Why Theravance Biopharma Shares Are Soaring

Shares of Theravance Biopharma Inc. (NASDAQ: TBPH) saw a solid gain on Wednesday after the company announced a global collaboration with Johnson & Johnson (NYSE: JNJ) subsidiary, Janssen Biotech. The collaboration is for TD-1473 and related backup compounds for inflammatory intestinal diseases, including ulcerative colitis and Crohn’s disease.

The plan is for Theravance together with Janssen to jointly develop and commercialize TD-1473 in inflammatory intestinal diseases, with the two companies sharing profits in the United States and expenses related to a potential Phase 3 program (67% to Janssen; 33% to Theravance). Also Theravance would receive double-digit tiered royalties on ex-U.S. sales.

Under the terms of the agreement, Theravance will receive an upfront payment of $100 million and will be eligible to receive up to an additional $900 million in potential payments, if Janssen elects to remain in the collaboration following the completion of certain Phase 2 activities.

In 2018, Theravance expects to initiate a large, Phase 2b/3 adaptive design induction and maintenance study in ulcerative colitis with TD-1473. Also the company is planning to initiate a Phase 2 study in Crohn’s disease in 2018. Following completion of the Phase 2 Crohn’s study and the Phase 2b induction portion of the ulcerative colitis study, Janssen can elect to enter into an exclusive license arrangement by paying Theravance a fee of $200 million.

Rick E. Winningham, board chair and chief executive of Theravance, commented:

Internally, we have been very excited about the potential of TD-1473 to serve as a transformational medicine designed to offer the proven therapeutic activity of JAK inhibitors without the safety concerns associated with systemic JAK exposure. We believe this transaction can accelerate the development of TD-1473 and maximize the potential value of the program to Theravance Biopharma. Janssen’s expertise and experience from multiple clinical development programs in both ulcerative colitis and Crohn’s disease, across a range of mechanisms of action, will be important in the development, regulatory, and commercial path forward for this program.

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Shares of Theravance were last seen up about 20% at $29.35, with a consensus analyst price target of $36.00 and a 52-week range of $22.90 to $43.44.

Johnson & Johnson traded up 0.5% at $132.44, with a 52-week range of $113.15 to $148.32 and a consensus price target of $149.68.