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Theravance, Inc. (NASDAQ:THRX)

Q4 2008 Earnings Call

February 12, 2009 5:00 pm ET

Executives

Michael W. Aguiar – Senior Vice President & Chief Financial Officer

Rick E. Winningham – Chief Executive Officer

Analysts

Thomas Russo – Robert W. Baird

Michael Aberman – Credit Suisse

Moshe Katri – Cowen & Company

Marshall Urist – Morgan Stanley

Ian Somaiya – Thomas Weisel Partners

Jim Birchenough – Barclays Capital

Biren Amin – Stanford Group

Operator

Ladies and gentlemen good afternoon. At this time, I would like to welcome everyone to the Theravance Conference Call to review results for the quarter and year ended December 31, 2008. During the presentation, all participants will be in a listen-only mode. A question-and-answer session will follow the Company’s formal remarks. (Operator instructions) I will repeat these instructions after management completes their prepared remarks. Today’s conference call is being recorded.

And now, I would like to turn the call over to Mike Aguiar, Senior Vice President and Chief Financial Officer. Please go ahead, sir.

Michael W. Aguiar

Good afternoon everyone, and thank you for joining us. With me on the call today is Rick Winningham, our Chief Executive Officer. Today's call will be in three parts. First of all, Rick will review highlights from the quarter and provide an update on our clinical programs, then I will review our financial results, and finally we will open up the call for questions.

Earlier today, Theravance issued a press release detailing fourth quarter and 2008 financial results and recent corporate developments. A copy of the press release can be downloaded from our website or you can call Investor Relations at 650-808-4100, and we will be happy to assist you.

Before we get started, we would like to remind you that this conference call contains forward-looking statements regarding future events and the future performance of Theravance. Forward-looking statements include anticipated results, and other statements regarding Theravance's goals, expectations, strategies, and beliefs. These statements are based upon the information available to the Company today, and Theravance assumes no obligation to update these statements as circumstances change.

Future events and actual results could differ materially from those projected in the Company's forward-looking statements. Additional information concerning factors that could cause results to differ materially from our forward-looking statements are described in greater detail in the Company's most recent 10-Q filed with the SEC.

I will now turn the call over to Rick Winningham, our Chief Executive officer. Rick?

Rick E. Winningham

Thanks Mike. Good afternoon everyone. During 2008, Theravance made progress in our clinical and regulatory activities. In particular, we achieved very important milestones in the Horizon collaboration with GSK reporting positive results in two Phase 2b studies and two indications with '444, the lead long-acting beta agonist. We recently reported results from three Phase 2b studies in asthma with fluticasone furoate GSK’s inhaled corticosteroid.

Additionally, in November, Telavancin received a favorable recommendation from the FDA Anti-Infective Drugs Advisory Committee for the treatment of complicated skin and skin structure infections. And finally, we recently submitted a new drug application to the FDA for Telavancin in the treatment of nosocomial pneumonia.

Now I will provide more details on these developments, and then Mike will walk through our financials. First let me turn to the Horizon program with GSK. Substantial progress has been made in this program since our last call. Last week, Theravance and GSK reported positive results from the three Phase 2b studies of fluticasone furoate, and we are pleased with the positive results of these studies and patients with mild, moderate, and severe asthma, which together enrolled over 1800 patients.

In December Theravance and GSK reported positive news in the two Phase 2b studies for '444 and these studies each enrolled approximately 600 patients with moderate to severe asthma, that study being about 600 patients and that another 600 patients study with moderate to severe chronic obstructive pulmonary disease.

In total, these five studies have enrolled over 3000 asthma and COPD patients worldwide. The results of these studies are very significant for the Horizon program. With these data, we have completed our dose ranging work for these assets, and have identified once daily doses of both compounds that are well tolerated and produce statistically significant bronchodilation.

The next step in the Horizon program is for GSK to conduct end of Phase 2 meetings with the FDA in the first half of 2009 to discuss the results of the program today and potential study designs for the Phase 3 programs in asthma and COPD.

Turning to the MABA program. Based on our positive proof-of-concept Phase 2study results, we reported in COPD patients with '081 during the third quarter of 2008. GSK and Theravance anticipate starting a larger Phase 2b dose ranging study in 2009. We believe that this compound may provide new treatment options, either as monotherapy or potentially in combination with an inhaled corticosteroid for patients suffering from COPD.

Now, we will turn our attention to the Telavancin program. On January 26, we announced we have submitted the new drug application to the FDA for the proposed indication to treat nosocomial pneumonia also known as hospital-acquired pneumonia. We expect to hear from FDA by the end of the first quarter whether the NDA was accepted for filing and if accepted to receive a PDUFA date for the NDA. We will earn a $10 million milestone payment from Astellas upon the FDA’s acceptance on the HAP NDA.

Last November, the FDA Anti-Infective Drugs Advisory Committee reviewed Telavancin for complicated skin and skin structure infections Telavancin received a favorable recommendation from the Committee. This is a very important positive development in the Telavancin program. The Committee voted 21 to 5 that the data presented demonstrated the safety and effectiveness of Telavancin for the treatment of complicated skin and skin structure infections. The committee also voted 18 to 5 with 3 abstentions that there are specific clinical situations in which benefits of Telavancin use in pregnant women with complicated skin and skin structure infections would outweigh the risks. And a 25 to 1 the risk management strategy is needed to prevent unintended use of Telavancin in pregnant women or women of child-bearing potential.

We are waiting to hear from FDA regarding the next steps for the NDA. As I noted in the call last week, we considered highly likely that we’re going to receive a complete response letter requesting Risk Evaluation and Mitigation Strategy or REMS, following from what was discussed at the FDA Advisory Committee Meeting. Upon FDA’s approval of Telavancin we will earn a $20 million milestone payment from Astellas.

Now, turning to our Gastrointestinal Motility Dysfunction Program. We completed a Phase 1 drug, drug interaction with TD-5108 to better categorize the PK properties of this compound. The initial results of this drug, drug interaction study were inline with our expectations. We intend to meet with FDA in the first half of 2009 to discuss the results of this drug, drug interaction study and in the thorough QT study.

In summary, I’m extremely pleased with the progress of our programs since the last quarterly update. This year we plan to progress or mid and earlier stage programs forward in a prudent, cost and cash effective manner.

And it now I’d like to outline our four significant operating milestones for 2009. The first milestone is to receive FDA approval for Telavancin in complicated skin and skin structure infections and launch Telavancin in the U.S. with our partner Astellas.

Our second milestone is to initiate a phase 3 clinical program, the Horizon collaboration with our partner GSK. Third, we anticipate initiation of a large Phase 2b study in MABA and COPD also partnered with GSK, and finally our fourth milestone is to receive U.S. regulatory approval for Telavancin in HAP, which is a stretch goal given our January ’09 NDA submission.

Now I’d like to turn the call over to Mike Aguiar, our Chief Financial Officer Mike?

Michael W. Aguiar

Thank you, Rick. Today I will discuss the results of the quarter and the year ended December 31 2008, and will provide guidance for full year 2009 expenses. For the quarter ended December 31 2008, Theravance had a net loss of $15.9 million. As expected, our spending was lower this quarter, and during both the prior quarter and the fourth quarter of 2007. This reduced spending was due to decreased clinical trial activity and the impact of our reduction in force announced in April 2008.

Total operating spending, less stock-based compensation for 2008, was $98.3 million, which is below our previous guidance range of $105 million to $115 million. Total R&D expenses for the fourth quarter of 2008 were $15.2 million, compared to spending of $30.9 million during the same period of last year, a decrease of $15.7 million. This decrease for the fourth quarter is primarily due to lower external development costs associated with Telavancin, TD-5108 and TD-1792, reduced employee related cost due to the reduction in force initiated in April 2008, lower bonus expense and reimbursement of $4.9 million for certain development expenses under our Telavancin license agreement with Astellas.

Excluding stock-based compensation cost, non-GAAP R&D spending was $12.5 million during the fourth quarter of 2008, compared to $27.9 million for the same period the prior year.

External R&D costs were $5.6 million in the fourth quarter of 2008 versus $12 million during the fourth quarter of 2007. The fourth quarter 2008 external R&D costs were primarily associated with Telavancin activities including preparing for the Anti-Infective Drug Advisory Committee Meeting, monitoring and audit activities for the skin and HAP studies, and preparation of the HAP NDA, offset by the reimbursement from Astellas.

General and administrative costs were $5.9 million during the fourth quarter of 2008, down $2.6 million compared to the same period last year. This decrease was due primarily to lower employee related cost due to the April restructuring. Excluding stock-based compensation, non-GAAP G&A expense was $4 million during the fourth quarter of 2008 compared to $6.3 million during the same period in 2007.

Revenue consisted primarily of the amortization of upfront and milestone payments received from the company’s partnerships with GSK and Astellas, and totaled $5.9 million during the fourth quarter of 2008.

Net loss for the fourth quarter was $15.9 million, or $0.26 per share, compared to a net loss of $33.1 million, or $0.54 per share during the fourth quarter of 2007. Cash, cash equivalents and marketable securities totaled $200.6 million as of December 31, 2008. This decrease of approximately $18.2 million during the fourth quarter was primarily due to cash used in operations that was partly offset by the Astellas reimbursement and certain Telavancin development expenses.

Now, turning to our guidance regarding expenses for 2009. For the full year 2009, we are providing an expense guidance range of between $90 million and $95 million. Consistent with our prior guidance, this includes total research and development expense, total general and administrative expense, but excludes stock-based compensation. Total cash used will be offset by any other milestone payments earned or other cash inflows.

Now, let me turn the call back to Rick for final closing comments.

Rick E Winningham

Thanks Mike. Just in conclusion and very briefly, I’m pleased with the company’s recent achievements. We are very excited about the opportunities that we have in front of us in 2009 and I’d like to turn the call over to the conference facilitator and open the call for questions.

Question-and-Answer Session

Operator

Thank you, sir. (Operator instructions) We’ll have our first question from Tom Russo with Baird.

Thomas Russo – Robert W. Baird

Good afternoon, thanks for taking the question. Mike, a couple of financial questions. You mentioned, I think - Rick mentioned the company’s goal of - stretch goal of getting HAP approval this year, but I don’t think you mentioned a potential milestone that be associated with that. I was hoping you could please comment on what that milestone would be and also whether that R&D reimbursement that we saw in the fourth quarter, is that the kind of thing that might recur again from time-to-time?

Michael W. Aguiar

Sure, with regard to the HAP approval milestone, we haven’t disclosed that yet. So, I would just say stay tuned on that we will potentially update that as we get a little closer to, where we are with regard to the regulatory status. With regard to the reimbursement we received from Astellas, there is a certain portion of expenses that are reimbursable is possible that there could be some small additional dollars that are reimbursed, but it will not be extensive looking forward.

Thomas Russo – Robert W. Baird

And then can you also share what your current assumption is regarding another FDA panel for HAP and why you would either expect it or not expect it?

Rick E. Winningham

Yeah Tom, this is Rick Winningham. I mean, our operating assumption is that, we’re hopeful that we would have another Advisory Committee Meeting to review Telavancin for Hospital-Acquired Pneumonia and, the basis for that is, it just generally seems to be the way the anti-infective division is going with regard to review of products.

Michael W. Aguiar

Yeah Tom, so just quickly, I think looking forward here, we would not be surprised that there is some sort of a HAP panel that happens that potentially could be, an industry level panel where certain issues are discussed with regard to the treatment of the disease similar to what’s happened in the other indications that be number one. Number two, we did request a priority review with our HAP application. However, we are guiding folks to assume a standard review and that - within that standard review it’s highly likely we think that there will be a panel because as Rick said it seems to be the way the FDA is treating that today. So, I think that’s probably our most recent guidance with regard to how to think about HAP and our regulatory position.

Thomas Russo – Robert W. Baird

Okay and then last question, I will jump out. Can you give any additional color on what the plans are for Phase 2b with the MABA, maybe even including whether that would be a monotherapy or combo program?

Michael W. Aguiar

Well, at this point I don’t have a whole lot of extra guidance to give. That’s something it’s still on discussion with GSK. I think the next point you’ll probably hear on that will be, once we have initiated a program and at that point we’ll give some additional guidance. I think there is a fair amount of history that’s out there of how we treat some of these respiratory programs and if possible that it could look, somewhat similar or maybe somewhat different, but again I think I would just say, hang on till we get the program started and you will see the details at that point.

Rick E. Winningham

Yeah I think our evaluation of ‘444 with GSK, has at the end of the day gave us a very rich data set with regard to ‘444 specifically in asthma as well as in COPD and I think just to add to what Mike said that the best guidance that we have going forward or what the '081 study might look like is sort of looking at the way the ‘444 study rolled out.

Thomas Russo – Robert W. Baird

Okay, thanks very much.

Michael W. Aguiar

Thank you.

Operator

And we will take our next question from May-Kin Ho, Goldman Sachs.

Michael W. Aguiar

May-Kin.

Operator

May-Kin, your line is open. Please check your mute function. Would you like to go to the next caller?

Rick E. Winningham

Yes let’s go to the next caller.

Operator

We’ll go to Michael Aberman with Credit Suisse.

Michael Aberman – Credit Suisse

Hi guys, can you hear me?

Rick E. Winningham

Yes.

Michael Aberman – Credit Suisse

Great. I wonder can you - is there anything in your current ongoing discussions with the FDA that, that lead you to expect complete response? In other words, is there a lot less in terms of discussion on the REMS? Or is it just a question of, based on historical probabilities are?

Rick E. Winningham

Well, I think it’s more based on historical probabilities and it’s also based on the fact that we recommended a specific risk management strategy during the close of our presentation at the Advisory Committee and that’s, that’s really basically what we would expect today to address in a risk evaluation mitigation strategy.

Michael Aberman – Credit Suisse

They have not come back, if they turn back you can alternate REMS yet?

Rick E. Winningham

No we’re waiting to hear something formal from them that really aligns the various constituencies within FDA.

Michael Aberman – Credit Suisse

Okay. As we look towards the HAP timeline, what’s - since there is a pretty robust discussion on Telavancin, not just specifically on skin, but what particular aspects of the Telavancin HAP NDA do you anticipate being, I know it’s early in the process, but to be controversial or not at the panel? Maybe if you can comment on just the data and what you think might be brought up?

Rick E. Winningham

No I think we do have a pretty robust HAP data set. As Mike said, we’re expecting sort of between now and the time that we might have an Advisory Panel Meeting on our own HAP application further to be a workshop that more or less in the same vain as the complicated skin workshop that happened just before our Advisory Committee. This one being targeted at Hospital-Acquired Pneumonia, Nosocomial Pneumonia and there maybe things that I don’t know that come up out of that workshop that we might eventually address in the advisory panel. Now, really our guidance is just based on one of conservatism and the number of drugs are going to Advisory Committee panels and I think it’s just safe to assume that Telavancin and HAP may, may go to one and we are certainly going to work on preparing a 401, and then if we happen to be surprised and not go there well that would be great.

Michael W. Aguiar

Michael, just the one thing is, we don’t obviously know how the FDA is since we are so early in the process. But if you just think back to the Doripenem Panel, the one other item that they discussed there, albeit relatively briefly was mortality. That was not a big player obviously in the skin panel. So, if possible that could be an additional topic that they would want to discuss, but again it’s awfully early in the process really at this point.

Michael Aberman – Credit Suisse

And I will get - one last question, it’s a part of a - if I missed it, because I missed the beginning of the call. In terms of your other assets like 5108, 1792 and LAMA and particularly in LAMA, do you have any movement on the partnering front? Or is that something not you expect in total you get resolution in the Telavancin?

Rick E. Winningham

No, I think well we’re - as we’ve said before, we are discussing those programs with different people. We don’t make public milestones or include partnerships as public milestones because it doesn’t really facilitate us getting the best possible transaction that we can achieve and clearly with those three programs that’s what we are shooting for.

Michael W. Aguiar

Yeah, I think importantly, as you know the partnering environment is pretty crowded today. There are a lot of folks who unfortunately have themselves in a tough financial position and are putting assets out at a pretty cheap price. So, I think we’re feeling reasonably good about where we are financially and don’t feel like we have to do a deal, but rather we would wait for the right deal. So, looking forward, I don’t want to give any guidance on the likelihood of timing other than to say it’s certainly a much, much tougher environment today to find good deals out there just to due to the huge volume of other activity that’s happening in that area.

May-Kin Ho - Goldman Sachs

Okay great. Appreciated guys, thanks.

Rick E. Winningham

Thank you.

Operator

And the next question will come from Rachel McMinn, Cowen & Company.

Moshe KatriCowen & Company.

Hi this is Moshe for Rachel. I understand you are guiding for the standard review for Telavancin and HAP, but can you remind us would Doripenem has with a six months review or ten months review?

Rick E. Winningham

Well, I can’t remember exactly what they had, at the end of the day, they - strikes to me that their Advisory Committee was in the month of July and they submitted sometime late summer the year before. So, and I am recalling the best as I can from memory. So, while they may have gotten a quicker action date at the end of the day it took ten plus months for a final action I believe for them. So, that’s really where our guidance is that we expect sort of a standard review time for this application.

Moshe KatriCowen & Company

Okay, thank you.

Michael W. Aguiar

Thank you.

Operator

And our next question will come from Marshal Urist with Morgan Stanley

Marshall Urist – Morgan Stanley

Yeah, hey guys, good afternoon. First question was just on the expense guidance. Could you talk a little bit about what that contemplates on spending in terms of the early the preclinical assets and as well as, 5108 in the other clinical programs?

Michael W. Aguiar

Sure, I don’t want to go into too gory of detail, but as I mentioned a little bit ago, the guidance range for the year is $90 million to $95 million for the total OpEx less stock comp. And if you just break that down, kind of really top level, there is about $70 million $75 million of what I might call core burn, and that really is all the activities happening here in the facilities, salaries, research, et cetera. On top of that you have somewhere in the neighborhood of $20 million or so of external cost and those would be principally related to various types of clinical activity, regulatory activities of Telavancin et cetera. So, as Rick started off the call, we do anticipate advancing our earlier pipeline during this year, and there will be activity happening in both the research and in some of the earlier stage clinical programs, but again we haven’t kind of gone into that level of granularity of guidance at this point.

Rick E Winningham

So, if you sort of break it up, sort of the mid stage products or LAMA, the Long-Acting Muscarinic Antagonist program, the 5-HT4 program and then the other Antibiotic program, we’d expect to make some progress in those three programs and then, as well we - the three earlier stage programs the peripheral mu antagonist for Opioid-Induced Bowel Dysfunction or Norepinephrine Serotonin Reuptake Inhibitor program for chronic pain and then our Angiotensin Receptor Blocker Neprilysin Inhibitor for Cardiovascular disease. We are pretty pleased right now at least I’m very pleased with the research organization and the progress that they’ve made on those programs and, we look forward to moving those forward this year.

Marshall Urist - Morgan Stanley

Okay cool. And then, one other question on Horizon, what do we expect to hear from you guys in terms of updates from here. I mean obviously, you plan, you gave timelines for the end of Phase 2 meeting and the phase 3, but what are we going to hear from you guys, in terms of details now going forward?

Michael W. Aguiar

Well, I think, the next level of details we mentioned on the last call will likely be when we actually enroll a patient in Phase 3. I think it’s unlikely at this point that you’re going to hear, some kind of a - coming out about the outcome of the Advisory Committee. So, you got a couple things that are happening, there will be a - hopefully an initiation press release to come out at some point. I would anticipate, there will be some posting on clintrial.gov. And then at that point, we will potentially provide some guidance in terms of timeframes, but I’d like to cross that first threshold first.

Marshall Urist – Morgan Stanley

Okay. Gotcha. All right, great thanks guys.

Operator

We will take our next question from Ian Somaiya with Thomas Weisel Partners.

Ian Somaiya – Thomas Weisel Partners

Yep, thank you. I guess in the hindsight the restructuring efforts of 2008 maybe were ideally time, given the uncertain economic downturn. Just curious now with the companies has roughly about $200 million in cash. The market value of the stock is obviously appreciated probably more reasonable than it was, for five or six months ago. When do you get comfortable being a little bit more aggressive in terms of pushing forward with your early stage programs?

Michael W. Aguiar

So, let me talk quickly on the on the financial side, then I’ll turn over to Rick, and let him about talk about, kind of looking forward and what we’re doing on that? With regard to financials, we had a view, I think a little tougher to finance, early last year and we took some moves that unfortunately turned out to be the right thing at the right time. And where we are today with regards to our guidance, and our programs is exactly inline with that prior guidance. And so, we really are executing exactly according to that. We have not dramatically ramped up here, because we understand the preciousness of the cash that we have on our balance sheet and the importance of maintaining quite a bit of flexibility from an operating perspective. So, we are exactly where we wanted to be in April and have continued to execute right along that. And so, I’ll turn it to Rick and let him talk a little bit about the other programs.

Rick E. Winningham

Yeah relative to progression Ian, what I mentioned just briefly in the call was we were - we progressed the programs in both a cost efficient and cash efficient manner. Clearly, we are looking forward to hitting some of these – hitting some of the milestones with Telavancin and the HAP filing acceptance, and then the skin approval, which would bring cash in the door. And then, with the existing cash balance that we have progressing the programs forward and what sort of the speed at which it will more or less be determined, relevant to the cash that we are forecasting bringing in from not only the milestones of Telavancin but, hopefully the launch of Telavancin and other milestones related to that program, as well as others. But I think, the message that Mike and I are both trying to give, we are going to be advancing our earlier stage pipeline this year. We are going to do it in an extremely cost and cash efficient manner with a very significant focus to milestones coming in the door and watching the cash that we have on hand.

Ian Soamaiya – Thomas Weisel Partners

Is there any data we can look forward to from these programs?

Rick E. Winningham

Well, I think, there is data that we can look forward to really from all the programs. I mean, but I think specifically, we’ll probably update you a little bit later in the year, as we move individually these programs forward and give you a better sense of the timing of additional data.

Ian Soamaiya – Thomas Weisel Partners

Okay, just a one question on Telavancin. How should we think about sales of the drugs this year? And just longer-term view point on, what the market opportunity is for that drug?

Rick E. Winningham

Well, we have we don’t give any sales guidance and obviously, 2009 sales will be incredibly dependent upon, when the drug will get approved. Obviously earlier would lead to more sales than later. I think we continue to look at the market and think there is a pretty robust opportunity out here. The last set of data we have is the year ended September 30 of 2008 and what we saw in the United States was about $35 million treatment base on an annual basis and that grew about 9% from the prior year. So, if you take a look at that and think about kind of where the current branded product pricing is in the neighborhood of $150 to $200 a day, we certainly think there is a big, big, big opportunity out there and a continued need due to the growth and incidence of MRSA. So we continue to be very optimistic about this. The final thing I would say is, I don’t expect that day one this will be a billion dollar drug. I think it will grow overtime, as our sales and marketing efforts kick in. So, we are pretty optimistic about this long-term, but I would like to get the drug approve before I provide any guidance on that.

Marshall Urist – Morgan Stanley

Okay, thank you.

Operator

And we will take our next question from Jim Birchenough with Barclays Capital.

Ryan Martin – Barclays Capital

Hi guys, actually this is Ryan Martin in here for Jim. Just I had a few questions. First with the end of Phase 2 meeting with the FDA that you have scheduled in the first half of this year, will you be sharing any combo data? I believe you did have a 60 patient study of ‘698 and ‘444 in combination?

Michael W. Aguiar

Yeah, during the last call, we gave guidance, it was unlikely, that we were going to be having any press release regarding of these enabling studies that are going on. As you may recall, we had a five Phase 2b studies that were going that we considered the real key programs and those are the ones that are reported out recently. There are a number of other studies going on of various sizes and we loosely categorize those as the Phase 3 enabling studies. So, today, I think it’s unlikely there will be any press release coming out on those. They are all kind of supports, where we are with the program today. But I think absent some blowup in one of those are some big problem, I think it’s unlikely you’ll hear further information on those.

Rick E. Winningham

Yeah, I think eventually you will as we Theravance with GSK begin to kick in the publication plan to support the Horizon program.

Ryan Martin – Barclays Capital

Okay, thanks. And then with, with the filing of the HAP NDA in Jan, do you guys have additional parity now on the filing in Europe in conjunction with Astellas?

Rick E. Winningham

Yeah, well, our responsibility in Europe is really to turn the HAP NDA over to the common technical document more or less over to Astellas. The plan today is for them to take the HAP data and the skin data and submit it in the Europe, and we plan to get that done - to get that done sometime this year, but that’s about all the guidance we can give right now.

Ryan Martin – Barclays Capital

Great, and just one final question. Have you and Astellas have started discussions with hospitals, formularies on pricing? And on those lines if you could share any additional thoughts on what kind of pricing, you guys are looking at relative to drugs on the market like Cubison?

Rick E. Winningham

Well, the pricing decision is one of the last decisions that gets made prior to launch, as you might imagine given where we are? There is a number of market, number of marketing research projects ongoing to support the launch of Telavancin but that's about all the guidance I can give today.

Ryan Martin – Barclays Capital

Okay, thanks a lot for taking my questions.

Michael W. Aguiar

Thank you.

Operator

(Operator Instructions) And we will go next to Biren Amin with Stanford Group.

Biren Amin – Stanford Group

Yeah, thanks for taking my questions. I was wondering, could you discuss your thoughts on partnership with 5108 as well as 1792?

Rick E. Winningham

Yeah, just very briefly, clearly, we’re working towards an objective of partnering those programs. We’re in discussions with people, but we don’t, as I said make a partnership a public milestone because that doesn’t always facilitate from a timing perspective getting the best transaction done. So, we are working on it and we will continue to work on it to bring one to consummation eventually, under terms that are attractive to Theravance.

Biren Amin - Stanford Group

So with 5108, are you currently discussing potential partnerships? Or are you waiting until the FDA meeting before you proceed forward?

Rick E. Winningham

No, we are currently in discussions. I think we believe that clearing through the FDA meetings is important hurdle and mile-marker for the discussions going forward.

Biren Amin - Stanford Group

All right, thanks.

Michael W. Aguiar

Thanks Biren.

Operator

And we will take a followup question from Michael Aberman with Credit Suisse.

Michael Aberman – Credit Suisse

Hi guys, thanks again just taking a follow up. And this might be - just a quick question on the guidance for expenses. I have a runrate that's much lower - on the fourth quarter runrate that’s much lower than your anticipated guidance on expenses for ’09? Can you give a sense of what, where you are going to be increasing that spend and for what programs and why?

Michael W. Aguiar

Well, if you just take the fourth quarter, the fourth quarter runrate and you pull out this reimbursement from Astellas. We spend about $22 million again of OpEx less stock comp. And so, and kind of multiply that times four, you’re basically at $90 million. So, I’m not sure it’s really that far below our current runrate. So, we haven’t given again a huge amount of detail, they are very specific programs and what’s moving forward. I think as you kind of look back into our pipeline, assuming that we are making progress, across a large number of those this year. And that, those costs are there to support that. So, it’s a little difficult to compare last year to this year, just because the outside services can be so dramatically different and any one or the other, but again it is pretty consistent with our current runrate.

Rick E. Winningham

So, generally less on, hopefully less on Telavancin going forward and more on the earlier stage programs moving them forward.

Michael Aberman – Credit Suisse

All right, thanks

Operator

And we will also take a followup question from Tom Russo with Baird

Thomas Russo – Robert W. Baird

I just wanted to clarify that after the end of Phase 2 meeting, if you either couldn’t go forward in both asthma and COPD, or had to do any additional Phase 2 work would that trigger a disclosure?

Michael W. Aguiar

I think we’ll have to cross that bridge, again with the guidance I’ve given is that in absence some - something going away. I think it’s unlikely there would be any discussion and it’s really depends upon what it is obviously if we had a major catastrophe that's quite different than a one month delay. And so, I think what I have to say is, let us kind of get to that point and if something cropped up that we feel needs to be disclosed we will but, as of right now my plan is not to have anything until the start of Phase 3.

Rick E Winningham

And I think, Tom going into the meetings with effectively 3000 patients in a 2b program, where we hit our end points that we were looking for in the program. I think we feel pretty good about where we are right now.

Thomas Russo – Robert W. Baird

Okay, thanks.

Rick E Winningham

Yeah.

Michael W. Aguiar

Great, thank you.

Operator

And it appears we have no further questions on the phone. I’d now like to turn the conference back over to Mr. Winningham. Please go ahead sir.

Rick Winningham

Thank you, operator. I would just like to thank everyone for participating. We look forward to updating you in 2009, as we make progress throughout the year and have a great day.

Operator

This does conclude today's conference call. We thank you for your participation. You may now disconnect.

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Source: Theravance, Inc. Q4 2008 Earnings Call Transcript
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