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UPDATED: Theravance: Biotech's big coming-of-age story

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With two of its respiratory meds under review for potential approvals this year, Theravance ($THRX) stands to grow up significantly in 2013, giving more reasons for large pharma companies to come knocking. GlaxoSmithKline ($GSK), Theravance's longtime lung drug partner and owner of 27% of the biotech's stock, rose again to the top of the list of potential acquirers in speculation this week.

Last week Rick Winningham, chairman and chief executive of Theravance, talked about his hopes for the company and GSK's respiratory drug Breo ahead of an upcoming meeting, when FDA advisers weigh in on whether the agency should approve the med for treating chronic obstructive pulmonary disease (COPD). Breo, which combines an experimental long-acting beta2 agonist (LABA) called vilanterol (VI) with the approved corticosteroid fluticasone furoate (FF), is a once-a-day inhaled therapy and the most advanced candidate from Theravance's GSK collaboration.

Theravance, founded in 1996, won its very first FDA approval in 2009 for Vibativ, an antibiotic for skin infections caused by Gram-positive bacteria, including dreaded MRSA superbugs. This year regulators will decide the fate of Breo (which will be marketed as Relvar in Europe) and Anoro, another once-a-day respiratory med that features the inhaled VI ingredient but in combination with an experimental long-acting muscarinic antagonist from GSK.

"We will really be building from a phase where we have one approved product, Vibativ, to, in the future, hopefully multiple approved products with Relvar/Breo and Anoro," Winningham told FierceBiotech in an interview last week. "We'll be going from a point in time where the revenue we've had has primarily come from development milestones to a period where we hopefully have significant revenue growth from royalties on global sales of our products."

Glaxo, which markets the twice-daily blockbuster Advair for COPD and asthma, could take in $738 million from sales of Breo/Relvar in 2016, according to Bloomberg's averaging of analyst estimates. Theravance would get a 15% royalty on sales of the drug from GSK for the first $3 billion in annual sales, giving the loss-making biotech a shot to move into profitability in the coming years. Last year the South San Francisco-based biotech reported a net loss of $18.5 million on revenue of $135.8 million.

This week's FDA advisory committee meeting should shed more light on the prospects of an approval for Breo, which is also under review in Europe and Japan. The program has produced a mixed bag of trial results to date. Previously known as Relovair, Breo/Relvar failed to best Advair and faces scrutiny over the risk of pneumonia death in patients taking the product.

Winningham expected to be a spectator during the upcoming AdComm meeting, as GSK takes the lead on making the case for Breo. Nevertheless, he made the case during an interview that the once-a-day med improves compliance, or the chances of patients taking their breathing meds as prescribed, compared with twice-daily treatments. "With better compliance to therapy, it's going to lead to better control of disease," he said, "and better control of disease is going to lead to better outcomes for patients."

The outcomes of regulatory decisions on Breo/Relvar and Anoro could have profound implications for Theravance, including whether GSK decides to pull the trigger on a buyout of the biotech. Yet Theravance has much more in its pipeline than the respiratory products, including antibiotic, CNS/pain and gastrointestinal motility treatments in midstage development.

Last year Theravance inked a collaboration with Merck ($MRK) focused on research of cardiovascular drugs as well as other pacts with Alfa Wassermann for its GI drug candidate velusetrag and R-Pharm to advance antibiotics.

Indeed, pacts with larger drugmakers have been a cornerstone for Theravance's strategy for most of its history. Partners have bought into the biotech's own recipe for discovering multivalent small molecules that can home in on multiple binding sites on one or more disease targets, making them potentially potent medicines. (Though it turns out that the key bronchodilator VI in Breo and Anoro, though discovered in the GSK-Theravance collaboration, came from Glaxo's labs.)

Winningham, who joined Theravance in 2001 after holding top-level jobs at Bristol-Myers Squibb ($BMY), has led the company through most of its major tie-ups beginning with the first GSK respiratory pact in 2002. Theravance co-founder Dr. P. Roy Vagelos, a former chairman and CEO of Merck, recruited Winningham to the company. Vagelos formed Theravance in 1996 with fellow co-founders George Whitesides, the high-profile Harvard chemist behind Genzyme and numerous other biotechs, and Dr. Mathai Mammen, Theravance's senior vice president of research and early clinical development.

The biotech's 17-year run could end with a major buyout by GSK. As Bloomberg reported Monday, Piper Jaffray analysts noted that the London-based drug giant could pay $51 per share for Theravance in a buyout, or more than double the closing price of the biotech's stock on March 1.

Winningham, via a spokeswoman, declined to comment on the buyout speculation on Monday. Yet he realizes how important this next year or so is for his company, given the many potential turning points.

"Over the next few years, assuming we're … successful," Winningham said in a March 1 interview, "this will lead to really transformative change in the company." -- Ryan McBride (email | Twitter)

Editor's Note: This story has been updated to include the fact that the March 7 AdComm meeting was delayed by the FDA due to inclement weather. Filing (PDF)