Theravance Biopharma, Inc. (TBPH)

ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Forward-Looking Statements

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You should read the following discussion in conjunction with our condensed consolidated financial statements (unaudited) and related notes included elsewhere in this report. This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements involve risks, uncertainties, and assumptions. All statements in this report, other than statements of historical facts, including, without limitation, the statements in Note 1 of the Notes to Condensed Consolidated Financial Statements, Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Part II, Item 1A. “Risk Factors” included in this Form 10-Q regarding the pending merger of a wholly owned subsidiary of Zymeworks Inc. (“Zymeworks”) with and into Theravance Biopharma, Inc. (“we,” “our,” “Theravance Biopharma” or the “Company”), with the Company continuing as the surviving company and becoming a wholly owned subsidiary of Zymeworks as a result of the merger, and statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans, intentions, designs, expectations, and objectives are forward-looking statements. The words “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “designed,” “developed,” “drive,” “estimate,” “expect,” “forecast,” “goal,” “indicate,” “intend,” “may,” “mission,” “opportunities,” “plan,” “possible,” “potential,” “predict,” “project,” “pursue,” “represent,” “seek,” “suggest,” “should,” “target,” “will,” “would,” and similar expressions (including the negatives thereof) are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These statements reflect our current views with respect to future events or our future financial performance, are based on assumptions, and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We may not actually achieve the plans, intentions, expectations or objectives disclosed in our forward-looking statements and the assumptions underlying our forward-looking statements may prove incorrect. Therefore, you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions, expectations, and objectives disclosed in the forward-looking statements that we make. Factors that we believe could cause actual results or events to differ materially from our forward-looking statements include, but are not limited to those discussed in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2025. Our forward-looking statements in this report are based on current expectations, and we do not assume any obligation to update any forward-looking statements for any reason, even if new information becomes available in the future. When used in this report, all references to “Theravance Biopharma”, the “Company”, or “we” and other similar pronouns refer to Theravance Biopharma, Inc. collectively with its subsidiaries.

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Management Overview

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Theravance Biopharma is a biopharmaceutical company primarily focused on the development and commercialization of medicines. Our focus is to deliver medicines that make a difference® in people’s lives.

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In pursuit of our purpose, we leverage decades of expertise, which has led to the development of the United States (“US”) Food and Drug Administration (the “FDA”) approved YUPELRI® (revefenacin) inhalation solution indicated for the maintenance treatment of patients with chronic obstructive pulmonary disease (“COPD”).

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Significant Developments - First Half of 2026

Ampreloxetine Phase 3 Clinical Study Top-line Results

On March 3, 2026, we announced that our ampreloxetine Phase 3 clinical study (CYPRESS) in development for the treatment of symptomatic neurogenic orthostatic hypotension in patients with multiple system atrophy did not meet its primary endpoint in the Orthostatic Hypotension Symptom Assessment composite score. As a result of this outcome, we are winding down the CYPRESS program, subject to certain restrictions set forth in the Merger Agreement

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between us and Zymeworks, while continuing certain targeted regulatory, scientific and intellectual property research and development activities to evaluate potential future regulatory and strategic opportunities and maximize the value of the program and related assets, including with respect to the CVR pursuant to the Merger Agreement (each defined below).

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Strategic Review Committee

In connection with the CYPRESS study results, the Strategic Review Committee of our Board of Directors (the "Committee") accelerated its ongoing review of alternatives to maximize value for shareholders. Since its formation in 2024, the Committee has been working on an ongoing basis with Lazard, its independent financial advisor, to evaluate opportunities available to the Company, including under multiple potential outcomes for the CYPRESS study. Building upon this work, the Committee has been acting with urgency to evaluate a broad range of value maximizing and tax efficient alternatives, including but not limited to a sale of the Company.

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Organizational Restructuring

Beginning in March 2026, we began implementing an organizational restructuring (the “Restructuring”) to streamline costs and align our resources with our commercial focus on YUPELRI. The Restructuring involves winding down our R&D function and significantly reducing our G&A function. The Restructuring is expected to reduce operating expenses by approximately 60%, relative to 2025 operating expenses of $111.1 million. The full run-rate cost savings of approximately $70 million are expected to be realized beginning in the second half of 2026.

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Agreement to be Acquired by Zymeworks

On June 28, 2026, the Company entered into an Agreement and Plan of Merger with Zymeworks and Zymeworks Merger Sub 1, an exempted company with limited liability incorporated under the laws of the Cayman Islands and a wholly owned subsidiary of Zymeworks (“Merger Sub”). Such Agreement and Plan of Merger, as may be amended, supplemented and restated from time to time, including the disclosure letters thereto, is referred to herein as the “Merger Agreement.” Pursuant to the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving company and becoming a wholly owned subsidiary of Zymeworks as a result of the Merger (the “Surviving Company”).

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At the effective time of the Merger (the “Effective Time”), each ordinary share issued and outstanding immediately prior to the Effective Time (other than each ordinary share (i) owned by the Company as a treasury share or by any direct or indirect subsidiary of the Company immediately prior to or at the Effective Time, (ii) held by Zymeworks or any direct or indirect subsidiary of Zymeworks immediately prior to or at the Effective Time, and (iii) that is issued and outstanding immediately prior to the Effective Time and is held by a shareholder who has validly exercised and not withdrawn or lost such shareholder’s right to dissent from the Merger pursuant to Section 238 of the Companies Act (As Revised) of the Cayman Islands) will be canceled and converted into the right to receive (i) $17.00 in cash, without interest and less any applicable withholding taxes (the “Per Share Cash Consideration”), and (ii) one contingent value right per ordinary share (each, a “CVR”), which will represent the right to receive a contingent payment equal to the CVR Payment Amount (as described below), if any, at the times and subject to the terms and conditions provided for in the Merger Agreement and the CVR Agreement (as defined in the Merger Agreement), in cash, without interest and less any applicable withholding taxes. Each CVR represents the contingent right to receive, subject to the terms and conditions of the Merger Agreement and the CVR Agreement:

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The CVRs and the possibility of receiving any payment pursuant to the CVRs are highly speculative and subject to numerous factors outside the control of Zymeworks or its affiliates. There can be no assurance that any transaction that may give rise to any payment pursuant to the CVRs will be executed or that any payment pursuant to the CVRs will ever be paid.

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The consummation of the Merger is subject to certain customary closing conditions, including, among others, (i) approval of the Merger Agreement by the affirmative vote of holders of ordinary shares representing at least two-thirds of the ordinary shares who, being entitled to do so, attend in person or by proxy and vote as a single class at an extraordinary general meeting where a quorum is present, (ii) the absence of a law or order remaining in effect which prohibits, restrains, makes illegal or enjoins the consummation of the Merger, (iii) the expiration or termination of the waiting period (and any extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 applicable to the Merger, (iv) the accuracy of the parties’ respective representations and warranties contained in the Merger Agreement (subject in certain instances to customary materiality thresholds), (v) the performance of the parties’ respective covenants contained in the Merger Agreement in all material respects, and (vi) solely as relates to Zymeworks’ obligation to consummate the Merger, the absence of any Material Adverse Effect (as defined in the Merger Agreement).

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Entry into the Merger Agreement was the culmination of a comprehensive strategic review process conducted by the Strategic Review Committee of our Board of Directors. The Merger is currently expected to be consummated in the second half of 2026. If the Merger is complet

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Management’s Discussion and Analysis (“MD&A”) is intended to facilitate an understanding of our results of operations, as well as our liquidity and capital resources. Additionally, it describes accounting policies and estimates that management has deemed as “critical accounting policies and estimates.” This MD&A should be read in conjunction with our consolidated financial statements and notes included in this Annual Report on Form 10-K. The information contained in this MD&A or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, our operating expenses, and future payments under our collaboration agreements, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Such statements are based upon current expectations that involve risks and uncertainties. You should review the section entitled “Risk Factors” in Item 1A of Part I above for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. See the section entitled “Special Note regarding Forward-Looking Statements” on page 3 for more information.

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Management Overview

Theravance Biopharma, Inc. (“we,” “our,” “Theravance Biopharma” or the “Company”) is a biopharmaceutical company primarily focused on the development and commercialization of medicines. Our focus is to deliver medicines that make a difference® in people’s lives.

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In pursuit of our purpose, we leverage decades of expertise, which has led to the development of the United States (“US”) Food and Drug Administration (the “FDA”) approved YUPELRI® (revefenacin) inhalation solution indicated for the maintenance treatment of patients with chronic obstructive pulmonary disease (“COPD”).

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Recent Significant Developments

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Ampreloxetine Phase 3 Clinical Study Top-line Results

On March 3, 2026, we announced that our ampreloxetine Phase 3 clinical study (CYPRESS) in development for the treatment of symptomatic neurogenic orthostatic hypotension in patients with multiple system atrophy did not meet its primary endpoint in the Orthostatic Hypotension Symptom Assessment composite score. As a result of this outcome, we have decided to wind down the ampreloxetine program.

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Strategic Review Committee

In connection with the CYPRESS study results, the Strategic Review Committee of our Board of Directors (the "Committee") is accelerating its ongoing review of alternatives to maximize value for shareholders. Since its formation in 2024, the Committee has been working on an ongoing basis with Lazard, its independent financial advisor, to evaluate opportunities available to the Company, including under multiple potential outcomes for the CYPRESS study. Building upon this work, the Committee will act with urgency to evaluate a broad range of value maximizing and tax efficient alternatives, including but not limited to a sale of the Company. There can be no assurance that the Committee's strategic review process will result in any transaction. We do not intend to disclose further developments on this review process unless and until it determines that such disclosure is appropriate or necessary. As we proceed with the orderly wind down of the ampreloxetine program, we will complete additional analyses of the CYPRESS dataset and Phase 3 program, in consultation with external experts, to assess whether the data merits further regulatory discussion. This assessment is intended to provide the Committee with additional clarity regarding any remaining value in ampreloxetine for our shareholders. There can be no assurance that any additional regulatory engagement will occur.

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Organizational Restructure

While the Committee accelerates its review, we are implementing an organizational restructuring (the “Restructuring”) to streamline costs and align our resources with our commercial focus on YUPELRI. The Restructuring will involve winding down our R&D function and significantly reducing our G&A function. The Restructuring is

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expected to reduce operating expenses by approximately 60%, relative to 2025 operating expenses of $111.1 million. The full run-rate cost savings of approximately $70 million are expected to be realized beginning in the third quarter of 2026.

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YUPELRI Net Sales Growth

In 2025, YUPELRI experienced net sales growth and reached launch-to-date highs in annual net sales and brand profitability. Through the combined commercialization efforts with our partner Viatris Inc., total YUPELRI net sales increased by 12% to $266.6 million in 2025 compared to 2024. Customer demand grew 7% in 2025 compared to 2024. In addition, in January 2026, we received a $25.0 million milestone payment for the achievement of $250.0 million in US net sales in 2025.

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Sale of TRELEGY® Royalties

In June 2025, we sold our remaining royalty interest in the global net sales of TRELEGY to GSK plc for $225.0 million while retaining our right to receive up to $150.0 million in remaining potential milestone payments from Royalty Pharma Investments. The sales transaction represented the first outcome of the ongoing efforts of the Committee to assess all strategic alternatives available to us to unlock shareholder value.

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Achievement of $50.0 Million TRELEGY® Royalty Milestone Payment for 2025

In February 2026, we received a $50.0 million maximum milestone payment from Royalty Pharma Investments associated with the achievement of certain minimum royalty payments related to 2025 TRELEGY global net sales. As of December 31, 2025, we are eligible to receive up to $100.0 million in remaining milestone payments related to TRELEGY’s 2026 global net sales. TRELEGY’s 2025 global net sales of $3.91 billion would exceed the thresholds required to achieve the $100.0 million milestone in 2026 (based on $3.51 billion of global net sales).

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See “Item 1. Business” starting on page 4 for a more complete discussion of our business.

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Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with US Generally Accepted Accounting Principles (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities, and other related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies and estimates discussed below are essential to understanding our operating results and financial condition, as these policies and estimates relate to the more significant areas involving management’s judgments.

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Future Royalty Payment Contingency

We treat contingent liabilities related to sale of future royalties as debt financings, amortized under the effective interest method over the estimated life of the related expected royalty stream. The contingent liabilities related to sale of future royalties and the debt amortization are based on current estimates of the amount and timing of future royalty payments. We periodically reassess the amount and timing of probability-adjusted estimated royalty payments based on internal sales projections and external information from market data sources, which are considered Level 3 inputs. To the extent our estimates of the amount and timing of future royalty payments are materially greater or less than previous estimates, we will prospectively adjust the amortization of the contingent liability and effective interest rate.

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Results of Operations

The following tables set forth our results of operations and management’s commentary for the 2025 period compared to the 2024 period.

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Revenue

While Viatris Inc. (“Viatris”) records the total net sales of YUPELRI within its own financial statements, our implied 35% YUPELRI revenue, as compared to the prior year period, was as follows:

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Our recognized revenue, as compared to the prior year period, was as follows:

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NM: Not Meaningful

We are entitled to a share of US profits and losses (65% to Viatris; 35% to Theravance Biopharma) received in connection with YUPELRI net sales. In accordance with the applicable accounting guidance, amounts receivable from Viatris in connection with the commercialization of YUPELRI are recorded within the consolidated statements of operations as revenue from “Viatris collaboration agreement”. Any reimbursement from Viatris attributed to the 65% cost-sharing of our R&D expenses is characterized as a reduction of R&D expense, as we do not consider performing R&D services for reimbursement to be a part of our ordinary operations.

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In 2025 and 2024, we recognized $75.0 million and $64.4 million, respectively, in revenue from the Viatris collaboration agreement, which represented an increase of 16%. The increase was primarily attributed to higher net sales of YUPELRI, which grew 12% and was driven by customer demand growth of 7% and improved net pricing due to favorable channel mix. We view customer demand as the primary driver for the brand and believe improvements to net pricing will likely moderate in the future.

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In 2025, we also recognized $32.5 million in licensing and milestone revenue comprised of (i) $25.0 million related to the achievement of a YUPELRI US net sales milestone and (ii) $7.5 million related to YUPELRI’s regulatory approval by China’s National Medical Products Administration (“NMPA”).

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Research and Development

Our R&D expenses consist primarily of employee-related costs, external costs, and various allocable expenses. We budget total R&D expenses on an internal department level basis, and we manage and report our R&D activities across the following four cost categories:

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