Intent on bouncing back from a pair of later-phase clinical trial failures, Theravance Biopharma said it will eliminate about 75% of its workforce—270 jobs—and slash its R&D budget next year through a restructuring that will refocus the company on respiratory drugs.
Theravance said approximately 75% of the job cuts are expected to be completed in November, and the rest in February 2022. The company estimated that the layoffs would cost it approximately $10 million to $12 million through the first quarter of 2022, in both cash and accelerated vesting of equity awards for severance and other costs—but would ultimately save Theravance approximately $165 million in operating expenses next year.
The job reduction was announced Wednesday, the same day Theravance acknowledged that its wholly-owned symptomatic neurogenic orthostatic hypotension (nOH) candidate ampreloxetine (TD-9855) failed the Phase III Study 0169 (NCT03750552) by missing its primary endpoint of improvement in OHSA #1 in patients receiving the drug for four weeks compared to placebo. OHSA #1—part of the 0–10 scale Orthostatic Hypotension Questionnaire—measures patients’ dizziness, lightheadedness, feeling faint, or feeling like they might blackout.
Study 0169 (NCT03750552) was a four-week, randomized, double-blind, placebo-controlled, parallel-group study to evaluate the efficacy and safety of ampreloxetine compared to placebo in 195 patients with symptomatic nOH. Theravance said it will determine “appropriate” next steps for two other clinical trials assessing ampreloxetine: Study 0170, which is assessing the drug in treating symptomatic nOH in patients with primary autonomic failure (NCT03829657; more than 75% enrolled) and Study 0171 (NCT04095793), a Phase III open-label extension study in patients with primary autonomic failure.
Last month Theravance acknowledged that izencitinib (TD-1473), a norepinephrine reuptake inhibitor being co-developed with Johnson & Johnson’s Janssen Biotech, failed a Phase IIb/III trial in patients with ulcerative colitis by missing its primary endpoint: A change in the total Mayo score at week eight, relative to placebo. Izencitinib also failed a key secondary endpoint of clinical remission at week 8, relative to placebo. Based on the disappointing topline results, Theravance said it would minimize future expenses associated with the program.
Theravance once envisioned izencitinib as a competitor to Janssen’s Stelara® (ustakinumab), AbbVie’s multi-indication blockbuster Humira® (adalimumab), and a newer rival, Zeposia® (ozanimod), which won FDA approval in May and is being marketed by Bristol-Myers Squibb’s Celgene subsidiary.
“Given the recent results from our late-stage development programs, we have made the difficult but necessary decision to focus our resources on our most promising respiratory programs and reduce the size of the organization,” Theravance chairman and CEO Rick E. Winningham said in a statement. “I am confident these actions will help us to continue making transformational medicines aimed at improving the lives of patients suffering from serious respiratory illnesses while creating value for our shareholders.”
Incorporated in the Cayman Islands, Theravance became a tax resident of Ireland in 2015, and has a U.S. subsidiary based in South San Francisco, CA.
Investors responded to Theravance’s planned restructuring and ampreloxetine’s clinical setback with a stock selloff that sent the company’s shares falling 15%, to $6.84 at the close of trading Wednesday from Tuesday’s closing price of $8.04.
“This comes as a major disappointment compared to our expectations,” Geoffrey C. Porges, MBBS, director of therapeutics research and a senior research analyst at SVB Leerink, wrote Wednesday in a research note.
As part of its restructuring, which it calls “A New, Focused Theravance Biopharma,” the company said it will pivot toward respiratory drugs—a shift dismissed by Porges: “We expect this will be of little interest to most investors.”
The only two exceptions will be izencitinib’s ongoing Phase II Crohn’s disease Study 0157 (NCT03758443), set to read out results in late fourth quarter 2021 or early first quarter 2022—and ampreloxetine’s Study 0170.
The failure of izencitinib in UC [ulcerative colitis] lowers our confidence ahead of the readout of data from the Phase II study in Crohn’s,” Brian P. Skorney, senior research analyst with Baird, wrote August 24 in a research note.
“In our view, UC was always the more reasonable indication and Crohn’s more of a Hail Mary. JAK [Janus kinase] inhibition has been much more demonstrably effective in UC than Crohn’s. Additionally, we think the nature of the disease makes a gut-restricted option less likely to work in Crohn’s compared to UC,” Skorney explained. “As such, we expect the data will not support continued development of izencitinib in Crohn’s, as well.”
Theravance’s respiratory pivot starts with its new, most advanced pipeline candidate nezulcitinib (TD-0903), an inhaled drug initially being developed for acute lung injury. Nezulcitinib is a lung-selective, nebulized pan-JAK inhibitor designed for delivery by nebulizer into patients’ lungs when the oxygen in their bloodstream begins to drop.
In June, nezulcitinib showed mixed results in a Phase II study (NCT04402866) that assessed the drug in 235 hospitalized patients with confirmed COVID-19 associated acute lung injury and impaired oxygenation. The randomized, double-blind, placebo-controlled study did not meet the primary endpoint: number of respiratory failure-free days (RFDs) from randomization through Day 28 in the intent-to-treat (ITT) population. However, nezulcitinib showed a favorable trend in improvement when compared to placebo in 28-day all-cause mortality rate.
Under its previous name of TD-0903, Theravance had envisioned the drug as a COVID-19 candidate; it is among more than 300 candidates listed in GEN’s COVID-19 Drug & Vaccine Tracker.
“Putting the brakes on”
In February, Theravance trumpeted the drug’s positive results in a Phase II trial. All three doses studied in the placebo-controlled trial generated high percentages of patients who were alive and free of respiratory failure 28 days after once-daily treatment administered over seven days. Among the six patients who received the highest dose (10 mg), all six were alive and respiratory failure-free on day 28. Similar positive results also occurred in 86% (six of seven patients) receiving the 3 mg dose, and 83% (five of six patients) receiving the 1 mg dose.
‘We’re trying to put the brakes on that hyperinflammatory stage,” Winningham told GEN Edge last winter. “I think if TD-0903 is successful in COVID, it’s a real game-changer for the program, and for inhaled JAK inhibition overall.”
Porges was among analysts who enthused over nezulcitinib earlier this year: “This program has tended to be disregarded by investors, but the dose-dependent improvement in outcomes seen in the small trial offer tantalizing hints of real activity and benefit, and are likely to garner considerable attention in coming days.”
Theravance’s two marketed drugs carry respiratory indications: Yupelri®, an inhaled maintenance treatment for chronic obstructive pulmonary disease (COPD) co-developed with Mylan (since merged with Pfizer’s Upjohn division to form Viatris); and Trelegy Ellipta® (fluticasone/umeclidinium/vilanterol), which is indicated for COPD and asthma, and was developed by Theravance’s predecessor company Theravance Inc. with Glaxo Group, whose affiliates include GlaxoSmithKline (GSK).
During the second quarter, Trelegy generated $405 million in net sales and Yupelri, $42 million. Theravance cited Bloomberg estimates from a consensus of analysts that Trelegy is on track to reach global peak sales of $3 billion and Yupelri, more than $400 million in U.S. peak sales.
Theravance is entitled to 35% of profits and losses on Yupelri (the rest goes to Viatris), as well as tiered royalties of 5.5% to 8.5% paid by GSK on worldwide net sales of Trelegy Ellipta, which won FDA approval in 2017. However, Theravance is enmeshed in a legal dispute over the royalties with Theravance’s predecessor, which renamed itself Innoviva in 2016.
“Short of announcing an outright sale of the two tangible assets (Trelegy royalties and Yupelri profit share), investors are unlikely to see any opportunity for realization of their value, and to expect continued value destruction in terms of capital allocation,” Porges warned. “TBPH’s access to Trelegy is at risk given their ongoing litigation with Innoviva, and the company has lost all credibility with respect to its R&D investments.”
Theravance’s restructuring will also include drastic cuts in two key areas of corporate spending.
As part of its restructuring, Theravance said its R&D budget will be trimmed this year from between $195 million to $225 million as originally forecast to investors, to between $180 million and $190 million according to updated guidance.
In 2022, however, Theravance’s R&D budget will be chopped to between $55 million to $65 million, the company stated in a preliminary guidance to investors.
Also to be chopped next year is Theravance’s spending on selling, general, and administrative (SG&A) expenses, to between $30 million and $40 million, from a projected $70 million to $80 million in 2021—down from the company’s initial guidance of $80 million to $90 million.