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Theravance, Inc. (NASDAQ:THRX) is a biopharmaceutical company with a diverse range of small molecule medicines in all stages of the development process, including one drug approved and on the market. The company distinguishes itself with expertise in developing drugs with multivalency, or the ability of a single small molecule to bind two or more distinct targets. The company also attempts to have multiple distinct product candidates in their development pipeline to increase the potential for market success, and has landed partnerships with giants such as GlaxoSmithKline (NYSE:GSK) and Merck (NYSE:MRK) to defray development costs.

Current portfolio

VIBATIV® is a lipoglycopeptide approved for the treatment of gram-positive bacterial infections, typically in patients with resistant bacteria such as MRSA. The drug is similar to the off-patent vancomycin and works by binding to a peptidoglycan that is critical in bacterial cell wall synthesis. FDA approval was granted in September 2009 for treatment of complicated skin and skin structure infections (cSSSI) and an additional indication was approved in November 2012 for nosocomial pneumonia, although only as a second-line treatment. Theravance had a license agreement with Astellas Pharma US Inc. from 2005 until January 2012 for marketing rights of VIBATIV®. Problems at an Ohio manufacturing plant caused disruptions in the supply of VIBATIV® and led to contract termination. In May 2012 a 5-year technology transfer and supply agreement was struck with Hospira Inc. (NYSE:HSP) for the manufacturing of VIBATIV®. Regulatory approval for manufacturing is expected sometime in mid-2013. With sales in the first nine months of 2011 at $11.9MM, I do not expect VIBATIV® to be a significant long-term revenue generator, especially considering that Theravance may partner with another company for marketing and distribution, leading to small royalty payments. However, the drug does demonstrate the ability of Theravance to take a product to market.

Pre-NDA submission pipeline

Theravance's pipeline is focused on four main treatment areas; respiratory, bacterial infections, CNS/pain, and gasterointestinal motility dysfunction. It has two drugs in Phase II trials for patients with COPD/asthma. In collaboration with GlaxoSmithKline, the company is developing GSK961081, a single molecule that has dual properties as a muscarinic antagonist and a b2 agonist, with both properties leading to bronchodilation. This opens up the possibility of combining the compound with an inhaled corticosteroid for a triple threat against COPD in a single formulation. Theravance also has its own hedge in the COPD space with TD-4208, a long-acting muscarinic antagonist that showed positive Phase IIa results and is beginning Phase IIb studies.

Theravance has five other drug candidates in Phase II or earlier for the other disease areas they are targeting.

Key Catalysts

Theravance has two NDA applications currently pending with the United States FDA and European Union EMA, both involving treatments for chronic pulmonary obstructive disease (COPD) and both in partnership with GlaxoSmithKline.

RELVAR™/BREO™ is a dual mechanism drug containing investigational bronchodilator and anti-inflammatory agents delivered via a dry powder inhaler. The bronchodilator is a long-acting b2 agonist and the anti-inflammatory is an inhaled corticosteroid. The formulation is proposed as a once daily inhalation, requiring patients to use an inhaler every 24 hrs instead of every 12 hrs with the blockbuster but now off-patent ADVAIR®. This dosing structure also matches the bronchodilator SPIRIVA® but with the added benefits of an anti-inflammatory. Phase III clinical trial results showed statistically significant improvement for three different doses versus a placebo when measuring the amount of air a patient can expire in one second (FEV1). The results are very convincing, and no major adverse effects were reported during the study or in the follow up, suggesting a high likelihood for positive results later this year.

ANORO™ is Theravance's other drug waiting marketing approval, and consists of the same long-acting b2 agonist as RELVAR™/BREO™, plus an investigational muscarinic antagonist that also acts as a bronchodilator. This dual-mechanism formula is also recommended as a once daily inhaled dose via a dry powder inhaler. Phase III trial results showed statistically significant improvement in pre-dose FEV1 on day 169 of the study compared to tiotropium bromide (SPIRIVA®). This drug represents another strong candidate for FDA approval and a potential revenue generator with partner GSK.

Financial profile

Theravance announced Q4 2012 results on February 12th and beat revenue and earnings per share estimates. Theravance has not yet had any major revenue generating drugs, but has managed to collect significant licensing and upfront fees, especially from the now terminated deal with Astellas Pharma and their antibiotic VIBATIV®. Public stock offerings have also added to Theravance's large amount of cash and cash equivalents at $343.7MM. This amount will cover the estimated 2013 total operating expenses of the company ($125MM-$135MM), as well as a potential upcoming $140MM payment to GSK for its partnership on RELVAR™/BREO™, ANORO™, and other combinations of these drug components. If Theravance gets favorable results from the two pending FDA submissions, there could be massive increases in revenue in the upcoming years, especially considering the partnership with GSK, a veteran in terms of marketing and selling drugs for COPD.

Investing

With large revenues expected in the time frame of years, this is a good stock to go long and hold, with the potential for upward momentum along the way from positive FDA announcements related to Theravance's COPD/asthma candidates. The diverse pipeline containing some exciting multivalent drug candidates should keep the company relevant in the future, and strong partnerships including a recent deal with Merck for developing therapies treating hypertension and heart failure suggest that veteran pharmaceutical players are confident in Theravance's research and development abilities.

Source: Theravance, Inc. Has Upcoming Catalysts And Long-Term Potential