11. Spin-Off from Innoviva, Inc.

On June 1, 2014, Innoviva separated its late-stage respiratory assets partnered with GSK from its biopharmaceutical operations by transferring its discovery, development and commercialization operations (the "Biopharmaceutical Business") into its then wholly-owned subsidiary Theravance Biopharma. Innoviva also contributed certain assets and liabilities from the Biopharmaceutical Business and $393.0 million of cash, cash equivalents and marketable securities to us. On June 2, 2014, Innoviva made a pro rata dividend distribution to its stockholders of record on May 15, 2014 of one ordinary share of Theravance Biopharma for every three and one half shares of Innoviva common stock outstanding on the record date. The Spin-Off resulted in Theravance Biopharma operating as an independent, publicly-traded company.

The net book value of the net assets that were transferred to us in connection with the Spin-Off was as follows:

(In thousands)	June 2, 2014
Cash and cash equivalents	$	277,541
Marketable investment securities		115,129
Accounts receivable		125
Reimbursement of certain liabilities		16,983
Prepaid and other current assets		3,172
Inventories		14,328
Property and equipment, net		9,580
Accrued liabilities		(22,342	)
Deferred revenue		(6,694	)
Other liabilities		(4,944	)

Net book value of assets transferred	$	402,878

In connection with the Spin-Off, Innoviva and Theravance Biopharma entered into various contractual agreements to govern matters such as tax, employee benefits, and transition services. Under the Transition Services Agreement, each party pays a monthly fee to the performing party related to a variety of administrative services. For the years ended December 31, 2016 and 2015, we billed Innoviva $0.1 million and $0.4 million, respectively, and Innoviva billed us $0.1 million and $0.5 million, respectively, under the Transition Services Agreement. As of December 31, 2016, we had no material receivables due from or payables due to Innoviva.

Limited Liability Company Agreement of Theravance Respiratory Company, LLC

Prior to the Spin-Off, Innoviva assigned to Theravance Respiratory Company, LLC ("TRC"), a Delaware limited liability company formed by Innoviva, its strategic alliance agreement with GSK and all of its rights and obligations under its collaboration agreement with GSK other than with respect to RELVAR® ELLIPTA®/BREO® ELLIPTA®, ANORO® ELLIPTA® and vilanterol monotherapy. Our equity interest in TRC entitles us to an 85% economic interest in any future payments made by GSK under the strategic alliance agreement and under the portion of the collaboration agreement assigned to TRC. The drug programs assigned to TRC include the Closed Triple or FF/UMEC/VI and the MABA program, as monotherapy and in combination with other therapeutically active components, such as an inhaled corticosteroid ("ICS"), and any other product or combination of products that may be discovered and developed in the future under the GSK agreements. Our economic interest will not include any payments associated with RELVAR® ELLIPTA®/BREO® ELLIPTA®, ANORO® ELLIPTA® or vilanterol monotherapy.

On May 31, 2014, we entered into the TRC LLC Agreement with Innoviva that governs the operation of TRC. Under the TRC LLC Agreement, Innoviva is the manager of TRC, and the business and affairs of TRC are managed exclusively by the manager, including (i) day to day management of the drug programs in accordance with the existing GSK agreements, (ii) preparing an annual operating plan for TRC and (iii) taking all actions necessary to ensure that the formation, structure and operation of TRC complies with applicable law and partner agreements.

We analyzed our ownership, contractual and other interests in TRC to determine if it is a variable-interest entity ("VIE"), whether we have a variable interest in TRC and the nature and extent of that interest. We determined that TRC is a VIE. The party with the controlling financial interest, the primary beneficiary, is required to consolidate the entity determined to be a VIE. Therefore, we also assessed whether we are the primary beneficiary of TRC based on the power to direct its activities that most significantly impact its economic performance and our obligation to absorb its losses or the right to receive benefits from it that could potentially be significant to TRC, and we determined that we are not the primary beneficiary of TRC. As a result, we do not consolidate TRC in our consolidated financial statements.