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Document and Entity Information - shares	3 Months Ended
Mar. 31, 2014	Apr. 30, 2014
Document and Entity Information
Entity Registrant Name	THERAVANCE INC
Entity Central Index Key	0001080014
Document Type	10-Q
Document Period End Date	Mar. 31, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		112,633,882
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 125,275	$ 143,510
Short-term investments	245,648	321,615
Accounts receivable, net of allowances of $209 and $89 at March 31, 2014 and December 31, 2013	3	199
Receivables from collaborative arrangements (including amounts from a related party of $775 and $2,247 at March 31, 2014 and December 31, 2013)	865	3,181
Prepaid expenses and other current assets	6,391	4,287
Inventories	11,014	10,406
Total current assets	389,196	483,198
Marketable securities	59,831	55,374
Restricted cash	833	833
Property and equipment, net	9,734	10,238
Intangible assets, net	137,477	124,257
Other assets	7,963	7,355
Total assets	605,034	681,255
Current liabilities:
Accounts payable	5,546	7,583
Payable to a related party	0	40,000
Accrued personnel-related expenses	13,829	10,881
Accrued clinical and development expenses	9,890	9,714
Accrued interest on convertible subordinated notes	1,273	2,800
Other accrued liabilities	4,792	4,137
Deferred revenue, current	8,814	9,289
Total current liabilities	44,144	84,404
Convertible subordinated notes	287,500	287,500
Deferred rent	4,891	4,774
Deferred revenue	5,247	5,455
Commitments and contingencies (Notes 3, 8 and 10)
Stockholders' equity:
Common stock, $0.01 par value; authorized: 200,000 shares; outstanding: 112,519 and 111,516 at March 31, 2014 and December 31, 2013	1,125	1,115
Additional paid-in capital	1,834,862	1,803,048
Accumulated other comprehensive income	171	162
Accumulated deficit	(1,572,906)	(1,505,203)
Total stockholders' equity	263,252	299,122
Total liabilities and stockholders' equity	$ 605,034	$ 681,255

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Revenue:
Product sales	$ 945	$ 0
Royalty revenue from a related party, net of intangible assets amortization of $1,780 and $0 for the three months ended March 31, 2014 and 2013 (Note 3)	(1,050)	0
Net revenue from collaborative arrangements (including amounts from a related party of $270 and $1,322 for the three months ended March 31, 2014 and 2013)	270	1,344
Total net revenue	165	1,344
Costs and expenses:
Cost of goods sold	188	0
Research and development	43,387	26,416
Selling, general and administrative	22,834	8,315
Total costs and expenses	66,409	34,731
Loss from operations	(66,244)	(33,387)
Other income (expense), net	(3)	(1,422)
Interest income	188	185
Interest expense	(1,644)	(2,736)
Net loss	$ (67,703)	$ (37,360)
Basic and diluted net loss per share (in dollars per share)	$ (0.62)	$ (0.39)
Shares used to compute basic and diluted net loss share (in shares)	109,859	96,379

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Cash flows from operating activities
Net loss	$ (67,703)	$ (37,360)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	3,400	1,898
Stock-based compensation	13,535	6,095
Change in fair value of capped-call derivative assets	0	1,422
Other non-cash items	(2)	(1)
Changes in operating assets and liabilities:
Accounts receivable	(178)	0
Receivables from collaborative arrangements	2,316	(1,153)
Prepaid expenses and other current assets	(2,132)	(1,224)
Inventories	(430)	(2,481)
Other assets	(998)	0
Accounts payable	(1,174)	(221)
Accrued personnel-related expenses, accrued clinical and development expenses, and other accrued liabilities	4,448	(3,176)
Accrued interest on convertible subordinated notes	(1,527)	(174)
Deferred rent expense	116	(202)
Deferred revenue	(308)	4,946
Net cash used in operating activities	(50,637)	(31,631)
Cash flows from investing activities
Purchases of property and equipment	(1,620)	(740)
Purchases of available-for-sale securities	(56,649)	(104,125)
Maturities of available-for-sale securities	122,399	54,753
Sales of available-for-sale securities	5,000	5,000
Increase in intangible assets	(55,000)	0
Payments received on notes receivable	0	100
Net cash provided by (used in) investing activities	14,130	(45,012)
Cash flows from financing activities
Proceeds from issuances of common stock, net	18,272	2,991
Purchase of capped-call options	0	(36,800)
Proceeds from issuances of convertible subordinated notes, net of debt issuance costs	0	281,673
Net cash provided by financing activities	18,272	247,864
Net increase (decrease) in cash and cash equivalents	(18,235)	171,221
Cash and cash equivalents at beginning of period	143,510	94,849
Cash and cash equivalents at end of period	$ 125,275	$ 266,070

Description of Operations and Summary of Significant Accounting Policies	3 Months Ended
	Mar. 31, 2014
Description of Operations and Summary of Significant Accounting Policies
Description of Operations and Summary of Significant Accounting Policies	1. Description of Operations and Summary of Significant Accounting Policies *Description of Operations* Theravance, Inc. (Theravance, the Company, the Registrant or we and other similar pronouns) is a biopharmaceutical company with a pipeline of internally discovered product candidates and strategic collaborations with pharmaceutical companies. Theravance is focused on the discovery, development and commercialization of small molecule medicines across a number of therapeutic areas including respiratory disease, bacterial infections, and central nervous system (CNS)/pain. *Basis of Presentation* The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In our opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of our financial position, results of operations, comprehensive loss and cash flows. The interim results are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2014 or any other period. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission (SEC) on March 3, 2014. *Business Separation* In April 2013, Theravance announced that its Board of Directors approved plans to separate its businesses into two independent publicly traded companies. The company to be spun-off, Theravance Biopharma, Inc. (Theravance Biopharma), filed an initial Form 10 with the SEC on August 1, 2013 and filed amendments of its Form 10 with the SEC on September 27, 2013, October 29, 2013, November 22, 2013, April 8, 2014, April 30, 2014 and May 7, 2014. After the spin-off, Theravance will be responsible for all development and commercial activities under the LABA collaboration and the Strategic Alliance agreements with Glaxo Group Limited (GSK). Theravance will be eligible to receive the associated potential royalty revenues from RELVAR®/BREO® ELLIPTA® (fluticasone furoate/vilanterol, “FF/VI”), ANORO™ ELLIPTA™ (umeclidinium bromide/vilanterol, “UMEC/VI”) and potentially VI monotherapy and 15% of the potential royalty revenues from UMEC/VI/FF, MABA (Bifunctional Muscarinic Antagonist-Beta2 Agonist), and MABA/FF and other products that may be developed under the LABA collaboration and Strategic Alliance agreements. Theravance Biopharma will be a biopharmaceutical company focused on discovery, development and commercialization of small-molecule medicines in areas of significant unmet medical need. The result will be two independent, publicly traded companies with different business models enabling investors to align their investment philosophies with the strategic opportunities and financial objectives of the two independent companies. The condensed consolidated financial statements do not reflect any adjustments resulting from the planned business separation. *Inventories* Inventories consist of raw materials, work-in-process and finished goods related to the production of VIBATIV® (telavancin). Raw materials include VIBATIV® active pharmaceutical ingredient (API) and other raw materials. Work-in-process and finished goods include third party manufacturing costs and labor and indirect costs we incur in the production process. Included in inventories are raw materials and work-in-process that may be used as clinical products, which are charged to research and development (R&D) expense when consumed. In addition, under certain commercialization agreements, we may sell VIBATIV® packaged in unlabeled vials that are recorded in work-in-process. Inventories are stated at the lower of cost or market value. We determine the cost of inventory using the average-cost method for validation batches. We analyze our inventory levels quarterly and write down any inventory that is expected to become obsolete, that has a cost basis in excess of its expected net realizable value or for inventory quantities in excess of expected requirements. *Revenue Recognition* Revenue is recognized when the four basic criteria of revenue recognition are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the nature of the fee charged for products or services delivered and the collectability of those fees. Where the revenue recognition criteria are not met, we defer the recognition of revenue by recording deferred revenue until such time that all criteria are met. Collaborative Arrangements and Multiple-Element Arrangements Revenue from nonrefundable, up-front license or technology access payments under license and collaborative arrangements that are not dependent on any future performance by us is recognized when such amounts are earned. If we have continuing obligations to perform under the arrangement, such fees are recognized over the estimated period of continuing performance obligation. We account for multiple element arrangements, such as license and development agreements in which a customer may purchase several deliverables, in accordance with FASB ASC Subtopic 605-25, “Multiple Element Arrangements.” For new or materially amended multiple element arrangements, we identify the deliverables at the inception of the arrangement and each deliverable within a multiple deliverable revenue arrangement is accounted for as a separate unit of accounting if both of the following criteria are met: (1) the delivered item or items have value to the customer on a standalone basis and (2) for an arrangement that includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in our control. We allocate revenue to each non-contingent element based on the relative selling price of each element. When applying the relative selling price method, we determine the selling price for each deliverable using vendor-specific objective evidence (“VSOE”) of selling price, if it exists, or third-party evidence (“TPE”) of selling price, if it exists. If neither VSOE nor TPE of selling price exist for a deliverable, we use the best estimated selling price for that deliverable. Revenue allocated to each element is then recognized based on when the basic four revenue recognition criteria are met for each element. For multiple-element arrangements entered into prior to January 1, 2011, we determined the delivered items under our collaborative arrangements did not meet the criteria to be considered separate accounting units for the purposes of revenue recognition. As a result, we recognized revenue from non-refundable, upfront fees and development contingent payments in the same manner as the final deliverable, which is ratably over the expected term of our performance of R&D services under the agreements. These upfront or contingent payments received, pending recognition as revenue, are recorded as deferred revenue and are classified as a short-term or long-term liability on the consolidated balance sheets and recognized over the estimated period of performance. We periodically review the estimated performance periods of our contracts based on the progress of our programs. Where a portion of non-refundable upfront fees or other payments received are allocated to continuing performance obligations under the terms of a collaborative arrangement, they are recorded as deferred revenue and recognized as revenue or as an accrued liability and recognized as a reduction of research and development expenses ratably over the term of our estimated performance period under the agreement. We determine the estimated performance periods, and they are periodically reviewed based on the progress of the related program. The effect of any change made to an estimated performance period and, therefore revenue recognized, would occur on a prospective basis in the period that the change was made. Under certain collaborative arrangements, we have been reimbursed for a portion of our research and development expenses. These reimbursements 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 to be a part of our ongoing and central operations. Therefore, the reimbursement of research and developmental services and any amounts allocated to our research and development services are recorded as a reduction of research and development expense. Amounts deferred under a collaborative arrangement in which the performance obligations are terminated will result in an immediate recognition of any remaining deferred revenue and accrued liability in the period that termination occurred, provided that there are no remaining performance obligations. We account for contingent payments in accordance with FASB Subtopic ASC 605-28 “Revenue Recognition—Milestone Method.” We recognize revenue from milestone payments when (i) the milestone event is substantive and its achievability was not reasonably assured at the inception of the agreement and (ii) we do not have ongoing performance obligations related to the achievement of the milestone. Milestone payments are considered substantive if all of the following conditions are met: the milestone payment (a) is commensurate with either our performance to achieve the milestone or the enhancement of the value of the delivered item or items as a result of a specific outcome resulting from our performance to achieve the milestone, (b) relates solely to past performance, and (c) is reasonable relative to all of the deliverables and payment terms (including other potential milestone consideration) within the arrangement. Under our collaborative arrangements with GSK, and in accordance with FASB Subtopic ASC 808-10, “Collaborative Arrangements,” royalty revenue earned is reduced by amortization expense resulting from the fees paid to GSK, which were capitalized as finite-lived intangible assets. When amortization expense exceeds amounts recognized for royalty revenues from GSK, negative revenue would be reported in our consolidated statements of operations. Product Revenues We sell VIBATIV® in the U.S. through a limited number of distributors, and title and risk of loss transfer upon receipt by these distributors. Healthcare providers order VIBATIV® through these distributors. Commencing in the first quarter of 2014, we record revenue on the sale of VIBATIV® on a sell-through basis, once the distributors sell the product to healthcare providers. Product sales are recorded net of estimated government-mandated rebates and chargebacks, distribution fees, estimated product returns and other deductions. We reflect such reductions in revenue as either an allowance to the related account receivable from the distributor, or as an accrued liability, depending on the nature of the sales deduction. Sales deductions are based on management’s estimates that consider payer mix in target markets, industry benchmarks and experience to date. We monitor inventory levels in the distribution channel, as well as sales of VIBATIV® by distributors to healthcare providers, using product-specific data provided by the distributors. Product return allowances are based on amounts owed or to be claimed on related sales. These estimates take into consideration the terms of our agreements with customers, historical product returns of VIBATIV® experienced by our former collaborative partner, Astellas, rebates or discounts taken, estimated levels of inventory in the distribution channel, the shelf life of the product, and specific known market events, such as competitive pricing and new product introductions. We update our estimates and assumptions each quarter and if actual future results vary from our estimates, we may adjust these estimates, which could have an effect on product sales and earnings in the period of adjustment. Sales Discounts: We offer cash discounts to our customers, generally 2% of the sales price, as an incentive for prompt payment. We expect our customers to comply with the prompt payment terms to earn the cash discount. We account for cash discounts by reducing accounts receivable by the full amount and recognizing the discount as a reduction of revenue in the same period the related revenue is recognized. Chargebacks and Government Rebates: For VIBATIV® sales in the U.S., we estimate reductions to product sales for qualifying federal and state government programs including discounted pricing offered to Public Health Service (PHS) as well as government-managed Medicaid programs. Our reduction for PHS is based on actual chargebacks that distributors have claimed for reduced pricing offered to such health care providers. Our accrual for Medicaid is based upon statutorily-defined discounts, estimated payer mix, expected sales to qualified healthcare providers, and our expectation about future utilization. The Medicaid accrual and government rebates that are invoiced directly to us are recorded in other accrued liabilities on the consolidated balance sheet. For qualified programs that can purchase our products through distributors at a lower contractual government price, the distributors charge back to us the difference between their acquisition cost and the lower contractual government price, which we record as an allowance against accounts receivable. Distribution Fees and Product Returns: We have written contracts with our distributors that include terms for distribution-related fees. We record distribution-related fees based on a percentage of the product sales price. We offer our distributors a right to return product purchased directly from us, which is principally based upon the product’s expiration date. Additionally, we have granted more expansive return rights to our distributors following our product launch of VIBATIV®. We will generally accept returns for expired product during the six months prior to and twelve months after the product expiration date on product that had been sold to our distributors. Product returned is generally not resalable given the nature of our products and method of administration. We have developed estimates for VIBATIV® product returns based upon historical VIBATIV® sales from our former collaborative partner, Astellas. We record distribution fees and product returns as an allowance against accounts receivable. Allowance for Doubtful Accounts: We maintain a policy to record allowances for potentially doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. As of March 31, 2014 and December 31, 2013, there was no allowance for doubtful accounts. Royalties We recognize royalty revenue on licensee net sales of our products in the period in which the royalties are earned and reported to us and collectability is reasonably assured. *Intangible Assets* We capitalize fees paid to licensors related to agreements for approved products or commercialized products. We capitalize these fees as finite-lived intangible assets and amortize these intangible assets on a straight-line basis over their estimated useful lives upon the commercial launch of the product, which is expected to be shortly after regulatory approval of such product. The estimated useful lives of these intangible assets are based on a country-by-country and product-by-product basis, as the later of the expiration or termination of the last patent right covering the compound in such product in such country and 15 years from first commercial sale of such product in such country, unless the agreement is terminated earlier. Consistent with our policy for classification of costs under the research and development collaborative arrangements, the amortization of these intangible assets will be recognized as a reduction of royalty revenue. We review our intangible assets for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The recoverability of finite-lived intangible assets is measured by comparing the asset’s carrying amount to the expected undiscounted future cash flows that the asset is expected to generate. The determination of recoverability typically requires various estimates and assumptions, including estimating the useful life over which cash flows will occur, their amount, and the asset’s residual value, if any. We derive the required cash flow estimates from near-term forecasted product sales and long-term projected sales in the corresponding market.

Net Loss per Share

3 Months Ended

Mar. 31, 2014

Net Loss per Share

Net Loss per Share

2. Net Loss per Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding, less RSAs subject to forfeiture. Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding, less RSAs subject to forfeiture, plus all additional common shares that would have been outstanding, assuming dilutive potential common shares had been issued for other dilutive securities.

For the three months ended March 31, 2014 and 2013, diluted and basic net loss per share were identical since potential common shares were excluded from the calculation, as their effect was anti-dilutive.

The computations for basic and diluted net loss per share were as follows:

	Three Months Ended March 31,
(In thousands, except per share data)	2014			2013
Numerator:
Net loss	$	(67,703	)	$	(37,360	)

Denominator:
Weighted-average shares of stock outstanding	112,052			99,181
Less: unvested RSAs	(2,193		)	(2,802		)
Weighted-average shares used to compute basic and diluted net loss per share	109,859			96,379

Net loss per share:
Basic and diluted net loss per share	$	(0.62	)	$	(0.39	)

Anti-Dilutive Securities

The following common equivalent shares were not included in the computation of diluted net loss per share because their effect was anti-dilutive:

	Three Months Ended March 31,
(In thousands)	2014	2013
Shares issuable under equity incentive plans and ESPP	3,211	5,469
Shares issuable upon the conversion of convertible subordinated notes	2,780	14,256
Total anti-dilutive securities	5,991	19,725

Collaborative Arrangements

3 Months Ended

Mar. 31, 2014

Collaborative Arrangements

Collaborative Arrangements

3. Collaborative Arrangements

Net Revenue from Collaborative Arrangements

We recognized net revenue from collaborative arrangements as follows:

	Three Months Ended March 31,
(In thousands)	2014			2013
GSK	$	(780	)	$	1,322
Other	—			22
Net revenue from collaborative arrangements	$	(780	)	$	1,344

GSK

LABA Collaboration

In November 2002, we entered into our long-acting beta2 agonist (LABA) collaboration with GSK to develop and commercialize once-daily LABA products for the treatment of chronic obstructive pulmonary disease (COPD) and asthma. For the treatment of COPD, the collaboration has developed two combination products: (1) RELVAR®/BREO® ELLIPTA® (FF/VI), a once-daily combination medicine consisting of a LABA, vilanterol (VI), and an inhaled corticosteroid (ICS), fluticasone furoate (FF) and (2) ANORO™ ELLIPTA™ (UMEC/VI), a once-daily medicine combining a long-acting muscarinic antagonist (LAMA), umeclidinium bromide (UMEC), with a LABA, VI. For the treatment of asthma, RELVAR® ELLIPTA® is approved in multiple regions outside of North America and the collaboration is further developing FF/VI for the U.S.

In the event that a product containing VI is successfully developed and commercialized, we will be obligated to make milestone payments to GSK, which could total as much as $220.0 million if both a single-agent and a combination product or two different combination products are launched in multiple regions of the world. Of these potential payments to GSK for registrational and launch-related milestone fees, we paid a total of $140.0 million as of March 31, 2014 and recorded an additional $30.0 million liability in April 2014. These milestone fees paid or owed to GSK were capitalized as finite-lived intangible assets, which are being amortized over their estimated useful lives commencing upon the commercial launch of the product. We estimate the remaining potential milestone payments of $50.0 million could be payable by the end of 2014.

Total milestone fees paid of $140.0 million as of March 31, 2014 resulted from the following:

· In May 2013, the U.S. Food and Drug Administration (FDA) approved BREO® ELLIPTA® as an inhaled long-term, once-daily maintenance treatment of airflow obstruction in patients with COPD, including chronic bronchitis and/or emphysema. It is also indicated to reduce exacerbations of COPD in patients with a history of exacerbations.

· In September 2013, the Japanese Ministry of Health, Labour and Welfare (MHLW) approved RELVAR® ELLIPTA® for the treatment of bronchial asthma in cases where concurrent use of inhaled corticosteroid and long-acting inhaled beta2 agonist is required.

· In October 2013, BREO® ELLIPTA® was launched in the U.S. for the treatment of COPD.

· In November 2013, the European Commission granted marketing authorization for RELVAR® ELLIPTA® for the regular treatment of asthma and the systematic treatment of COPD.

· In December 2013, RELVAR® ELLIPTA® was launched in Japan for the treatment of bronchial asthma.

· In December 2013, the U.S. FDA approved ANORO™ ELLIPTA™ as a combination anticholinergic/long-acting beta2-adrenergic agonist (LABA) indicated for the long-term, once-daily, maintenance treatment of airflow obstruction in patients with COPD, including chronic bronchitis and/or emphysema.

· In January 2014, RELVAR® ELLIPTA® was launched in the European Union.

Total milestone fees recorded of $30.0 million in April 2014 resulted from the following:

· In April 2014, ANORO™ ELLIPTA™ was launched in the U.S. for the treatment of COPD.

We are entitled to receive annual royalties from GSK on sales of RELVAR®/BREO® ELLIPTA® as follows: 15% on the first $3.0 billion of annual global net sales and 5% for all annual global net sales above $3.0 billion. Sales of single-agent LABA medicines and combination medicines would be combined for the purposes of this royalty calculation. For other products combined with a LABA from the LABA collaboration, such as ANORO™ ELLIPTA™, royalties are upward tiering and range from 6.5% to 10%.

Amortization expense resulting from the milestone fees paid to GSK, which are capitalized as finite-lived intangible assets, is a reduction to royalty revenue. When amortization expense exceeds amounts recognized for royalty revenue, negative revenue would be reported in our consolidated statements of operations.

2004 Strategic Alliance

In March 2004, we entered into our strategic alliance with GSK (the Strategic Alliance agreement and the LABA collaboration are together referred to herein as the GSK Agreements). Under this alliance, GSK received an option to license exclusive development and commercialization rights to product candidates from certain of our discovery programs on pre-determined terms and on an exclusive, worldwide basis. Upon GSK’s decision to license a program, GSK is responsible for funding all future development, manufacturing and commercialization activities for product candidates in that program. In addition, GSK is obligated to use diligent efforts to develop and commercialize product candidates from any program that it licenses. If the program is successfully advanced through development by GSK, we are entitled to receive clinical, regulatory and commercial milestone payments and royalties on any sales of medicines developed from the program. If GSK chooses not to license a program, we retain all rights to the program and may continue the program alone or with a third party. GSK has no further option rights on any of our research or development programs under the strategic alliance.

In 2005, GSK licensed our bifunctional muscarinic antagonist-beta2 agonist (MABA) program for the treatment of COPD, and in October 2011, we and GSK expanded the MABA program by adding six additional Theravance-discovered preclinical MABA compounds (the “Additional MABAs”). GSK’s development, commercialization, milestone and royalty obligations under the strategic alliance remain the same with respect to GSK961081 (‘081), the lead compound in the MABA program. GSK is obligated to use diligent efforts to develop and commercialize at least one MABA within the MABA program, but may terminate progression of any or all Additional MABAs at any time and return them to us, at which point we may develop and commercialize such Additional MABAs alone or with a third party. Both GSK and we have agreed not to conduct any MABA clinical studies outside of the strategic alliance so long as GSK is in possession of the Additional MABAs. If a single-agent MABA medicine containing ‘081 is successfully developed and commercialized, we are entitled to receive royalties from GSK of between 10% and 20% of annual global net sales up to $3.5 billion, and 7.5% for all annual global net sales above $3.5 billion. If a MABA medicine containing ‘081 is commercialized as a combination product, such as ‘081/FF, the royalty rate is 70% of the rate applicable to sales of the single-agent MABA medicine. For single-agent MABA medicines containing an Additional MABA, we are entitled to receive royalties from GSK of between 10% and 15% of annual global net sales up to $3.5 billion, and 10% for all annual global net sales above $3.5 billion. For combination products containing an Additional MABA, such as a MABA/ICS combination, the royalty rate is 50% of the rate applicable to sales of the single-agent MABA medicine. If a MABA medicine containing ‘081 is successfully developed and commercialized in multiple regions of the world, we could earn total contingent payments of up to $125.0 million for a single-agent medicine and up to $250.0 million for both a single-agent and a combination medicine. If a MABA medicine containing an Additional MABA is successfully developed and commercialized in multiple regions of the world, we could earn total contingent payments of up to $129.0 million.

Agreements Entered into with GSK in Connection with the Spin-Off

In conjunction with the planned spin-off of Theravance Biopharma, on March 3, 2014, we, Theravance Biopharma and GSK entered into a series of agreements clarifying how the companies will implement the spin-off and operate following the spin-off. We, Theravance Biopharma and GSK entered into a three-way master agreement providing for GSK’s consent to the spin-off provided certain conditions are met. In addition, we and GSK also entered into amendments of our LABA collaboration and Strategic Alliance agreements, and Theravance Biopharma and GSK entered into a governance agreement, a registration rights agreement and an extension agreement. The three-way master agreement is currently effective, but will terminate if the spin-off is not effected by June 30, 2014, and the other agreements will become effective upon the spin-off, provided that the spin-off is effected on or before June 30, 2014.

The amendments to the GSK Agreements do not change the economics or royalty rates. The amendments to the GSK Agreements do provide that GSK’s diligent efforts obligations regarding commercialization matters under both agreements will change upon regulatory approval in either the United States or the European Union of UMEC/VI/FF or a MABA in combination with FF. Upon such regulatory approval, GSK’s diligent efforts obligations as to commercialization matters under the GSK Agreements will have the objective of focusing on the best interests of patients and maximizing the net value of the overall portfolio of products under the collaboration agreement and strategic alliance agreement. Since GSK’s commercialization efforts following such regulatory approval will be guided by a portfolio approach across products in which we will retain our full interests upon the spin-off and also products in which we will have retained only a portion of our interests upon the planned spin-off transaction, GSK’s commercialization efforts may have the effect of reducing the overall value of our remaining interests in the GSK Agreements after the spin-off.

Purchases of Common Stock under the Company’s Governance Agreement and Common Stock Purchase Agreements with GSK

During the first quarter of 2014, GSK purchased 342,229 shares of our common stock pursuant to its periodic “top-up” rights under our Amended and Restated Governance Agreement, dated as of June 4, 2004, as amended, among us, GSK and certain GSK affiliates, for an aggregate purchase price of approximately $12.9 million.

GSK Contingent Payments and Revenue

The potential future contingent payments receivable related to the MABA program of $363.0 million are not deemed substantive milestones due to the fact that the achievement of the event underlying the payment predominantly relates to GSK’s performance of future development, manufacturing and commercialization activities for product candidates after licensing the program.

Net revenue recognized from GSK under the LABA collaboration and strategic alliance agreements was as follows:

	Three Months Ended March 31,
(In thousands)	2014			2013
Royalty revenue	$	730		$	—
Amortization of intangible assets	(1,780		)	—
Net royalty revenue	(1,050		)	—
LABA collaboration	—			907
Strategic alliance—MABA program license	270			415
Total net revenue from GSK	$	(780	)	$	1,322

Amortization expense for intangible assets, which is a reduction to royalty revenue, exceeded amounts recognized for royalty revenues under the LABA Collaboration with GSK, resulting in negative revenue in the first quarter of 2014.

Clinigen Group

Commercialization Agreement

In March 2013, we entered into a commercialization agreement (the “Clinigen Commercialization Agreement”) with Clinigen Group plc (Clinigen) to commercialize VIBATIV® for the treatment of hospital acquired nosocomial pneumonia, including ventilator-associated pneumonia, known or suspected to be caused by methicillin resistant Staphylococcus aureus (MRSA) when other alternatives are not suitable. Under the agreement, we granted Clinigen exclusive commercialization rights in the European Union and certain other European countries (including Switzerland and Norway). We received a $5.0 million upfront payment in March 2013. Also, we are eligible to receive tiered royalty payments on net sales of VIBATIV®, ranging from 20% to 30% during the term of the agreement, and from a low double digit percentage to a mid-teen percentage if Clinigen exercises its post-term option. We are responsible, either directly or through our vendors or contractors, for supplying at Clinigen’s expense both API and finished drug product for Clinigen’s commercialization activities. The agreement has a term of at least 15 years, with an option to extend exercisable by Clinigen. However, Clinigen may terminate the agreement at any time after it has initiated commercialization upon twelve months’ advance notice.

Under the Clinigen Commercialization Agreement, the significant deliverables were determined to be the license, committee participation and manufacturing supply. We determined that the license represents a separate unit of accounting as the license, which includes rights to our underlying technologies for VIBATIV®, has standalone value because the rights conveyed permit Clinigen to perform all efforts necessary to use our technologies to bring the compound through commercialization. We based the best estimate of selling price for the license on potential future cash flows under the arrangement over the estimated commercialization period. We determined that the committee participation represents a separate unit of accounting as Clinigen could negotiate for and/or acquire these services from other third parties, and we based the best estimate of selling price on the nature and timing of the services to be performed. We based the best estimate of selling price for the manufacturing supply on a fully burdened cost to purchase and transfer the underlying API and finished goods from our third party contract manufacturer.

The $5.0 million upfront payment received in 2013 was allocated to two units of accounting based on the relative selling price method as follows: $4.9 million to the license and $0.1 million to the committee participation. We did not recognize any revenue from the license and committee participation as the technical transfer activities were not completed as of March 31, 2014 and the associated units of accounting were not delivered. The amount of the upfront payment allocated to the committee participation was deferred and will be recognized as revenue over the estimated performance period. Amounts received under a future separate supply agreement for API and finished goods, which will be manufactured by our third party contract manufacturers, will be recognized as revenue to the extent of future API and finished goods inventory sales.

Reimbursement of R&D Costs

Under certain collaborative arrangements, we are entitled to reimbursement of certain R&D costs. Our policy is to account for the reimbursement payments by our collaboration partners as reductions to R&D expense.

The following table summarizes the reductions to R&D expenses related to the reimbursement payments:

	Three Months Ended March 31,
(In thousands)	2014		2013
GSK	$	43	$	171
Merck	—		1,429
Alfa Wassermann	72		208
R-Pharm	18		326
Total reduction to R&D expense	$	133	$	2,134

Available-for-Sale Securities

3 Months Ended

Mar. 31, 2014

Available-for-Sale Securities

Available-for-Sale Securities

4. Available-for-Sale Securities

The classification of available-for-sale securities in the consolidated balance sheets is as follows:

(In thousands)	March 31, 2014		December 31, 2013
Cash and cash equivalents	$	119,160	$	125,009
Short-term investments	245,648		321,615
Marketable securities	59,831		55,374
Restricted cash	833		833
Total	$	425,472	$	502,831

The estimated fair value of available-for-sales securities is based on quoted market prices for these or similar investments that were based on prices obtained from a commercial pricing service. Available-for-sale securities are summarized below:

	March 31, 2014
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. government securities	$	37,042	$	74	$	—		$	37,116
U.S. government agencies	110,171		59		—			110,230
U.S. corporate notes	88,607		48		(10		)	88,645
U.S. commercial paper	74,487		—		—			74,487
Money market funds	114,994		—		—			114,994
Total	$	425,301	$	181	$	(10	)	$	425,472

	December 31, 2013
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. government securities	$	42,104	$	55	$	(1	)	$	42,158
U.S. government agencies	141,278		61		(8		)	141,331
U.S. corporate notes	94,923		54		—			94,977
U.S. commercial paper	102,021		2		(1		)	102,022
Money market funds	122,343		—		—			122,343
Total	$	502,669	$	172	$	(10	)	$	502,831

At March 31, 2014, all of the available-for-sale securities had contractual maturities within two years and the average duration of marketable securities was approximately seven months. We do not intend to sell the investments that are in an unrealized loss position, and it is unlikely that we will be required to sell the investments before recovery of their amortized cost basis, which may be maturity. We have determined that the gross unrealized losses on our marketable securities at March 31, 2104 were temporary in nature. All marketable securities with unrealized losses at March 31, 2014 have been in a loss position for less than twelve months.

During each of the three months ended March 31, 2014 and 2013, we sold available-for-sale securities totaling $5.0 million, and the related realized gains and losses were not significant in any of these periods.

- Definition

The entire disclosure for investments in certain debt and equity securities.

+ References + Details

Fair Value Measurements

3 Months Ended

Mar. 31, 2014

Fair Value Measurements

Fair Value Measurements

5. Fair Value Measurements

We define 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.

Our valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. We classify these inputs into the following hierarchy:

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

Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3—Unobservable inputs and little, if any, market activity for the assets.

Our available-for-sale securities are measured at fair value on a recurring basis and our convertible subordinated notes are not measured at fair value on a recurring basis. The estimated fair values were as follows:

	Estimated Fair Value Measurements at Reporting Date Using:
Types of Instruments	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets at March 31, 2014:
U.S. government securities	$	37,116	$	—	$	—	$	37,116
U.S. government agency securities	82,895		27,335		—		110,230
U.S. corporate notes	69,497		19,148		—		88,645
U.S. commercial paper	74,487		—		—		74,487
Money market funds	114,994		—		—		114,994
Total assets measured at estimated fair value	$	378,989	$	46,483	$	—	$	425,472
Liabilities at March 31, 2014:
Convertible subordinated notes due 2023	$	—	$	369,685	$	—	$	369,685

	Estimated Fair Value Measurements at Reporting Date Using
Types of Instruments	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets at December 31, 2013:
U.S. government securities	$	42,158	$	—	$	—	$	42,158
U.S. government agency securities	98,236		43,095		—		141,331
U.S. corporate notes	61,591		33,386		—		94,977
U.S. commercial paper	3,499		98,523		—		102,022
Money market funds	122,343		—		—		122,343
Total assets measured at estimated fair value	$	327,827	$	175,004	$	—	$	502,831
Liabilities at December 31, 2013:
Convertible subordinated notes due 2023	$	—	$	408,250	$	—	$	408,250

At March 31, 2014, securities with a total fair value of $2.8 million were measured using Level 1 inputs in comparison to December 31, 2013, at which time the securities had a fair value of $2.9 million and were measured using Level 2 inputs. The transfer to Level 1 from Level 2 was primarily the result of increased trading volume of the securities at and around March 31, 2014, compared to December 31, 2013.

At March 31, 2014, securities with a total fair value of $1.0 million were measured using Level 2 inputs in comparison to December 31, 2013, at which time the securities had a fair value of $1.0 million and were measured using Level 1 inputs. The transfer to Level 2 from Level 1 was primarily the result of decreased trading volume of the securities at and around March 31, 2014, compared to December 31, 2013.

Due to their short-term maturities, we believe that the fair value of our bank deposits, receivables from collaborative arrangements, accounts payable and accrued expenses approximate their carrying value.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Intangible Assets

3 Months Ended

Mar. 31, 2014

Intangible Assets

Intangible Assets

7. Intangible Assets

Intangible assets, which consist of registrational and launch-related milestone fees paid or owed to GSK, were as follows:

	March 31, 2014
(In thousands)	Weighted Average Remaining Amortization Period (Years)	Gross Carrying Value		Accumulated Amortization			Net Carrying Value
FDA approval and launch of BREO® ELLIPTA® in the U.S.	15.4	$	60,000	$	(1,579	)	$	58,421
MHLW approval and launch of RELVAR® ELLIPTA® in Japan	14.7	20,000		(444		)	19,556
European Commission approval and launch of RELVAR® ELLIPTA®	14.8	30,000		(500		)	29,500
FDA approval of ANOROTM ELLIPTATM in the U.S.	15.2	30,000		—			30,000
Total intangible assets		$	140,000	$	(2,523	)	$	137,477

	December 31, 2013
(In thousands)	Weighted Average Remaining Amortization Period (Years)	Gross Carrying Value		Accumulated Amortization			Net Carrying Value
FDA approval and launch of BREO® ELLIPTA® in the U.S.	15.7	$	60,000	$	(632	)	$	59,368
MHLW approval and launch of RELVAR® ELLIPTA® in Japan	14.9	20,000		(111		)	19,889
European Commission approval of RELVAR® ELLIPTA®	15	15,000		—			15,000
FDA approval of ANOROTM ELLIPTATM in the U.S.	15.2	30,000		—			30,000
Total intangible assets		$	125,000	$	(743	)	$	124,257

Additional information regarding these milestone fees is included in Note 3 “Collaborative Arrangements.” Amortization expense for the BREO® ELLIPTA® intangible asset for the U.S. region and the RELVAR® ELLIPTA® intangible asset for the Japan region began in the fourth quarter of 2013 and for the RELVAR® ELLIPTA® intangible asset for the European Union region began in the first quarter of 2014. Amortization expense is recorded as a reduction in revenue from collaborative arrangements. Amortization expense in the first quarter of 2014 was $1.8 million. Estimated annual amortization expense of intangible assets is $8.1 million for 2014, $9.1 million for each of the years from 2015 to 2018 and $94.7 million thereafter.

Stock-Based Compensation

3 Months Ended

Mar. 31, 2014

Stock-Based Compensation

Stock-Based Compensation

8. Stock-Based Compensation

Equity Incentive Plan

The 2012 Equity Incentive Plan (2012 Plan) provides for the grant of stock options, time-based and performance-contingent RSUs, time-based and performance-contingent RSAs, and stock appreciation rights to employees, non-employee directors and consultants. As of March 31, 2014, total shares remaining available for issuance under the 2012 Plan were 2,925,115.

Performance-Contingent RSAs

Over the past three years, the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) has approved grants of performance-contingent RSAs to senior management and a non-executive officer. Generally, these awards have dual triggers of vesting based upon the achievement of certain performance goals by a pre-specified date, as well as a requirement for continued employment. When the performance goals are probable of achievement for these types of awards, time-based vesting and, as a result, recognition of stock-based compensation expense commence.

Included in these performance-contingent RSAs is the grant of 1,290,000 special long-term retention and incentive performance-contingent RSAs to senior management in 2011. The awards have dual triggers of vesting based upon the achievement of certain performance conditions over a six-year timeframe from 2011 through December 31, 2016 and require continued employment. The maximum potential expense associated with this program, net of forfeitures, is $28.2 million related to stock-based compensation expense, which would be recognized in increments based on achievement of the performance conditions.

As of March 31, 2014, we determined that the achievement of the requisite performance conditions for vesting of the first tranche of these awards was probable and, as a result, $6.8 million of the total stock-based compensation expense of $7.0 million related to this grant was recognized in the first quarter of 2014.

In May 2014, the Compensation Committee approved the modification of certain performance conditions for the second tranche of awards related to this grant. The modification permitted recognition of partial achievement of the original performance conditions that were met prior to the business separation. Therefore, we determined that the achievement of the modified performance conditions for this tranche was probable. As a result an additional $4.3 million of stock-based compensation expense will be recognized over a one year vesting period commencing in May 2014. In addition, the remaining unvested equity award was restructured to reflect the change in our Company and to address potential retention concerns following the business separation.

Stock-Based Compensation Expense

The allocation of stock-based compensation expense included in the condensed consolidated statements of operations was as follows:

	Three Months Ended March 31,
(In thousands)	2014		2013
Research and development	$	5,439	$	3,797
Selling, general and administrative	8,096		2,298
Total stock-based compensation expense	$	13,535	$	6,095

Total stock-based compensation expense capitalized to inventory was not material for the first quarter of 2014 and was $0.1 million for first quarter of 2013.

As of March 31, 2014, unrecognized compensation expense, net of expected forfeitures, was as follows: $19.8 million related to unvested stock options; $12.7 million related to unvested RSUs; and $21.9 million related to unvested RSAs (excludes performance-contingent RSAs).

Valuation Assumptions

The range of weighted-average assumptions used to estimate the fair value of stock options granted was as follows:

	Three Months Ended March 31,
	2014			2013
*Employee stock options*
Risk-free interest rate	1.78-1.95		%	1.01%-1.14		%
Expected term (in years)	6			6
Volatility	60		%	58		%
Dividend yield	—		%	—		%
Weighted-average estimated fair value of stock options granted	$	21.29		$	12.32

Stockholders’ Equity

For the three months ended March 31, 2014, approximately 433,000 shares were exercised at a weighted-average exercise price of $15.34 per share, for total cash proceeds of approximately $6,636,000.

Description of Operations and Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2014
Description of Operations and Summary of Significant Accounting Policies
Basis of Presentation	*Basis of Presentation* The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In our opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of our financial position, results of operations, comprehensive loss and cash flows. The interim results are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2014 or any other period. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission (SEC) on March 3, 2014.
Inventories	*Inventories* Inventories consist of raw materials, work-in-process and finished goods related to the production of VIBATIV® (telavancin). Raw materials include VIBATIV® active pharmaceutical ingredient (API) and other raw materials. Work-in-process and finished goods include third party manufacturing costs and labor and indirect costs we incur in the production process. Included in inventories are raw materials and work-in-process that may be used as clinical products, which are charged to research and development (R&D) expense when consumed. In addition, under certain commercialization agreements, we may sell VIBATIV® packaged in unlabeled vials that are recorded in work-in-process. Inventories are stated at the lower of cost or market value. We determine the cost of inventory using the average-cost method for validation batches. We analyze our inventory levels quarterly and write down any inventory that is expected to become obsolete, that has a cost basis in excess of its expected net realizable value or for inventory quantities in excess of expected requirements.
Revenue Recognition	*Revenue Recognition* Revenue is recognized when the four basic criteria of revenue recognition are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the nature of the fee charged for products or services delivered and the collectability of those fees. Where the revenue recognition criteria are not met, we defer the recognition of revenue by recording deferred revenue until such time that all criteria are met.
Collaborative Arrangements and Multiple-Element Arrangements	Collaborative Arrangements and Multiple-Element Arrangements Revenue from nonrefundable, up-front license or technology access payments under license and collaborative arrangements that are not dependent on any future performance by us is recognized when such amounts are earned. If we have continuing obligations to perform under the arrangement, such fees are recognized over the estimated period of continuing performance obligation. We account for multiple element arrangements, such as license and development agreements in which a customer may purchase several deliverables, in accordance with FASB ASC Subtopic 605-25, “Multiple Element Arrangements.” For new or materially amended multiple element arrangements, we identify the deliverables at the inception of the arrangement and each deliverable within a multiple deliverable revenue arrangement is accounted for as a separate unit of accounting if both of the following criteria are met: (1) the delivered item or items have value to the customer on a standalone basis and (2) for an arrangement that includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in our control. We allocate revenue to each non-contingent element based on the relative selling price of each element. When applying the relative selling price method, we determine the selling price for each deliverable using vendor-specific objective evidence (“VSOE”) of selling price, if it exists, or third-party evidence (“TPE”) of selling price, if it exists. If neither VSOE nor TPE of selling price exist for a deliverable, we use the best estimated selling price for that deliverable. Revenue allocated to each element is then recognized based on when the basic four revenue recognition criteria are met for each element. For multiple-element arrangements entered into prior to January 1, 2011, we determined the delivered items under our collaborative arrangements did not meet the criteria to be considered separate accounting units for the purposes of revenue recognition. As a result, we recognized revenue from non-refundable, upfront fees and development contingent payments in the same manner as the final deliverable, which is ratably over the expected term of our performance of R&D services under the agreements. These upfront or contingent payments received, pending recognition as revenue, are recorded as deferred revenue and are classified as a short-term or long-term liability on the consolidated balance sheets and recognized over the estimated period of performance. We periodically review the estimated performance periods of our contracts based on the progress of our programs. Where a portion of non-refundable upfront fees or other payments received are allocated to continuing performance obligations under the terms of a collaborative arrangement, they are recorded as deferred revenue and recognized as revenue or as an accrued liability and recognized as a reduction of research and development expenses ratably over the term of our estimated performance period under the agreement. We determine the estimated performance periods, and they are periodically reviewed based on the progress of the related program. The effect of any change made to an estimated performance period and, therefore revenue recognized, would occur on a prospective basis in the period that the change was made. Under certain collaborative arrangements, we have been reimbursed for a portion of our research and development expenses. These reimbursements 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 to be a part of our ongoing and central operations. Therefore, the reimbursement of research and developmental services and any amounts allocated to our research and development services are recorded as a reduction of research and development expense. Amounts deferred under a collaborative arrangement in which the performance obligations are terminated will result in an immediate recognition of any remaining deferred revenue and accrued liability in the period that termination occurred, provided that there are no remaining performance obligations. We account for contingent payments in accordance with FASB Subtopic ASC 605-28 “Revenue Recognition—Milestone Method.” We recognize revenue from milestone payments when (i) the milestone event is substantive and its achievability was not reasonably assured at the inception of the agreement and (ii) we do not have ongoing performance obligations related to the achievement of the milestone. Milestone payments are considered substantive if all of the following conditions are met: the milestone payment (a) is commensurate with either our performance to achieve the milestone or the enhancement of the value of the delivered item or items as a result of a specific outcome resulting from our performance to achieve the milestone, (b) relates solely to past performance, and (c) is reasonable relative to all of the deliverables and payment terms (including other potential milestone consideration) within the arrangement. Under our collaborative arrangements with GSK, and in accordance with FASB Subtopic ASC 808-10, “Collaborative Arrangements,” royalty revenue earned is reduced by amortization expense resulting from the fees paid to GSK, which were capitalized as finite-lived intangible assets. When amortization expense exceeds amounts recognized for royalty revenues from GSK, negative revenue would be reported in our consolidated statements of operations.
Product Revenues	Product Revenues We sell VIBATIV® in the U.S. through a limited number of distributors, and title and risk of loss transfer upon receipt by these distributors. Healthcare providers order VIBATIV® through these distributors. Commencing in the first quarter of 2014, we record revenue on the sale of VIBATIV® on a sell-through basis, once the distributors sell the product to healthcare providers. Product sales are recorded net of estimated government-mandated rebates and chargebacks, distribution fees, estimated product returns and other deductions. We reflect such reductions in revenue as either an allowance to the related account receivable from the distributor, or as an accrued liability, depending on the nature of the sales deduction. Sales deductions are based on management’s estimates that consider payer mix in target markets, industry benchmarks and experience to date. We monitor inventory levels in the distribution channel, as well as sales of VIBATIV® by distributors to healthcare providers, using product-specific data provided by the distributors. Product return allowances are based on amounts owed or to be claimed on related sales. These estimates take into consideration the terms of our agreements with customers, historical product returns of VIBATIV® experienced by our former collaborative partner, Astellas, rebates or discounts taken, estimated levels of inventory in the distribution channel, the shelf life of the product, and specific known market events, such as competitive pricing and new product introductions. We update our estimates and assumptions each quarter and if actual future results vary from our estimates, we may adjust these estimates, which could have an effect on product sales and earnings in the period of adjustment. Sales Discounts: We offer cash discounts to our customers, generally 2% of the sales price, as an incentive for prompt payment. We expect our customers to comply with the prompt payment terms to earn the cash discount. We account for cash discounts by reducing accounts receivable by the full amount and recognizing the discount as a reduction of revenue in the same period the related revenue is recognized. Chargebacks and Government Rebates: For VIBATIV® sales in the U.S., we estimate reductions to product sales for qualifying federal and state government programs including discounted pricing offered to Public Health Service (PHS) as well as government-managed Medicaid programs. Our reduction for PHS is based on actual chargebacks that distributors have claimed for reduced pricing offered to such health care providers. Our accrual for Medicaid is based upon statutorily-defined discounts, estimated payer mix, expected sales to qualified healthcare providers, and our expectation about future utilization. The Medicaid accrual and government rebates that are invoiced directly to us are recorded in other accrued liabilities on the consolidated balance sheet. For qualified programs that can purchase our products through distributors at a lower contractual government price, the distributors charge back to us the difference between their acquisition cost and the lower contractual government price, which we record as an allowance against accounts receivable. Distribution Fees and Product Returns: We have written contracts with our distributors that include terms for distribution-related fees. We record distribution-related fees based on a percentage of the product sales price. We offer our distributors a right to return product purchased directly from us, which is principally based upon the product’s expiration date. Additionally, we have granted more expansive return rights to our distributors following our product launch of VIBATIV®. We will generally accept returns for expired product during the six months prior to and twelve months after the product expiration date on product that had been sold to our distributors. Product returned is generally not resalable given the nature of our products and method of administration. We have developed estimates for VIBATIV® product returns based upon historical VIBATIV® sales from our former collaborative partner, Astellas. We record distribution fees and product returns as an allowance against accounts receivable. Allowance for Doubtful Accounts: We maintain a policy to record allowances for potentially doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. As of March 31, 2014 and December 31, 2013, there was no allowance for doubtful accounts.
Royalties	Royalties We recognize royalty revenue on licensee net sales of our products in the period in which the royalties are earned and reported to us and collectability is reasonably assured.
Intangible Assets	*Intangible Assets* We capitalize fees paid to licensors related to agreements for approved products or commercialized products. We capitalize these fees as finite-lived intangible assets and amortize these intangible assets on a straight-line basis over their estimated useful lives upon the commercial launch of the product, which is expected to be shortly after regulatory approval of such product. The estimated useful lives of these intangible assets are based on a country-by-country and product-by-product basis, as the later of the expiration or termination of the last patent right covering the compound in such product in such country and 15 years from first commercial sale of such product in such country, unless the agreement is terminated earlier. Consistent with our policy for classification of costs under the research and development collaborative arrangements, the amortization of these intangible assets will be recognized as a reduction of royalty revenue. We review our intangible assets for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The recoverability of finite-lived intangible assets is measured by comparing the asset’s carrying amount to the expected undiscounted future cash flows that the asset is expected to generate. The determination of recoverability typically requires various estimates and assumptions, including estimating the useful life over which cash flows will occur, their amount, and the asset’s residual value, if any. We derive the required cash flow estimates from near-term forecasted product sales and long-term projected sales in the corresponding market.

- Definition

Disclosure of accounting policy for major classes of inventories, bases of stating inventories (for example, lower of cost or market), methods by which amounts are added and removed from inventory classes (for example, FIFO, LIFO, or average cost), loss recognition on impairment of inventories, and situations in which inventories are stated above cost. If inventory is carried at cost, this disclosure includes the nature of the cost elements included in inventory.

+ References + Details

- Definition

Disclosure of accounting policy for revenue recognition. If the entity has different policies for different types of revenue transactions, the policy for each material type of transaction is generally disclosed. If a sales transaction has multiple element arrangements (for example, delivery of multiple products, services or the rights to use assets) the disclosure may indicate the accounting policy for each unit of accounting as well as how units of accounting are determined and valued. The disclosure may encompass important judgment as to appropriateness of principles related to recognition of revenue. The disclosure also may indicate the entity's treatment of any unearned or deferred revenue that arises from the transaction.

+ References + Details

Collaborative Arrangements (Tables)

3 Months Ended

Mar. 31, 2014

Collaborative Arrangements

Schedule of net revenue from collaborative arrangements recognized

	Three Months Ended March 31,
(In thousands)	2014			2013
GSK	$	(780	)	$	1,322
Other	—			22
Net revenue from collaborative arrangements	$	(780	)	$	1,344

Schedule of revenue recognized from GSK under the LABA collaboration and strategic alliance agreements

	Three Months Ended March 31,
(In thousands)	2014			2013
Royalty revenue	$	730		$	—
Amortization of intangible assets	(1,780		)	—
Net royalty revenue	(1,050		)	—
LABA collaboration	—			907
Strategic alliance—MABA program license	270			415
Total net revenue from GSK	$	(780	)	$	1,322

Summary of reductions to R&D expenses related to the reimbursement payments

	Three Months Ended March 31,
(In thousands)	2014		2013
GSK	$	43	$	171
Merck	—		1,429
Alfa Wassermann	72		208
R-Pharm	18		326
Total reduction to R&D expense	$	133	$	2,134

Available-for-Sale Securities (Tables)

3 Months Ended

Mar. 31, 2014

Available-for-Sale Securities

Schedule of available-for-sale securities

(In thousands)	March 31, 2014		December 31, 2013
Cash and cash equivalents	$	119,160	$	125,009
Short-term investments	245,648		321,615
Marketable securities	59,831		55,374
Restricted cash	833		833
Total	$	425,472	$	502,831

Schedule of amortized cost and estimated fair values for available-for-sale securities

	March 31, 2014
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. government securities	$	37,042	$	74	$	—		$	37,116
U.S. government agencies	110,171		59		—			110,230
U.S. corporate notes	88,607		48		(10		)	88,645
U.S. commercial paper	74,487		—		—			74,487
Money market funds	114,994		—		—			114,994
Total	$	425,301	$	181	$	(10	)	$	425,472

	December 31, 2013
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. government securities	$	42,104	$	55	$	(1	)	$	42,158
U.S. government agencies	141,278		61		(8		)	141,331
U.S. corporate notes	94,923		54		—			94,977
U.S. commercial paper	102,021		2		(1		)	102,022
Money market funds	122,343		—		—			122,343
Total	$	502,669	$	172	$	(10	)	$	502,831

- Definition

Tabular disclosure of available-for-sale securities which includes, but is not limited to, changes in the cost basis and fair value, fair value and gross unrealized gain (loss), fair values by type of security, contractual maturity and classification, amortized cost basis, contracts to acquire securities to be accounted for as available-for-sale, debt maturities, transfers to trading, change in net unrealized holding gain (loss) net of tax, continuous unrealized loss position fair value, aggregate losses qualitative disclosures, other than temporary impairment (OTTI) losses or other disclosures related to available for sale securities.

+ References + Details

Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2014

Fair Value Measurements

Schedule of estimated fair values

	Estimated Fair Value Measurements at Reporting Date Using:
Types of Instruments	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets at March 31, 2014:
U.S. government securities	$	37,116	$	—	$	—	$	37,116
U.S. government agency securities	82,895		27,335		—		110,230
U.S. corporate notes	69,497		19,148		—		88,645
U.S. commercial paper	74,487		—		—		74,487
Money market funds	114,994		—		—		114,994
Total assets measured at estimated fair value	$	378,989	$	46,483	$	—	$	425,472
Liabilities at March 31, 2014:
Convertible subordinated notes due 2023	$	—	$	369,685	$	—	$	369,685

	Estimated Fair Value Measurements at Reporting Date Using
Types of Instruments	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands)	Level 1		Level 2		Level 3		Total
Assets at December 31, 2013:
U.S. government securities	$	42,158	$	—	$	—	$	42,158
U.S. government agency securities	98,236		43,095		—		141,331
U.S. corporate notes	61,591		33,386		—		94,977
U.S. commercial paper	3,499		98,523		—		102,022
Money market funds	122,343		—		—		122,343
Total assets measured at estimated fair value	$	327,827	$	175,004	$	—	$	502,831
Liabilities at December 31, 2013:
Convertible subordinated notes due 2023	$	—	$	408,250	$	—	$	408,250

Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2014

Intangible Assets

Schedule of intangible assets

	March 31, 2014
(In thousands)	Weighted Average Remaining Amortization Period (Years)	Gross Carrying Value		Accumulated Amortization			Net Carrying Value
FDA approval and launch of BREO® ELLIPTA® in the U.S.	15.4	$	60,000	$	(1,579	)	$	58,421
MHLW approval and launch of RELVAR® ELLIPTA® in Japan	14.7	20,000		(444		)	19,556
European Commission approval and launch of RELVAR® ELLIPTA®	14.8	30,000		(500		)	29,500
FDA approval of ANOROTM ELLIPTATM in the U.S.	15.2	30,000		—			30,000
Total intangible assets		$	140,000	$	(2,523	)	$	137,477

	December 31, 2013
(In thousands)	Weighted Average Remaining Amortization Period (Years)	Gross Carrying Value		Accumulated Amortization			Net Carrying Value
FDA approval and launch of BREO® ELLIPTA® in the U.S.	15.7	$	60,000	$	(632	)	$	59,368
MHLW approval and launch of RELVAR® ELLIPTA® in Japan	14.9	20,000		(111		)	19,889
European Commission approval of RELVAR® ELLIPTA®	15	15,000		—			15,000
FDA approval of ANOROTM ELLIPTATM in the U.S.	15.2	30,000		—			30,000
Total intangible assets		$	125,000	$	(743	)	$	124,257

Net Loss per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Numerator:
Net loss	$ (67,703)	$ (37,360)
Denominator:
Weighted-average shares of stock outstanding	112,052	99,181
Less: unvested RSAs (in shares)	(2,193)	(2,802)
Weighted average shares used to compute basic and diluted net loss per share	109,859	96,379
Net loss per share:
Basic and diluted net loss per share (in dollars per share)	$ (0.62)	$ (0.39)
Securities that could potentially dilute basic EPS in the future
Anti-dilutive securities (in shares)	5,991	19,725
Equity incentive plans and ESPP
Securities that could potentially dilute basic EPS in the future
Anti-dilutive securities (in shares)	3,211	5,469
Convertible subordinated notes
Securities that could potentially dilute basic EPS in the future
Anti-dilutive securities (in shares)	2,780	14,256

Collaborative Arrangements (Details 2) $ in Thousands	1 Months Ended	3 Months Ended
Collaborative Arrangements (Details 2) $ in Thousands	Apr. 30, 2014 USD ($)	Mar. 31, 2014 USD ($) Item shares	Mar. 31, 2013 USD ($)
Information related to collaborative arrangements
Amortization of intangible asset		$ (1,780)	$ 0
Net royalty revenue		(1,050)	0
Revenues		270	1,344
GSK
Information related to collaborative arrangements
Royalty revenue		730	0
Amortization of intangible asset		(1,780)	0
Net royalty revenue		(1,050)	0
Revenues		(780)	1,322
GSK \| MABA
Information related to collaborative arrangements
Potential future contingent payments receivable		363,000
Long-acting beta agonist (LABA) collaboration \| GSK
Information related to collaborative arrangements
Obligation for milestone payments		$ 220,000
Number of combination products \| Item		2
Registrational and launch-related milestone fees paid		$ 140,000
Portion of potential milestone payments that could be payable by the end of 2014		$ 50,000
Royalty rate for first level of annual global net sales (as a percent)		15.00%
Annual global sales level used to determine royalty rate		$ 3,000,000
Royalty rate for sales above first level of annual global net sales (as a percent)		5.00%
Revenues		$ 0	907
Long-acting beta agonist (LABA) collaboration \| GSK \| Subsequent events
Information related to collaborative arrangements
Registrational and launch-related milestone fees owed	$ 30,000
Long-acting beta agonist (LABA) collaboration \| GSK \| Minimum
Information related to collaborative arrangements
Royalty rate for combination products (as a percent)		6.50%
Long-acting beta agonist (LABA) collaboration \| GSK \| Maximum
Information related to collaborative arrangements
Royalty rate for combination products (as a percent)		10.00%
2004 Strategic alliance \| GSK \| MABA
Information related to collaborative arrangements
Number of products which Company is obligated to use diligent efforts to discover after license of a program \| Item		1
Number of preclinical MABA compounds discovered \| Item		6
Revenues		$ 270	$ 415
2004 Strategic alliance \| GSK \| MABA containing '081 \| Maximum
Information related to collaborative arrangements
Potential contingent payments that the Company could receive in respect to single-agent and combination medicines		250,000
2004 Strategic alliance \| GSK \| MABA containing '081 - single-agent
Information related to collaborative arrangements
Annual global sales level used to determine royalty rate		$ 3,500,000
Royalty rate for sales above first level of annual global net sales (as a percent)		7.50%
2004 Strategic alliance \| GSK \| MABA containing '081 - single-agent \| Minimum
Information related to collaborative arrangements
Royalty rate for first level of annual global net sales (as a percent)		10.00%
2004 Strategic alliance \| GSK \| MABA containing '081 - single-agent \| Maximum
Information related to collaborative arrangements
Royalty rate for first level of annual global net sales (as a percent)		20.00%
Potential contingent payments that the Company could receive		$ 125,000
2004 Strategic alliance \| GSK \| MABA containing '081 - combination product
Information related to collaborative arrangements
Royalty rate for combination products as a percentage of the rate applied to single products		70.00%
2004 Strategic alliance \| GSK \| MABA containing additional MABA \| Maximum
Information related to collaborative arrangements
Potential future contingent payments receivable		$ 129,000
2004 Strategic alliance \| GSK \| MABA containing additional MABA - single-agent
Information related to collaborative arrangements
Annual global sales level used to determine royalty rate		$ 3,500,000
Royalty rate for sales above first level of annual global net sales (as a percent)		10.00%
Royalty rate for combination products as a percentage of the rate applied to single products		50.00%
2004 Strategic alliance \| GSK \| MABA containing additional MABA - single-agent \| Minimum
Information related to collaborative arrangements
Royalty rate for first level of annual global net sales (as a percent)		10.00%
2004 Strategic alliance \| GSK \| MABA containing additional MABA - single-agent \| Maximum
Information related to collaborative arrangements
Royalty rate for first level of annual global net sales (as a percent)		15.00%
Governance agreement \| GSK \| Common Stock
Information related to collaborative arrangements
Company's stock purchased by related party (in shares) \| shares		342,229
Company's stock purchased by related party		$ 12,900

Available-for-Sale Securities (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Available-for-sale securities
Amortized Cost	$ 425,301		$ 502,669
Gross Unrealized Gains	181		172
Gross Unrealized Losses	(10)		(10)
Estimated Fair Value	$ 425,472		502,831
Maturity period for marketable securities
Maximum contractual maturity period	2 years
Average contractual maturity period	7 months
Amount of available-for-sale securities sold	$ 5,000	$ 5,000
Cash and cash equivalents
Available-for-sale securities
Estimated Fair Value	119,160		125,009
Short-term investments
Available-for-sale securities
Estimated Fair Value	245,648		321,615
Marketable securities
Available-for-sale securities
Estimated Fair Value	59,831		55,374
Restricted cash
Available-for-sale securities
Estimated Fair Value	833		833
U.S. government securities
Available-for-sale securities
Amortized Cost	37,042		42,104
Gross Unrealized Gains	74		55
Gross Unrealized Losses	0		(1)
Estimated Fair Value	37,116		42,158
U.S. government agencies
Available-for-sale securities
Amortized Cost	110,171		141,278
Gross Unrealized Gains	59		61
Gross Unrealized Losses	0		(8)
Estimated Fair Value	110,230		141,331
U.S. corporate notes
Available-for-sale securities
Amortized Cost	88,607		94,923
Gross Unrealized Gains	48		54
Gross Unrealized Losses	(10)		0
Estimated Fair Value	88,645		94,977
U.S. commercial paper
Available-for-sale securities
Amortized Cost	74,487		102,021
Gross Unrealized Gains	0		2
Gross Unrealized Losses	0		(1)
Estimated Fair Value	74,487		102,022
Money market funds
Available-for-sale securities
Amortized Cost	114,994		122,343
Gross Unrealized Gains	0		0
Gross Unrealized Losses	0		0
Estimated Fair Value	$ 114,994		$ 122,343

Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Intangible assets
Net Carrying Value	$ 137,477		$ 124,257
Amortization expense	1,780	$ 0
Estimated amortization expense for the year 2014	8,100
Estimated amortization expense for the year 2015	9,100
Estimated amortization expense for the year 2016	9,100
Estimated amortization expense for the year 2017	9,100
Estimated amortization expense for the year 2018	9,100
Estimated amortization expense after the year 2018	94,700
GSK
Intangible assets
Gross Carrying Value	140,000		125,000
Accumulated Amortization	(2,523)		(743)
Net Carrying Value	137,477		$ 124,257
Amortization expense	$ 1,780	$ 0
GSK \| BREO ELLIPTA
Intangible assets
Weighted Average Remaining Amortization Period	15 years 4 months 24 days		15 years 8 months 12 days
Gross Carrying Value	$ 60,000		$ 60,000
Accumulated Amortization	(1,579)		(632)
Net Carrying Value	$ 58,421		$ 59,368
GSK \| RELVAR ELLIPTA Japan
Intangible assets
Weighted Average Remaining Amortization Period	14 years 8 months 12 days		14 years 10 months 24 days
Gross Carrying Value	$ 20,000		$ 20,000
Accumulated Amortization	(444)		(111)
Net Carrying Value	$ 19,556		$ 19,889
GSK \| RELVAR ELLIPTA Europe
Intangible assets
Weighted Average Remaining Amortization Period	14 years 9 months 18 days		15 years
Gross Carrying Value	$ 30,000		$ 15,000
Accumulated Amortization	(500)		0
Net Carrying Value	$ 29,500		$ 15,000
GSK \| ANORO ELLIPTA
Intangible assets
Weighted Average Remaining Amortization Period	15 years 2 months 12 days		15 years 2 months 12 days
Gross Carrying Value	$ 30,000		$ 30,000
Accumulated Amortization	0		0
Net Carrying Value	$ 30,000		$ 30,000

Stock-Based Compensation (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		12 Months Ended
Stock-Based Compensation (Details) - USD ($) $ in Thousands	May 31, 2014	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2011
Stock-based compensation
Stock-based compensation expense		$ 13,535	$ 6,095
RSAs
Stock-based compensation
Maximum potential expense, net of forfeiture		$ 21,900
RSAs \| Performance-contingent
Stock-based compensation
Period for which compensation committee has approved grants		3 years
RSAs \| Performance-contingent \| 2011 Restricted Stock Awards
Stock-based compensation
Shares of common stock approved and authorized for issuance				1,290,000
Timeframe for achievement of performance conditions				6 years
Maximum potential expense, net of forfeiture				$ 28,200
Stock-based compensation expense		$ 6,800
Total stock-based compensation that will be recognized in the year		$ 7,000
RSAs \| Performance-contingent \| 2011 Restricted Stock Awards \| Subsequent events
Stock-based compensation
Stock-based compensation expenses that will be recognized subject to sufficient performance conditions	$ 4,300
Vesting period	1 year
2012 Equity Incentive Plan
Stock-based compensation
Shares remaining available for issuance		2,925,115

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Mar. 31, 2014	Dec. 31, 2013
Account receivable, allowance	$ 209	$ 89
Receivable from related party	$ 775	$ 2,247
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized shares	200,000	200,000
Common stock, outstanding shares	112,519	111,516

Income Taxes	3 Months Ended
Income Taxes	Mar. 31, 2014
Income Taxes
Income Taxes	9. Income Taxes We did not record a provision for income taxes for the three months ended March 31, 2014 and 2013, because we expect to and did generate a taxable net operating loss for the fiscal years ended December 31, 2014 and 2013. In addition, the deferred tax assets remain fully offset by a valuation allowance or uncertain tax position liabilities.

Commitments and Contingencies	3 Months Ended
Commitments and Contingencies	Mar. 31, 2014
Commitments and Contingencies
Commitments and Contingencies	10. Commitments and Contingencies *Special Long-Term Retention and Incentive Cash Awards Program* In 2011, we granted special long-term retention and incentive cash bonus awards to certain employees. The awards have dual triggers of vesting based upon the achievement of certain performance conditions over a six-year timeframe from 2011 through December 31, 2016 and continued employment. The maximum potential cash bonus expense associated with this program is $38.2 million, which would be recognized in increments based on the probable achievement of the performance conditions. As of March 31, 2014, we determined that the achievement of the requisite performance conditions for the first tranche of these awards was probable and, as a result, $9.1 million of the total cash bonus expense of $9.5 million related to this grant was recognized in the first quarter of 2014. In May 2014, the Compensation Committee approved the modification of certain performance conditions for the second tranche of awards related to this grant. The modification permitted recognition of partial achievement of the original performance conditions that were met prior to the business separation. Therefore, we determined that the achievement of the requisite performance conditions for this tranche was probable. As a result an additional $5.0 million of cash bonus expense will be recognized over a one year vesting period commencing in May 2014. In addition, a portion of the remaining cash award was restructured to address potential retention concerns following the business separation.

Subsequent Event	3 Months Ended
Subsequent Event	Mar. 31, 2014
Subsequent Event
Subsequent Event	11. Subsequent Event *Private Placement of $450 Million of 9% Non-Recourse Notes* In April 2014, we entered into certain note purchase agreements relating to the private placement of $450.0 million aggregate principal amount of non-recourse 9% fixed rate term notes due 2029 (the “2029 Notes”) issued by our wholly-owned subsidiary. The 2029 Notes are secured by a security interest in a segregated bank account established to receive 40% of royalties from global net sales occurring on or after April 1, 2014 and ending upon the earlier of full repayment of principal or May 15, 2029 due to us under the LABA Collaboration with GSK. The 2029 Notes bear an annual interest rate of 9%, with interest and principal paid quarterly beginning November 15, 2014. The 2029 Notes may be redeemed at any time prior to maturity, in whole or in part, at specified redemption premiums. Prior to May 15, 2016, in the event that the specified portion of royalties received in a quarter is less than the interest accrued for the quarter, the principal amount of the 2029 Notes will increase by the interest shortfall amount for that period. Since the principal and interest payments on the 2029 Notes are based on royalties from product sales, which will vary from quarter to quarter, the 2029 Notes may be repaid prior to the final maturity date in 2029. From the net proceeds of the offering of approximately $434.3 million, we established a $32.0 million milestone payment reserve account to fund 40% of any future milestone payments that could become payable under the LABA Collaboration with GSK. This milestone reserve account is a segregated bank account in which the $32.0 million is retained. As part of this sale, we incurred approximately $15.7 million in transaction costs, which will be amortized to interest expense over the estimated life of the 2029 Notes.

Description of Operations and Summary of Significant Accounting Policies (Details) - Item	3 Months Ended
	Mar. 31, 2014	Apr. 30, 2013
Business Separation
Number of independent publicly traded companies created as a result of the separation of businesses as approved by the Board of Directors		2
GSK \| LABA collaboration and Strategic Alliance agreements
Business Separation
Potential royalty revenues (as a percent)	15.00%

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Amortization of intangible assets	$ 1,780	$ 0
Revenue from a related party	$ 270	$ 1,322

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Net loss	$ (67,703)	$ (37,360)
Other comprehensive income (loss):
Net unrealized gain (loss) on available-for-sale securities, net of tax	9	(7)
Comprehensive loss	$ (67,694)	$ (37,367)

Description of Operations and Summary of Significant Accounting Policies (Details 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Allowance for doubtful accounts
Allowance for doubtful accounts	$ 0	$ 0
Intangible Assets
Estimated useful life	15 years
VIBATIV
Product Revenues
Cash discounts (as a percent)	2.00%
Expired product return acceptance period prior to product expiration date	6 months
Expired product return acceptance period after product expiration date	12 months

Collaborative Arrangements (Details 3) - Commercialization Agreement - Clinigen $ in Millions	1 Months Ended	3 Months Ended
	Mar. 31, 2013 USD ($) Item	Mar. 31, 2014	Mar. 31, 2013
Information related to collaborative arrangements
Upfront payment	$ 5.0
Agreement term			15 years
Period of advance notice to terminate the agreement	12 months
Number of units of accounting based on the relative selling price method \| Item	2
Upfront payment received allocated to license	$ 4.9
Upfront payment received allocated to committee participation	$ 0.1
Minimum
Information related to collaborative arrangements
Royalty rate, as a percentage of net sales		20.00%
Maximum
Information related to collaborative arrangements
Royalty rate, as a percentage of net sales		30.00%

Fair Value Measurements (Details) - USD ($) $ in Thousands	Mar. 31, 2014	Dec. 31, 2013
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	$ 425,472	$ 502,831
U.S. government securities
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	37,116	42,158
U.S. government agency securities
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	110,230	141,331
U.S. corporate notes
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	88,645	94,977
U.S. commercial paper
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	74,487	102,022
Money market funds
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	114,994	122,343
Recurring basis \| Quoted Prices in Active Markets for Identical Assets, Level 1
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	378,989	327,827
Fair value measurements transfer to Level 1 From Level 2	2,800	2,900
Recurring basis \| Quoted Prices in Active Markets for Identical Assets, Level 1 \| U.S. government securities
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	37,116	42,158
Recurring basis \| Quoted Prices in Active Markets for Identical Assets, Level 1 \| U.S. government agency securities
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	82,895	98,236
Recurring basis \| Quoted Prices in Active Markets for Identical Assets, Level 1 \| U.S. corporate notes
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	69,497	61,591
Recurring basis \| Quoted Prices in Active Markets for Identical Assets, Level 1 \| U.S. commercial paper
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	74,487	3,499
Recurring basis \| Quoted Prices in Active Markets for Identical Assets, Level 1 \| Money market funds
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	114,994	122,343
Recurring basis \| Quoted Prices in Active Markets for Identical Assets, Level 1 \| Convertible Subordinated Notes Due 2023
Estimated fair values of entity's financial assets and liabilities
Total convertible subordinated notes	0	0
Recurring basis \| Significant Other Observable Inputs, Level 2
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	46,483	175,004
Fair value measured transfer to Level 2 From Level 1	1,000	1,000
Recurring basis \| Significant Other Observable Inputs, Level 2 \| U.S. government securities
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	0	0
Recurring basis \| Significant Other Observable Inputs, Level 2 \| U.S. government agency securities
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	27,335	43,095
Recurring basis \| Significant Other Observable Inputs, Level 2 \| U.S. corporate notes
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	19,148	33,386
Recurring basis \| Significant Other Observable Inputs, Level 2 \| U.S. commercial paper
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	0	98,523
Recurring basis \| Significant Other Observable Inputs, Level 2 \| Money market funds
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	0	0
Recurring basis \| Significant Unobservable Inputs, Level 3
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	0	0
Recurring basis \| Significant Unobservable Inputs, Level 3 \| U.S. government securities
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	0	0
Recurring basis \| Significant Unobservable Inputs, Level 3 \| U.S. government agency securities
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	0	0
Recurring basis \| Significant Unobservable Inputs, Level 3 \| U.S. corporate notes
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	0	0
Recurring basis \| Significant Unobservable Inputs, Level 3 \| U.S. commercial paper
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	0	0
Recurring basis \| Significant Unobservable Inputs, Level 3 \| Money market funds
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	0	0
Recurring basis \| Significant Unobservable Inputs, Level 3 \| Convertible Subordinated Notes Due 2023
Estimated fair values of entity's financial assets and liabilities
Total convertible subordinated notes	0	0
Recurring basis \| Total
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	425,472	502,831
Recurring basis \| Total \| U.S. government securities
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	37,116	42,158
Recurring basis \| Total \| U.S. government agency securities
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	110,230	141,331
Recurring basis \| Total \| U.S. corporate notes
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	88,645	94,977
Recurring basis \| Total \| U.S. commercial paper
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	74,487	102,022
Recurring basis \| Total \| Money market funds
Estimated fair values of entity's financial assets and liabilities
Total assets measured at fair value	114,994	122,343
Nonrecurring basis \| Significant Other Observable Inputs, Level 2 \| Convertible Subordinated Notes Due 2023
Estimated fair values of entity's financial assets and liabilities
Total convertible subordinated notes	369,685	408,250
Nonrecurring basis \| Total \| Convertible Subordinated Notes Due 2023
Estimated fair values of entity's financial assets and liabilities
Total convertible subordinated notes	$ 369,685	$ 408,250

Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2014	Dec. 31, 2013
Inventories
Raw materials	$ 3,997	$ 5,138
Work-in-process	2,225	360
Finished goods	4,792	4,908
Total inventories	$ 11,014	$ 10,406

Stock-Based Compensation (Details 3) - Stock options - $ / shares	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Weighted-average assumptions
Risk-free interest rate, minimum (as a percent)	1.78%	1.01%
Risk-free interest rate, maximum (as a percent)	1.95%	1.14%
Expected life	6 years	6 years
Volatility (as a percent)	60.00%	58.00%
Dividend yield (as a percent)	0.00%	0.00%
Weighted-average estimated fair value of awards granted (in dollars per share)	$ 21.29	$ 12.32

Stock-Based Compensation (Details 4)	3 Months Ended
Stock-Based Compensation (Details 4)	Mar. 31, 2014 USD ($) $ / shares shares
Stockholders' Equity
Awards exercised (in shares) \| shares	433,000
Weighted-average exercise price of awards exercised (in dollars per share) \| $ / shares	$ 15.34
Total cash proceed \| $	$ 6,636,000

Subsequent Event (Details) - 9% fixed rate term notes due 2029 - Subsequent events - GSK $ in Millions	1 Months Ended
	Apr. 30, 2014 USD ($)
Subsequent events
Notes issued	$ 450.0
Interest rate (as a percent)	9.00%
Percentage of royalties from global net sales	40.00%
Proceeds from issuance of debt, net of issuance costs	$ 434.3
Reserve account established to cover a portion of the remaining milestone payments	32.0
Transaction costs	$ 15.7