What: Shares of Theravance Biopharma (NASDAQ:TBPH) jumped by more than 10% in early trading Monday before finishing the day up nearly 7% on news that it had inked a collaborative deal with generics Goliath Mylan (NASDAQ:MYL) to develop a treatment for COPD.

So What: Mylan is handing over a modest $15 million up front and up to $220 million in potential milestone payments to partner on Theravance Biopharma's TD-4208. Mylan is also making a $30 million equity investment in Theravance BioPharma at a price of $18.92 per share.

TD-4208 is a once-daily, long-acting therapy for COPD that is delivered via the mist of a nebulizer, rather than by a handheld device. Theravance Biopharma believes TD-4208's differentiated delivery could help as many as 9% of American COPD patients. If so, that could be a sizable market opportunity. In the United States there are approximately 12.7 million adults diagnosed with COPD, as well as a similar number of people whose COPD might remain undiagnosed.


As part of the spinoff, Theravance BioPharma will share in payments made by GlaxoSmithKline to Theravance. However, future growth depends on Theravance Biopharma successfully developing its own in-house pipeline products, including TD-4208, which is expected to enter phase 3 testing this year.

Mylan is a market share-leading maker of nebulized respiratory therapies, so this deal gives Theravance Biopharma a well-heeled development partner and equity owner that is already deeply embedded in TD-4208's target market of prescribing doctors.

Whether those advantages could someday help make TD-4208 a top-selling drug remains uncertain, especially since final phase 3 trials have not yet started. However, it is certainly a strong vote of confidence that is encouraging to investors willing to take the risk of a late-stage failure.