Historical

Spin-Off of
TBPH (a)

Pro Forma
Adjustments

Notes

Unaudited
Pro Forma

ASSETS

Current assets:

Cash and cash equivalents

$

125,275

$

—

$

(125,275

)

(b), (d)

$

—

Short-term investments

245,648

—

(245,648

)

(b)

—

Accounts receivable, net of allowances

3

(3

)

—

—

Receivables from collaborative arrangements

865

(90

)

—

775

Prepaid expenses and other current assets

6,391

(4,493

)

—

1,898

Inventories

11,014

(11,014

)

—

—

Total current assets

389,196

(15,600

)

(370,923

)

2,673

Marketable securities

59,831

—

(41,516

)

(b)

18,315

Restricted cash

833

(833

)

—

—

Property and equipment, net

9,734

(9,734

)

—

—

Intangible assets, net

137,477

—

—

137,477

Other assets

7,963

—

—

7,963

Total assets

$

605,034

$

(26,167

)

$

(412,439

)

$

166,428

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

5,546

$

(4,984

)

$

4,984

(c)

$

5,546

Accrued personnel-related expenses

13,829

(13,417

)

9,129

(c), (d)

9,541

Accrued clinical and development expenses

9,890

(9,890

)

9,890

(c)

9,890

Accrued interest on convertible subordinated notes

1,273

—

—

1,273

Other accrued liabilities

4,792

(2,521

)

3,821

(c), (e)

6,092

Deferred revenue, current

8,814

(7,732

)

—

1,082

Total current liabilities

44,144

(38,544

)

27,824

33,424

Convertible subordinated notes

287,500

—

—

287,500

Deferred rent

4,891

(4,891

)

—

—

Deferred revenue

5,247

(648

)

—

4,599

Commitment and contingencies

Stockholders’ equity:

Common Stock

1,125

—

—

1,125

Additional paid-in capital

1,834,862

—

(440,092

)

(f)

1,394,770

Accumulated other comprehensive income

171

—

(171

)

(b)

—

Accumulated deficit

(1,572,906

)

17,916

—

(1,554,990

)

Total stockholders’ equity

263,252

17,916

(440,263

)

(159,095

)

Total liabilities and stockholders’ equity

$

605,034

$

(26,167

)

$

(412,439

)

$

166,428

Historical

Spin-Off
of TBPH (a)

Pro Forma
Adjustments

Notes

Unaudited
Pro Forma

Revenues:

Product sales

$

945

$

(945

)

$

—

$

—

Royalty revenue from a related party

(1,050

)

—

—

(1,050

)

Net revenue from collaborative arrangements

270

—

—

270

Total revenues

165

(945

)

—

(780

)

Costs and expenses:

Cost of goods sold

188

(188

)

—

—

Research and development

43,387

(41,723

)

—

1,664

Selling, general and administrative

22,834

(19,052

)

—

3,782

Total costs and expenses

66,409

(60,963

)

—

5,446

Loss from operations

(66,244

)

60,018

—

(6,226

)

Other income (expense), net

(3

)

—

—

(3

)

Interest income

188

—

(164

)

(g)

24

Interest expense

(1,644

)

—

—

(1,644

)

Net loss

$

(67,703

)

$

60,018

$

(164

)

$

(7,849

)

Basic and diluted net loss per share

$

(0.62

)

$

(0.07

)

Shares used to compute basic and diluted net loss per share

109,859

109,859

Historical

Spin-off
of TBPH (a)

Pro Forma
Adjustments

Notes

Unaudited
Pro Forma

Revenues:

Royalty revenue from a related party

$

1,202

$

—

$

—

$

1,202

Net revenue from collaborative arrangements

3,556

(226

)

—

3,330

Total revenues

4,758

(226

)

—

4,532

Operating expenses:

Research and development

125,181

(120,579

)

—

4,602

Selling, general and administrative

48,440

(35,931

)

—

12,509

Total operating expenses

173,621

(156,510

)

—

17,111

Loss from operations

(168,863

)

156,284

—

(12,579

)

Other income (expense), net

6,732

—

—

6,732

Interest income

778

—

(706

)

(g)

72

Interest expense

(9,348

)

—

—

(9,348

)

Net loss

$

(170,701

)

$

156,284

$

(706

)

$

(15,123

)

Basic and diluted net loss per share

$

(1.67

)

$

(0.15

)

Shares used to compute basic and diluted net loss per share

102,425

102,425

(a)

Represents the assets, liabilities, and operations of Theravance Biopharma prior to the Spin-Off. The ordinary shares of Theravance Biopharma were distributed to the Company’s stockholders on June 2, 2014.

(b)

Includes the capital contribution of $393.0 million in cash, cash equivalents, short-term investments and marketable securities, including the derecognition of the related unrealized gains or losses on available-for-sale securities in accumulated other comprehensive income, from the Company to Theravance Biopharma, plus the amount of accrued non-discretionary bonus, accrued clinical and development expenses and accrued sales and marketing expenses that Theravance Biopharma will record on its balance sheet in connection with the Spin-Off. Under the Separation and Distribution Agreement, the Company is obligated to fund all current liabilities, with the exception of deferred rent, deferred revenue, accrued vacation and accrued discretionary cash bonus that were incurred by Theravance Biopharma through the Spin-Off date. For ease of administration and in connection with the assignment of certain rights and obligations under the Separation and Distribution Agreement, certain current liabilities, which were transferred to Theravance Biopharma on the Spin-Off date, are to be paid by Theravance Biopharma. As such, the Company will provide additional funding to Theravance Biopharma to reimburse it for these liabilities that were incurred before the Spin-Off and transferred to Theravance Biopharma on the Spin-Off date (such amount was $19.4 million as of March 31, 2014). Such payment by the Company is expected to be made in late June 2014 or early July 2014.

(c)

Under the Separation and Distribution Agreement, the Company is obligated to fund all current liabilities, with the exception of deferred rent, deferred revenue, accrued vacation and accrued discretionary cash bonus that were incurred by Theravance Biopharma through the Spin-Off date. These pro forma adjustments reflect the payment of certain liabilities by the Company that had been allocated to the Theravance Biopharma’s business in the historical financial statements.

(d)

The adjustment of $9.1 million related to the accrued non-discretionary cash bonus expense allocated to Theravance Biopharma in the historical financial statements was paid by the Company in May 2014 prior to the Spin-Off date. Therefore, no additional funding will be required by the Company to Theravance Biopharma subsequent to the Spin-Off date for this portion of the accrued non-discretionary cash bonus expense.

(e)

In connection with the Spin-Off, the leases for the facilities in South San Francisco, California, which formerly served as the Company’s headquarters, were assigned to Theravance Biopharma. The Company would be held liable by the landlord if Theravance Biopharma defaults under its lease obligations. The pro forma adjustment includes a preliminary estimation of $1.3 million for the liability related to the fair value of the Company’s guarantee of the payments under the lease agreements for the facilities in South San Francisco, California. The estimated fair value of this lease guarantee was reflected as an adjustment to additional paid-in capital upon the Spin-Off.

(f)

Represents the value of the net assets contributed from the Company to Theravance Biopharma.

(g)

To reflect reduced interest income that would have been earned as a result of the $393.0 million in cash, cash equivalents and marketable securities that was contributed to Theravance Biopharma, assuming the amount was contributed as of the beginning of the period presented.