting Muscarinic Antagonist (LAMA) Program

We recently reported clinical results from our Phase 1 study in the LAMA

program with our lead investigational compound, GSK1160724 (TD-4208), for

the treatment of COPD. TD-4208 administered as a single dose to healthy

volunteers was generally well tolerated, with a similar incidence of

adverse events to placebo. In addition, TD-4208 demonstrated evidence of

bronchodilation in volunteers sensitive to muscarinic antagonists. We also

announced GSK’s intent to return the LAMA program to the company because

the current formulation of the compound is incompatible with GSK’s

proprietary inhaler device. Both parties are currently discussing the

transfer of information and materials back to the company.

Bacterial Infections Programs

Telavancin

We plan on submitting to the U.S. Food and Drug Administration (FDA) a New

Drug Application (NDA) for telavancin in the treatment of hospital-acquired

pneumonia (HAP) caused by Gram-positive bacteria including resistant

pathogens such as methicillin-resistant Staphylococcus aureus (MRSA) in the

fourth quarter 2008.

Earlier this week, we announced that the FDA has not yet made a decision

regarding the NDA for telavancin for the treatment of complicated skin and

skin structure infections (cSSSI). The Prescription Drug User Fee Act

(PDUFA) date for action by FDA was July 21, 2008, and as of July 23, 2008,

the company had not received an action letter from the FDA.

As previously announced, the FDA had indicated that it did not expect to

take final action on the telavancin NDA prior to completing its further

evaluation of study site monitoring and study conduct in the ATLAS Phase 3

program, nor prior to resolution of the manufacturing issues not

specifically related to telavancin that were cited in the approvable letter

received in October 2007.

Telavancin is also under review for its safety and efficacy by regulatory

authorities in Europe for the treatment of complicated skin and soft tissue

infections and in Canada for the treatment of cSSSI.

Gastrointestinal (GI) Motility Dysfunction Program

We continue to evaluate the data and the study site audit from a previously

conducted thorough QTc study of TD-5108, our lead compound, which evaluated

the potential for QT prolongation. We currently intend to initiate a

drug-drug interaction (DDI) study later in 2008. We intend to meet with

the FDA later in 2008 to discuss the thorough QTc study and appropriate

next steps, including conducting another thorough QTc study if necessary.

We continue to evaluate the potential of this compound in chronic

constipation, constipation-predominant irritable bowel syndrome and other

indications.

Financial Results

Revenue

Revenue was $5.5 million for the second quarter of 2008 compared with $5.3

million for the same period of 2007. This increase was due to higher

amortization of milestone payments received from the company’s partnerships

with GSK and Astellas. All payments received to date under these agreements

are being amortized over the relevant performance periods rather than being

recognized when received.

Research and Development

Research and development expense for the second quarter of 2008 decreased

to $20.0 million from $43.5 million for the same period of 2007. Total

external research and development expense for the second quarter of 2008

was $4.9 million compared with $16.3 million for the same period in 2007.

The lower expenses in the second quarter of 2008 were primarily due to

decreased external clinical study costs associated with telavancin,

TD-5108, and TD-1792 as well as lower employee related costs. Total

research and development stock-based compensation expense for the second

quarter of 2008 was $1.9 million compared with $3.2 million in same period

of 2007.

General and Administrative

General and administrative expense for the second quarter of 2008 decreased

to $7.3 million from $9.5 million for the same period in 2007. The lower

expense in the second quarter of 2008 was due to lower employee related

costs due to the reduction in force announced in April 2008, and lower

external costs. Total general and administrative stock-based compensation

expense for the second quarter of 2008 was $1.9 million compared with

$2.3 million for the same period in 2007.

Restructuring Charges

The $5.1 million of restructuring charges in the second quarter of 2008

resulted from the company’s workforce restructuring initiated in April 2008

in response to the completion of its Phase 3 development activities with

telavancin and to reduce its overall cash burn rate. The charges consisted

of employee and severance benefits.

Cash and Cash Equivalents

Cash, cash equivalents and marketable securities totaled $232.3 million as

of June 30, 2008, a decrease of $26.3 million during the quarter. The

decrease was primarily due to cash used in operations and severance related

payments.

Conference Call and Webcast Information

As previously announced, the company has scheduled a conference call to

discuss this announcement beginning at 5:00 p.m. Eastern Daylight Time

today. To participate in the live call by telephone, please dial

877-681-3372 from the U.S., or 719-325-4931 for international callers.

Those interested in listening to the conference call live via the internet

may do so by visiting the company’s web site at www.theravance.com. To

listen to the live call, please go to the web site 15 minutes prior to its

start to register, download, and install any necessary audio software.

A replay of the conference call will be available on the company’s web site

for 30 days through August 23, 2008. An audio replay will also be available

through 11:59 p.m. Eastern Daylight Time on August 7, 2008 by dialing

888-203-1112 from the U.S., or 719-457-0820 for international callers, and

entering confirmation code 5381460.

About Theravance

Theravance is a biopharmaceutical company with a pipeline of internally

discovered product candidates. Theravance is focused on the discovery,

development and commercialization of small molecule medicines across a

number of therapeutic areas including respiratory disease, bacterial

infections and gastrointestinal motility dysfunction. The company’s key

programs include: telavancin for the treatment of serious Gram-positive

bacterial infections with Astellas Pharma Inc., the Horizon program with

GlaxoSmithKline plc, and the Gastrointestinal Motility Dysfunction program.

By leveraging its proprietary insight of multivalency toward drug discovery

focused primarily on validated targets, Theravance is pursuing a next

generation strategy designed to discover superior medicines in areas of

significant unmet medical need. For more information, please visit the

company’s web site at www.theravance.com.

THERAVANCE®, the Theravance logo, and MEDICINES THAT MAKE A DIFFERENCE®

are registered trademarks of Theravance, Inc.

This press release contains and the conference call will contain certain

“forward-looking” statements as that term is defined in the Private

Securities Litigation Reform Act of 1995 regarding, among other things,

statements relating to goals, plans, objectives and future events.

Theravance intends such forward-looking statements to be covered by the

safe harbor provisions for forward-looking statements contained in Section

21E of the Exchange Act and the Private Securities Litigation Reform Act of

1995. Examples of such statements include statements relating to the goals

and expected timing of clinical studies and data from studies, statements

regarding the potential benefits and mechanisms of action of drug

candidates, statements concerning the timing of seeking regulatory approval

of our product candidates (including with respect to telavancin statements

regarding any expectation (i) regarding the results of the additional site

evaluations underway by the FDA, (ii) that the third-party manufacturer

will successfully address the cGMP issues the FDA noted in the approvable

letter, or (iii) that the FDA will approve the telavancin NDA on the basis

of existing preclinical and clinical data or at all), the enabling

capabilities of Theravance’s approach to drug discovery and its proprietary

insights, statements concerning expectations for product candidates through

development and commercialization and projections of revenue or operating

cost savings and restructuring charges and other financial items. These

statements are based on the current estimates and assumptions of the

management of Theravance as of the date of this press release and the

conference call and are subject to risks, uncertainties, changes in

circumstances, assumptions and other factors that may cause the actual

results of Theravance to be materially different from those reflected in

its forward-looking statements. Important factors that could cause actual

results to differ materially from those indicated by such forward-looking

statements include, among others, risks related to delays or difficulties

in commencing or completing clinical studies, the potential that results of

clinical or preclinical studies indicate product candidates are unsafe or

ineffective, our dependence on third parties in the conduct of our clinical

studies, delays or failure to achieve regulatory approvals, risks of

relying on third-party manufacturers for the supply of our product

candidates and risks of collaborating with third parties to develop and

commercialize products. These and other risks are described in greater

detail under the heading “Risk Factors” contained in Item 1A of

Theravance’s Quarterly Report on Form 10-Q filed with the Securities and

Exchange Commission (SEC) on May 8, 2008 and the risks discussed in our

other periodic filings with the SEC. Given these uncertainties, you should

not place undue reliance on these forward-looking statements. Theravance

assumes no obligation to update its forward-looking statements.


                        THERAVANCE, INC.

         CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

             (In thousands, except per share data)





                                 Three Months Ended     Six Months Ended

                                      June 30,              June 30,

                                --------------------  --------------------

                                  2008       2007       2008       2007

                                ---------  ---------  ---------  ---------

                                    (unaudited)           (unaudited)



Revenue (1)                     $   5,505  $   5,305  $  11,150  $  10,703



Operating expenses:

  Research and development (2)     19,996     43,497     46,775     92,355

  General and administrative (2)    7,256      9,512     16,422     18,310

  Restructuring charges             5,063         --      5,063         --



                                ---------  ---------  ---------  ---------

Total operating expenses           32,315     53,009     68,260    110,665

                                ---------  ---------  ---------  ---------



Loss from operations              (26,810)   (47,704)   (57,110)   (99,962)



Interest and other income, net      1,295      2,603      2,967      5,441

Interest expense                   (1,511)       (24)    (2,647)       (54)

                                ---------  ---------  ---------  ---------

Net loss                        $ (27,026) $ (45,125) $ (56,790) $ (94,575)

                                =========  =========  =========  =========

Net loss per share              $   (0.44) $   (0.75) $   (0.93) $   (1.57)

                                =========  =========  =========  =========



Shares used in computing

 net loss per share                61,192     60,341     61,098     60,222

                                =========  =========  =========  =========





(1) Revenue includes amounts from GSK, a related party, of $2.8 million and

    $5.7 million for the three and six months ended June 30, 2008,

    respectively, and $2.8 million and $5.6 million for the three and six

    months ended June 30, 2007, respectively.



(2) Amounts include stock-based compensation expense for the three and six

    months ended June 30 as follows (in thousands):





                                          Three Months    Six Months Ended

                                         Ended June 30,       June 30,

                                        ----------------- -----------------

                                          2008     2007     2008     2007

                                        -------- -------- -------- --------

                                          (unaudited)       (unaudited)



Research and development                $  1,870 $  3,196 $  4,592 $  6,564

General and administrative                 1,862    2,309    4,054    4,729

                                        -------- -------- -------- --------

Total stock-based compensation expense  $  3,732 $  5,505 $  8,646 $ 11,293

                                        ======== ======== ======== ========







                       THERAVANCE, INC.

             CONDENSED CONSOLIDATED BALANCE SHEETS

             (In thousands, except per share data)





                                                  June 30,    December 31,

                                                    2008          2007

                                                ------------  ------------

                                                (unaudited)       (2)



Assets

  Cash, cash equivalents and marketable

   securities                                   $    232,347  $    126,816

  Other current assets                                20,144         7,271

  Marketable securities - non-current                     --         2,456

  Property and equipment, net                         18,481        20,091

  Other assets                                        10,418         5,349

                                                ------------  ------------

    Total assets                                $    281,390  $    161,983

                                                ============  ============





Liabilities and stockholders’ equity (net

 capital deficiency)

  Current liabilities, net of current portion

   of deferred revenue                          $     26,176  $     33,014

  Deferred revenue (1)                               188,505       188,655

  Convertible subordinated notes                     172,500            --

  Other long-term liabilities                          5,835         6,578

  Stockholders’ equity (net capital deficiency)     (111,626)      (66,264)

                                                ------------  ------------

Total liabilities and stockholders’ equity (net

 capital deficiency)                            $    281,390  $    161,983

                                                ============  ============





(1) Deferred revenue includes the current portion of $24.0 million and

    $22.5 million as of June 30, 2008 and December 31, 2007, respectively.

    Deferred revenue is the result of milestone payments that were earned

    under the company’s collaborations with Astellas and GSK.



(2) The condensed consolidated balance sheet amounts at December 31, 2007

    are derived from audited financial statements.

Contact Information:
Michael W. Aguiar
Senior Vice President and Chief Financial Officer
650-808-4100

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