Theravance Biopharma Inc
For the period ended Dec 31, 2023. Filed Mar 1, 2024.
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FY2023 · Filed Mar 1, 2024
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Item 8. Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Shareholders and the 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, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
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 Public Company Accounting Oversight Board (United States) (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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
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 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 theconsolidated 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 account or disclosure to which it relates.
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| | | Management’s Estimates of the Amount and Timing of Ampreloxetine Royalties |
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| Description of the Matter | | As more fully described in Note 10 to the consolidated financial statements, during 2022 the Company received $25 million from Royalty Pharma Investments (RPI) in exchange for royalties on future sales of ampreloxetine (“ampreloxetine funding”). The ampreloxetine funding is accounted for as a contingent liability that is accreted based on management’s estimates of the amount and timing of future royalty payments to RPI. On a periodic basis, the Company reviews the significant inputs used to estimate the ampreloxetine liability to assess whether there are indicators that suggest changes to the amount and timing of future royalty payments to RPI are required. Any such changes are accounted for prospectively. Auditing management’s assessment of whether changes to the amount and timing of future royalty payments to RPI are required was complex due to the subjective nature of the factors that can influence future sales of ampreloxetine, a number of which are not within the Company’s control. Management’s royalty forecast involves significant unobservable inputs including forecasted ampreloxetine revenues, the expected term of the royalty stream, as well as the overall probability of ampreloxetine’s clinical trial success. |
| How We Addressed the Matter in Our Audit | | We gained an understanding of and tested management’s identification of the factors that significantly influence the amount and timing of royalties payable to RPI. We assessed management’s process for appropriateness by (i) performing inquiries of internal personnel responsible for commercial forecasting and clinical operations overseeing the ampreloxetine phase 3 clinical trial, (ii) corroborating assumptions against external market research and industry data, and (iii) evaluating whether assumptions were consistent with evidence obtained in other areas of the audit. We also reviewed press releases and other relevant third-party data for evidence indicating whether a material change in future royalty forecasts was necessary. Lastly, we performed sensitivity analyses to quantify the impact of any such changes. |
/s/Ernst & Young LLP
We have served as the Company’s auditor since 2013.
San Mateo, California
March 1, 2024
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