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.

Management Overview

Theravance Biopharma is a biopharmaceutical company primarily focused on the discovery, development and commercialization of respiratory medicines. Our core purpose is to create medicines thatmake a difference® in people’s lives.

In pursuit of our purpose, we leverage decades of respiratory expertise to discover and develop transformational medicines that make a difference. These efforts have led to the development of the US FDA approved YUPELRI® (revefenacin) inhalation solution indicated for the maintenance treatment of patients with COPD. Our respiratory pipeline of internally discovered programs is targeted to address significant patient respiratory needs.

We have an economic interest in potential future payments from GSK pursuant to our agreements with Innoviva” relating to certain programs, including TRELEGY.

Strategic Actions to Focus on Respiratory Diseases

Given clinical results from our late-stage development programs, in September 2021, our board of directors approved a plan to focus our resources on our most promising respiratory programs and reduce the size of the Company in order to maximize shareholder value. At completion, the corporate restructuring (the “Restructuring”) will result in us reducing headcount by approximately 75%, an estimated 270 positions, through a reduction in our workforce. Approximately 75% of the total reduction in workforce occurred at the end November 2021, and the remainder will be completed at the end of February 2022.

As a result of the Restructuring, we expect to realize estimated operating expense savings (excluding share-based compensation and any one-time restructuring, severance, and termination costs) of approximately $170.0 million. We estimate that we will incur totalRestructuring and related expenses of approximately$32.0 million comprised of $17.0 million in cash expenses and $15.0 million in non-cash expenses. These expenses are primarily comprised of severance and other related costs. In 2021, we recognized $20.1 million of the Restructuring expenses comprised of $11.5 million in cash-related expenses and $8.6 million in non-cash expenses.

We expect to recognize the majority of the remaining approximate $12.0 million in Restructuring expenses, comprised of $5.0 million in cash-related expenses and $7.0 million in non-cash expenses, in the first quarter of 2022 and the balance by the third quarter of 2022. The remaining Restructuring expense estimates are subject to a number of assumptions, and actual final amounts may differ. We may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the Restructuring.

The go-forward organization leverages our expertise in developing and commercializing respiratory therapeutics. We intend to significantly narrow our R&D focus on our core respiratory assets, including a clinical study

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with Viatris Inc. (“Viatris”) intended to provide data to support a possible label update for YUPELRI, which would capture more of YUPELRI’s addressable market and further strengthen its competitive advantage, and investment in our inhaled Janus kinase inhibitor portfolio, with focus on our most advanced clinical candidate, nezulcitinib, initially targeting acute lung injury. We will also continue to explore strategic partnerships for both core and non-core assets to unlock value. All of these actions drive towards our goal to maximize shareholder value.

After implementing these strategic actions, we plan to become sustainably cash flow positive beginning in the second half of 2022, and we will work to optimize our capital structure in order to maximize total shareholder returns.

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. The extent to which the COVID-19 pandemic will continue to directly or indirectly impact our business, results of operations and financial condition, including these estimates, will depend on future developments that are highly uncertain and may be impacted by the emergence of new information concerning the COVID-19 pandemic, ongoing spread of the disease across the US and the globe, and the actions taken to contain or treat the disease, including vaccine availability, distribution, acceptance and effectiveness. 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.

Revenue Recognition

We recognize revenue under Accounting Standards Codification (“ASC”), Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, an entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

At contract inception, once the contract is determined to be within the scope of ASC 606, we identify the performance obligations in the contract by assessing whether the goods or services promised within each contract are distinct. We then recognize revenue for the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Collaborative Arrangements under ASC 606

We enter into collaborative arrangements with partners that fall under the scope of Accounting Standards Codification, Topic 808, Collaborative Arrangements (“ASC 808”). While these arrangements are in the scope of ASC 808, we may analogize to ASC 606 for some aspects of these arrangements. We analogize to ASC 606 for certain activities within collaborative arrangements for the delivery of a good or service (i.e., a unit of account) that is part of our ongoing major or central operations. Revenue recognized by analogizing to ASC 606 is recorded as “collaboration revenue” or “licensing revenue” whereas, revenue recognized in accordance with ASC 808 is recorded on a separate collaboration revenue line on the consolidated statements of operations.

The terms of our collaborative arrangements typically include one or more of the following: (i) up-front fees; (ii) milestone payments related to the achievement of development, regulatory, or commercial goals; (iii) royalties on net sales of licensed products; (iv) reimbursements or cost-sharing of research and development expenses; and (v) profit/loss sharing arising from co-promotion arrangements. Each of these payments results in collaborationrevenues or an offset

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against research and development expense. Where a portion of non-refundable up-front fees or other payments received is allocated to continuing performance obligations under the terms of a collaborative arrangement, they are recorded as deferred revenue and recognized as collaboration revenue when (or as) the underlying performance obligation is satisfied.

As part of the accounting for these arrangements, we must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation which determines how the transaction price is allocated among the performance obligations. The estimation of the stand-alone selling price may include such estimates as, forecasted revenues or costs, development timelines, discount rates and probabilities of technical and regulatory success. We evaluate each performance obligation to determine if they can be satisfied at a point in time or over time, and we measure the services delivered to our collaborative partner which are periodically reviewed based on the progress of the related program. The effect of any change made to an estimated input component and, therefore revenue or expense recognized, would be recorded as a change in estimate. In addition, variable consideration (e.g., milestone payments) must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.

Up-front Fees: If a license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize collaboration revenues from the transaction price allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing collaboration revenue from the allocated transaction price. For example, when we receive up-front fees for the performance of research and development services, or when research and development services are not considered to be distinct from a license, we recognize collaboration revenue for those units of account over time using a measure of progress. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue or expense recognition as a change in estimate.

Milestone Payments: At the inception of each arrangement that includes milestone payments (variable consideration), we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our or the collaborative partner’s control, such as non-operational developmental and regulatory approvals, are generally not considered probable of being achieved until those approvals are received. At the end of each reporting period, we re-evaluate the probability of achievement of milestones that are within our or the collaborative partner’s control, such as operational developmental milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenues and earnings in the period of adjustment. Revisions to our estimate of the transaction price may also result in negative collaboration revenues and earnings in the period of adjustment.

Royalties: For arrangements that include sales-based royalties, including commercial milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Our income earned related to TRELEGY sales is included within “income from our investment in TRC, LLC” on the consolidated statements of operations.

Reimbursement, cost-sharing and profit-sharing payments: Under certain collaborative arrangements, we have been reimbursed for a portion of our research and development expenses or participate in the cost-sharing of such research and development expenses. Such reimbursements and cost-sharing arrangements have been reflected as a reduction of research and development expense in our consolidated statements of operations, as we do not consider performing research and development services for reimbursement to be a part of our ongoing major or central operations.

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Research and Development Expenses

We incur substantial expenses associated with our clinical trials. Accounting for clinical trials relating to activities performed by clinical research organizations (“CROs”), contract manufacturing organizations (“CMOs”) and other external vendors requires management to exercise significant estimates in regard to the timing and accounting for these expenses. We estimate costs of research and development activities conducted by service providers, which include, the conduct of sponsored research, preclinical studies, and contract manufacturing activities. The diverse nature of services being provided under CRO and other arrangements, the different compensation arrangements that exist for each type of service and the lack of timely information related to certain clinical activities complicates the estimation of accruals for services rendered by CROs, CMOs and other vendors in connection with clinical trials.

Research and development (“R&D”) expenses are recorded in the period that services are rendered or goods are received. R&D expenses consist of salaries and benefits, laboratory supplies and facility costs, as well as fees paid to third parties that conduct certain R&D activities on our behalf, net of certain external R&D expenses reimbursed under our collaborative arrangements.

As part of the process of preparing our consolidated financial statements, we are required to estimate and accrue certain R&D expenses. This process involves the following:

Examples of estimated R&D expenses that we accrue include:

• fees paid to investigative sites in connection with clinical studies;

• professional service fees for consulting and related services.

We base our expense accruals related to clinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical studies on our behalf. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts depend on factors, such as the successful enrollment of patients and the completion of clinical study milestones. Our service providers typically invoice us monthly in arrears for services performed. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates.

To date, we have not experienced significant changes in our estimates of accrued R&D expenses after a reporting period. However, due to the nature of estimates, there is no assurance that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical studies and other R&D activities. Such changes in estimates will be recognized as R&D expenses in the period that the change in estimate occurs.

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Theravance Respiratory Company, LLC (“TRC”)

Through our 85% equity interest in TRC, we are entitled to receive an 85% economic interest in any future payments made by GSK under the strategic alliance agreement and under the portion of the collaboration agreement assigned to TRC (net of TRC expenses paid and the amount of cash, if any, expected to be used by TRC pursuant to the TRC LLC Agreement over the next four fiscal quarters). The primary drug program assigned to TRC is TRELEGY.

We analyzed our ownership, contractual and other interests in TRC to determine if TRC is a variable-interest entity (“VIE”), whether we have a variable interest in TRC and the nature and extent of that interest. We determined that TRC is a VIE. The party with the controlling financial interest, the primary beneficiary, is required to consolidate the entity determined to be a VIE. Therefore, we also assessed whether we are the primary beneficiary of TRC based on the power to direct its activities that most significantly impact its economic performance and our obligation to absorb its losses or the right to receive benefits from it that could potentially be significant to TRC. Based on our assessment, we determined that we are not the primary beneficiary of TRC, and, as a result, we do not consolidate TRC in our consolidated financial statements. TRC is recognized in our consolidated financial statements under the equity method of accounting.

Income related to our equity ownership of TRC is reflected within our consolidated statements of operations and is classified as non-operating income. Amounts due from TRC that we believe to be collectable within one year and our equity in the net assets of TRC are reflected on our consolidated balance sheets as a current asset and a non-current asset, respectively. The portion of the Non-Recourse 2035 Notes classified as a current liability, if any, is based on the amount of royalties received, or receivable, as of December 31, 2021, that are expected to be collected from TRC and used to make a principal repayment on the Non-Recourse 2035 Notes within the next twelve months. The determination of the amounts likely to be received from TRC within the next twelve months requires significant judgement due to the significant variability of the amounts paid to the Company, as compared to the royalties due. Consequently, the actual amount paid to the holders of the 2035 Notes within twelve months of the reporting date may differ significantly from that recorded in the consolidated balance sheets.

Income Taxes

We utilize the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are anticipated to be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Our total unrecognized tax benefits of $75.0 million and $63.4 million, as of December 31, 2021 and December 31, 2020, respectively, may reduce the effective tax rate in the period of recognition. We currently have a full valuation allowance against our deferred tax assets, which would impact the timing of the effective tax rate benefit should any of our uncertain positions be favorably settled in the future.

We assess all material positions, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is greater than 50% likely to be realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and we will determine whether the factors underlying the sustainability assertion have changed and whether the amount of the recognized tax benefit is still appropriate.

The recognition and measurement of tax benefits requires significant judgment. We have taken certain positions where we believe that our position is greater than 50% likely to be realized upon ultimate settlement and for which no reserve for uncertain tax positions has been recorded. If we do not ultimately realize the expected benefit of these positions, we will record additional income tax expenses in future periods. Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available.

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Any tax levied or credited by a governmental taxing authority that is not based on our income is outside the scope of accounting for income taxes. Therefore, we record such items as a component in our loss before income taxes.

Results of Operations

The following tables set forth our results of operations for the periods presented. Management’s commentary for the 2021 results compared to 2020 results are presented in the paragraphs below, and management’s commentary for the 2020 results compared to the 2019 results are included in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 26, 2021.

Revenue

Revenue, as compared to the prior years, was as follows:

Change

NM: Not Meaningful

Collaboration revenue was $11.5 million in 2021, which represented a $15.0 million decrease from 2020. Collaboration revenue was primarily comprised of revenue recognized related to the $100.0 million upfront payment received in 2018 pursuant to the Janssen collaboration agreement that was entered into in February 2018. Janssen collaboration revenue is recognized for the R&D services we performed during the period based on a measure of our efforts toward satisfying the performance obligation relative to the total expected efforts or inputs to satisfy the performance obligation (e.g., costs incurred compared to total budgeted costs). The $15.0 million decrease in collaboration revenue compared to 2020 reflects the reduction of costs incurred to satisfy the remaining performance obligation related to the recently completed izencitinib Phase 2 study in ulcerative colitis and the closeout of the izencitinib Phase 2 study in Crohn’s disease. As of December 31, 2021, we have recognized all of the revenue associated with the Janssen $100.0 million upfront payment.

Licensing revenue was $1.5 million in 2020 and was attributable to the achievement of a milestone related to the acceptance of a clinical trial application associated with our agreement with Viatris to develop and commercialize nebulized revefenacin in China and adjacent territories. We did not recognize any licensing revenue in 2021.

We are entitled to a share of US profits and losses (65% to Viatris; 35% to Theravance Biopharma) received in connection with commercialization of YUPELRI. 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” irrespective of whether the overall collaboration is profitable. Amounts payable to Viatris in connection with the commercialization of YUPELRI, if any, are recorded within the consolidated statements of operations as a collaboration loss within selling, general and administrative expenses. 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.

In 2021 and 2020, we recognized $43.8 million and $43.9 million, respectively, in revenue from the Viatris collaboration agreement, which represented the receivables due from Viatris related to YUPELRI. While Viatris records the total net sales of YUPELRI within its own financial statements, Viatris collaboration agreement revenue in our financial statements includes our implied 35% share of net sales of YUPELRI for 2021 and 2020 of $56.7 million and $50.0 million, respectively. While institutions in some parts of the country are allowing more in-person access, in-person engagements remain below pre-pandemic levels. Total 2021 prescription volumes continue to grow across most specialties with volumes heading toward parity with 2020. However, prescription volumes in pulmonology remain

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below pre-pandemic levels. Despite the challenges of the respiratory pandemic, dose demand for YUPELRI increased 25% in 2021 compared to 2020.

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:

1) Employee-related costs, which include salaries, wages and benefits;

The following table summarizes our R&D expenses incurred, net of any reimbursements from collaboration partners, as compared to the prior years:

Change

R&D expenses decreased by $67.3 million in 2021 compared to 2020, and the decrease was across all R&D categories. External-related expenses decreased by $44.9 million and was the largest contributor to the total R&D expense decrease. The decrease in external-related expenses was primarily due to the completion, or-near completion, of our late-stage clinical programs, primarily izencitinib and ampreloxetine. The decreases across the remaining R&D categories were primarily due to the Restructuring announced in September 2021 which resulted in significant reductions in employee-related expenses, share-based compensation expenses, and other allocated expenses of $11.9 million, $5.7 million, and $4.8 million, respectively.The reduction in employee-related expenses was primarily due to the reversal of the annual corporate bonus, and the reduction in share-based compensation was primarily due to a reduction in employee headcount. The reduction in other allocated expenses was primarily due to the decrease in allocated overhead costs from selling, general, and administrative expenses due to the Restructuring. Expenses that were directly attributed to the Restructuring are included in the Restructuring and Related Expenses section below.

Under certain of our collaborative arrangements, we receive partial reimbursement of employee-related costs and external costs, which have been reflected as a reduction of R&D expenses of $7.9 million, $10.1 million and $5.6 million for 2021, 2020, and 2019, respectively.

As a result of the Restructuring and our focus on our respiratory programs, we expect R&D expenses to continue to decrease over the next 12 months.

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Selling, General and Administrative

Selling, general and administrative expenses, as compared to the prior years, were as follows:

Change

Selling, general and administrative expenses decreased by $9.4 million in 2021 compared to 2020. The $9.4 million decrease was primarily attributed to the Restructuring and resulted in reductions in employee-related expenses, share-based compensation expenses, and external-related services. The decrease in employee-related expenses was primarily due to the reversal of the annual corporate bonus, and the reduction in share-based compensation was primarily due to a reduction in employee headcount. The decrease in external-related expenses was primarily due to a reduction in expenses related to the Restructuring. Expenses that were directly attributed to the Restructuring are included in the Restructuring and Related Expenses section below.

Share-based compensation expense related to selling, general and administrative expenses was $28.1 million, $31.7 million, and $31.5 million, in 2021, 2020, and 2019, respectively.

Through June 2021, we leased approximately 170,000 square feet of office and laboratory space in two buildings in South San Francisco, California, under a non-cancelable operating lease that ends in May 2030. In July 2021, we terminated approximately 8,000 square feet of office space in one of the buildings and returned the space to the building’s landlord for their use. We determined that the termination would be accounted for as a lease modification under the applicable accounting guidance. As a result of the modification, we adjusted the value of our operating lease assets and liabilities in our consolidated balance sheets that resulted in a gain of $1.9 million in 2021. The $1.9 million gain was offset against facility expenses within selling, general and administrative expenses and then partially allocated to R&D expenses above.

Effective October 2021, we also subleased approximately 21,000 square feet of our South San Francisco office and laboratory space. Under the terms of the sublease agreement, the Company will receive an initial monthly base rent of $0.1 million, with annual base rent increases of 3%, and the subtenant’s proportionate share of the building’s operating expenses. In October 2021, we began recognizing the sublease income on a straight-line basis over the term of the sublease which ends in September 2028. The sublease income was be reflected as a reduction facility expenses within selling, general and administrative expenses and then partially allocated to R&D expenses above.

As a result of the Restructuring, we expect our selling, general and administrative expenses to significantly decrease over the next 12 months.

Restructuring and Related Expenses

Restructuring and related expenses, as compared to the prior years, were as follows:

Change

NM: Not Meaningful

Of the total $20.1 million in Restructuring and related expenses recognized in 2021, $10.5 million was related to R&D expenses and $9.6 million was related to selling, general and administrative expenses. The Restructuring and related expenses were primarily comprised of one-time severance payments, employee-related separation costs, retention costs, and other Restructuring-related expenses. The $20.1 million also included non-cash charges of $8.6 million

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primarily related to the modification of equity awards for employees affected by the Restructuring and certain related awards for other employees.

We estimate that we will incur totalRestructuring and related expenses of approximately$32.0 million comprised of $17.0 million in cash expenses associated with employee termination benefits and related costs and $15.0 million in non-cash expenses relating to the acceleration of equity-awards for employees affected by the Restructuring. We expect to recognize the majority of the remaining approximate $12.0 million in Restructuring and related expenses, comprised of $5.0 million in cash-related expenses and $7.0 million in non-cash expenses, in the first quarter of 2022 and the balance by the third quarter of 2022. The remaining Restructuring expense estimates are subject to a number of assumptions, and actual final amounts may differ. We may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the Restructuring.

We are also evaluated the impact of the Restructuring on the carrying value of our long-lived assets, such as property and equipment and operating lease assets. This process included evaluating the estimated remaining lives, significant changes in the use, and potential impairment charges related to our long-lived assets. Based on our evaluation, we determined that our long-lived assets were not impaired as of December 31, 2021, and we did not recognize any impairment charges related to the long-lived assets in 2021. However, we may incur additional costs not currently contemplated due to events that may occur because of, or that are associated with, the Restructuring.

Income from Investment in TRC, LLC

Income from investment in TRC, as compared to the prior years, was as follows:

Change

The income from investment in TRC, LLC represented our share of the royalty payments from GSK to TRC on the net sales of TRELEGY (net of our share of TRC expenses paid and the amount of cash, if any, expected to be used by TRC pursuant to the TRC LLC Agreement over the next four fiscal quarters).

Income from investment in TRC, LLC increased by $35.5 million in 2021 compared to 2020 which included $8.5 million representing our share of the one-time fee that GSK paid to TRC upon termination of the MABA program in June 2020. The $104.0 million and $68.4 million in TRC income for 2021 and 2020, respectively, were recorded net of our share of TRC expenses of $3.4 million and $2.2 million, respectively. Our share of TRC expenses for both years were primarily comprised of TRC’s legal and related expenses associated with the arbitration between Innoviva and TRC and us.

In connection with the issuance of our $380.0 million net principal amount Non-Recourse 2035 Notes in February 2020, 75% of the income from our investment in TRC is available only for payment of the Non-Recourse 2035 Notes and is not available to pay other creditor obligations or claims.

See “Risk Factors—We do not control the commercialization of TRELEGY and we do not control TRC; accordingly the amount of royalties we receive will depend on, among other factors, GSK’s ability to further commercialize TRELEGY and TRC’s decisions concerning use of cash in accordance with the TRC LLC Agreement” for additional information regarding our economic interest in TRC, LLC.

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Interest Expense

Interest expense primarily consisted of interest payments due on the Convertible Senior 2023 Notes, the redeemed Non-Recourse 2033 Notes, and the Non-Recourse 2035 Notes, as well as, the amortization of the associated debt issuance costs. Interest expense, as compared to the prior year, was as follows:

Change

NM: Not Meaningful

Interest expense increased by $2.3 million in 2021 compared to 2020 The $2.3 million increase was primarily attributed to additional interest expense incurred in 2021 related to an increase in principal balance of the Non-Recourse 2035 Notes. The increase in principal balance resulted from the February 2020 re-financing of the Non-Recourse 2033 Notes and interest payment shortfalls added to the principal balance as of the applicable interest payment dates.

Loss on Extinguishment of Debt

Loss on extinguishment of debt as compared to the comparable periods in the prior year, was as follows:

Change

NM: Not Meaningful

In 2020, we recognized a $15.5 million loss on the extinguishment of debt related to the issuance of the Non-Recourse 2035 Notes in February 2020. A portion of the proceeds from the Non-Recourse 2035 Notes were used to repay the outstanding balance of the Non-Recourse 2033 Notes that were issued in November 2018. The $15.5 million loss was comprised of a redemption premium related to the early repayment of the Non-Recourse 2033 Notes and the write-off of the previously deferred debt issuance costs related to the portion of the Non-Recourse 2033 Notes that was considered extinguished.

Interest and Other Income (Expense), net

Interest and other income (expense), net, as compared to the prior years, was as follows:

Change

NM: Not Meaningful

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Interest and other income (expense), net, decreased by $1.7 million in 2021 compared to 2020. The decrease was primarily due to higher investment balances in 2020 following the issuance of the Non-Recourse 2035 Notes in February 2020, lower investment yields in 2021, and an increase in foreign currency losses in 2021.

In June 2020, GSK completed its previously announced offering of $300.0 million of exchangeable senior notes due 2023, $280.3 million of which are exchangeable into our ordinary shares that are held by GSK and its affiliates for investment purposes. The $1.6 million in costs were primarily comprised of financial advisory and legal-related costs incurred by us in connection with the GSK offering.

Provision for Income Tax Benefit

The provision for income tax benefit, as compared to the prior years, was as follows:

Change

The benefits for income tax were primarily due to the reversals of previously accrued contingent liabilities for uncertain tax positions due to a lapse of the statute of limitations. The $8.4 million decrease in income tax benefit in 2021 compared to 2020 was primarily due to a lower estimate of the uncertain tax positions taken with respect to transfer pricing and tax credits in comparison to 2020. Our provision for income tax expense differs from the expected statutory rate due to the valuation allowance on deferred tax assets.

We are currently under Internal Revenue Service (“IRS”) examination for the tax year ended December 31, 2018. We believe that an adequate provision has been made for any adjustments that may result from the tax examination.

Liquidity and Capital Resources

As of December 31, 2021, we had approximately $173.5 million in cash, cash equivalents, and investments in marketable securities (excluding restricted cash). To date, we have financed our operations primarily through public offerings of equity securities, private placements of equity and debt, revenue from collaboration and licensing arrangements and, to a lesser extent, revenue from product sales. As of December 31, 2021, we had outstanding (i) $230.0 million in principal Convertible Senior 2023 Notes and (ii) $392.6 million in principal Non-Recourse 2035 Notes which are stated net of a 5.0% retention by us in compliance with Regulation RR — Credit Risk Retention (17 C.F.R. Part 246).

The Non-Recourse 2035 Notes were issued on February 28, 2020 and are secured by all of the Triple Royalty Sub II LLC’s (the “Issuer II”) rights, title and interest as a holder of the Issuer II Class C Units in TRC. The primary source of funds to make payments on the Non-Recourse 2035 Notes is the 63.75% economic interest of the Issuer (evidenced by the Issuer II Class C Units) in any future payments that may be made by GSK to TRC under the strategic alliance agreement and under the portion of the collaboration agreement assigned to TRC by Innoviva (net of TRC expenses paid and the amount of cash, if any, expected to be used by TRC pursuant to the TRC LLC Agreement over the next four fiscal quarters) relating to the GSK-Partnered Respiratory Programs, including the Trelegy program. As a result, the holders of the Non-Recourse 2035 Notes have no recourse against Theravance Biopharma even if the TRELEGY payments are insufficient to cover the principal and interest payments for the Non-Recourse 2035 Notes. Prior to and including the December 5, 2024 payment date, in the event that the distributions received by the Issuer II from TRC in a quarter is less than the interest accrued for that quarter, the principal amount of the Non-Recourse 2035 Notes will increase by the interest shortfall amount for that quarter. While the holders of the Non-Recourse 2035 Notes have no recourse against Theravance Biopharma, the terms of the Non-Recourse 2035 Notes also provide that Theravance Biopharma, at its option, may satisfy the quarterly interest payment obligations by making a capital contribution to the Issuer II.

A portion of the proceeds from the Non-Recourse 2035 Notes issuance were used to repay, in full, the remaining outstanding balance of the Non-Recourse 2033 Notes, as well as, a 5% premium on the early redemption of

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the Non-Recourse 2033 Notes. The Non-Recourse 2033 Notes were issued in November 2018 and were structured similarly to the Non-Recourse 2035 Notes.

On June 29, 2021, we sold 6,700,000 ordinary shares at a price to the public of $15.00 per share (the “Shares”). Under the terms of the underwriting agreement, on June 29, 2021, the underwriters also exercised a 30-day option to purchase an additional 1,005,000 ordinary shares for a total of 7,705,000 ordinary shares sold. The total gross proceeds from the offering were $115.6 million, before deducting underwriting discounts and commissions and offering expenses. The Shares were issued pursuant to our currently effective shelf registration statement on Form S-3, which became effective automatically on December 3, 2019, and a prospectus supplement filed with the SEC in connection with the offering.

Corporate Restructuring

On September 15, 2021, we announced the Restructuring to focus our capital resources on our respiratory programs, resulting in an approximate 75% reduction in workforce to significantly reduce operational costs and preserve capital. Approximately 75% of the total reduction in workforce occurred at the end of November 2021, and the remainder will be completed at the end of February 2022. In 2021, we recognized $20.1 million of the Restructuring and related expenses comprised of $11.5 million in cash-related expenses and $8.6 million in non-cash expenses. We estimate that we will incur totalRestructuring and related expenses of approximately$32.0 million comprised of $17.0 million in cash expenses associated with employee termination benefits and related costs and $15.0 million in non-cash expenses relating to the acceleration of equity-awards for employees affected by the Restructuring and certain related awards for other employees. We expect to recognize the majority of the remaining approximate $12.0 million in Restructuring and related expenses, comprised of $5.0 million in cash-related expenses and $7.0 million in non-cash expenses, in the first quarter of 2022 and the balance by the third quarter of 2022.

As a result of the Restructuring, we expect to realize estimated operating expense savings (excluding share-based compensation and any one-time restructuring, severance, and termination costs) of approximately $170.0 million. We expect to be sustainably cash flow positive beginning in the second half of 2022 primarily achieved through our reduced cash expenditures in light of the Restructuring and the focus on our respiratory assets. These estimates are subject to a number of assumptions, and actual results may differ. We may also incur additional costs not currently contemplated due to events that may occur because of, or that are associated with, the Restructuring.

Despite expected expense savings from the Restructuring, we may continue to incur net losses over the next several yearsdue to expenditures relating to our continuing respiratory drug discovery efforts and preclinical and clinical development of our current respiratory product candidates. In particular, to the extent we advance our respiratory product candidates into and through later-stage clinical studies without a partner, we may incur substantial expenses. In addition, we may invest strategically in our research efforts to continue to grow our respiratory development pipeline. In the past, we have received a number of significant payments from collaboration agreements and other significant transactions. In the future, we may continue to receive potential substantial payments from future collaboration transactions if the drug candidates in our pipeline achieve positive clinical or regulatory outcomes or if our product candidates are approved and meet certain milestones.

Our new strategic business plan is subject to significant uncertainties and risks as a result of, among other factors, the COVID-19 pandemic, clinical program outcomes, whether, when and on what terms we are able to enter into new collaboration arrangements, expenses being higher than anticipated, the sales levels of our approved products, unplanned expenses, cash receipts being lower than anticipated, and the need to satisfy contingent liabilities, including litigation matters and indemnification obligations.

Adequacy of cash resources to meet future needs

We expect our cash, cash equivalents and marketable securities will be sufficient to fund our operations for at least the next twelve months from the date of issuance of this Annual Report on Form 10-K based on current operating plans and financial forecasts. We plan to be sustainably cash flow positive beginning in the second half of 2022 primarily driven by our Restructuring and forecasted revenues and royalties generated by YUPELRI and TRELEGY net sales.

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As needed, we may seek to obtain additional financing in the form of public or private equity offerings, debt financing or additional collaborations and licensing arrangements. However, future financing may not be available in amounts or on terms acceptable to us.

Without adequate financial resources to fund our expected future operations, we may be required to relinquish rights to our technologies, product candidates or territories, or grant licenses on terms that are not favorable to us, in order to raise additional funds through collaborations or licensing arrangements. We may also have to sequence preclinical and clinical studies as opposed to conducting them concomitantly in order to conserve resources, or, as we have recently announced in September 2021, we may need to delay, reduce or eliminate one or more of our research or development programs and reduce overall overhead expenses. In addition, we may have to make further reductions in our workforce and may be prevented from continuing our discovery, development and commercialization efforts and exploiting other corporate opportunities.

Cash Flows

Cash flows, as compared to the prior years, were as follows:

Year Ended December 31, Change

Net cash flows used in operating activities

Net cash used in operating activities was $207.9 million in 2021, consisting of a net loss of $199.4 million, a net increase in cash resulting from adjustments for non-cash and other reconciling items of $31.2 million and a net decrease in cash resulting from changes in operating assets and liabilities of $39.6 million.

Net cash used in operating activities was $250.4 million in 2020, consisting primarily of a net loss of $278.0 million, a net increase in cash resulting from adjustments for total non-cash and other reconciling items of $67.1 million and a net decrease in cash resulting from changes in operating assets and liabilities of $39.5 million.

Net cash flows provided by (used in) investing activities

Net cash provided by investing activities was $124.5 million in 2021, consisting primarily of cash inflows from the net purchase and maturities of marketable securities of $127.9 million and partially offset by $3.4 million used for the purchase of property and equipment.

Net cash provided by investing activities was $10.7 million in 2020 and was primarily attributed the proceeds from the sales of marketable securities of $19.9 million which was partially offset by $6.6 million related to the purchase of property and equipment and $2.7 million in cash outflows resulting from net purchases and maturities of marketable securities.

Net cash flows provided by financing activities

Net cash provided by financing activities was $91.9 million in 2021, consisting of the sale of 7,705,000 ordinary shares for total net proceeds of $108.2 million and $3.5 million in proceeds from ESPP and share option purchases. These proceeds were partially offset by $10.7 million in principal payments on the Non-Recourse 2035 Notes and $9.1 million related to the repurchase of shares to satisfy tax withholding obligations.

Net cash provided by financing activities was $263.1 million in 2020, consisting primarily of the sale of 5,500,000 ordinary shares for total net proceeds of $139.9 million and the issuance of our Non-Recourse 2035 Notes for

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total net proceeds of $374.7 million. A portion of the of the Non-Recourse 2035 Notes proceeds were used to repay, in full, the remaining $235.3 million outstanding balance of our Non-Recourse 2033 Notes and an $11.5 million redemption premium related to the payoff of the Non-Recourse 2033 Notes. In addition to the above, net cash provided by financing activities was partially offset by the repurchase of shares to satisfy tax withholding obligations in the amount of $9.7 million.

Contractual Obligations

In the table below, we set forth our significant contractual obligations, as well as obligations related tocontracts that we are likely to continue, regardless of the fact that some were cancelable as of December 31, 2021. Some of the amounts that we include in this table are based on management’s estimate and assumptions about these obligations, including their duration. Because these estimates and assumptions are necessarily subjective, the amount of the obligations that we will pay in future periods may vary from those reflected in the table.

Years

(In thousands) Total Within 1 1 to 3 3 to 5 After 5

9.5% Non-recourse notes due 2035 - net principal * 392,626 * * * *

Commitments and Contingencies

We indemnify our officers and directors for certain events or occurrences, subject to certain limits. We maintain insurance policies that may limit our exposure, and therefore, we believe the fair value of these indemnification agreements is minimal. Accordingly, we have not recognized any liabilities relating to these agreements as of December 31, 2021. However, no assurances can be given regarding the amounts that may ultimately be covered by the insurers, and we may incur substantial liabilities because of these indemnification obligations.

Performance-Contingent Awards

We periodically grant performance-contingent awards to our employees. For the year ended December 31, 2021, we recognized $0.8 million of aggregate share-based compensation expense and $0.4 million in cash bonus expense related to these types of awards. As of December 31, 2021, the maximum remaining expense related to

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outstanding performance-contingent awards was $2.9 million which had performance expiration dates through December 2025.

Recent Accounting Pronouncements

The information required by this item is included in “Item 8, Note 1. Organization and Summary of Significant Accounting Policies,” in our consolidated financial statements included in this Annual Report on Form 10-K.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks in the ordinary course of our business. These risks primarily include risk related to interest rate sensitivities.

Interest Rate Sensitivity

We have invested primarily in money market funds, federal agency notes, corporate debt securities, commercial papers and US treasury notes. To reduce the volatility relating to these exposures, we have put investment and risk management policies and procedures in place. The securities in our investment portfolio are not leveraged and are classified as available-for-sale due to their short-term nature. We currently do not engage in hedging activities.

We performed a sensitivity analysis to determine the impact a change in interest rates would have on the value of our investment portfolio. As of December 31, 2021 and 2020, we have estimated that a hypothetical 100 basis point increase in interest rates would have resulted in a decrease in the fair market value of our investment portfolio of $0.2 million and $0.5 million, respectively. Such losses would only be realized if we sold the investments prior to maturity.

We are also subject to interest rate sensitivity on our outstanding Convertible Senior 2023 Notes that were issued in November 2016 and our Non-Recourse 2035 Notes that were issued in February 2020. Increases in interest rates would result in a decrease in the fair value of our outstanding debt and decreases in interest rates would result in an increase in the fair value of our outstanding debt. These decreases or increases in the fair value of our outstanding debt would be partially offset by corresponding decreases or increases in our fixed income investment portfolio. The Convertible Senior 2023 Notes pay interest semi-annually, and the $230.0 million of principal is scheduled to be repaid in October 2023. The Non-Recourse 2035 Notes pay interest and principal quarterly, and the remaining net principal of $392.6million is due by 2035.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 81

Consolidated Balance Sheets as of December 31, 2021 and 2020 83

Notes to Consolidated Financial Statements 88

Supplementary Financial Data (unaudited) 120

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Theravance Biopharma, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Theravance Biopharma, Inc. (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, shareholders' deficit, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, based on our audits and the report of other auditors, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

We did not audit the financial statements of Theravance Respiratory Company, LLC (“TRC”), an entity in which the Company has an 85% economic interest. The Company’s equity in net assets of TRC and amounts due from TRC totaled $111.1 million at December 31, 2021, and the Company’s equity in the net income of TRC was $104.0 million for 2021. The 2021 financial statements of TRC were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the 2021 amounts included for TRC, is based solely on the report of the other auditors.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), Theravance Biopharma, Inc.'s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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Revenue from collaborative and licensing arrangements

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2013.

Redwood City, California

February28, 2022

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THERAVANCE BIOPHARMA, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

December 31, December 31,

Assets

Current assets:

Receivables from collaborative arrangements 14,065 15,868

Prepaid clinical and development services 10,245 20,374

Other prepaid and current assets 8,561 10,359

Equity in net assets of TRC, LLC 67,537 12,750

Liabilities and Shareholders' Deficit

Current liabilities:

Accrued personnel-related expenses 12,796 35,238

Accrued clinical and development expenses 17,010 28,799

Accrued general and administrative expenses 2,898 6,048

Accrued interest payable 3,940 3,974

Current portion of non-recourse notes due 2035, net 16,940 19,334

Operating lease liabilities 503 9,867

Other accrued liabilities 1,304 2,013

Long-term operating lease liabilities 52,681 47,220

Long-term deferred revenue 310 348

Other long-term liabilities 2,420 1,833

Commitments and contingencies

Shareholders’ Deficit

Accumulated other comprehensive income — 47

Total liabilities and shareholders’ deficit $ 374,819 $ 469,057

See accompanying notes to consolidated financial statements

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THERAVANCE BIOPHARMA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

Year Ended December 31,

Revenue:

Expenses:

Restructuring and related expenses (1) 20,142 — —

Loss on extinguishment of debt — (15,464) —

Provision for income tax benefit 151 8,520 5,222

Net loss per share:

Basic and diluted net loss per share $ (2.87) $ (4.46) $ (4.25)

(1) Amounts include share-based compensation expense as follows:

Year Ended December 31,

Restructuring and related expenses 8,362 — —

See accompanying notes to consolidated financial statements.

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THERAVANCE BIOPHARMA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

Year Ended December 31,

Other comprehensive income (loss):

See accompanying notes to consolidated financial statements.

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THERAVANCE BIOPHARMA, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT

(In thousands)

Accumulated

Additional Other Total

Ordinary Shares Paid-In Comprehensive Accumulated Shareholders'

Shares Amount Capital Income (Loss) Deficit Deficit

Proceeds from ESPP purchases 203 — 3,474 — — 3,474

Issuance of restricted shares 1,105 — — — — —

Option exercises 164 — 3,142 — — 3,142

Accumulated

Additional Other Total

Ordinary Shares Paid-In Comprehensive Accumulated Shareholders'

Shares Amount Capital Income (Loss) Deficit Deficit

Proceeds from ESPP purchases 245 — 3,701 — — 3,701

Issuance of restricted shares 1,907 — — — — —

Option exercises 68 — 1,361 — — 1,361

Accumulated

Additional Other Total

Ordinary Shares Paid-In Comprehensive Accumulated Shareholders'

Shares Amount Capital Income (Loss) Deficit Deficit

Proceeds from ESPP purchases 275 — 3,466 — — 3,466

Issuance of restricted shares 2,682 — — — — —

Option exercises — — 5 — — 5

See accompanying notes to consolidated financial statements.

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THERAVANCE BIOPHARMA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended December 31,

Operating activities

Amortization and accretion income, net 10 (1,079) (3,451)

Loss on disposal of property and equipment 39 — —

Amortization of right-of-use assets 3,786 3,344 3,224

Gain from lease modification (1,863) — —

Loss on extinguishment of debt — 15,464 —

Changes in operating assets and liabilities:

Accounts receivable — — 620

Prepaid clinical and development services 10,129 (17,638) (561)

Other prepaid and current assets 2,867 (2,327) (73)

Tax receivable — (258) (3,700)

Accrued interest payable (34) (1,685) 2,573

Operating lease liabilities (1,742) 1,600 (2,317)

Investing activities

Purchases of property and equipment (3,406) (6,616) (3,176)

Proceeds from the sale of marketable securities — 19,942 —

Proceeds from the sale of property and equipment 6 64 5

Proceeds from the sale of VIBATIV business, net — — 5,000

Financing activities

Proceeds from the sale of ordinary shares, net 108,180 139,915 —

Proceeds from issuance of 2035 notes, net — 380,000 —

Payment of issuance costs on 2035 notes — (5,326) —

Principal payment on 2035 notes (10,730) — —

Payment of redemption premium on 2033 notes — (11,470) —

Proceeds from option exercises 5 1,361 3,142

Supplemental disclosure of cash flow information

Cash (received) paid for income taxes, net $ (4,089) $ 14 $ 22

(1)Amounts for the year ended December 31, 2019 include the transition adjustment for the adoption of ASC 842, Leases.

See accompanying notes to consolidated financial statements.

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THERAVANCE BIOPHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies

Theravance Biopharma, Inc. (“Theravance Biopharma” or the “Company”) is a biopharmaceutical company primarily focused on the discovery, development and commercialization of respiratory medicines. The Company’s core purpose is to create medicines thatmake a difference® in people’s lives.

Basis of Presentation

The Company’s consolidated financial statements as of December 31, 2021 and 2020, and for the year ended December 31, 2021, 2020, and 2019 have been prepared in conformity with United States (“US”) Generally Accepted Accounting Principles ("GAAP"), and the US Securities and Exchange (“SEC”) regulations for annual reporting.

Principles of Consolidation

The consolidated financial statements include the accounts of Theravance Biopharma and its wholly-owned subsidiaries, all of which are denominated in US dollars. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures in the consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. Actual results could differ materially from those estimates.

Segment Reporting

The Company operates in a single segment, which is the discovery (research), development and commercialization of human therapeutics. The Company’s business offerings have similar economics and other characteristics, including the nature of products and manufacturing processes, types of customers, distribution methods and regulatory environment. The Company is comprehensively managed as one business segment by the Company’s Chief Executive Officer and the management team. Revenue from collaborative arrangements, including royalty revenue, are attributed to regions based on the location of the collaboration partner. Revenue from profit sharing-type arrangements is attributed to the geographic market in which the products are sold. Capitalized property and equipment is predominantly located in the US.

Cash and Cash Equivalents

The Company considers all highly-liquid investments purchased with a maturity of three months or less on the date of purchase to be cash equivalents. Cash equivalents are carried at fair value.

Restricted Cash

The Company maintains restricted cash for certain lease agreements and letters of credit by which the Company has pledged cash and cash equivalents as collateral. The Company may also maintain restricted cash for debt servicing of its non-recourse notes. See “Note 4. Cash, Cash Equivalents, and Restricted Cash” for more information.

Investments in Marketable Securities

The Company invests in marketable securities, primarily commercial paper, corporate notes, government bonds and government agency bonds. The Company classifies its marketable securities as available-for-sale securities and reports them at fair value in cash and cash equivalents or marketable securities on the consolidated balance sheets with related unrealized gains and losses included as a component of shareholders’ deficit. The amortized cost of debt

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securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest and other income (loss) on the consolidated statements of operations. The cost of securities sold is based on the specific identification method. Realized gains and losses and interest and dividends on securities are included in interest and other income (loss).

The Company accounts for credit losses on available-for-sale debt securities in accordance with Accounting Standards Codification (“ASC”), Topic 326, Financial Instruments – Credit Losses (“ASC 326”). Under ASC 326, the Company regularly reviews its investments for declines in estimated fair value below amortized cost. The factors considered in determining whether a credit loss exists include the creditworthiness of the security issuers, the number of securities in unrealized loss positions, the severity and duration of the unrealized losses, whether the Company has the intent to sell the securities and whether it is more likely than not that the Company will be required to sell the securities before the recovery of the security’s amortized cost basis.

In circumstances where the Company intends to sell, or is more likely than not required to sell, the security before it recovers its amortized cost basis, the difference between fair value and amortized cost is recognized as a loss in the consolidated statements of operations, with a corresponding write-down of the security's amortized cost. In circumstances where neither condition exists, the Company then evaluates whether a decline is due to credit-related factors. To determine the portion of a decline in fair value that is credit-related, the Company compares the present value of the expected cash flows of the security discounted at the security's effective interest rate to the amortized cost basis of the security. A credit-related impairment is limited to the difference between fair value and amortized cost and recognized as an allowance for credit loss on the consolidated balance sheets with a corresponding adjustment to net income (loss). Any remaining decline in fair value that is non-credit related is recognized in other comprehensive loss, net of tax. Improvements in expected cash flows due to improvements in credit are recognized through reversal of the credit loss and corresponding reduction in the allowance for credit loss.

Fair Value of Financial Instruments

The Company defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect the Company’s market assumptions. The Company classifies these inputs into the following hierarchy:

Level 1 — Quoted prices for identical instruments in active markets.

Financial instruments include cash equivalents, marketable securities, accounts receivable, accounts payable, accrued liabilities and debt. The Company’s cash equivalents and marketable securities are carried at estimated fair value and remeasured on a recurring basis. The carrying value of accounts receivable, receivables from collaborative arrangements, accounts payable and accrued liabilities approximate their estimated fair value due to the relatively short-term nature of these instruments. The fair value of the Company's debt is classified as a level 2 financial instrument and is disclosed in “Note 6. Debt”.

Receivables from Collaborative Arrangements

For the periods presented, the Company’s receivables from collaborative arrangements relate to amounts due arising from its collaboration (and licensing) agreements. When appropriate, the Company provides for an allowance for credit losses. The Company performs periodic credit evaluations of its customers and generally does not require

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collateral. For the periods presented, the Company did not have any material write-offs of receivables from collaborative arrangements.

Concentration of Credit Risks

The Company invests in a variety of financial instruments and, based on its policy, limits the amount of credit exposure with any one issuer, industry or geographic area for investments other than instruments backed by the US federal government.

The Company’s receivables primarily relate to amounts due under its collaboration and licensing agreements. Accordingly, the Company may be exposed to credit risk generally associated with pharmaceutical companies or specific to its collaboration agreements. The Company performs periodic evaluations of its customers and generally does not require collateral. For the year ended December 31, 2021, 2020, and 2019, the Company did not experience any material losses related to its receivables.

Property and Equipment

Property, equipment and leasehold improvements are stated at cost, net of accumulated depreciation, and amortized using the straight-line method as follows:

Leasehold improvements Shorter of remaining lease terms or useful life

Equipment, furniture and fixtures 5 - 7 years

Software and computer equipment 3 - 5 years

Leases

The Company determines whether a contract is or contains a lease at inception of the arrangement. In evaluating whether a contract is indicative of a lease, the Company considers all relevant facts and circumstances to assess whether the arrangement has extended to the Company the right to both (i) obtain substantially all the economic benefits from use of an identified asset and (ii) direct the use of the identified asset. To the extent that the Company determines a contract represents a lease, the arrangement is classified as either an operating lease or a finance lease, with the classification affecting the presentation and pattern of expense recognition in the consolidated statements of operations. The Company did not have any finance leases at either December 31, 2021 or 2020.

Operating lease assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the leasing arrangement. The Company records operating leases on the consolidated balance sheets through an operating lease asset and a corresponding short-term and long-term operating lease liability, as applicable. Lease liabilities are measured based on the present value of lease payments over the lease term discounted at the implicit interest rate, when readily available or using the Company’s incremental borrowing rate, if the implicit rate is not determinable. The incremental borrowing rate is considered the rate of interest that the Company would have to pay to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. The Company measures its operating lease assets based on the corresponding operating lease liabilities adjusted for (i) prepayments made to the lessor at or before the commencement date, (ii) any initial direct costs incurred, and (iii) tenant incentives granted under the lease contract.

In calculating operating lease assets and liabilities, the Company may elect to combine lease and non-lease components based on the asset type. The Company’s lease terms may include options to extend the lease only when it is reasonably certain that such options will be exercised, and the Company recognizes lease expense on a straight-line basis over the lease term. Operating lease assets are evaluated for possible impairment in accordance with the Company’s long-lived assets policy.

The Company does not recognize operating lease assets or liabilities for leases that have a lease term of 12 months or less at commencement date, and the lease expense related to these short-term lease arrangements is recognized on a straight-line basis over the term of the lease.

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Capitalized Software

The Company capitalizes certain costs related to direct material and service costs for software obtained for internal use. Upon being placed in service, these costs and other future capitalizable costs related to the internal use software system integration are depreciated over five years. There were no material capitalized software costs recorded for the year ended December 31, 2021 or 2020.

Impairment of Long-Lived Assets

The Company’s long-lived assets consists of property and equipment, operating lease assets and other assets. The carrying value of long-lived assets is reviewed for impairment whenever events or changes in circumstances indicate that the asset may not be recoverable. An impairment loss is recognized when the total of estimated future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. There was no impairment of long-lived assets recorded for the year ended December 31, 2021, 2020, or 2019.

Revenue Recognition

The Company recognizes revenue under ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, an entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company identifies the performance obligations in the contract by assessing whether the goods or services promised within each contract are distinct. The Company then recognizes revenue for the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Collaborative Arrangements under ASC 606

The Company enters into collaborative arrangements with partners that fall under the scope of ASC Topic 808, Collaborative Arrangements (“ASC 808”). While these arrangements are in the scope of ASC 808, the Company may analogize to ASC 606 for some aspects of these arrangements. The Company analogizes to ASC 606 for certain activities within collaborative arrangements for the delivery of a good or service (i.e., a unit of account) that is part of its ongoing major or central operations. Revenue recognized by analogizing to ASC 606 is recorded as “collaboration revenue” or “licensing revenue” whereas, revenue recognized in accordance with ASC 808 is recorded on a separate collaboration revenue line on the consolidated statements of operations.

The terms of the Company’s collaborative arrangements typically include one or more of the following: (i) up-front fees; (ii) milestone payments related to the achievement of development, regulatory, or commercial goals; (iii) royalties on net sales of licensed products; (iv) reimbursements or cost-sharing of research and development expenses; and (v) profit/loss sharing arising from co-promotion arrangements. Each of these payments results in collaboration revenues or an offset against research and development expense. Where a portion of non-refundable up-front fees or other payments received is allocated to continuing performance obligations under the terms of a collaborative arrangement, they are recorded as deferred revenue and recognized as collaboration revenue when (or as) the underlying performance obligation is satisfied.

As part of the accounting for these arrangements, the Company must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation which determines how the transaction price is allocated among the performance obligations. The estimation of the stand-alone selling price may include such estimates as, forecasted revenues or costs, development timelines, discount rates and probabilities of technical and regulatory success. The Company evaluates each performance obligation to determine if they can be satisfied at a point in time or over time, and it measures the services delivered to the collaborative partner which are periodically reviewed based on the progress of the related program. The effect of any change made to an

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estimated input component and, therefore revenue or expense recognized, would be recorded as a change in estimate. In addition, variable consideration (e.g., milestone payments) must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.

Up-front Fees: If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes collaboration revenues from the transaction price allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing collaboration revenue from the allocated transaction price. For example, when the Company receives up-front fees for the performance of research and development services, or when research and development services are not considered to be distinct from a license, the Company recognizes collaboration revenue for those units of account over time using a measure of progress. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue or expense recognition as a change in estimate.

Milestone Payments: At the inception of each arrangement that includes milestone payments (variable consideration), the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s or the collaborative partner’s control, such as non-operational developmental and regulatory approvals, are generally not considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re-evaluates the probability of achievement of milestones that are within its or the collaborative partner’s control, such as operational developmental milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenues and earnings in the period of adjustment. Revisions to the Company’s estimate of the transaction price may also result in negative collaboration revenues and earnings in the period of adjustment.

Royalties: For arrangements that include sales-based royalties, including commercial milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). The Company’s income earned related to TRELEGY sales is included within “income from investment in TRC, LLC” on the consolidated statements of operations.

Reimbursement, cost-sharing and profit-sharing payments: Under certain collaborative arrangements, the Company has been reimbursed for a portion of its research and development expenses or participates in the cost-sharing of such research and development expenses. Such reimbursements and cost-sharing arrangements have been reflected as a reduction of research and development expense in the Company’s consolidated statements of operations, as the Company does not consider performing research and development services for reimbursement to be a part of its ongoing major or central operations.

Research and Development Expenses

Research and development (“R&D”) expenses are recorded in the period that services are rendered or goods are received. R&D expenses consist of salaries and benefits, laboratory supplies and facility costs, as well as fees paid to third parties that conduct certain R&D activities on behalf of the Company, net of certain external R&D expenses reimbursed under the Company’s collaborative arrangements.

TBPH US Equity

TBPH · 10-K · period ended 2021-12-31

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

TBPH US Equity☆

TBPH · 10-K · period ended 2021-12-31

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

TBPH US Equity