Ladies and gentlemen, good afternoon. I'd like to welcome everyone to the Theravance Biopharma Fourth Quarter and Full Year 2022 Conference Call. [Operator Instructions]. Also, today's conference is being recorded. And now I'd like to turn the call over to Rick Winningham, Chief Executive Officer. Please go ahead.

Good afternoon, and thank you for joining the Theravance Biopharma fourth quarter and full year 2022 conference call to discuss our business. I'll remind you that this call will contain forward-looking statements that involve risks and uncertainties, including statements about our development pipeline, expected benefits of our products, anticipated timing of clinical trials, regular filings and expected financial results. Information concerning factors that could cause results to differ materially from our forward-looking statements is described further in our filings with the SEC. I drift your attention to Slide 3. Joining me today are Rhonda Farnum, Chief Business Officer; Rick Graham, Research and Development; and Aziz Sawaf, Chief Financial Officer. Before I get started, I'd like to make a brief statement regarding public announcement that provide made earlier today, the Board management are committed to acting in the best interest of the company and all of its shareholders, and we're open to evaluating all ideas to maximize shareholder value, including those from Irenic. We're disappointed that Irenic has chosen to make a public announcement of this nature as we had engaged in substantive constructive dialogue on multiple occasions to work cooperatively with them. We've been offered to speak with them under a nondisclosure agreement and we'll discuss their ideas and our upcoming plans, but our offers were refused. Our Nominating and Governance Committee is regular board refreshment process in place to thoroughly evaluate all potential candidates and their skill sets, including relevant industry experience and public board experience. Our committee and other members of our Board and management team met with Andy Dodge to consider him in good faith as a candidate to join our Board. But given this lack of health care and relevant public company board experience, we ultimately determined that he was not the most suitable candidate for…

Thank you, Rick. Looking to Slide 6. We are very pleased to share the latest performance update on YUPELRI. In Q4, net sales of YUPELRI reached another quarterly high launch to date. As a reminder, Theravance and Viatris co-promote YUPELRI in the U.S., Theravance's commercial and medical teams cover the hospital segment, and Viatris is responsible for the outpatient-based community healthcare needs and promotion for the products. Slide 7 shows Theravance’s imply 35% share of net sales for YUPELRI during the fourth quarter of 2022 of $19.5 million, up 27% from Q4 of 2021. I am also pleased to highlight that the implied 35% of YUPELRI net sales for the full year of 2022 was $70.7 million, which represents a 25% year-over-year net sales growth. The significant growth for the brand was again driven by strong overall customer demand from hospital and community outlets. In Q4 of 2022, demand increased by 6% quarter-over-quarter and by 19% year-over-year. Looking specifically at the Theravance hospital efforts on the right side of Slide 7, in Q4 of 2022, doses sold exclusively in the hospital setting represented an increase of 22% from the previous quarter, demonstrating the highest quarterly hospital volume launch to date, which led to full-year growth of 53% over 2021. We have continued to see significant growth in YUPELRI's hospital business every quarter since Q3 of 2020. 580 secured hospital formulary wins launched to date have led to approximately 1,200 purchasing hospital outlets at the end of 2022 driving that growth. Also, additional adoptions are increasing weekly. We believe these wins in forthcoming system additions will yield continued growth through 2023 as YUPELRI will be the first LAMA of choice in many hospitals due to the growing recognition and acceptance of YUPELRI's clinical benefits and once-daily value proposition. Turning to Slide…

Thanks, Rhonda. For those of you following the slides, I'll begin on Slide 11. Ampreloxetine is a norepinephrine reuptake inhibitor being developed for the treatment of symptomatic neurogenic orthostatic hypotension in patients with MSA. In MSA patients with nOH, blood pressure falls when upgrade owing to impaired release of norepinephrine, leading to debilitate symptoms, which can have a profound impact on quality of life. MSA of a rare disease affecting approximately 50,000 people in the United States. Approximately 70% to 90% of MSA patients experienced nOH symptoms, and we believe the addressable patient population for ampreloxetine is in the range of 35,000 to 45,000 patients in the U.S. We're seeking orphan drug designation for the treatment of MSA patients with symptomatic nOH. Neither of the two approved therapies to treat orthostatic hypotension have demonstrated durable effectiveness in mitigating the debilitating symptoms for patients with MSA. There exists a significant unmet need and ampreloxetine has the potential to provide a unique treatment profile improving effectiveness of multiple symptoms, durability of effect, once-daily dosing and a favorable safety profile. As we enter into a new era in treating MSA symptoms, the potential of ampreloxetine offers hope to MSA patients with symptomatic nOH. On Slide 12, I will explain the unique benefits of ampreloxetine treatment. Starting with the figure on the left. In the Phase III study, 170, ampreloxetine was effective at treating a constellation of cardinal symptoms in MSA patients. These symptoms include dizziness, vision impairment, weakness, fatigue, trouble concentrating and head and neck to comfort. The magnitude of changes for these items was clinically meaningful and the durability of effect was maintained over the length of the 22-week study. In addition to a favorable impact on symptom scores with ampreloxetine treatment. There was an improvement in activities of daily living that…

Thanks, Rick. Turning to Slide 15, I'll provide an update on our return of capital program. As Rick mentioned earlier, we have increased the program by $75 million and $250 million to $325 million is completed approximately $155 million today in the form of share buybacks, including $60 million completed in the open market, which was initiated in mid-December. This $155 million represents approximately 50% of the upsized capital return program, and we have $170 million remaining assets today. We expect to complete the remainder of the program by end of 2023. Today, we have bought back approximately 15 million shares at a weighted average share price of $10.21. Turning to Slide 16, which covers our Q4 2022 financial highlights, starting with the balance sheet items. We ended Q4 with approximately $327 million of cash. Within the quarter we had two significant cash outflows. First, we paid $180 million of taxes related to the sale of our technology royalties. This tax payment was $3 million less than expected when we bought the tax liability at the end of Q3. Second, we have $34 million worth of share buybacks. Excluding these two cash outflows, we incurred $7 million of cash burn in Q4 and a substantial improvement versus prior quarters and a result of the share repurchases, we ended 2022 to 65 million shares outstanding. Our end of 2022 cash balance of $327 million excludes the remaining $197 million earmarked for a return of a program in 2023, including the amounts already purchased in early 2023 and the remaining amount on the program as of today. The Board continuously evaluates progress towards achieving towards achievement of our financial targets and other factors, and if appropriate, we'll update the plan accordingly as demonstrated by the action today to substantially increase the size…

Thanks, Aziz. On Slide 19, as we reviewed, we're taking three additional strategic actions to drive near, mid and long-term value creation, upsizing the capital return program to $325 million. This continuing investments in research, reducing head count by approximately 17%, focusing exclusively on ampreloxetine and YUPELRI; and three, evolving the Board, which includes the appointment of Susannah Gray as an Independent Director of the Board. And again, we're looking forward to benefiting from her deep expertise, and we're committing to declassifying Board of Directors. Before we open the call up for questions, I'd like to reiterate a few key items. Our team is laser-focused on building on last year's growth of YUPELRI and generating important data from the PIFR-2 study in the second half of 2023. Additionally, we remain focused on advancing ampreloxetine with study initiation and patient enrolment in the Phase III program as well as achieving orphan drug designation. And importantly, we will continue to execute on achieving the important goal of non-GAAP profitability in the second half of the year, all of which should continue to drive shareholder value. Thank you, everyone, for your time and your participation, and I'll now hand the call back to the operator for questions.

[Operator Instructions] And our first question comes from the line of David Risinger from SVB Securities.

Thanks, very much. And thank you for the update and the commentary on the prospects. So, I have a few questions, please. First, with respect to YUPELRI profit growth, it's obviously been constrained and been well below end-market sales growth due to the partnership change. But I'm hoping that you can help us understand when that annualizes and we should see the positive inflection in YUPELRI profit growth once it annualizes? And then the follow-on to that is, when should we expect YUPELRI profit growth to approach that of end market sales growth? And then a separate financial question, please. In terms of thinking about R&D spending beyond '24, once you're done with TGFR-2, any color you can provide on that? I know that you're not going to provide guidance for 2024 at this time, but if you could help us understand the outlook for R&D spending beyond '23, that would be helpful? Thank you.

Sure. Thank you, David. I'll take the last question, and then I'll kick it over to Aziz to provide some color on the first two questions. So, our [indiscernible] post ampreloxetine, it's -- that's what we're ampreloxetine R&D really development spending and the regulatory cost and progressing it to approval, assuming success, that's going to contribute a majority of the R&D costs as we assume today. Obviously, through 2023 or part of 2023, we'll have TGFR costs, which we're also absorbing. But with data in the second half of '23, those TGFR costs are going to drop materially. So, Aziz, do you want to comment on David's first two questions?

Yes. David. I think when you're saying profitability, maybe you're referring to the collaboration revenue. As a reminder, we achieved all-time high profitability this quarter, just like the last couple of quarters. In terms of normalization of the amount that this would have happened in the last couple of quarters, the only time that would have been affected was early on in 2022 after we had the restructuring within Theravance. As you know, since we reduced our commercial footprint a little bit. And that reduction in spend actually reduces our collaborating revenue because the 65% of the cost reimbursement is baked into that number. So that would have washed out in the beginning of the first half of last year. So Q3 and Q4 of 2022 would reflect more normalized spend. So, going forward, if you just think about the collaboration revenue and profit, in spend has been somewhat normalized, if you just take 35% of the incremental sales that should flow to both the collaboration revenue and the bottom line as well.

Great. Thank you.

And our next question comes from the line of Douglas Tsao from H.C. Wainright. Your question please.

Hi. Good afternoon. Thanks for taking my question. I think in terms of YUPELRI, you indicated that in the hospital, there was a slight decrease in share and that was largely driven by just the overall market growth. So, in terms of the accounts that you're selling, was your market share largely unchanged? Or did you see a drop there as well?

Yes. Thanks, Doug, for the question. So, for those particular accounts where we have secured not only the formulary position, but also the LAMA of choice. We do have a higher market share. But when you look at the overall marketplace and particularly due to the fact that in December, the entire nebulized market went up significantly, as I highlighted, the highest since the launch of YUPELRI it affected our overall drop.

Doug, we continue to see overall very strong overall growth, and that's driven both by the market but also driven very importantly by the work done in achieving both formulary status and LAMA of choice as Rhonda emphasized.

And so, as we look ahead because obviously, the volume growth has been really impressive, should we see and you continue to have these important formulary wins and LAMA of choice wins in particular, should we see a resumption of that share growth trend that we've seen pretty consistently for the last three years?

Yes. And as I commented during the earnings script, we have already seen a return to growth in the first couple of months of the year. So, we'll continue to obviously continue to work through those accounts where we know there are opportunities and we believe with the prior success that we have the ability to continue to capture that LAMA Choice position.

Okay great. Thank you very much.

And our next question comes from the line of Eva Privitera from Cowen. Your question please.

Hi. Congrats on the quarter and thanks for taking my question. So, with the discontinuation of R&D and the expectation that YUPELRI will start generating meaningful cash. How are you approaching capital allocation after the $325 million share repurchase is complete? Should we expect accumulated cash balances to be returned? And if so, would this be additional share repurchase? Or can we expect something like a quarterly dividend in the future?

Well, I think -- thanks for the question. I think as Aziz pointed out, we're going to execute on the $325 million capital return if we can after looking at what's in front of us, if we can increase the returns to shareholders and the whatever form it might take, then we will do that. Obviously, we've got -- we'll still continue to spend on YUPELRI and a bit on ampreloxetine, but the -- we'll certainly look at returning capital as we can in excess of the $325 million.

Okay. Thank you.

And our next question comes from the line of William Humphrey from Morgan Stanley. Your question please.

This is Will on for Vikram. Thanks for taking my question. Back on YUPELRI, what's your latest thinking on if positive PIFR-2 data, is going to be increasing sales or share? And if so, how significant of an increase, particularly in that in-hospital share? Do you see that driving? Or I guess, how do you see that influencing prescriber behaviour?

Thanks all for the question. In looking at the hospital component specifically, having the ability to be even more definitive on the appropriate patient as well as the role relative to handheld choice in the inpatient environment a positive PIFR-2 study would certainly help to improve that messaging and pull through. Similarly, you would expect the same to be able to affect the community or outpatient volume. As particularly in that sense, helping clinicians understand not only the importance of reassessing a patient's ability to utilize a handheld device versus what can be offered with the nebulized therapy, definitely contributing to a competitive advantage in that particular situation.

I think the real opportunity here, Will, with PIFR, as Rhonda indicates, it's really growing beyond what is considered the traditional nebulized market and making progress growing beyond the traditional nebulize market, which is about one in 10 COPD patients to something greater than that while the foothold would be in the hospital, the majority of the volume will be in the outpatient. And I think that's the real opportunity with the PIFR program.

Okay. That’s very helpful. Thanks very much.

And our next question comes from the line of Liisa Bayko from Evercore ISI. Your question please.

I just wanted to ask a couple of questions about the CYPRESS study for ampreloxetine in MSA. First of all, what are your powering assumptions for this study design as it relates to the OSHA score?

Yes. Liisa, this is Rick Graham. We don't disclose powering assumptions, but just assume that it is traditionally powered as a traditional Phase III study. I think 1 of the things that I can point to is if you look at our data from the 170 study, in the MSA patients. We had a statistically significant outcome in the 38 MSA patients using this OHSA composite. So that should give you a sense of what we're looking at here.

And how does that -- okay, I see what you're saying there. Okay, fine. And then can you remind us of the exclusivity for ampreloxetine?

Yes, sure. We would expect composition of matter with patent term extension to be out to 2035. And then beyond that, for ampreloxetine in the use of nOH. have added a new slide to the deck Slide 26, which outlines the patent protection for both YUPELRI and ampreloxetine.

Okay, great. Thank you very much.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Mr. Winningham for any further remarks.

Yes, I'd just like to thank everyone for joining us today on this important call outlining both the strategic actions that we've taken and the review of 2022 performance and the outlook of -- for 2023. We're excited about what we can accomplish in the business in 2023 with the focus on YUPELRI and ampreloxetine, and we look forward to bringing you updates as we work through the year and work through the important capital return program and increase of which we highlighted today. So please have a good day, and thank you for joining us.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.