Theravance Reports Third Quarter 2008 Financial Results

SOUTH SAN FRANCISCO, CA, Oct 23 (MARKET WIRE) --
Theravance, Inc. (NASDAQ: THRX) reported today its financial results for
the quarter ended September 30, 2008. Net loss for the third quarter of
2008 was $20.9 million, compared with $32.4 million for the same period
of 2007, a decrease of $11.5 million. Net loss per share was $0.34 for
the third quarter of 2008 compared with a net loss per share of $0.53 for
the third quarter of 2007.

"We made progress during the third quarter in our respiratory programs and
with the U.S. telavancin program," said Rick E Winningham, Chief Executive
Officer. "GSK has now completed enrollment in all five Phase 2b studies in
the Horizon program, enrolling approximately 3,000 patients in total. We
anticipate communicating the results from these studies late this year and
in early 2009. Last week, we announced that we believe the ATLAS site
inspection activities for telavancin have been successfully resolved. We
look forward to reviewing the telavancin cSSSI NDA at the upcoming FDA
Advisory Committee meeting in November. In Europe, Astellas and Theravance
recently made a decision following discussions with the CHMP to withdraw
the telavancin cSSTI application and Astellas currently intends to prepare
a new marketing authorization application, including data from the
hospital-acquired pneumonia Phase 3 studies."

Program Highlights

Respiratory Programs

Horizon

Enrollment in the Phase 2b asthma and chronic obstructive pulmonary
disease (COPD) studies of the lead long-acting beta2 agonist (LABA),
GW642444 ('444), is complete. We expect to report results for the Phase
2b asthma study of '444 during the fourth quarter of 2008 and for the
Phase 2b COPD study of '444 in early 2009.

Enrollment is also complete for three Phase 2b studies in patients with
mild, moderate, and severe asthma with the lead inhaled corticosteroid
(ICS), GW685698 ('698). We expect to concurrently report results from all
three '698 Phase 2b studies in early 2009.

Inhaled Bifunctional Muscarinic Antagonist-Beta2 Agonist (MABA) Program

We are formulating a plan with GlaxoSmithKline plc (GSK) for the further
development of GSK961081 ('081), the lead MABA compound for the treatment
of COPD. In July, we reported clinical results from a Phase 2 study with
'081 in COPD patients. In this study, '081 administered once daily to COPD
patients demonstrated 24-hour bronchodilation on hour 24 on day 14 which
was statistically significantly greater than placebo, and similar in
magnitude to a combination therapy active control of salmeterol dosed
twice daily plus tiotropium dosed once daily. '081 was generally well
tolerated throughout the 14-day study, and adverse events were generally
mild or moderate, with the most common adverse events being headache and
dizziness. We received a milestone payment of $10 million in July from
GSK in conjunction with the successful achievement of proof-of-concept in
the Phase 2 clinical study.

Inhaled Long-Acting Muscarinic Antagonist (LAMA) Program

We continue working with GSK to complete the return of the LAMA program
from GSK to Theravance. In July, we reported clinical results from a Phase
1 study of TD-4208, an investigational compound for the treatment of COPD
in the LAMA program. In that study, a single dose of TD-4208 administered
to healthy volunteers was generally well tolerated, with a similar
incidence of adverse events, all mild or moderate, to placebo. In
addition, TD-4208 demonstrated evidence of bronchodilation in volunteers
sensitive to muscarinic antagonists. We intend to explore partnerships
with other companies for the further development of TD-4208.

Bacterial Infections Programs

Telavancin

On October 14, 2008, we announced that the Anti-Infective Drugs Advisory
Committee of the U.S. Food and Drug Administration (FDA) will convene on
the morning of November 19, 2008 to review the New Drug Application (NDA)
for telavancin for the treatment of complicated skin and skin structure
infections (cSSSI) caused by Gram-positive bacteria, including resistant
pathogens such as methicillin-resistant Staphylococcus aureus (MRSA).
Based upon discussions with the FDA, we believe the site inspection issues
in the ATLAS program have been successfully resolved. The FDA requested
that the efficacy data from three clinical sites that enrolled 73 of the
total 1,867 patients from the ATLAS studies be removed from the efficacy
analysis for Advisory Committee review. The removal of these data had no
impact on the previously reported conclusions of the studies.

We plan on submitting to the FDA a NDA for telavancin for the treatment of
hospital-acquired pneumonia (HAP) caused by Gram-positive bacteria
including resistant pathogens such as MRSA either in the fourth quarter of
2008 or in early 2009.

Also, we recently announced that new telavancin data will be presented at
CHEST 2008, the annual meeting of the American College of Chest Physicians
(ACCP) in Philadelphia, PA on October 27, 2008 and at the 48th Annual
Interscience Conference on Antimicrobial Agents and Chemotherapy (ICAAC)
and the Infectious Diseases Society of America (IDSA) 46th Annual Meeting
to be held in Washington, D.C. from October 25-28, 2008. At CHEST, a
podium presentation titled, "Telavancin: A Novel Agent for
Ventilator-Associated Pneumonia Due to Staphylococcus aureus" and focusing
on subgroup data from the telavancin Phase 3 ATTAIN studies will be
presented by Dr. Andrew Shorr, M.D., M.P.H., Associate Director, Pulmonary
and Critical Care Medicine, Washington Hospital Center and Associate
Professor of Medicine, Georgetown University. At ICAAC/IDSA, telavancin
data will be featured in twenty-five posters or podium presentations.

Astellas Pharma Europe B.V., a European subsidiary of Astellas Pharma
Inc., voluntarily withdrew the European Marketing Authorization
Application (MAA) for telavancin for the treatment of complicated skin
and soft tissue infections (cSSTI) on October 20, 2008. Astellas and
Theravance have taken this decision based on communications from the
Committee for Medicinal Products for Human Use (CHMP) of the European
Medicines Agency (EMEA) that the data provided are not sufficient to
allow the Committee to conclude a positive benefit-risk balance for
telavancin for the sole indication of cSSTI at this time. Astellas
currently intends to prepare a new MAA with expanded clinical trial data
that was not available at the time of the initial application, including
data from the HAP Phase 3 studies.

Gastrointestinal (GI) Motility Dysfunction Program

We recently dosed the first subject in a Phase 1 drug-drug interaction
study with TD-5108, our lead compound in the program. We continue to
evaluate the potential of this compound in chronic idiopathic
constipation, constipation-predominant irritable bowel syndrome and other
indications, and we intend to explore partnerships with other companies
for the further development of TD-5108.

Financial Results

Revenue

Revenue was $6.0 million for the third quarter of 2008 compared with $5.7
million for the same period of 2007. This increase was due to higher
amortization of milestone payments received from the company's
partnerships with GSK and Astellas. All payments received to date under
these agreements are being amortized over the relevant performance
periods rather than being recognized when received.

Research and Development

Research and development expense for the third quarter of 2008 decreased
to $20.1 million from $32.0 million for the same period of 2007. Total
external research and development expense for the third quarter of 2008
was $5.0 million compared with $11.4 million for the same period in 2007.
The lower expenses in the third quarter of 2008 were primarily due to
decreased external clinical study costs associated with TD-5108, TD-1792,
and telavancin as well as lower employee related costs due to the
reduction in force announced in April 2008. Total research and
development stock-based compensation expense for the third quarter of
2008 was $2.9 million compared with $3.5 million in same period of 2007.

General and Administrative

General and administrative expense for the third quarter of 2008 decreased
to $6.5 million from $8.5 million for the same period in 2007. The lower
expense in the third quarter of 2008 was primarily due to lower employee
and facilities related costs due to the reduction in force announced in
April 2008. Total general and administrative stock-based compensation
expense for the third quarter of 2008 was $1.8 million compared with $2.4
million for the same period in 2007.

Restructuring Charges

The company incurred restructuring charges in the second and third
quarters of 2008 totaling $5.1 million. The charges resulted primarily
from the reduction in force initiated in April 2008 in response to the
completion of the company's Phase 3 development activities with
telavancin and to reduce its overall cash burn rate. The charges
consisted primarily of employee and severance benefits.

Cash and Cash Equivalents

Cash, cash equivalents and marketable securities totaled $218.8 million as
of September 30, 2008, a decrease of $13.5 million during the quarter. The
decrease was primarily due to cash used in operations and severance
related payments that were partially offset by a $10.0 million milestone
payment received from GSK for the successful achievement of
proof-of-concept in the MABA Phase 2 clinical study.

Conference Call and Webcast Information

As previously announced, the company has scheduled a conference call to
discuss this announcement beginning at 5:00 p.m. Eastern Daylight Time
today. To participate in the live call by telephone, please dial
877-397-0235 from the U.S., or 719-325-4855 for international callers.
Those interested in listening to the conference call live via the internet
may do so by visiting the company's web site at www.theravance.com. To
listen to the live call, please go to the web site 15 minutes prior to its
start to register, download, and install any necessary audio software.

A replay of the conference call will be available on the company's web
site for 30 days through November 22, 2008. An audio replay will also be
available through 11:59 p.m. Eastern Standard Time on November 6, 2008 by
dialing 888-203-1112 from the U.S., or 719-457-0820 for international
callers, and entering confirmation code 4772510.

About Theravance

Theravance is a biopharmaceutical company with a pipeline of internally
discovered product candidates. Theravance is focused on the discovery,
development and commercialization of small molecule medicines across a
number of therapeutic areas including respiratory disease, bacterial
infections and gastrointestinal motility dysfunction. The company's key
programs include: telavancin for the treatment of serious Gram-positive
bacterial infections with Astellas Pharma Inc., the Horizon program and
Bifunctional Muscarinic Antagonist-Beta2 agonist (MABA) program with
GlaxoSmithKline plc, and the Gastrointestinal Motility Dysfunction
program. By leveraging its proprietary insight of multivalency toward
drug discovery focused primarily on validated targets, Theravance is
pursuing a next generation strategy designed to discover superior
medicines in areas of significant unmet medical need. For more
information, please visit the company's web site at www.theravance.com.

THERAVANCE(R), the Theravance logo, and MEDICINES THAT MAKE A
DIFFERENCE(R) are registered trademarks of Theravance, Inc.

This press release contains and the conference call will contain certain
"forward-looking" statements as that term is defined in the Private
Securities Litigation Reform Act of 1995 regarding, among other things,
statements relating to goals, plans, objectives and future events.
Theravance intends such forward-looking statements to be covered by the
safe harbor provisions for forward-looking statements contained in Section
21E of the Exchange Act and the Private Securities Litigation Reform Act
of 1995. Examples of such statements include statements relating to the
goals and expected timing of clinical studies and data from studies,
statements regarding the potential benefits and mechanisms of action of
drug candidates, statements concerning the timing of seeking regulatory
approval of our product candidates (including with respect to telavancin
statements regarding any expectation that regulatory authorities will
approve telavancin on the basis of existing preclinical and clinical data
or at all), the enabling capabilities of Theravance's approach to drug
discovery and its proprietary insights, statements concerning
expectations for product candidates through development and
commercialization and projections of revenue or operating cost savings
and restructuring charges and other financial items. These statements are
based on the current estimates and assumptions of the management of
Theravance as of the date of this press release and the conference call
and are subject to risks, uncertainties, changes in circumstances,
assumptions and other factors that may cause the actual results of
Theravance to be materially different from those reflected in its
forward-looking statements. Important factors that could cause actual
results to differ materially from those indicated by such forward-looking
statements include, among others, risks related to delays or difficulties
in commencing or completing clinical studies, the potential that results
of clinical or preclinical studies indicate product candidates are unsafe
or ineffective, our dependence on third parties in the conduct of our
clinical studies, delays or failure to achieve regulatory approvals,
risks of relying on third-party manufacturers for the supply of our
product candidates and risks of collaborating with third parties to
develop and commercialize products. These and other risks are described
in greater detail under the heading "Risk Factors" contained in Item 1A
of Theravance's Quarterly Report on Form 10-Q filed with the Securities
and Exchange Commission (SEC) on August 7, 2008 and the risks discussed
in our other periodic filings with the SEC. Given these uncertainties,
you should not place undue reliance on these forward-looking statements.
Theravance assumes no obligation to update its forward-looking
statements.

THERAVANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
(unaudited) (unaudited)

Revenue (1) $ 5,999 $ 5,669 $ 17,149 $ 16,372

Operating expenses:
Research and development
(2) 20,075 31,964 66,850 124,319
General and
administrative (2) 6,494 8,462 22,916 26,772
Restructuring charges 50 -- 5,113 --

---------- ---------- ---------- ----------
Total operating expenses 26,619 40,426 94,879 151,091
---------- ---------- ---------- ----------

Loss from operations (20,620) (34,757) (77,730) (134,719)

Interest and other income,
net 1,209 2,414 4,176 7,855
Interest expense (1,517) (21) (4,164) (75)
---------- ---------- ---------- ----------
Net loss $ (20,928) $ (32,364) $ (77,718) $ (126,939)
========== ========== ========== ==========
Net loss per share $ (0.34) $ (0.53) $ (1.27) $ (2.10)
========== ========== ========== ==========

Shares used in computing
net loss per share 61,545 60,664 61,247 60,384
========== ========== ========== ==========

(1) Revenue includes amounts from GSK, a related party, of $3.3 million
and $9.0 million for the three and nine months ended
September 30, 2008, respectively, and $2.8 million and $8.5 million
for the three and nine months ended September 30, 2007, respectively.

(2) Amounts include stock-based compensation expense for the three and
nine months ended September 30 as follows (in thousands):

Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
2008 2007 2008 2007
-------- -------- -------- --------
(unaudited) (unaudited)

Research and development $ 2,947 $ 3,514 $ 7,539 $ 10,078
General and administrative 1,810 2,359 5,863 7,089
-------- -------- -------- --------
Total stock-based compensation expense $ 4,757 $ 5,873 $ 13,402 $ 17,167
======== ======== ======== ========

THERAVANCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)

September 30, December 31,
2008 2007
------------- -------------
(unaudited) (2)

Assets
Cash, cash equivalents and marketable
securities $ 218,837 $ 126,816
Other current assets 8,890 7,271
Marketable securities - non-current -- 2,456
Property and equipment, net 17,328 20,091
Other assets 10,207 5,349
------------- -------------
Total assets $ 255,262 $ 161,983
============= =============

Liabilities and stockholders' equity (net
capital deficiency)
Current liabilities, net of current portion
of deferred revenue $ 19,709 $ 33,014
Deferred revenue (1) 182,506 188,655
Convertible subordinated notes 172,500 --
Other long-term liabilities 5,699 6,578
Stockholders' equity (net capital
deficiency) (125,152) (66,264)
------------- -------------
Total liabilities and stockholders' equity
(net capital deficiency) $ 255,262 $ 161,983
============= =============

(1) Deferred revenue includes the current portion of $24.0 million
and $22.5 million as of September 30, 2008 and December 31, 2007,
respectively. Deferred revenue is the result of milestone payments
that were earned under the company's collaborations with Astellas
and GSK.

(2) The condensed consolidated balance sheet amounts at
December 31, 2007 are derived from audited financial statements.

Contact Information:
Michael W. Aguiar
Senior Vice President and Chief Financial Officer
650-808-4100
Email Contact

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