Theravance Biopharma (TBPH) is a compelling special situation following a 30-35% stock drop after its only pipeline drug failed a Phase 3 trial, pivoting it to a single-product company.
The company's core value lies in its 35% economic interest in the growing COPD drug Upelri, co-marketed with Viatris, which has patent protection until 2039.
Driven by activist investors with board seats, TBPH has launched an accelerated strategic review, with a sale of the company or its Upelri asset to partner Viatris being the highly anticipated outcome.
The investment thesis presents an asymmetric risk/reward profile, with a protected downside (significant cash, ongoing free cash flow) and a potential 40-50% upside to a fair value of $20-$22 per share, with a deal expected before the next earnings call.
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Concerns Raised
Potential for a lower-than-expected acquisition premium due to Viatris being the primary logical bidder.
Risk that the strategic process fails to result in a sale, leaving the company in limbo.
Historical management underperformance and value destruction, though this is now mitigated by activist involvement.
Opportunities Identified
Acquisition by partner Viatris at a significant premium, with a deal anticipated before the next earnings call.
Market underappreciation of the China royalty stream's long-term value, which could be worth several hundred million dollars.
Monetization of the $2.6B Irish tax attribute, which could add over $100 million in value to a strategic acquirer.