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, Rick will review the highlights in the quarter and provide an update on our clinical programs, and 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 second quarter 2008 financial results and recent corporate developments. A copy of the press release can be downloaded from our web site or you can call Investor Relations at 650-808-4100, and we'll 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 information available to the company today and Theravance assumes no obligation to update these statements as circumstances change. Future events, financial result could differ materially from those projected in the company's forward-looking statements. Additional information concerning factors that could cause these 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.

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, Rick will review the highlights in the quarter and provide an update on our clinical programs, and 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 second quarter 2008 financial results and recent corporate developments. A copy of the press release can be downloaded from our web site or you can call Investor Relations at 650-808-4100, and we'll 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 information available to the company today and Theravance assumes no obligation to update these statements as circumstances change. Future events, financial result could differ materially from those projected in the company's forward-looking statements. Additional information concerning factors that could cause these 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.

Thanks, Mike. Good afternoon everyone. During the second quarter, we made progress on our clinical and regulatory activities. Most importantly, we announced positive Phase II results of our MABA program for the treatment of COPD with the lead candidate '081 achieving proof of concept. We also recently announced Phase I results in our LAMA program and the GSK intends to return that program to Theravance. The Horizon Program in collaboration with GSK recently completed enrollment in two of the three Phase IIb asthma studies with the ICS '698, and we expect to complete enrollment in the LABA study with '444 in asthma during the third quarter With regard to our Telavancin skin NDA, we've audited a number of sites and based on the work completed to date, we've not identified issues we believe we should call into question the integrity of the data contained in our NDA. Also for Telavancin, we believe there has been positive progress by our contract manufacturer towards resolving its issues with the FDA, which I remind you were unrelated to Telavancin. And we are on track to file the HAP NDA in the fourth quarter of the year. And finally, we have substantially completed our restructuring activities and have realigned the company's resources towards support our priority programs. Now I'll provide more details on these developments and Michael will walk you through our financials later in the call. I'll start with our MABA program. Early last week, we announced positive results in a proof-of-concept Phase II study with '081, the lead compound. These results show that '081 dosed once daily to COPD patients, exhibited 24-hr bronchodilation that was similar to a combination therapy control of salmeterol dosed twice daily plus tiotropium dosed once daily. '081 was generally well tolerated with a similar overall incidence of…

Thank you, Rick. Today, I'll discuss the results of the quarter ended June 30, 2008 and will provide guidance for full-year 2008 expenses. For the quarter ended June 30, 2008, Theravance had a net loss of $27 million. As expected, our spending was lower this quarter than during both the first quarter of 2008 and the second quarter of 2007 due primarily to decreased clinical trial activity. Total R&D spending for the second quarter of 2008 was $20 million compared to spending of $43.5 million during the same period last year, a decrease of $23.5 million. This decrease was driven primarily by lower outside clinical study spending on Telavancin, TD-5108 and TD-1792, lower non-executive bonus accruals and lower employee costs due to impact of our restructuring activities. Excluding stock-based compensation costs, non-GAAP R&D spending was $18.1 million during the second quarter of 2008 compared to $40.3 million for the same period last year. Total external R&D costs were $4.9 million compared to $16.3 million for the second quarter of 2008 and 2007 respectively. General and administrative costs were $7.3 million during the second quarter of 2008, down $2.2 million compared to the same period last year. This decrease was due primarily to lower employee-related costs due to reduction in force announced in April 2008 and other lower external costs. Excluding stock-based compensation, non-GAAP G&A expense was $5.4 million during the second quarter of 2008 compared to $7.2 million during the same period last year. Revenue consisted primarily of the amortization of upfront and milestone payments, received from the company's partnerships with GSK and Astellas and was $5.5 million in the second quarter of 2008. Revenue remained relatively flat compared to the same quarter in 2007. We did earn a $10 million proof-of-concept milestone based upon successful completion of the Phase…

Thanks, Mike. Before inviting you to ask questions, I’d like to review our four significant operating milestones for 2008. First, we remain on track to submit Telavancin NDA for hospital-acquired pneumonia to the FDA in the fourth quarter of 2008. Our second milestone is to receive regulatory approval for Telavancin for the complicated skin and skin structure infections, if approved, and to launch Telavancin with our partner Astellas. Third, we recently achieved the milestone in reporting positive Phase II MABA top line results in COPD and finally we’re on track to report the Phase IIb asthma data with the Horizon program with '444. In summary, Theravance has made significant progress since our last update. In our respiratory programs, we reported again positive Phase II on our MABA program and have completed or nearing completion in the enrollment of three Phase IIb studies in asthma in our Horizon program. We’ve completed a number of auditing visits in our skin program and remain confident in the overall quality of the data submitted to the FDA. And finally, we remain again on track to submit our Telavancin NDA for hospital-acquired pneumonia by the end of the year. And now, I would like to turn the call over to the conference facilitator and open the call for questions.

(Operator instructions) Our first question will come from Rachel McMinn. Rachel McMinn – Cowen & Co.: Thanks very much. I wanted to ask a couple of questions on Horizon. I guess just given that one of the '698 trials is not going to be reading out this year, do you still expect to disclose top line results to investors on '444 this year?

Yes, we intend on communicating the top line results for '444 dished [ph] on asthma this year. We’re still in discussions with GSK over the communication strategy with regard to the ICS studies in mild, moderate, and severe asthmatics, and then just closely we do expect to release data on the '444 COPD study in early 2009. Rachel McMinn – Cowen & Co.: Okay. Have you – I guess worked through what the strategy – like a bigger picture strategy is, so if '698 isn’t going to finish up until early 2009 and COPD in early 2009, is that the point after which you can go to the FDA and have end of Phase II meeting? Or is there one of these studies that's more dating [ph] than others and once you get that, then you can have an end of Phase II meeting perhaps a little bit earlier.

We haven’t landed on the strategy with the FDA. I think it is important that the ICS study for the severe asthmatics has been completed and the ICS study for the mild asthmatics are completed, and the moderate asthmatics of course fall in the middle. So the completion of the first two studies should give us a considerable amount of information about '698 and its activity in an asthmatic patient population. But we have not decided with GSK on the strategy to approach the FDA. Rachel McMinn – Cowen & Co.: Okay. So at that point, once you I guess clarify that strategy, we’ll have a better sense of when the Phase III can start or are there other kind of combination studies that you think will be important before – that need to get done before the Phase III program can get activated?

The important next step in the program is the approach with the FDA with the data from the studies that are ongoing in both asthma and COPD. That’s by far the largest patient populations that have been exposed to both '444 and '698, the inhaled corticosteroid, as is noted on clinicaltrials.gov. GSK has a number of other studies ongoing that should put us in a position to approach the FDA after the conclusion of the current Phase IIb studies in asthma. Rachel McMinn – Cowen & Co.: Okay, great. And then just a question on Telavancin and I’ll hop back into the queue. I’m curious why you’re so confident in the site audit. I recognize it sounds like you’ve done a lot of work there to try to understand the data, but given that FDA seems on a hunt to just investigate, I would imagine that’s a lot of sites, I don't know if you are prepared to disclose the number of sites that you believe FDA has audited and how that overlaps with what you’ve done. But I’m just a little bit confused because it seems like there’s this sort of – we don’t really even understand why the FDA is auditing as many sites as they are.

Sure. The only thing I was relaying on the conference call was really that we’ve done a significant amount of additional work on auditing a significant number of sites. And in the course of completing those audits, based on what we have found out, we still have a significant confidence in the integrity of the data that we submitted in the skin NDA. At the end of the day, it’s the FDA’s call. I believe they will take the information that we provide them related to these audits into consideration as well as information from their ongoing audit program.

Just to give a little perspective on what the nature of these audits were, we did go to a large number of sites and we were doing full census audits. So we were going and looking at every single patient there. These were relatively comprehensive in nature. We certainly found a whole variety of what you consider normal clinical study issues, but the important point we’re trying to relay with this expression of confidence is that, while we have seen a number of miscellaneous issues that would be considered normalness, we have not seen anything to date that calls into question data integrity, in our view. Clearly, the important view is what the FDA thinks about the results of their audits plus the results of our audits but at least to date we do not have a reason to believe that there is a systemic problem with the data nor that any of the findings to date are calling to question data integrity. Rachel McMinn – Cowen & Co.: Can you disclose how many sites that FDA has investigated and how that overlaps with what you’ve done?

We can’t really. There’s minimal overlap between the sites, so that has not been a big area of tremendous of overlap; there’s a little bit. But we really are somewhat limited in the communications we can give right now regarding the absolute of number of sites or the specific content of the '483. Those are private communications between the FDA and the site. So all we can really say about the '483 is that again our perspective is that the issues that were identified in those are of a normal clinical trial type nature in that there’s nothing in there that to date has caused us to believe that there is a data integrity issue or a systemic problem with the data in the study. Rachel McMinn – Cowen & Co.: Okay. I’ll hop back into the queue. Thanks.

Thanks, Rachel.

And we go next to May-Kin Ho with Goldman Sachs. May-Kin Ho – Goldman Sachs: The filing of the HAP application, have you discussed with the FDA recently whether they are still on board in terms of your filing that regardless whether you have the approval of the skin indication?

Yes. Based on what we know today, the HAP NDA sort of stands on its own relative to approximately 1500 patient program in a much more serious disease, offsetting that again as I went over was done in two studies that were double blind randomized study. So I think we’re confident right now that there isn’t something from a regulatory perspective in between where we are in the filing. May-Kin Ho – Goldman Sachs: I asked that because usually they don’t like to have another application until they finish with one, that’s why I’m asking.

Yes. And I think if you follow the Doripenem example, Doripenem was under evaluation for I think intra-abdominal infections and complicated UTI, and during the course of that review Doripenem – in the middle of that review, Doripenem filed their NDA for hospital-acquired pneumonia. So we’re more or less are planning on a similar strategy. May-Kin Ho – Goldman Sachs: On the 698 study for moderate patients, is there an issue with enrollment?

Well, I think enrollment is going, but is going slower than what we’d anticipated but GSK and their execution study have taken action to get enrollment back on target. And I think while it has been delayed slightly, the study is accruing well today based on what we know and it should complete – we should have data available from that study in early 2009. May-Kin Ho – Goldman Sachs: And lastly on the manufacturing side, I just want to clarify something. You mentioned that from that side recently because of the FDA letter, there are a number of products that came out. Do you mean that actually the products were now allowed to be back in the market?

Well yes – no, I mean that the ANDAs for these products have been approved, which gives one confidence at the present time that the status of the manufacturing side has changed. May-Kin Ho – Goldman Sachs: I see. Okay, thank you.

Thanks, May-Kin.

Our next question comes from Michael Aberman with Credit Suisse. Michael Aberman – Credit Suisse: I guess if I could, you mentioned Doripenem in your comments just now and I just wondered, obviously you probably paid attention to the recent advisory committee meeting. I just wonder if you can give us some color as to how you think it relates to your trial and did you see any differences in mortality for example or any trends that we can take away and how a similar panel might look at your data?

Sure. Well, I think we learned quite a bit from the Doripenem advisory committee. I’m very glad that more or less happened when it did. I think most of the issues that were addressed in the Doripenem and advisory committee. We were aware of – the Doripenem studies and the Telavancin studies were quite different in that the Doripenem had two open label studies, one in HAP and one in BAP [ph], as compared to the Telavancin were not open-label, were blinded studies. The mortality clearly – mortality in this study overall – all caused mortality in the Telavancin study were we’ve disclosed previously were consistent with historical studies and in the study of hospital-acquired pneumonia. We’ve said also that we’ll plan on presenting that data at IDSA, ICAAC and CHES in the fall. Right now, I think the only thing that the Doripenem did was give us additional confidence in the data that we have. And certainly in specific areas around radiology reports, we are aware that there was going to be a focus of that at the advisory committee and we began working shoring up the data in that relative to our own filing of our NDA. Michael Aberman – Credit Suisse: Can you remind us where your non-inferiority margin was in this trial?

Yes. Well, the non-inferiority margin that we used when we powered the trial was 20%. However, only thing what matters right now is that the – in the key populations of the all treated and the clinical valuable populations, the lower band of the non-inferiority margins that we saw in the study were greater than negative 10% for Telavancin. Michael Aberman – Credit Suisse: Okay. And getting back – I had a question but it’s leaving me, so I’ll get back in the queue. Appreciate it.

Thanks.

Thanks, Michael.

And we’ll take our next question from Jim Birchenough with Lehman Brothers. Jim Birchenough – Lehman Brothers: Yes. Hi guys. Can you hear me?

Yes, Jim. Jim Birchenough – Lehman Brothers: So I just want to follow up on a few prior items, just in terms of the site audits that you’ve done, I just want to understand, is it that you understand the issues that FDA is concerned about and when you’ve audited sites you haven’t seen those issues, or you’ve seen those issues but you don’t think it’s a bigger problem?

Well Jim, I think the way I would describe it is we have gone out and again done a – what I'm going to call census audits. So essentially looking at every patient in each of these sites and then we have taken that universe of collected data that we had based upon that and looked at it both internally through our internal end as well as in consultation with external experts in this area, and waive that data. And whether we felt there was a problem or not and today I think the conclusion is that while there were again miscellaneous step that came up as expected that the body of evidence did not suggest to us that there is a systemic problem with the study or data integrity problem. We clearly don't have complete transparency what the FDA is looking for. We have had a number of communications with them that occurred back in the February-March time frame, but they were certainly not complete communications. So today I think what I would say is that our opinion right now is based upon our internal resources and our external consultants in that obviously the important judge will be the FDA when they compile both the results of our activities plus the results of their activities, and today, unfortunately I don't know what that ultimate screen is. I just know that we have taken a look at the data, and in our opinion, we believe there's nothing there that rises to the level of a data integrity issue. Jim Birchenough – Lehman Brothers: And in just following up on Telavancin, just wondering if you have brought an update on EMEA review? I believe there was a CHMP meeting today. Was Telavancin reviewed today or is that pushed out beyond into future months?

We haven't given the guidance on that. The EMEA review of Telavancin is under review as is the review of the Canadian application. I think generally we would expect some sort of action late this year perhaps in Europe. Jim Birchenough – Lehman Brothers: So it sounds like it wasn't part of the PHMP review today, though?

No. Jim Birchenough – Lehman Brothers: Okay. And then just finally on the asthma and COPD program, it was unclear from your earlier comments if there are additional studies that GSK is conducting beyond the one that we've been focused on for year-end and early '09. Are there other studies that go beyond the early '09 timeframe that we should be looking for?

Well, I think again, Jim, the major studies are the studies that are ongoing in the Phase II program right now covering 1,800 patients in the ICS program and 1,200 patients in the long-acting beta agonist programs plus the 20 [ph] COPD and asthma. I think that as we continue to roll forward to Phase III, there will be other smaller studies that GSK does – they're doing now and we will do over the next few months, but the major decision-making studies in progression in the Phase III major studies are really the 3,000 patient studies that are ongoing. Jim Birchenough – Lehman Brothers: Great. Thanks for taking the questions.

Thanks Jim.

Our next question will come from Biren Amin with Stanford Group. Biren Amin – Stanford Group: Yes. Hi, thanks for taking my questions. I guess to focus on the 483 issue, could you tell us if the issued covered with the first 483 and that led to the cancellation of the advisory panel, if that was cited in the 483 from the recent audit process?

Well, I think that the cancellation of the advisory panel was really due to the sort of intersection between the observations at a particular site and the CRO, so with the intersection of both those issues that really led to the cancellation of the advisory committee. I think relative to the comments that Mike made earlier on the 483 is what we've seen at the 483 that has been issued today don't give us any cause for concern with regard to a question on data integrity. To expand on what Mike said of course is that the 483 is one document that comes out of an FDA review or audit of the site. The other key document is an entity of inspection report I believe, and that report is not given to the site or not given to the sponsor, in fact it just goes directly back to FDA and so we don't have any visibility on what those reports are. Biren Amin – Stanford Group: Okay. And of the 483s recently issued, how many patients do they represent of the (inaudible) program?

Well, we haven't really been able to communicate that other than to say at this point, a very substantial percent of the patients in the overall study has been reviewed either by the FDA or by us. It is a very large number, certainly more thank half. So there has been a very, very deep dive between the two entities, the Theravance's activities and the FDA's activities mentioned in the study. But unfortunately, I can't give you a specific percentage other than to say a very large percentage of the patients – obviously a smaller percentage of the sites, because you have a variety of them having one or two patients on it. Jim Birchenough – Lehman Brothers: Okay. And I guess moving to 5108, I guess the change there has been a pushback with the QT trial into '09, and so I just want to maybe understand why this shift in strategy around that program, because it seems that earlier in the year, Theravance hoped to get another QT study underway, so that way you could possibly start partnering a discussion?

Well, I think first of all, we took a little bit hit on the timeline due to the restructuring that we did. Secondly, the drug-drug interaction studies, a smaller Phase I study relatively easy to get up and moving, and thirdly, I think when we – to repeat the thorough QT study, we want to take special care in both the design and the site selection of the study to address what the current state of the art is in the execution of these studies. And when you sort of add all those up, it really ends up pushing the thorough QT study out into – probably out into early '09. Jim Birchenough – Lehman Brothers: Alright, thanks.

All right, thanks, Biren.

And our next question will come from Marshall Urist with Morgan Stanley. Marshall Urist – Morgan Stanley: Yes. Hey guys. So, first one, apologize for keeping going around and around on this 483 thing, but can you at least comment qualitatively if the sort of miscellaneous issues that you identified in your audit are more or less consistent with what you know of the 483?

I'm not sure I totally understand the question. Are you asking of the things that we saw in the Theravance? Marshall Urist – Morgan Stanley: Are they consistent what you know of what was cited in the 483?

Which 483, is it ones that led to the cancellation of the –? Marshall Urist – Morgan Stanley: No, from the FDA's ongoing audit.

I think as a general statement, yes. Obviously you have very different – specific things, but I think in a general comment, the nature and severity of them is very consistent as far as we are aware today. Marshall Urist – Morgan Stanley: Okay, thanks. And the next thing is that, could you guys talk broadly about what gives you confidence that the FDA on Horizon isn't going to want a larger set of combination data before signing off on Phase III?

Well, I think the confidence is just really that the number of patients that have been studied in the large Phase IIb setting here at various – in differences of severity in asthma, and the thoroughness of the program sort of behind it in looking at the drugs and combination. As everybody on the call knows, the FDA can do – make a decision at any point in time that they'd like to see something else, but I think just based on where we are right now, we believe fully coming out of this Phase IIb program, we'll have a substantial body of evidence on the effectiveness of the drugs if the studies are positive. Marshall Urist – Morgan Stanley: Okay, sure. And then last thing on the HAP application, do you guys have plans to meet with the FDA again before you file – post the Doripenem panel just sort of sit down on your end, take their temperature about their feeling, about the different issues that were raised there or do you feel like, with the data set and the work that you've been doing that you guys are ready to go?

Well, I think what – again what we saw in the Doripenem advisory committee was more or less consistent with our previous conversations that we had with the agency. If something else were to come up between now that required additional clarification, we'd certainly sit down and talk with the FDA about it and that we certainly will have conversations with the FDA between now and when we file just to make sure that we're submitting an application. The type of application that – and covers the issues that they want to see, but right now the Doripenem advisory committee was more or less pretty consistent with what the guidance that we've been previously given.

Yes, Marshall I think I would just add one thing which is that many of the issues discussed there are not likely to be particularly relevant to our application. There was a lot of discussion around the study design and the open label nature and some of the current medications. Those are probably not going to be big issues. I would have loved to have clear resolution on the whole monitor of already [ph] margin discussion. I think our perspective at this point is, if you take the view that the FDA adopted of the 10%, we're okay with that because the data in the most important populations today has a lower end of the confidence interval that is greater than negative 10. So in that context, I think we're in pretty good shape. However, we're going to have to wait and see as we get a little bit closer if there is some additional clarification that comes out of there. Marshall Urist – Morgan Stanley: Okay, great. And actually one last one, can you just comment on the pace that you know about these audits of the audits, the FDA audits have been scheduled, I mean has it been, did it peak and is it trailing off now or has it been kind of slow and steady?

I think it's a little hard to say, I would have said I think the FDA is being pretty diligent in their work here. And we're certainly pleased with the fact that they have been moving pretty rapidly through this. I don't know that they'll make a definitive judgment that they are nearing the end or not nearing the end of this. As Rick mentioned today, there is one audit that is ongoing as we speak and there is one that is scheduled. But again, there could be another call that comes in shortly. So we don't know where they are in that process. I would just make the comment that I think they've been very diligent in moving forward on this and we're pretty pleased with their progress. Marshall Urist – Morgan Stanley: Okay, great. Thanks guys.

Great. Thanks, Marshall.

And we'll take our next question from Tom Russo with Baird. Tom Russo – Robert W. Baird: Thanks for taking the question. I know in Glaxo's update this week they talked about what they see as a unique approach of engaging payers earlier in the development process. And I was wondering if you could talk about whether conversations about pharmacoeconomics and the value of Horizon has happened yet with payers and at what point you would look to maybe go head to head against existing therapies in the development of Horizon?

I really can't comment on GSK's comments that they've made earlier this week and a few weeks ago relative to the Horizon program. I think clearly in part of the development program, there will be a comparison against active controls but we haven't finalized the Phase III design yet and won't until GSK and we walk out of the meetings with the regulatory authorities in both the US and Europe. Tom Russo – Robert W. Baird: Okay. And then can you also remind us the approval related milestones for Telavancin, how much of that comes from Europe and kind of maybe the status of HAP for Europe?

We haven't broken down the remaining milestones by indication other than to say the remaining milestones in general can be characterized as related to regulatory events. So there are no sales milestones there left in there, but we haven't given the specific events or the specific amount of those. With regard to the HAP indication in Europe, that will most likely follow the HAP submission here in the United States and so I would say, stay tuned as we get a little bit closer to concluding that. Tom Russo – Robert W. Baird: Okay, thanks.

Thanks, Tom.

And our next question comes from Ian Somaiya with Thomas Weisel. Ian Somaiya – Thomas Weisel: Is there any way to quantify the number of patients that might have been enrolled at these sites that are in question today?

What sites are those, Ian? Ian Somaiya – Thomas Weisel: Sites that where they might have been specific misconduct in the trial.

We're not aware of site specific misconduct in the study. What Mike referred to in the information that we have to date with 483s that the FDA has and the audits that we've done are by and large errors that – the identification of errors sort of spread out among a lot of sites which you might see in the case of a 2000 patient clinical trial. Ian Somaiya – Thomas Weisel: Okay. And in the event that there are issues found in specific sites, is the FDA willing to look at the data excluding the data from the patients that are enrolled at those sites?

Well, I can't say it perspectively what they would do because that's projecting out in the future. I can just say from a historical view as I've noted previously with the one site in question, they've requested a sensitivity analysis and an analysis of the data excluding that specific site. I think one of the benefits of the ATLAS study – of the ATLAS program in general is that it's an extraordinarily robust data set with over 1,800 – there were 1,900 patients in the Phase III program, and the confidence intervals relative to – of a non-inferiority margin are relatively tight. So, the size of the setting would certainly help us in the instance that sensitivity analyses are done with or without sites in the analysis. Ian Somaiya – Thomas Weisel: Okay. Thank you.

Great. Thanks, Ian.

And gentlemen it appears we have no further questions standing by at this time. I would now like to turn the conference back to Mr. Winningham. Please go ahead sir.

Thank you very much operator and I'd like to thank everyone for participating and have a good day.

This concludes today's conference call. We thank everyone for their participation and you may disconnect at this time.