Discontinued Operations (Tables)

6 Months Ended

Jun. 30, 2014

Schedule of discontinued operations presented on condensed consolidated statements of operations

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2014			2013			2014			2013
Net revenues (1)	$	2,184		$	5		$	3,129		$	27
Loss from discontinued operations (2)	$	(43,413	)	$	(34,888	)	$	(94,934	)	$	(61,502	)

(1)

Net revenues primarily consist of revenue from collaborative arrangements and product sales. Revenue from collaborative arrangements was recognized from our agreement with R-Pharm CJSC, which was transferred to Theravance Biopharma as a part of the Spin-Off. Products sales were generated from sales of 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 ordered VIBATIV® through these distributors. Commencing in the first quarter of 2014, revenue on the sale of VIBATIV® was recorded on a sell-through basis, once the distributors sold the product to healthcare providers. Product sales were recorded net of estimated government-mandated rebates and chargebacks, distribution fees, estimated product returns and other deductions.

(2)

Loss from discontinued operations before income taxes includes the reimbursement of research and development costs from our former collaborative arrangements, excluding GSK, which we accounted for as reductions to research and development expense. Reimbursement of research and development costs from discontinued operations from our collaborative arrangements was $22,000 and $2.1 million for the three months ended June 30, 2014 and 2013, and $0.1 million and $3.9 million for the six months ended June 30, 2014 and 2013.

In addition, the loss from discontinued operations before income taxes for the six months ended June 30, 2014 includes the 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.

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 cash bonus expense was recognized in the first quarter of 2014, the majority of which is included in discontinued operations. In May 2014, the total cash bonus of $9.5 million for the first tranche was paid.

- Definition

Tabular disclosure of disposal groups, which may include the gain (loss) recognized in the income statement and the income statement caption that includes that gain (loss), amounts of revenues and pretax profit or loss reported in discontinued operations, the classification and carrying value of the assets and liabilities comprising the disposal group, and the segment in which the disposal group was reported. Also may include the amount of adjustments to amounts previously reported in discontinued operations such as resolution of contingencies arising from the disposal transaction or the operations of the component prior to disposal.

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