Ladies and gentlemen, good afternoon. I'd like to welcome everyone to Theravance Biopharma's Third Quarter 2023 Conference Call. During the presentation, all participants will be in a listen-only mode. A question-and-answer session will follow the company's formal remarks. [Operator Instructions] Also, today's conference call is being recorded. And now I'd like to turn the call over to Rick Winningham, Chief Executive Officer. Please go ahead, sir.

Good afternoon, and thank you for joining the Theravance Biopharma's third quarter 2023 earnings results conference call. Turning to slide two, I'd 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, regulatory 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. On slide three. I'm joined today by Rick Graham our Head of Research and Development; Rhonda Farnum, Theravance’s Chief Business Officer; and Aziz Sawaf, our Chief Financial Officer. Moving to slide four, throughout the year we communicated progress on several strategic objectives for the company. Mainly to grow YUPELRI while completing and disclosing the results of the PIFR-2 study, initiating and advancing our Phase 3 CYPRESS study and advancing – achieving non-GAAP profitability during the second half of the year subject to YUPELRIs continued growth. Based on our third quarter performance, we continue to make good progress against these objectives. Beginning with YUPELRI, our combined team achieved $58.3 million in total third quarter net sales, representing growth of 9% year-on-year, and the highest quarterly net sales results since launch. Highlights include another outstanding performance by our hospital-based commercial organization, continued growth in the retail channel, and further market share gains. We completed our PIFR 2 study enrollment in the third quarter and continue to expect to share top-line data in January. In a new and exciting development, we've just learned that Viatris Phase 3 study of YUPELRI in Chinese patients with moderate to very severe COPD was positive, and that that data were consistent with the previous findings of YUPELRI’s strong efficacy. Our partners at Viatris plan to move…

Thanks, Rick. Let me begin on slide nine by providing some additional detail on the unmet need in MSA for patients with NOH, as well as why we believe we can quickly and successfully move ampreloxetine toward NDA filing and approval. First, it's important to recognize that nOH symptoms are persistent upon sitting or standing, and without effective treatment, lead to deconditioning that can have lasting effects. Moreover, the combined effects of symptomatic nOH and MSA disease progression have a significant impact on quality of life over time. As we highlight here, studies evaluating the effects of nOH symptoms on patients' quality of life consistently highlight a substantial negative impact, despite the availability and use of therapeutic intervention. Currently approved therapies to treat orthostatic hypotension carry safety warnings for supine hypertension, which is an important side effect impacting use, especially amongst the many MSA patients that have pre-existing supine hypertension resulting from their disease. Ampreloxetine works differently than available therapies using a patient's own norepinephrine, which we believe is why there was no impact on supine blood pressure in the phase three study 170 and no signal for supine hypertension in over 800 patients and healthy volunteers studied to date. In the 170 study, Ampreloxetine demonstrated a durable and clinically relevant treatment effect compared to placebo in MSA patients, as well as a broad and consistent effect on the six cardinal symptoms of nOH evaluated by the OHSA composite score. If this efficacy and safety profile is replicated in the ongoing Phase 3 CYPRESS study, we believe ampreloxetine will bring compelling value to patients and caregivers. So let's talk more about CYPRESS on slide 10. In the past, we've described ampreloxetine mechanism of action and why it's particularly well suited to address the symptoms of nOH in MSA patient. Ampreloxetine…

Thanks, Rick. Let's begin on slide 12 with a snapshot of YUPELRI's value to Theravance. As I'll cover in greater detail in a moment, YUPELRI enjoyed another successful quarter of growth, bringing its last 12-month sales to approximately $216 million. As we always note, Theravance is entitled to 35% of YUPELRI's profits through our collaboration with Viatris. In addition to the direct contribution of YUPELRI profits in the U.S., we also stand to achieve potential YUPELRI value through milestones and royalties through our relationship with Viatris. One important source of this value is in China and adjacent territories, where Viatris just completed a successful Phase 3 registration enabling study. This study, for which we plan to make additional details available shortly, demonstrated YUPELRI's strong lung function benefits and the advantages of LAMA therapy as foundational for the maintenance treatment of COPD. On the basis of these results, our partners at Viatris plan to file for approval in China in mid-2024. We stand to receive up to $45 million in milestone payments associated with YUPELRI monotherapy, as well as low double-digit tiered royalties on sales in these territories. Turning to slide 13, you can see the continuation of YUPELRI’s net sales performance with total sales of 9% year-on-year and 6% quarter-on-quarter to $58.3 million. The advances implied 35% share of net sales for YUPELRI during the third quarter of 2023 was $20.4 million. This represents the highest level of sales achieved since launch, benefit from growing demand generation in both the hospital and community settings. We believe that this is a direct result of our strategic initiatives, including educating on concomitant use of YUPELRI with the LAMA, transition of care coordination, and fulfillment support, which we see impacting important key performance indicators internally. On slide 14, I'll cover our hospital performance,…

Thanks, Rhonda. Beginning on slide 18, I'd like to start by discussing how our transformation in recent years and disciplined approach to capital allocation are driving today's financial performance. First, even through our challenging COVID environment, we've been able to contribute to YUPELRI net sales growth each year since 2020. Second, we've taken significant action to reduce costs. By focusing our portfolio and reducing headcount, we've achieved a 70% reduction in operating expenses, including share-based compensation, going from $370 million in 2020 to a projected $115 million in 2023. Third, we eliminated our debt. In 2022, the company monetized its trilogy interest for $1.1 billion, using the proceeds to achieve a debt-free balance sheet and initiate, and now largely complete, a program to return $325 million of capital to shareholders via share buyback, which has reduced our share count by approximately 34%. By implementing these strategies, we've been able to focus our capital allocation on two high-value initiatives. Growing YUPELRI and progressing ampreloxetine towards a significant value inflection point. Turning to the quarter, slides 19 and 20 cover our detailed financial results, which came in better than expectations on the expense side. I'll cover the highlights on slide 21. Starting with collaboration revenue, we reported $15.7 million, recognized through our Viatris partnership, representing an all-time high. Regarding expenses, shortly after the elimination of research in late Q1, we introduced an initiative aimed at streamlining our G&A organization. This initiative led to a reduction in G&A expenses and was the largest driver behind the overall decrease in spend from Q2 to Q3. We remain dedicated to assessing additional cost-cutting initiatives within G&A and maintaining a disciplined approach to expense management. In the quarter, we reported a GAAP loss of $9 million and a non-GAAP loss of $0.7 million, with cash burn…

Thanks, Aziz. On slide 26, I'll finish by summarizing our intentions in the context of how we began. As we approach the end of 2023, our highest operating priorities are to continue to maximize the value of YUPELRI by continuing with our growth initiatives and taking full advantage of PIFR-2 should we achieve a positive outcome. Simultaneously, we'll work hard to bring CYPRESS to a successful conclusion while ensuring as many patients as possible have access to ampreloxetine, should the results support regulatory approvals. We look forward to achieving milestones and royalties related to both TRELEGY and YUPELRI in the future. We'll do this by keeping a sharp eye on expenses and managing the business as efficiently as possible. As always, we remain committed to the best path forward to drive value for our shareholders. I thank you for your time, your attention, and now I'll turn the call back over to the operator for questions.

Thank you, sir. [Operator Instructions] Our first question comes from David Risinger with Leerink Partners. You may proceed.

Yes, thanks very much, and congrats on the updates. I have two questions, please. First, regarding ampreloxetine CYPRESS study, could you please remind us about the process after you enroll the last patient into the openly labeled portion of the study in the second half of 2024, and when we should expect top-line efficacy results? And then separately, could you provide some more detail on the YUPELRI-XUS [Ph] economic opportunities and potential timing? Thanks very much.

Sure, David. Rick, you want to kind of just outline verbally for David the open label? And randomized withdrawal?

Yes, sure. Yes, happy to do it. Thanks for the question, David. So as a reminder, the study design is a randomized withdrawal design for CYPRESS, similar to the 170 study with some small differences in duration of the open label and randomized withdrawal period. But to answer your question, what happens after open label is that patients get randomized to either remain on ampreloxetine or go to placebo, and that is an eight-week duration for the open label period. So once they get through that eight weeks, then we will start working on cleaning the data and working toward a top-line result. Now, keep in mind, we're still early in the study conduct process, and we continue to add sites. But as Rick said in his opening remarks, we're approximately a year and a half from top-line data is our estimate today.

Dave, I think your next question was on YUPELRI economics.

Yes, ex-U.S. So there was a --Yes, that would be, ex-U.S. economics.

Yes, I can take that one, David. Okay. So yes, there's two components of the ex-U.S. economics, the first of which, since we just highlighted the China opportunity and the fact that Viatris were going to file the application next year. The economics are up to 52.5 million in milestones for development and sales. Now, of that 52.5, 45 is related to the monotherapy. So the 45 is in play right now. Of the 45 and this will be outlined in our 10-Q when we file in a couple days, 7.5 of that is related to a regulatory approval milestone. And the rest of the 37.5 relate to sales milestones, which we don't break out currently. So the next milestone for the China opportunity would be seven and a half if the China regulatory authorities approve the product. And then in addition to the development and sales milestones, we have low double-digit tiered royalties in China. Outside of China, which I think is probably going to be a bit of a smaller opportunity, we're actually already getting low double-digit to mid-team royalties. We have a little -- we had one recognized Q4 of last year. We have a tiny bit each quarter, but they're pretty much immaterial. I would focus most of the modeling on the China opportunity.

Great. Thank you.

Thank you. One moment for questions. Our next question comes from Douglas Tsao with H.C. Wainwright. You may proceed.

Hi. Good afternoon. Thanks for taking the question. So just maybe starting on YUPELRI, we saw this quarter sort of a new high in terms of your hospital market share at 16.1%. But if I look at the sort of hospital sales in terms of doses, it looks like it was relatively flat to the first quarter. So can you maybe just help us understand some of those dynamics? Because if I look at the share versus the first quarter, you're up like 120 basis points. So, some really nice performance there. So just what's going on in the overall market?

Rhonda, you want to describe the Q1 and then Q3?

Yes. So Doug, as you recall, Q1 was definitely a high performance quarter for the hospital business. Certainly we had some situation associated with the challenges and short acting shortages that I think certainly contributed a bit to that. As well as what we typically experience in Q3 of each year seasonally is the lower kind of opportunity and what is reflected with reduction in exacerbations, reduction in hospital admissions, as well as even doctor appointments for these patients. It's typically the lower of the year. But to look at the growth that certainly has returned within this quarter and seeing that build over two successful quarters at the beginning of the first half of the year, I'm very pleased to see the market share continue to grow. This being built off of the continued acceptance and adoption of protocols and formulary approvals, both in systems as well as individual accounts that the team has been able to accomplish. So that continuing to contribute to this ongoing build across the hospital business for the team. So that contributing to the 16.1% market share.

Okay. And as a follow up, when we look at the retail side, and I know that's not necessarily what you have as much focus on, we saw really nice quarter-on-quarter growth at 9%. We did see a slight decline in terms of the new to product Rx. So just to help us understand, you know, or put some context around that trend.

Yes. So, the refill certainly continuing to occur for those patients that had already received or had been prescribed in the prior quarter. So the TRx is continuing to build, which I think you already appreciate that growth. But looking at the metric or the indicator associated with new to product, seeing that typically to be lesser for most respiratory products, as I mentioned earlier, Q3 is typically for respiratory, the lower quarter.

Okay. And Rhonda, are most of the retail scripts originating from a hospitalization still?

We still see a majority of patients that are exposed to YUPELRI during in their inpatient stay, which I'll remind you is for, a shorter persistency. It averages around three and a half days per stay. And those patients exiting the majority are leaving with a script in hand to be prescribed in the outpatient or maintenance care setting.

Okay. Great. Thank you so much.

Thank you. [Operator Instructions] One moment for questions. Our next question comes from Eva Xia Privitera with TD Cowen. You may proceed.

Hi, congrats on the great quarter. And thanks for taking our questions. I have a question about YUPELRI. Can you maybe talk about YUPELRI’s growth trends in the DME segment versus retail, since it's the larger portion? And, how are you and your partners thinking about growth in that segment?

Yes. So, as I reflected in the call, we have, the challenge with the particular view not being real time for DME. It's due to the adjudication process associated with Medicare Part B scripts. And that lags approximately a quarter. So, the best I can reflect on performance for you in its totality is in contrast to Q2 performance. So, the DME space grew approximately 6% in Q2. And I'll contrast that to what we reported in the retail space, which was 8% for Q2. So, unfortunately, I don't have the latest DME view to offer, other than we continue to focus and ensure that for patients that are being supported and filled through that channel, get the best possible support to ensure that that progress is moving as quickly as possible and equating to the highest level of fulfilment, regardless of where they choose to go, whether that's DME or conventional retail.

Thanks, Rhonda. And a follow-up question on the PIFR-2 trial. Assuming that the trial is successful, since these patients are already on label, would publication of the data be gating to driving uptake? And what would be the potential timeline for publication?

I can take that, Rick?

Yes, go ahead.

So, you've hit the guiding factor head-on. Publication is vastly important, and the team will move as expeditiously as possible to ensure we are published in the highest standard peer-reviewed journal so that we will then have the ability to educate on those data.

Great. Thank you.

And given the variability on timelines associated with individual peer-reviewed journals, I can't really speak to one specifically.

Thank you.

Thank you. It appears we have no further questions on the phone. I'd now like to turn the conference back to Mr. Winningham for, please go ahead, sir.

Yes, thank you very much. I'd like to thank everyone for joining us today. We're pleased with the progress that we made this quarter. We look forward to continuing that progress in the fourth quarter and into 2024 as we really align resources behind the two growth drivers of the company, YUPELRI and ampreloxetine. So, thank you very much for joining us, and have a great day.

Thank you. This concludes today's conference call. We thank you for your participation. You may now disconnect.