* 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
By Zeba Siddiqui
April 25 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
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
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
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
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
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
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)