Theravance Biopharma Inc (TBPH) 2020 Q1 法說會逐字稿

Ladies and gentlemen, good afternoon. I would like to welcome everyone to the Theravance Biopharma conference call. (Operator Instructions) Today's conference call is being recorded.

And now I would like to turn the call over to Gail Cohen, Vice President, Corporate Communications and Investor Relations. Please go ahead.

Good afternoon, everyone. And thank you for joining the Theravance Biopharma conference call and webcast to discuss our first quarter 2020 financial results and outlook. I hope everyone is safe and remaining healthy during this unprecedented time.

As always, I remind you that this conference call will contain forward-looking statements, which involve certain risks and uncertainties, including statements about our product pipeline, expected benefits of our products, the anticipated timing of trial results and regulatory filings and expected sales and financial results. Information concerning factors that could cause results to differ materially from our forward-looking statements is described further in the company's filings with the SEC.

And now I would direct your attention to Slide 3. Joining us are Rick Winningham, Chief Executive Officer, who will open today's call with an overview, followed by Brett Haumann, Chief Medical Officer; and Frank Pasqualone, Chief Commercial Operations Officer, who will review the specifics of our commercial and development portfolios. Andrew Hindman, Chief Financial Officer, will share our first quarter financial update, and Rick will then close the presentation. Following some prepared remarks, we will open the call for questions.

A copy of the press release and the slides accompanying this call can be downloaded from our website, or you can call Investor Relations at (650) 808-4045, and we'll be happy to assist you.

Now I will hand the call to Rick for opening comments.

Thanks, Gail. Good afternoon, everyone. And thank you for joining us. I'd like to start by thanking all of the frontline workers, key health care workers putting their lives at risk to help others; first responders; the scientists; the entire Theravance Biopharma team, in many cases, working 24 hours a day to find medical solutions. All of you are heroes, and we're appreciative beyond words.

Today, we'll speak specifically to the Theravance Biopharma COVID-19 response. In a situation as rapidly evolving as the COVID-19 pandemic, it was important that Theravance acted with speed and agility, focusing on the needs of our employees to keep them safe and the needs of the communities we serve while advancing our business. We've been tracking the coronavirus since early January and put in place travel restrictions and shelter-in-place guidance for a majority of our workforce. Thanks to the investment in infrastructure, employees were able to move readily from in-office to working from home with limited disruption. Lab-based employees have continued their important work with appropriate safety precautions put in place.

The company established a cross-functional COVID-19 task force of senior leaders to guide decision-making and ensure continuous communication. Shortly thereafter, we made a decision to have the field force, both commercial and medical affairs team members, our medical, scientific and clinical trial liaisons to suspend in-person visits.

As you've heard me state multiple times, 2020 is a pivotal year for Theravance Biopharma, and much of that has to do with progress on our clinical trial programs. We've been working with regulators, ethics committees, clinical sites, CROs, all of whom have taken a practical and reasonable approach to ensuring patients in trials continue to have access to important medications and remain safe while ensuring data integrity is not compromised. We are grateful for all the efforts to date.

So yes, we have delays, and Brett Haumann will share the specifics shortly. But thanks to the tremendous efforts of our team and partners, the studies are well-managed, and we're working to minimize such delays when and where possible.

The team has done a tremendous job through the years building our global network of suppliers. And this diversity -- and because of this diversity, we feel comfortable noting that we will -- believe we'll be able to continue to supply -- maintain our supply and access to pipeline medicines through, at a minimum, the end of 2021.

Thanks to the efforts early in the first quarter, we have nearly $500 million in cash on the balance sheet and believe we're well capitalized to continue investing in our streamlined pipeline. Andrew will walk through the financial specifics at the end of the presentation.

The Theravance Biopharma team has a long and relevant history of respiratory drug development of new chemical entities for the treatment of asthma and COPD as well as the treatment of nosocomial and ventilator-associated pneumonia. When reports from Wuhan indicated an unusual inflammatory condition in the lungs of patients with this new virus, our team began working to understand the virus and the inflammatory phenotype. We quickly combined our immunology and respiratory expertise to accelerate significantly the development of our nebulized pan-JAK inhibitor, TD-0903, to assess 0903's utility in preventing a cytokine storm associated with acute lung injury in patients hospitalized due to COVID-19, with the ultimate goal of preventing progression to acute respiratory distress syndrome. The decision to accelerate 0903 was based on a global understanding of hyperinflammation of the lungs and the potential of TD-0903 to stop the cytokines and the chemokines responsible for this hyperinflammation as well as the downstream consequences and to restore the lung function of COVID-19 patients.

If we can prove that 0903 is a useful medicine, Theravance Biopharma has the capability of scaling nebulized medicines to produce hundreds of thousands of doses relatively quickly. Separately but importantly, the learnings from the early 0903 development plan will accelerate our understanding of its role in other serious inflammatory conditions in the lung.

I'll now turn the call over to Brett to share more specifics about the 0903 program and our hypothesis on how it will address the serious inflammatory consequences of SARS-CoV-2. Brett?

Thanks, Rick. From the outset, our goal of this particular program was to identify a lung-selective pan-JAK inhibitor suitable for inhaled delivery by nebulization that would achieve maximal anti-inflammatory effects deep within the lung while minimizing the risk of suppressing the systemic immune system. We believe TD-0903 is that molecule.

Slide 7 shows the course of the disease in more detail to illustrate where we aim to intervene as highlighted by the orange-shaded box in the middle of the graphic in what is referred to as the pulmonary phase of the infection. By way of orientation, early in the course of the clinical disease, the virus demonstrates very effective and efficient replication in the airways. This phase, referred to on the left-hand side of this chart as the viral response phase, is characterized by high viral counts in the airways and produces a dry cough and fever in most patients. In the majority of cases, there's an appropriate immune response in the hosts, including early increases in interferon that lead to effective clearance of the virus and minimal cellular destruction in the lungs. However, in some patients, the immune response becomes dysregulated as shown on Slide 8.

The interferon response is delayed. The virus infects and destroys cells in the deeper parts of the lungs, particularly the cells lining the alveolus where gaseous exchange occurs. Destruction of these cells, called pneumocytes, results in a loss of surfactant, swelling of the membrane lining the alveolus that reduces the amount of oxygen that can get into the bloodstream and marked macrophage and neutrophil infiltration into the alveolus.

This cellular destruction and inflammatory infiltration is also associated with an excessive production of cytokines and chemokines, producing the so-called cytokine storm. Clinically, this cytokine storm produces acute lung injury, resulting in shortness of breath and hypoxia in the pulmonary phase. As the host's inflammatory response amplifies and hyperinflammation becomes the dominant disease process, patients are at increased risk of significant morbidity, including the onset of acute respiratory distress syndrome, or ARDS; a need for mechanical ventilation; and even death. Our approach is to block the signaling of the cytokines driving the cytokine storm, thereby arresting the hyperinflammation and halting the progression of the acute lung injury.

Slide 9 highlights some of our key preclinical data in support of 0903's potential as a lung-selective nebulized pan-JAK inhibitor. 0903 is a potent inhibitor of all 4 JAK enzymes. We've demonstrated that it potently inhibits cytokine-induced activation of JAK-STAT signaling in human epithelial and immune cells as well as mice models of inflammation. 0903 is designed to be lung-selective, with lung concentration several hundredfold above plasma concentrations.

The figure on the right illustrates the relationship between lung and plasma concentrations in a rodent model. It's worth noting that the vertical axis is a logarithmic scale. And in the case of the rats, the lung-to-plasma ratio is approximately 200-fold.

Consistent with our organ-selective approach, 0903 was designed to have an extended duration of lung action and any drug entering the systemic circulation to be rapidly cleared. This is supported by our preclinical work and PK/PD modeling that suggests that the doses we'll be testing in the clinic, we will have good duration of action and low plasma concentrations well below the levels that would lead to systemic JAK inhibition outside the lung.

We've also completed a robust nonclinical safety package, including 28-day inhalation GLP studies in both rat and dog. As seen on Slide 10, we initiated the Phase I study to assess the safety, tolerability and pharmacokinetics of single and multiple ascending doses in healthy volunteers. And we're currently completing the single ascending portion of the study, to be followed immediately by the multiple ascending portion, in which cohorts of healthy volunteers will test different doses for 7 days. The program will then move rapidly to a nested Phase II study, referred to on this slide as Phase II part 1, in hospitalized patients with COVID-19 in the same clinical setting in the U.K. as is conducting the Phase I study. This study has been under review by the U.K. regulatory agency, the MHRA. And we're pleased to announce today that the MHRA approved the Phase II study this morning.

Data from the Phase I study will inform the decision to progress not only to the next higher dose in volunteers but also to the initiation of testing the same 7-day dosing regimen in patients. Once patients complete the ascending dose portion of the study, all the data will be evaluated to inform the selection of 2 nominal doses that will be moved forward into part 2 of the Phase II study and compared to a placebo arm, although all arms will allow for other standards of care such as oxygen and antiviral therapy. Part 2 will be a randomized, multicenter study conducted at hospital-based clinical sites in the U.K., EU and United States, pending the appropriate IRB and regulatory approvals in these territories. The number of patients in each arm of the study -- of the patient study is still subject to regulatory review, but will be confirmed on ClinicalTrials.gov once the design is approved.

In addition to safety and tolerability, the study will evaluate a number of clinically relevant end points, including the ratio of oxygen in the blood compared to the oxygen delivered to the patients, the so-called P/F ratio, as well as the proportion of patients who require oxygen, ICU admission and the requirement for assisted ventilation as well as outcome measures such as the length of hospital stay. Survival data will also be collected and reported, although this will not be a powered end point as survival studies require very large patient numbers to be properly powered. This is obviously a very important program in light of the current pandemic and the pressures on limited resources in the hospital setting, and we look forward to providing updates on our progress with this set of studies as the year progresses.

Moving to TD-8236 on Slide 11. This is our lung-selective inhaled pan-JAK inhibitor in development for the treatment of inflammatory lung diseases, including steroid-resistant asthma. We believe inhaled TD-8236 could be used in patients with moderate-to-severe asthma who remain symptomatic despite being compliant on high-dose inhaled corticosteroids. And it could provide additional benefits and asthma control rather than moving patients on to biological agents or systemic steroids. As reported last year, the results from the Phase I single ascending dose study in healthy volunteers and from the multiple ascending dose study in mild asthma patients were encouraging, with no significant safety or tolerability findings.

Turning to Slide 12. The MAD study in asthma patients also allows to evaluate reductions in fractional exhaled nitric oxide, or FeNO, an established disease activity biomarker in asthma. Over the 7 days of 8236 administration, these patients experienced reductions in FeNO compared to placebo at all doses above 150 micrograms as illustrated on this slide. Based on these encouraging study results, we're conducting a Part C extension portion of this Phase I study in patients with moderate-to-severe asthma. These patients represent the population that would ultimately be most likely to benefit from 8236.

In parallel as noted on Slide 13, we're also conducting a Phase II lung allergen challenge study. This is a mechanistic study in which patients inhale an allergen that provokes an exacerbation-like response in the lung under controlled conditions and is accepted as a strong proof-of-concept in predicting a reduced risk of exacerbations in patients with asthma. Both studies have continued with caution through the current pandemic, and we expect to report results from Part C of the MAD and the lung allergen challenge study in the second half of 2020.

As we're discussing the respiratory assets in our portfolio, I'll pass over to Frank now to speak to our commercial update on YUPELRI. And then I'll come back for a brief update on the other nonrespiratory programs in our development portfolio.

Thanks, Brett, and good afternoon, everyone. Before moving into YUPELRI specifics for the quarter, I want to also express our gratitude to the Theravance Biopharma team and to the frontline health care professionals, many of whom are our customers. We will win together. YUPELRI, indicated for the maintenance treatment of patients with COPD, is the first and only once-daily nebulized, long-acting muscarinic antagonist that provides a full 24 hours of control for patients.

I would like to start with a few comments about nebulization as a drug delivery vehicle during the current pandemic. As you may know, the Center for Disease Control released interim guidelines for limiting the exposure of health care workers to the virus that causes COVID-19, in which drug nebulization in COVID-19-positive patients is listed as a high-risk exposure. High-risk exposure is defined as being present in the room for procedures such as nebulization when the health care provider's eyes, nose or mouth are not protected. The CDC have further guided that it is uncertain whether potential associations between performing this common procedure and increased risk of inflection might be due to aerosols generated by the procedure or due to increased contact between those administering the nebulized medication and infected patients. We're working with leading scientific organizations to assemble scientifically substantiated evidence regarding the appropriate use of nebulized therapy in COVID-19-positive patients.

I'd also like to point out that YUPELRI is manufactured in the United States, and supply chains are monitored regularly. No disruption of supply is currently anticipated.

Now turning to Slide 15. We're concluding the first quarter of 2020 for YUPELRI, and we were pleased with customer acceptance and brand performance in the first quarter of the year. Remember that in our commercial strategy with Mylan, we focus on the institutional setting while Mylan covers the outpatient COPD treatment segment. There are about 800,000 patients admitted each year to U.S. hospitals for worsening of their COPD.

About half of those patients leave the hospital with a prescription for nebulized therapy, making the hospital a promising setting to establish patients on YUPELRI therapy. Importantly, there are additional COPD patients that are routinely hospitalized for other conditions unrelated to a worsening of their COPD symptoms, but who require maintenance therapy for their COPD while hospitalized, and these patients may additionally benefit from treatment with YUPELRI.

Critical to successful implementation is the strategy to have the patient remain on YUPELRI for maintenance treatment of their COPD following discharge from the hospital. This is best achieved through a collaborative strategy at the field level between Mylan and Theravance Biopharma representatives. And due to diligence in training, preparation and frequent communication between the 2 companies at the field level, this cooperation is working well, and we believe it will continue to play an important role in the future success of YUPELRI.

As shown on Slide 16, we are tracking key performance metrics, including formulary reviews and wins, patient uptake and market access. So through the third -- through the end of the first quarter, we continued to observe strong customer response and acceptance. The team has added 90 formulary wins year-to-date for a total of 176 formulary wins launched to date. The 176 formularies cover 312 accounts, of which 81 were added in 2020, with 82% of those accounts purchasing to date. Since the launch, a total of 462 accounts have ordered YUPELRI and about 2/3 of these accounts have reordered at least once. The team is on track to deliver on both strategic imperatives, continuing to expand the formulary access base and prioritizing patient demand pull-through efforts in the accounts with YUPELRI now on formulary. And we've provided exceptional medical information support to the field with 100% of health care provider requests fulfilled in under 30 days. We estimate that through first quarter 2020, approximately 40,000 patients have been prescribed YUPELRI since launch.

As we are all keenly aware, COVID-19 is having a significant global impact on communities and the health care system. All Theravance Biopharma commercial and development activities are adjusting to ensure business continuity while limiting person-to-person exposure. We've decided to withdraw all sales and medical scientific liaison personnel from direct customer engagement activities in mid-March 2020. While face-to-face sales details are not currently occurring, the Theravance Biopharma sales team was still able to complete 2,200 virtual interactions by shifting to the use of technology, including communication via phone, e-mail, text and video conferencing from March 13 through April 30, 2020. All internal and external interactions have been transitioned to a virtual format, with promotional assets being converted to digital designs to meet these needs.

Going forward, we will be looking to invest more heavily in nonpersonal and digital promotion to maintain adequate share of mind with our targeted health care professional audience. To ensure YUPELRI's future success in the post-pandemic health care environment, since mid-March, we've been working to quickly understand and innovate aspects of commercialization so that we can adapt ahead of the demands of what may be an evolved health care existence and functionality.

Now turning to our marketing efforts and the impact on marketplace perceptions and prescribing behaviors. Our marketing research data as of January 2020 showed that YUPELRI achieved an 87% share of the nebulized LAMA market and a 13.7% share of the long-acting nebulized market.

YUPELRI continues to receive its highest ratings on product attributes such as once-daily dosing, appropriate for severe patients, device route of delivery and patient convenience.

We continue to be pleased with the increasing awareness level of YUPELRI among pulmonologists in both the hospital and community office settings. Our tracking studies showed that 48% of hospital-based pulmonologists have experienced prescribing YUPELRI through December 2019, a 16% increase since July 2019. 58% of targeted office-based pulmonologists had experienced prescribing YUPELRI, up from 51% in July 2019. And approximately half of YUPELRI patients are using the product in combination with other long-acting agents.

Turning to market access. Traditional Medicare, which represents approximately 83% of the YUPELRI patient population, has been filling and reimbursing prescriptions more smoothly since the permanent J code was awarded in mid-2019. Coverage to date from major commercial insurance plans, representing 8% of YUPELRI business, has been positive with 61% of commercial payers covering YUPELRI to date. Medicaid covers most products in the nebulized class and requires prior authorization, but does not hinder a Medicare patient from access to YUPELRI.

With solid market access in our most important segments, YUPELRI is increasingly becoming an accepted source of potential relief for those patients in need of nebulized therapy for the maintenance treatment of their COPD. We are only 1 year into the life of YUPELRI. Remember, we only launched with full sales support in February 2019 and are pleased with our performance to date. We believe we are well-positioned to continue to drive adoption and to build upon the strong base of target prescribers and payers we've established to date. The team has demonstrated its agility and flexibility in the face of unprecedented change and is ready to react to continuing market changes as restrictions are relaxed county by county in the coming months, leveraging a mix of technology, virtual, and when appropriate, in-person solutions to continue delivering for the COPD community.

As noted in our press release today, our YUPELRI net sales trajectory could be affected by COVID-19 in the second quarter. We have observed increased volatility in YUPELRI sales since the emergence of the pandemic. However, as we previously communicated, we expect to be cash flow positive in the YUPELRI business by end of the year. And at this point in time, our projections continue to support this guidance, although we will continue to assess and evaluate the impact of COVID-19. We are preparing for a higher degree of volatility during the remainder of 2020 as disruptions in day-to-day operations of hospitals and clinics may continue.

Now I'll turn it back to Brett for some additional information on our clinical development programs. Brett?

Thanks, Frank. The COVID-19 pandemic and associated social distancing measures are creating unprecedented challenges for everyone working in clinical trials and drug development. We've been working to adjust to the changes imposed in each of the 35 countries where we have clinical sites and accommodating new regulatory guidance as it emerges.

We've been focused on 2 key elements: first, to protect the patients and site staff in our clinical programs and to accommodate their limitations into our planning; and second, to preserve the integrity of our data in the studies. We've implemented various approaches including remote assessments and shipping clinical trial supplies and medication to patients' homes. We've been able to continue randomizing patients throughout the pandemic.

But in March, we took a carefully considered decision to temporarily suspend the screening of new patients for both TD-1473 and ampreloxetine trials for a period of 4 weeks in order to prioritize ongoing support for patients who were already in screening and those patients who were already randomized. At the end of the 4-week period, we were able to reopen screening in a limited number of sites that meet our requirements, including conducive country, regional and site-specific criteria to ensure patient safety and compliance with the protocol requirements. And we continue to evaluate all sites on a weekly basis to reopen as conditions allow.

The situation is expected to continue to evolve, and different countries are expected to respond differently to further outbreaks in terms of lockdown, social distancing restrictions and health care provisions. As a result, an accurate re-estimation of expected completion dates for these programs at this time remains difficult. We've, therefore, noted for both programs a completion time frame of 2021 without any greater specificity at this time, although we are taking extensive action to minimize the extent of the disruption and delay.

In terms of 1473 as featured on Slide 18, we recently announced a key publication of 1473 featured in the Journal of Crohn's and Colitis with William Sandborn as lead author. This is an important paper because it was the first peer-reviewed publication of data we've previously shared at ECCO and DDW in 2019. And it's a comprehensive review of our translational efforts to characterize specifically the gut-selective features of 1473. And on a corporate level, this peer-reviewed publication provides insight into Theravance Biopharma's organ-selective research strategy and translational development approach spanning the early research, preclinical to clinical elements of the program.

On Slide 19 as a reminder, 1473 is in 2 clinical studies in partnership with Janssen. RHEA is a Phase IIB/III study of 1473 in patients with moderately to severely active ulcerative colitis, while DIONE is a Phase II study in patients with Crohn's disease. Both studies have been impacted by COVID-19 in slowing enrollment, and both studies are now expected to read out in 2021.

Let's turn now to Slide 20 and ampreloxetine, our once-daily norepinephrine reuptake inhibitor in development for the treatment of patients with symptomatic neurogenic orthostatic hypotension, or nOH. The registrational Phase III program of ampreloxetine includes 2 studies as depicted on Slide 21. First, the SEQUOIA study assesses the efficacy and safety of a 10-milligram dose versus placebo over 4 weeks in 188 patients. Second, the REDWOOD study, which assesses the durability of response to ampreloxetine by testing 254 patients, including patients from the SEQUOIA study, on open-label treatment for 4 months, and then randomizing half the patients to placebo in a double-blind 6-week withdrawal phase. Both studies have been impacted in terms of rates of enrollment, but we have been able to continue enrolling and treating patients. And we're taking steps to support patients with remote visits and assessments as needed. We now expect the SEQUOIA study to report data in 2021, and we're evaluating the impact on the REDWOOD study that follows it.

To summarize the programs that Frank and I have touched upon, please see Slide 22. We have a strong focus in respiratory with a commercialized product and multiple assets at various stages of clinical development, including an accelerated program for COVID-19. We have strong global partnerships with economic benefits in GI and skin-selective JAKi therapy areas. And we have an opportunity in a rare disease to help a population in need. 2020 remains a pivotal year for Theravance Biopharma.

I'll now turn the call over to Andrew for a review of our financial results.

Thank you, Brett. And before moving into Theravance Biopharma's financials, I'll speak to GSK's TRELEGY ELLIPTA, the first and only once-daily single-inhaler triple-therapy approved for the treatment of COPD, from which we receive upward-tiering royalties. As a reminder, 75% of the economic -- of the income from our economic interest is pledged to service outstanding notes, and 25% of income from our economic interest is retained by Theravance Biopharma.

In the first quarter earnings last week, GSK estimated that 1/2 to 2/3 of the pharma sales growth are due to COVID-19-related demand and stock building, especially in the respiratory portfolio, and that TRELEGY's latest month, March 2020, had a COVID-related uptick that is not reflected for most other brands. TRELEGY ELLIPTA revenue for Q1 was $249 million on a global basis.

GSK also reiterated that the supplemental NDA timing for the asthma indication is the second half of this year. There was no mention of the review status of the supplemental NDA for a potential mortality benefit claim for TRELEGY versus ANORO in COPD patients. It was previously noted that the FDA postponed the advisory committee meeting initially scheduled for April 21, 2020, and there has been no further public update provided.

Moving to Slide 25. I'll begin with our financial results for first quarter 2020, then cover our financial guidance for 2020, and close with a brief update on our relatively recent financial -- financing activities. Revenue for the first quarter of 2020 was $19.9 million, comprised of collaboration revenue of $6.6 million, primarily attributed to the Janssen collaboration agreement for 1473 and $11.7 million in Mylan collaboration revenue related to YUPELRI.

Revenue for the first quarter represents a $14.5 million increase over the same period in 2019. The increase was primarily due to an increase in Mylan collaboration revenue related to YUPELRI and a larger portion of recognized revenue related to the $100 million upfront payment from the Janssen collaboration agreement on 1473 that was entered into in February 2018.

R&D expenses for the first quarter of 2020 were $66.0 million compared to $53.8 million in the same period in 2019. The $12.2 million increase was primarily due to a $12.4 million increase in external-related expenses related to the advancement of priority programs, notably 1473, ampreloxetine and 8236; and a $1.7 million increase in share-based compensation expense; and a $2.2 million decrease in employee-related expenses. First quarter R&D expenses included noncash share-based compensation of $7.9 million.

SG&A expenses for the first quarter of 2020 were $26.3 million compared to $25.2 million in the same period in 2019. The $1.1 million increase was primarily due to a $1.4 million increase in share-based compensation expense, a $0.8 million increase in employee-related expenses and a $0.6 million increase in internal-related (sic) [external-related] expenses. These increases were partially offset by a $1.4 million decrease related to collaboration expenses payable to Mylan in connection with the commercialization of YUPELRI, which was formally launched in the first quarter of 2019. First quarter SG&A expenses included noncash share-based compensation of $7.4 million.

Cash and cash equivalents and marketable securities totaled $492.1 million as of March 31, 2020. We have this capital base as a result of actions we took early in the year, namely on February 4 -- 14, 2020, we closed our public offering of 5.5 million ordinary shares at a price to the public of $27 per share. The gross proceeds to Theravance Biopharma from the offering are approximately $148.5 million before deducting underwriting discounts, commissions and estimated offering expenses.

And on March 2, 2020, Theravance announced the closing of a private placement of $400 million in aggregate principal amount of nonrecourse 9.5% fixed-rate term notes. The notes are secured by a portion of the future payments the company expects to receive related to royalties due on net sales of TRELEGY ELLIPTA, with 75% of such payments to be used to satisfy debt obligations until the notes are repaid, and the remaining 25% of such payments are directed to the benefit of the company on an ongoing basis. The company used a portion of the net proceeds from the -- this transaction to repay in full the remaining outstanding balance of the $250 million outstanding 9.0% fixed rate term notes that were due in 2033 as well as a 5% premium on the early redemption of those notes. We intend to use the remainder of the net proceeds to support continued execution of Theravance Biopharma's key development programs.

I'll now turn to our 2020 financial guidance. We are maintaining our financial guidance for the year based on our current assessment of the impact of COVID-19.

We expect full year 2020 operating loss, excluding share-based compensation, in the range of $205 million to $225 million. Operating loss guidance does not include royalty income from TRELEGY ELLIPTA, which we recognize in our statement of operations as income from investment in TRC LLC nor does it include potential future business development collaborations. Factors such as potential changes to the timing and cost of clinical studies associated with our key programs, ongoing COVID-19 risks and challenges alluded to by my colleagues and other factors could impact our future financial guidance.

Now I'll turn the back -- the call back over to Rick for some closing remarks.

Thanks, Andrew. The situation continues to evolve as the pandemic's effects are felt around the world. But we've implemented a comprehensive business plan to support our performance, and we're well capitalized to advance the company despite the obstacles presented by the current environment.

As you'll see on Slide 26 (sic) [Slide 27], we expedited development of TD-0903 to potentially help patients hospitalized with COVID-19. We continue to have a catalyst-rich year ahead.

We're continuously assessing the impact of the pandemic on our operations and plan for a future of progress. I'm inspired by the deep commitment of Theravance Biopharma team as well as our industry peers and collaborations that are transpiring with researchers, scientists, health care professionals, government and NGOs at record speeds to find solutions to the short- and long-term impacts of the disease.

In conclusion, we remain committed to staying focused in respiratory, advancing our innovative lung-selective pipeline with an accelerated time line for 0903 to support the global response to COVID-19 and reporting on 8236 results later this year. We'll continue to manage aggressively our commercial operations and driving sales for YUPELRI. Janssen and Theravance Biopharma are well aligned as we drive forward our important research and development efforts on our gut-selective programs, 1473 and TD-5202. And we're committed to progressing ampreloxetine as expeditiously as possible for patients suffering from nOH who need an alternative treatment. Our commitment to our mission to transform the treatment of serious diseases through the discovery, development, commercialization of primarily organ-selective medicines designed to maximize patient benefit while minimizing patient risk has never been stronger.

In closing, one of the challenges that leaders have in these unique times is to fashion their organizations so that they're stronger, not only when the organizations emerge from this current situation but during this time. Without a doubt, because of the actions of the leaders of the company regardless of function or project, the Theravance Biopharma team's stronger today, and we will emerge from this a stronger company.

And now I'd like to hand the call back over to the operator for questions.

(Operator Instructions) And we have our first question from Geoffrey Porges with SVB Leerink.

This is Brad Canino on for Geoff. I'm going to have 2 questions, one on YUPELRI and one on TD-1473. And I'll start with YUPELRI because if I look at your previous slide disclosures, it shows you added roughly 9,000 to 10,000 patients both in Q4 and Q1. So is that the steady state that we should expect when we come out of COVID-19? Or is there potential to see an inflection in that quarterly addition rate?

Frank, do you want to take that? Frank, your mute's on.

Apologies for that. The way we're looking at the year, we -- as I said during the remarks, we're maintaining the guidance that we've issued. We did see some volatility when the pandemic first hit. We seem to be coming out of that. The way we view the year -- the rest of the year rolling out, we plan to reintroduce the commercial folks. Not -- if I could use an analogy, not sort of using a light switch but dialing it up, looking at the data, looking at the scientific information and turning on face-to-face visits as appropriate based on those data.

We do look at some of what's happening in the endemic -- in the pandemic as potential points of leverage for YUPELRI. We're reemphasizing what YUPELRI has to offer as a once-a-day medicine. Most importantly, patients need to have their airways remain open. And our data supports full 24 hours of control. Once a day translates into being less resource-intensive for respiratory therapists, which we find -- which always find themselves very busy all the time, but particularly due to this pandemic, there's potentially safety issues. HCPs need to go into a patient's room with less frequency. With a once-a-day medicine, it could result in less PPE being consumed.

So these are the issues that may cause accounts to take a closer look at the drug like -- at a drug like YUPELRI, and these are the issues that we're emphasizing and discussing right now. So we feel very good about where we are. We feel like we've got a handle on the challenges. We feel like we've pivoted the organization very effectively and efficiently and the shifts we believe are going to get us where we need to be by December 31.

Yes. I'd just -- this is Rick. I'd just add, I think the way we see the overall evolution of the brand, we're still quite early in the adoption curve. So I think our expectations for YUPELRI are quite high. We've still got a number of -- obviously, just the numbers that Frank outlined in his presentation, we've still got a number of physicians that -- where we need to get the complete message of the features and benefits to those physicians. So relative to the incremental 10,000, I'd say we're pleased with the performance obviously in the first quarter, but I think we're still early in the evolution of the brand.

Yes. I would also say we've been pleased with customers' willingness to connect with our field forces, both the sales representatives as well as the medical science liaisons. So there's clearly still a high level of curiosity and interest in the brand as you might expect for a brand at the point in the life cycle that YUPELRI is.

Okay. And I want to ask about the 1473 UC readout as I think the concern here is missed endoscopy readings for enrolled patients due to COVID-19, which could lead to an incomplete data set. But I know your original plan was to enroll a small proportion of the total Phase III patients in this first phase, both to find the right dose but also to deliver the initial data set to J&J to trigger the opt-in.

So first, have there been any cases of missing data? And then is there any flexibility here, if that's the case, to still fulfill those 2 outcomes, both for the dose and J&J?

Brett?

I'm happy to take that call. Brad, this is Brett. We've been very fortunate up till now that we've not lost a single patient actually in our programs, either ampreloxetine or LUNAR, to COVID-19-related impact. We've come fairly close with some sites being impacted either by their staff or by not being able to accommodate the endoscopy suite because that's been decommissioned or transferred over to other COVID activities. But in those cases, we've been able to get adjacent sites to support, and in some cases, to move facility so that the endoscopy can be completed. It's actually quite unusual for us to have any disruption at this point. And certainly, as things stand right now, patients have been able to maintain their commitment on endoscopy. But it was part of the reason that we chose to pause the screening of new patients so that we can actually ensure that we were providing thorough protection for the patients in the program itself.

Going forward, one of the criteria that we evaluate in order to allow a site to reopen is its ability to support endoscopy because it's such a critical element of both the UC and the Crohn's study. So we're continuing to evaluate that.

You asked about the split between Phase II and III. And you're right, 240 patients will be recruited to Phase IIb, and another 600 -- roughly 600 patients to Phase III. But ideally, what we're looking to do here is select the appropriate dose to take into that larger Phase III portion, and that strategy remains in place. That hasn't been impacted. I think really what we've been looking at over the last 6 weeks has been more of a logistical disruption caused by either site or patient access issues, but the designs of the studies themselves remain unchanged.

Great. Congratulations, again, on keeping the integrity of those trials. That's important.

Our next question comes from Tyler Van Buren with Piper Sandler.

I wanted to ask on TD-0903 since it looks like update from the COVID-19 program there might be the next big clinical update that we get. I guess, specifically, with respect to the data updates for the program between the SAD/MAD and then the 2 parts in the hospitalized patients, will we get a data update from you all at each phase? Or can you just, I guess, generally tell us how The Street will be updated with respect to the data from that program?

Yes. Sorry, Rick.

I -- no, I think -- of course, we'll -- when we go into patients, as has been our historical practice, we'll issue a press release. It was -- Brett and the entire team, just done a terrific job. Phil Worboys and the translational group as well as development getting the MHRA approval today to progress with -- or to get approval on the protocol. We now just need to work through the remainder of the Phase I, and then we're set to go in the first part of the Phase II. So Brett, you want to add anything.

Yes, a little bit more color. Tyler, we're working in almost real time to evaluate the information that is generated from each cohort and including independent evaluation. So it's not just our determination to move to the next cohort. We have an independent group that is assessing this outside the company as well. I think that our ability to move fast is probably the stronger driver right now than reporting the data. But rest assured that we're taking into account all of the data as it emerges in order to form that -- inform that decision for the next dose. We absolutely will present the data, but it may be that, in fact, the studies have moved beyond the data points by the time we speak about them just because of our compulsion and our urgency to get to patients and to see whether this works there.

But certainly, we will be putting out data. I think one of the elements that we will be able to speak about as we move into part 2 of the Phase II study is the appropriate dose, and that will be a disclosed element of what we put out on ClinicalTrials.gov. By inference, you'll get a sense then of what we've learnt through the earlier parts of that program.

Okay. That's helpful. And just for a follow-up on the Phase II, can you give us any more specificity with respect to what sort of PK/PD you want to see in the multiple ascending dose to have confidence to move into part 2? And then in part 2, what are going to be the primary end points? And what would you like to see?

Sure. So anything I say at this moment is subject, of course, still to ongoing regulatory discussions. We are in discussions, active discussions with regulators to confirm and finalize the design.

But you asked about PK and PD. The PK elements will be very much akin to what you've seen us talk about with previous JAK-selective programs. We are keen to ensure that the JAK inhibition remains localized to the lung and that we get very little systemic exposure. And so we'll be looking for very small, low amounts of drug in the bloodstream after nebulized therapy. We will also be looking at evidence that the drug is working in the lung.

And in COVID-19 patients, one of the most sensitive markers, we believe, is the oxygen saturation, the amount of oxygen that is getting into the bloodstream. If we can improve the inflammation and blunt this cytokine storm, one of the things that should happen with these patients is they should improve their oxygenation so that they don't need mechanical ventilation or supplementary oxygen in the ward. And hopefully, that drives them home sooner and puts them on the path to recovery.

So although we'll be looking at a number of measures including length of hospital stay, time in ICU, time on ventilation, really one of the key markers for us is this P/F ratio, this ratio of the amount of oxygen in the blood compared to the amount of oxygen that the patients are inhaling. That's the key end point for us, both in part 1 and in part 2.

I think, Tyler, yes, the other point I'd just add is obviously with the experience that we've had, we do have some models that we're using to help us with where we will need to be. And I think as we accumulate more data from healthy volunteers, those models will help us with regard to understanding sort of the right dose range for patients. So next -- yes.

And our next question is from Douglas Tsao with H.C. Wainwright.

Maybe -- obviously, you're starting the study for TD-0903 in the U.K., and obviously, the setup that you have for the Phase I is advantageous. What's the timing? Or would you be able to expect to have sites outside of the U.K. participate in the first part of the Phase II study? Or do you expect that, that would most likely be for part 2 of the Phase II study before you sort of go global?

Thanks, Doug. That's a great question. We believe that staying within the local setting for part 1 of Phase II actually has assisted in its approval, because we believe that having investigators who can learn from the findings in Phase I and apply them immediately to Phase II part 1 allows us to move quickly. It provides reassurance to IRBs and regulators that there are eyes on this program that understand the impact and can interpret findings from both healthy volunteers and patients simultaneously. And for that reason, we don't believe that we'll be moving outside of the U.K. until we get to part 2, but we're in active discussion with regulators outside of the U.K. to support additional sites joining in part 2.

Our next question is from Joseph Stringer with Needham & Company.

This is Joey on for Alan. A couple of them on TD-1473, when I go back to your comment about sites -- some sites on a case-by-case basis reopening and part of that criteria is being able to use endoscopy. Is that sort of a gastroenterology guideline sort of issue? Or is that something that's in terms of elective type of procedure? Maybe a little bit more color on the process of reopening these sites. And then sort of coupled with that, you're reiterating your 2020 guidance in terms of operating loss. And does that imply that maybe you're -- you have some level of confidence that you can sort of reopen some of these sites maybe sooner rather than later?

I'm happy to comment on the endoscopy question. I'll pass over to Andrew and Rick for the guidance element. But just to clarify, what we're doing with individual sites is to go back to them to ensure that site staff are able to get to the facility, that the facility itself is able to take patients in, and the patients themselves are able to travel into the units in order to complete the procedures that are required. And for the UC and Crohn's study, particularly at end points, 12 weeks for the Crohn's study and at 8 weeks for the UC study, endoscopy forms a critical part of the overall evaluation for the primary end point in those studies. It's why we're wanting to work prudently and judiciously with sites to ensure that they actually can accommodate the endoscopy into the patient visits. So it's not a GI guideline necessarily or that we're sort of working with international guidance on this. We're just really working directly with sites to ensure that the conditions and criteria we need to continue the study are in place. And at this stage, we really are rebuilding our sense of where sites are. Of course, bear in mind, a lot of this will be impacted by issues outside the site's control: lockdowns, social distancing requirements, work-from-home policies and so on. Those have impacted clinical site performance, and of course, patients' ability to come into those sites. But all of those factors are being considered on a site-by-site basis and a week-by-week basis to reopen sites as soon as they -- as we believe that they have the requisite conditions. Let me pass over to Andrew for the guidance.

Sure. And it's a great question. With the -- as you might expect, we've -- our team has done quite a bit of scenario analysis under different planning assumptions. But with respect to 1473 and ampreloxetine's key studies, the key emphasis there is to keep them going as quickly as possible under the circumstances that Brett alluded to in his remarks.

So while there certainly has been some delay of spending related to the delay of the execution of those programs, it does not comprise a significant portion of the composition of spending across the programs in R&D in 2020. Of course, there are new expenses that are being added associated with the acceleration of the 0903 program. And then there are other studies that we've made a decision to delay the initiation of. These are not related to those on 1473 and ampreloxetine, but have to do with other opportunities for continuing to invest in life cycle management for YUPELRI and other programs in our pipeline.

So overall, the shift in spend is different, but the underlying or overarching result in operating loss guidance for the year happens to be the same range. And Rick, I don't know if you'd add anything else to that.

Yes, I'd just -- to complement what Brett and Andrew both said, it's important to understand the granularity here with which we're adding sites back. I think Frank made the comment in his section on adding the sales representatives back on sort of a county-by-county basis in the United States. That's sort of the level of granularity that Brett's team is going through with regard to adding sites back, sites within a country, but also not only within that country, within a given geography.

I should also say there's been -- we've had -- we've seen some terrific sort of teamwork even between sites in a given area working together to enable us to get endoscopies done or certain reads done to the benefit of the patients and to the benefit of our program. We just can't say enough because these are -- these programs have a certain level of challenge to them, but the level of teamwork that we've had with our sites really around the country or around the world, I think Brett said 35 different countries, has been pretty extraordinary whether it's ampreloxetine or the 1473. So I think we'll get these sites back up. We'll get them rolling. Of course, we can't predict what a second wave might be in a given geography. But our base is so broad that we're going to very, very actively manage the reinitiation of the sites on a global basis.

(Operator Instructions) Next question is from Douglas Tsao with H.C. Wainwright.

You're on mute.

Sorry about that. Sorry about that. I had hit mute.

Going back to 903 (sic) [0903], just given the fact that given sort of the emergence of COVID-19, that sort of -- that program got accelerated, does that change the trajectory or your thinking in terms of development for the -- of the drug in the original CLAD indication, since you will have accomplished a good amount of Phase I work in COVID-19 or for COVID-19 in healthy volunteers? Or once this sort of -- how this plays out, you'll sort of to be determined?

Brett, you want to touch on that? And then I'll finish it off.

Yes. So Doug, I think we had been in very advanced preclinical planning for testing 0903 in patients who've undergone lung transplant, and really the focus was going to be to see whether we could reduce rejection rates in patients post lung transplants. None of that has changed in terms of the opportunity that would be presented by using a nebulized product that was able to penetrate deep into the lung. And really I think what we recognized is that -- I don't think anybody wished the world to go through COVID, but having an asset that could be utilized in this fashion, we really felt compelled to move it in this direction. We do not believe that it compromises our ability to come back to thinking about CLAD in the future. In fact, if anything, information that we've gleaned in this early stage in dampening down inflammation could really inform a broad swathe of potential uses for JAK inhibitors in the lung. Because there are several other non-virally-related causes of ARDS and several other inflammatory conditions in the lung where this could benefit. Rick?

Yes. I think there are sort of 2 segments, both of which are informed by the work that's ongoing with hyperinflammation related to COVID-19. One of the segments of work are other acute respiratory distress syndrome type of causes. And clearly, the information that we get with regard to suppression of cytokines coming out of this, the inflammation is different in these different types of ARDS. But this pan-JAK inhibitor, getting it into the lung and getting it out, there should be some similarities -- enough similarities such that we can take the learnings from COVID-19 and apply it there.

And there's another completely different stream of work, which is acute lung allograft dysfunction or CLAD -- and CLAD for chronic or acute as well as lung sarcoidosis and a couple of other very significant conditions of the lung that are driven by inflammatory processes. And I think regardless of whether you're looking at the ARDS group or this other group, both of those are going to be informed by the work that is ongoing here with treating hyperinflammation related to COVID-19.

Thank you. And it appears that we have no further questions on the phone. I would now like to turn the conference back to Mr. Winningham. Please go ahead, sir.

Yes, I'd like to thank everybody for joining us today on our update. As I said at the beginning, I'd like to thank all of the first-line responders, the health care professionals that are in emergency rooms and hospitals all over the world as well as the Theravance Biopharma team, who's been doing a terrific job throughout this pandemic. Wish everybody on the phone good health and their families and stay safe. And I, again, appreciate you joining us for this update. Take care.

And this concludes today's conference call. We thank you for your participation, you may now disconnect.