UPDATE 2-Theravance to split into two listed cos, shares jump
* Oone new company will focus on drugs under deal with GSK
* 1st-qtr loss $0.39/share vs. est loss $0.38/share
* Revenue down $125.8 mln at $1.3 mln (Adds comments from conference call, analyst; updates share price)
By Zeba Siddiqui
April 25 (Reuters) - Theravance plans to split into two publicly traded U.S. companies, separating some of its most advanced respiratory drugs under development with GlaxoSmithKline Plc from its other biopharmaceutical operations.
The move fuels speculation that the British drugmaker, which owns 27 percent of Theravance, could eventually buy out the U.S. company's most lucrative products.
On Thursday, Theravance shares jumped 10 percent to $33.50 in after-hours trading.
After the split, the company holding the respiratory drugs franchise will be called Royalty Management Co and the other, Theravance Biopharma, will focus on development of small-molecule compounds in rare disease areas.
"The objective here is to concentrate one set of assets that have a less overall development and regulatory risk and another set of assets that ... have more development and regulatory risk," Rick E Winningham, Theravance's chief executive of 12 years, told analysts on a conference call.
Cowen & Co analyst Kyle Rasbach said it had always been his contention that it made sense for Glaxo to acquire Breo and Anoro after there was some regulatory clarity on the products.
"I think (the split) makes it one step more likely," Rasbach said.
The stock of Theravance rose sharply in early March after Piper Jaffray said in a research report that Glaxo could take over Theravance if U.S. Food and Drug Administration ruled positively on the companies' respiratory drugs, branded Breo Ellipta and Anoro.
An advisory panel to the FDA recommended on April 17 that the agency approve Breo Ellipta to treat chronic obstructive pulmonary disease (COPD), a condition that includes emphysema, chronic bronchitis or both. The drugmakers are hoping the once-daily delivery of Breo will make their drug more attractive to patients.
Since then, Theravance shares have risen 10 percent.
The FDA is expected to issue its final decision on approval of Breo and Anoro this year and CEO Winningham said he was optimistic on the prospects of both drugs.
Under the division, Royalty Management will directly or indirectly hold and continue to manage the rights to the potential near-term respiratory product royalty revenues from Glaxo.
The outstanding convertible notes and milestone payments due to Glaxo after regulatory approval and launch of Breo and Anoro would remain as obligations of Royalty Management, Theravance said.
The company added it was evaluating the tax status of the distributions and expects the separation to take place by late 2013 or early 2014.
Under Theravance Biopharma would fall a number of early or mid-stage compounds such as those for gastrointestinal disorders and attention deficit hypersensitivity disorder.
Theravance Biopharma will remain based in the current headquarters at South San Francisco, California, and will be headed by Winningham, who will also initially become CEO of Royalty Management.
BofA Merrill Lynch and Centerview Partners LLC are financial advisors and Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP and Skadden, Arps, Slate, Meagher & Flom LLP are legal advisers to Theravance on the deal.
On Thursday, Theravance also reported a first-quarter net loss of $37.4 million, or 39 cents per share, compared with a profit of $84.6 million, or $1.01 per share, a year earlier.
Revenue fell by $125.8 million to $1.3 million. The steep fall in revenue reflected the scrapping in January of Theravance's global deal with Japan's Astellas Pharma Inc to develop and market its antibiotic Vibativ.
Analysts on average had expected a loss of 38 cents per share on revenue of $2.3 million, according to Thomson Reuters I/B/E/S.
Theravance shares rose to $33.50 in extended trading, after closing 1.24 percent higher at $30.92. (Reporting by Zeba Siddiqui in Bangalore; Editing by Don Sebastian, Maju Samuel)
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