The market has exhibited a fickle tendency towards the US biotechnology sector as a whole in recent months so it is worth reminding investors that our interest is focused on the specific and compelling attractions of individual biotechnology companies. Their return to form in recent weeks is pleasing but it is a drop in the ocean when compared to the long-term potential that they hold.June 2017
Theravance Biopharma is a US-listed biopharmaceutical company which is focused on developing potential best-in-class treatments for patients with a range of serious illnesses. The company is starting to benefit from an attractive royalty stream from Trelegy Ellipta, will soon see revenues from its profit share arrangement on Yupelri, and has a diversified development pipeline with considerable long-term potential across a wide range of conditions. Its management team is experienced in developing and commercialising treatments in a range of medical fields, with localised delivery for localised disease a key area of developmental focus.
The company was spun out of Theravance (now known as Innoviva) in 2014. We have been invested in the business since August 2015.
Investment case summary
The investment case for Theravance Biopharma is based primarily around an exciting and diverse pipeline of potential treatments currently in development. The business also benefits from the prospect of a growing royalty stream from its economic interest in Trelegy Ellipta, a GlaxoSmithKline and Innoviva product that was recently approved for use in patients suffering from chronic obstructive pulmonary disease (COPD). This asset has additional potential in asthma, with Phase III trial completion anticipated towards the end of this year.
In the gastrointestinal field, the company is developing a number of potential treatments for conditions such as ulcerative colitis and Crohn’s disease. In particular, its JAK-inhibitor program (TD-1473) looks very interesting – the company recently announced a lucrative global collaboration with Janssen on this asset. Meanwhile, in cardiovascular, the company is investigating TD-9855 as a potential treatment for neurogenic orthostatic hypotension (nOH) and, in respiratory, Yupelri (formerly known as revefenacin), which has been developed in partnership with Mylan, received approval for use in COPD patients in the US in November 2018.
Many of the programs in Theravance Biopharma’s pipeline are potential game-changers in their fields but its current market cap could be justified purely by the future revenue stream from Trelegy Ellipta. In our view, therefore, Theravance Biopharma’s share price continues to materially underappreciate the company’s considerable long-term potential. Following a non-dilutive debt financing in December 2018, the company is fully-funded to deliver its key value inflection points.
|Income Focus Fund||2.27%|
|Equity Income Fund||4.34%|
As at 31 March 2019
In order to manage the overall healthcare burden governments need to encourage innovative therapies that have the potential to reduce overall healthcare expenditure. These include new therapies that help to keep people out of hospital or advances in treatments that turn health conditions that were previously seen as terminal into chronic or even curable conditions.February 2017
Since our initial investment the shares have performed very well… The market does appear to be sitting up and taking notice of this exciting business but the share price continues to attribute very little value to the development pipeline. In our view Theravance Biopharma’s share price continues to materially underappreciate the business’ considerable long-term potential.September 2016