An Updated View On Theravance Biopharma

Summary

• Today we revisit a small developmental biotech concern called Theravance Biopharma.
• Yesterday, Theravance posted encouraging mid-stage trial results and garnered praise from a couple of analyst firms.
• We take a deeper look at the investment case for Theravance in the paragraphs below.
• This idea was first discussed with members of my private investing community, The Biotech Forum. To get an exclusive ‘first look’ at my best ideas, subscribe today >>

If you try to cure evil with evil you will add more pain to your fate.” ― Sophocles, Ajax

Today we take a look at Theravance Biopharma (NASDAQ:TBPH). Wednesday morning the company posted encouraging four-week data from its 2 clinical trial evaluating TD-9855. This compound is a once-daily norepinephrine and serotonin reuptake inhibitor and is in this study to treat patients with symptomatic neurogenic orthostatic hypotension (nOH) which is a rare disorder characterized by low pressure when a person stands up. The company also posted second quarter results yesterday.

Initiation of a registrational Phase 3 program in nOH planned in late 2018 or early 2019 following positive data from this Phase 2 study and successful dialogue with FDA.

Given this let's revisit the investment case around Theravance.

Company Overview:

Theravance Biopharma is an Cayman Islands based clinical staged biopharmaceutical company that was founded in 2013 and came public in mid-2014. The company aims to create novel and potentially best-in-class therapeutics to address the unmet needs of patients being treated for serious conditions in the acute care setting. The company’s areas of focus include infectious disease, respiratory, gastrointestinal, and cardiovascular. Theravance Biopharma currently has a market cap around $1.4 billion and trades at just over $25.50 a share.

Pipeline:

Vibativ is the company’s first product to make it onto the market. It is a once-daily dual-mechanism antibiotic that has been approved to treat certain difficult to treat infections in the United States, Europe, and a few other countries.

Source: Company Website

As can be seen above, Theravance has a diverse pipeline with multiple 'shots on goal'. Here are some of the recent highlights around key developments. In February of this year, the company made an announcement that they would be teaming up with Janssen Pharmaceutical, who’s parent company is Johnson & Johnson (JNJ), to develop TD-1473 in inflammatory intestinal diseases. TD-1473 is a novel, orally administered and intestinally restricted JAK inhibitor. The therapeutic has the potential to offer the proven therapeutic activity of JAK inhibitors without the safety concerns associated with systemic JAK exposure. Theravance Biopharma will receive an upfront payment of $100 million and will be eligible to receive up to an additional $900 million in potential payments. The $900 million in additional payments is dependent upon such things as Janssen electing to enter into an exclusive license with Theravance after the Phase 2 trials are completed. Theravance Biopharma plans to initiate a large Phase 2b/3 adaptive design induction and maintenance study in ulcerative colitis with TD-1473 in the fourth quarter of 2018 and is also planning to initiate a Phase 2 study in Crohn's disease sometime this quarter. Lastly, if approved, Theravance Biopharma may elect to co-commercialize in the United States, and Janssen will be solely responsible for the therapeutic’s commercialization outside the United States. Theravance Biopharma is looking to receive double-digit tiered royalties on ex-US sales.

Respiratory, Revefenacin (TD-4208):

Revefenacin is an investigational, once-daily, nebulized long-acting muscarinic antagonist being designed for the treatment of chronic obstructive pulmonary disease. COPD is the third leading cause of death in the United States. Approximately, 15.7 million Americans have been diagnosed with COPD. In 2010, The costs of managing COPD in the U.S. were estimated to be nearly $50 billion.

Revefenacin is seeking to be the best-in-class, once-daily, single-agent product for COPD patients who require, or prefer, nebulized therapy. The company will make an oral presentation around effect of revefenacin on reducing exacerbation rates in chronic obstructive pulmonary disease based on the Phase 3 clinical program at the European Respiratory Society Paris 2018 International Congress in September

Source: Company Presentation

In late January of this year, the company announced that the FDA has accepted for review the company’s NDA for Revefenacin. If approved, Revefenacin would be the first once-daily, nebulized bronchodilator for the treatment of COPD. The FDA assigned a Prescription Drug User Fee Act target action date of November 13, 2018 and stated that they do not currently plan to convene an advisory committee meeting to discuss Revefenacin’s NDA. Theravance and Mylan reported in two prior Phase 3 trials that Revefenacin demonstrated statistically significant improvements compared to placebo and had comparable rates of adverse events to that of the placebo. Theravance Biopharma is eligible to receive up to $220 million in development and sales milestone payments, as well as a profit-sharing arrangement with Mylan on US sales and double-digit royalties on ex-US sales.

Analyst Commentary & Balance Sheet:

In quick succession yesterday after trial results were posted, Needham ($40 price target) and Cantor Fitzgerald ($55 price target) reissued their Buy ratings on this 'Tier 3' development concern. Here is the color from Needham's call Wednesday.

Theravance provided a 2Q18 corporate update today and announced top-line results from the Phase 2 trial of Hypotension (NOH). An impact on both blood pressure and symptoms is apparent and mgmt announced plans to start a Phase 3 trial around YE18. Separately, Phase 2 trial of Colitis (UC) has also been completed. As a reminder, 80mg data had previously been disclosed. Mgmt noted that a dose-response across 20mg-80mg-270mg is evident and that full data will be presented later this yr. Initiation of larger and longer-term trials in UC and Crohns Disease are planned for 2H18. We continue to expect Yupelri (revefenacin) FDA approval in COPD by 11/13/18 PDUFA date. Reiterate BUY. Pipeline is diverse, but Theravance is making noteworthy progress w/ several programs."

The current median analyst price target is $42.00 a share. Revenue for the second quarter was $23.5 million. This was comprised of revenue from collaborative arrangements of $18.1 million and product sales of VIBATIV^® of $5.4 million. Total operational costs for the quarter were just under $75 million. Theravance ended the first half of 2018 with just over $370 million in cash and marketable securities on the balance sheet.

Source: Company Presentation

Verdict:

There is much to like about the Theravance story. It has multiple ‘shots on goals’, strategic partnerships with some major players in the industry and upcoming milestones as well. Yesterday's study results were encouraging and it is nice to see Theravance getting some 'shout outs' from the analyst community this week.

We view the company as one with an attractive risk/reward profile at current trading levels and merits consideration within a well-diversified biotech portfolio.

If pain doesn't lead to humility, you have wasted your suffering.” ― Katerina Stoykova Klemer

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Analyst’s Disclosure: I am/we are long TBPH. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.