INVA - NASDAQ

Michael W. Aguiar - President and Chief Executive Officer Eric D'Esparbes – SVP and Chief Financial Officer

Tyler Van Buren - Cowen and Company Aaron Gal - Sanford C. Bernstein & Co. Gena Wang - Leerink Partners LLC Brian Skorney - Robert W. Baird & Co. Stephen Willey – Stifel Nicolaus

Ladies and gentlemen, good afternoon. At this time, I would like to welcome everyone to the Theravance First Quarter 2015 Financial Results Webcast and 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] Today's conference is being recorded. And now I would like to turn the conference over to Eric D'Esparbes, Chief Financial Officer of Theravance. Please go ahead, sir.

Good afternoon, everyone and thank you for joining us. With me on the call today is Mike Aguiar, our Chief Executive Officer. On today's call, Mike will review the highlights from the quarter and I will review our financial results. Following our comments, we will open up the call for questions. Earlier today, Theravance issued a press release announcing recent corporate developments and fourth quarter and full year 2014 financial results. A copy of the press release can be found on our website. 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, plans, objectives, expectations, strategies and beliefs. These statements are based upon the information available to the Company today and Theravance assumes no obligation to update these statements as circumstances change. Future events and actual results could differ materially from those projected in the Company's forward-looking statements. Additional information concerning factors that could cause results to differ materially from our forward-looking statements are described in greater detail in the Company's press release and Form 10-K for the quarter ended March 31, 2015 to be filed with the Securities and Exchange Commission. I would now like to turn the call over to Mike Aguiar, our Chief Executive Officer. Mike.

Thank you Eric and good afternoon everybody. This is a very important time at Theravance and we are making good progress towards our 2015 goals. In particular I'm very pleased with last week’s approval by the FDA of BREO for the treatment of patients 18 years and older in the U.S. with asthma which according to IMS represents approximately 92% of total U.S. LABA ICS prescriptions for asthma. This is a significant catalyst for Theravance that provides an important new treatment option for patients and physicians dealing with a serious disease that substantially expands the market opportunity for BREO in the U.S. and it sets Theravance up for a successful 2015. In building Theravance as a standalone company, one of our primary objectives was to create an efficient low cost company with a short path to profitability. I'm pleased to report that in the first quarter of 2015 we have made further progress towards this goal by reducing operating expenses and expanding operating margin versus Q4 last year. Our second important goal of the spin was to return capital to shareholders. As part of this initiative we paid a cash dividend of $0.25 per share on March 31, 2015 and today declared another dividend of $0.25 payable on June 30 to stockholders of record as of the close of businesses on June 12, 2015. Turning now to our programs RELVAR/BREO is our lead respiratory program partnered with GSK for the treatment of patients with chronic obstructive pulmonary disease or COPD and asthma, it is a combination inhaled respiratory medicine consisting of vilanterol, a long-acting beta2 agonist or LABA, and fluticasone furoate, an inhaled corticosteroid, or ICS, both delivered in the ELLIPTA dry powder inhaler. As of March 31, 2015, this medicine has been approved in 58 countries and launched in 36. Total net sales for RELVAR/BREO during the first quarter of 2015 were approximately $60 million. Our second respiratory program with GSK, ANORO, is a combination dual bronchodilator medicine for the treatment of COPD consisting of the LABA vilanterol and the long-acting muscarinic antagonist, or LAMA umeclidinium. As of March 31, 2015, it has been approved in 50 countries and launched in 20. Total net sales for ANORO during the first quarter of 2015, was approximately $18 million. While we are still early in the launch cycle for both products, we're optimistic about the prospects for our portfolio. So far in 2015 we have continued to see further growth in volume and market share for both products. For example, according to IMS total U.S. prescription volumes increased by 35% for BREO and 46% for ANORO in Q1 2015 compared to Q4 2014. In the U.S. a number of positive events and changes are in process, first as we discussed on our last conference call the collaboration plan to grow product volume by making significant commercial investments in higher levels of couponing and gaining additional payer coverage with the cost of these initiatives being a wider growth to net spread. We believe these investments are paying off as total prescriptions for both products increased significantly during Q1 as discussed above. Second, new GSK management and commercial teams in the U.S. are now in place and the salesforce is being reorganized to create dedicated teams for BREO and for ANORO. As GSK mentioned during their call today, the asthma launch event in the U.S. will occur shortly and as part of a new launch for BREO in the U.S. We believe this new indication could provide a significant sales catalyst as asthma affects nearly 19 million adults in the U.S. We are supportive of these actions by GSK and believe they will have significant positive effect on the prospects to our portfolio. Outside the U.S. we continue to see volume growth as well. For example excluding the impact of Q4 stocking associated with the ending of Ryotan restrictions on BREO and currency fluctuations, net sales were up significantly in Q1. Additionally during their call earlier today, GSK forecast up to 16 new market launches with our products this year. As we have discussed before we can expect some lumpiness in reported net sales on a quarter-over-quarter basis as we are still early in the growth phase of our products and new country launches, normal wholesaler inventory fluctuations and currency movements may continue to influence our quarterly results. Looking forward, the next major 2015 catalyst for BREO is the SUMMIT study which evaluates the impact of BREO on all cause mortality in 16,000 patients with preexisting cardiovascular risk factors. We expect SUMMIT to readout in the second half of the year. If the results are positive this could be a significant differentiating feature compared to other LABA ICS products in the treatment of COPD and support the future use of BREO in this patient population. We remain optimistic in the long-term growth drivers for both products, these drivers include the recent approval by the FDA of the asthma indication, the potential for approval and launch of both products in additional countries, further optimization of the ongoing commercial activities especially in the U.S., the results from the SUMMIT mortality study with BREO expected in the second half of the year and results from the Salford Lung Study in 2016. Throughout the rest of the year, we will continue to work closely with our partner GSK as we pursue our goal of optimizing the growth and commercial success of both BREO and ANORO across the globe. I'll now turn the call over to Eric who will review our first quarter 2015 financial results. Eric.

Thanks, Mike. Before I present our Q1 financial results, I want to remind you that as a result of the separation of Theravance Biopharma from Theravance, Inc in mid 2014, there have been a number of adjusting entries to prior period that reflect the financial impact as discontinued operation accounting. This will result in limited comparability between Q1 financials, our previously reported results and our future operating results. Total revenues for the first quarter included $10.1 million of royalties earned and $0.2 million of revenues from collaborative arrangements offset by $3.5 million of amortization of capitalized fees from a related party. Royalty revenues earned include $9 million for BREO and $1.1 million for ANORO. As Mike stated earlier, while prescription trends for RELVAR/BREO and ANORO are continuing to show positive weekly growth during the first quarter, this growth was offset during Q1 by a few factors some of which we've discussed in our February call. First we experienced a widening growth to net spread reflective of improved coverage at lower net pricing especially with express script CVS Caremark and an extended coupon program by GSK. Both of which we view as important investments in the success of BREO and ANORO. Second Q4 2014 sales for RELVAR in Japan were higher associated with inventory stocking of one month dosage form due to the end of the Ryotan restrictions. Finally, we experienced foreign exchange headwinds related to the appreciation of the U.S. dollar especially against the euro as the appreciation of the U.S. dollar reached up to 20% in some markets across the globe from the previous quarter. Our operating costs decreased during the first quarter due to the completion of the transaction – transition activities following the separation of Theravance Biopharma. Total operating expense for the first quarter of 2015 were $6.2 million compared to $7.2 million in the fourth quarter of 2014 a decrease of $1 million. Sock based compensation expense was $1.9 million in the first quarter of 2015. We maintain our guidance level for our operating expenses composed of R&D and G&A costs before stock based compensation accruals in the range of between $17 million and $19 million for the full-year 2015. Cash, cash equivalent short-term investments, and marketable securities totaled $255.1 million as of March 31, 2015. For 2015 we will begin reporting adjusted EBITDA as a financial metric, we believe this metric is useful in assessing the contribution to our quarterly liquidity position coming from our operating activities without regards to financing methods, capital structure or non-cash charges. A reconciliation of the metric is included in our earnings press release. For the first quarter of 2015, we generated an adjusted EBITDA of $6.2 million compared to an adjusted EBITDA of $5 million in the fourth quarter of 2014. This increase in a cash generating ability of operations, results from a combination of steady royalty revenues and a continued optimization of our cost structure as a royalty management company. We believe our financial position is strong and remain comfortable with our current level of capital return to our shareholders, which we are maintaining through our second quarter dividend of $0.25 per share payable on June 30, 2015. And now I would like to turn the call over to Mike for final closing comments.

Thank you Eric. In summary I'm pleased with the progress of our programs and on increasing volume and getting approval for Asthma in the U.S., our primary focus for the remainder of 2015 will remain on maximizing the value of our base businesses collaboration with GSK. This includes working with GSK to optimize the commercial success of both BREO and ANORO and continuing the global rollout of both products. We're encouraged by the approval of BREO for asthma in the U.S. the recent commercial trends of both products and remain optimistic about the future prospects of Theravance. I would now like to turn the call over to the conference facilitator and open up the call for questions.

Our next question comes from Ronny Gal with Bernstein. Your line is open.

Thank you. Our next question comes from Gena Wang of Leerink Partners. Your line is open.

Thank you. [Operator Instructions] Our next question comes from Stephen Willey of Stifel. Your line is open.

Thank you. It appears we have no further question on the phone. I’d like to turn the conference back over to Mr. D'Esparbes for closing remarks.

All right. Thank you very much, operator. And thanks everyone for participating. Just to mention we will be participating at the BOMA Healthcare Conference next week and Mike will be presenting so hopefully we look forward to see some of you over there. Have a great day.