Drug developer Theravance Biopharma (NASDAQ:TBPH) is not your typical biotech company.
It emerged in 2014 from a spinoff of the R&D branch of its parent company, now called Innoviva (NASDAQ:INVA). Shareholders in Innoviva received a dividend of Theravance Biopharma stock. The R&D efforts focus on inflammation and immunology.
At the end of 2018, Theravance and partner Mylan (NASDAQ:MYL) gained Food and Drug Administration (FDA) approval and launched Yupelri to treat chronic obstructive pulmonary disease (COPD).
Theravance markets the once-daily inhaled drug to hospitals, while Mylan sells Yupelri as a maintenance therapy in outpatient settings. According to Theravance, approximately 21,000 patients received the drug through the first three quarters of 2019.
Theravance and Mylan expanded their relationship last June when Mylan gained the rights to develop and commercialize Yupelri in China, home to more than 100 million patients with chronic COPD. Theravance received $18.5 million upfront and is eligible for another $54 million in milestones as well as royalty payments.
Theravance owns additional royalty streams
First, GlaxoSmithKline (NYSE:GSK) pays an upward tiering royalty, ranging from 5.5% to 8.5% on global net sales of Trelegy Ellipta, its once-daily inhaler of a three-drug combination to treat COPD. It quickly grabbed 31% market share during its first year. Approved in 38 countries, it received marketing approval in China last quarter. GSK also plans to file for approval with the FDA for additional indications, including asthma.
Second, Theravance sold rights to Vibativ, a drug for life-threatening bacterial infections, to Cumberland Pharmaceuticals. After receiving a $20 million upfront payment, the company will receive tiered royalties up to 20% of U.S. net sales. The agreement caps the cumulative royalty payments on the drug at $100 million.
Clinical trial results expected this year
In its early days for the drug launch, Theravance supports a pipeline of drug candidates in inflammation and immunology. Three of the four pipeline candidates seek to inhibit a family of biological targets involved with inflammation called Janus kinase (JAK).
The other drug candidate, called ampreloxetine, inhibits norepinephrine reuptake, which seeks to prevent blood pressure from dropping.
Jakafi, a blood cancer therapy from Incyte and Olumiant, a multiple sclerosis drug from Eli Lilly provide precedent that inhibiting JAK can benefit patients. Theravance believes its drug candidates can target specific organs such as the lungs or the gut, thereby reducing side effects. Clinical trial results this year will reveal whether this pans out.
Theravance expects to report data later this year from a phase 2b trial in ulcerative colitis and a phase 2 trial in Crohn's disease with its drug TD-1473, a gut-selective JAK inhibitor. The Janssen unit of Johnson & Johnson (NYSE:JNJ) saw promise and is collaborating on this program.
Before that, the company should report data in the first half of the year from an ongoing phase 1 trial of its JAK3 inhibitor for inflammatory intestinal diseases. Theravance also plans to release data from a phase 2 allergen trial with its lung selective JAK inhibitor dubbed TD-8326.
Down 13% over the past two years, shareholders of Theravance have not been rewarded. The stock ran up a few times but consistently retreated.
Woodford Investment Management, the troubled U.K.-based healthcare fund, owned roughly 20% of Theravance's stock a few months back. In a subsequent SEC filing, Link Services, which took control of Woodford's portfolio, sold more than half of its position. With millions of shares now absorbed by the market, perhaps Theravance's stock will see some relief from the recent selling pressure that depressed its stock price.
Will investors get news next week?
Both Theravance and Mylan will present at the J.P. Morgan Healthcare Conference being held this week in San Francisco. Biotech investors hope for updates on Yupelri's launch as it passes the one-year mark, but don't hold your breath to get much information out of Mylan.
Yupelri represents a single new drug within Mylan's extensive product portfolio, and, more importantly, Mylan is in the midst of a multi-billion dollar merger with Upjohn, a unit of Pfizer.
Perhaps with a major shareholder's position off-loaded, commercial sales on the rise, and a handful of clinical trial results, the stock will begin to gain traction. It is too tough to predict at this stage, so I'm on the sidelines until I hear more from the company and see how sales of Yupelri materialize.