1080014--2/26/2010--THERAVANCE

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Risks Related to our Business If the RELOVAIR program does not progress into Phase 3 asthma studies, or if the Phase 3 program in asthma or chronic obstructive pulmonary disease (COPD) does not demonstrate safety and efficacy, the RELOVAIR program will be significantly delayed, our business will be harmed, and the price of our securities could fall. With regard to our telavancin NP NDA, we believe that the FDA's position is that it will require data from an additional clinical study or studies before it will consider the NP NDA for approval and we do not currently intend to conduct any such studies. If telavancin is not approved by the European Medicines Agency (EMEA) or if the EMEA requires data from additional clinical studies of telavancin, our business will be adversely affected and the price of our securities could fall. If our product candidates, in particular the lead compounds in the RELOVAIR TM program with GSK that recently commenced a Phase 3 clinical program in COPD, and telavancin for the treatment of NP are determined to be unsafe or ineffective in humans, our business will be adversely affected and the price of our securities could fall. With regard to all of our programs, any delay in commencing or completing clinical studies for product candidates, as we are currently experiencing in our Bifunctional Muscarinic Antagonist-beta 2 Agonist (MABA) program with GSK, and any adverse results from clinical or preclinical studies or regulatory obstacles product candidates may face, would harm our business and could cause the price of our securities to fall. If our product candidates that we develop on our own or through collaborative partners are not approved by regulatory agencies, including the FDA, we will be unable to commercialize them. may not be accepted by physicians, patients, third party payors, or the medical community in general. We commenced a workforce restructuring in April 2008 to focus our efforts on our key research and exploratory development programs and to reduce our overall cash burn rate. Even after giving effect to this restructuring, we do not have sufficient cash to fully develop and commercialize our un-partnered product candidates, and the restructuring may impact our ability to execute our business plan. Even if our product candidates receive regulatory approval, such as VIBATIV , commercialization of such products may be adversely affected by regulatory actions and oversight. We have incurred operating losses in each year since our inception and expect to continue to incur substantial losses for the foreseeable future. If we fail to obtain the capital necessary to fund our operations, we may be unable to develop our product candidates and we could be forced to share our rights to commercialize our product candidates with third parties on terms that may not be favorable to us. Global financial and economic conditions have had an impact on our industry, may adversely affect our business and financial condition in ways that we currently cannot predict, and may limit our ability to raise additional funds. If our partners do not satisfy their obligations under our agreements with them, or if they terminate our partnership with them, we will be unable to develop our partnered product candidates as planned. We rely on a limited number of manufacturers for our product candidates, and our business will be harmed if these manufacturers are not able to satisfy our demand and alternative sources are not available. Our relationship with GSK may have a negative effect on our ability to enter into relationships with third parties. If we are unable to enter into future collaboration arrangements or if any such collaborations with third parties are unsuccessful, we will be unable to fully develop and commercialize our product candidates and our business will be adversely affected. We depend on third parties in the conduct of our clinical studies for our product candidates. We face substantial competition from companies with more resources and experience than we have, which may result in others discovering, developing, receiving approval for or commercializing products before or more successfully than we do. We have no experience selling or distributing products and no internal capability to do so. If we lose key management or scientific personnel, or if we fail to retain our key employees, our ability to discover and develop our product candidates will be impaired. Our business and operations would suffer in the event of system failures. Our principal facility is located near known earthquake fault zones, and the occurrence of an earthquake, extremist attack or other catastrophic disaster could cause damage to our facilities and equipment, which could require us to cease or curtail operations. Risks Related to our Alliance with GSK GSK's ownership of a significant percentage of our stock and its ability to acquire additional shares of our stock may create conflicts of interest, and may inhibit our management's ability to continue to operate our business in the manner in which it is currently being operated. GSK's rights under the strategic alliance and governance agreements may deter or prevent efforts by other companies to acquire us, which could prevent our stockholders from realizing a control premium. GSK could sell or transfer a substantial number of shares of our common stock, which could depress the price of our securities or result in a change in control of our company. Risks Related to Legal and Regulatory Uncertainty If our efforts to protect the proprietary nature of the intellectual property related to our technologies are not adequate, we may not be able to compete effectively in our market. Litigation or third-party claims of intellectual property infringement would require us to divert resources and may prevent or delay our drug discovery and development efforts. Product liability lawsuits could divert our resources, result in substantial liabilities and reduce the commercial potential of our medicines. Government restrictions on pricing and reimbursement, as well as other healthcare payor cost-containment initiatives, may negatively impact our ability to generate revenues. If we use hazardous and biological materials in a manner that causes injury or violates applicable law, we may be liable for damages. The price of our securities has been extremely volatile and may continue to be so, and purchasers of our securities could incur substantial losses. Concentration of ownership will limit your ability to influence corporate matters. Anti-takeover provisions in our charter and bylaws, in our rights agreement and in Delaware law could prevent or delay a change in control of our company.

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1080014--2/26/2010--THERAVANCE_INC