Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) Q1 2023 Earnings Call Transcript May 6, 2023

Operator: Good day, and welcome to the Ironwood Pharmaceuticals Q1 2023 Investor Update Conference Call. Today’s call is being recorded [Operator Instructions]. I will now turn the call over to Matt Roache, Director of Investor Relations. Please go ahead.

Matt Roache: Thank you, Angela. Good morning, and thanks for joining us for our first quarter 2023 investor update. Our press release issued this morning can be found on our Web site. Today’s call and accompanying slides include forward-looking statements. Such statements involve risks and uncertainties that may cause actual results to differ materially. A discussion of these statements and risk factors is available on the current safe harbor statement slide as well as under the heading Risk Factors in our annual report on Form 10-K for the year ended December 31, 2022, and in our future SEC filings. All forward-looking statements speak as of the date of this presentation and we undertake no obligation to update such statements.

Also included are non-GAAP financial measures, which should be considered only as a supplement to and not a substitute for or superior to GAAP measures. To the extent applicable, please refer to the tables at the end of our press release for reconciliations of these measures to the most directly comparable GAAP measures. During today’s call, Tom McCourt, our CEO, will review our strategic priorities and provide an update on the commercial performance of LINZESS. Mike Shetzline, our Chief Medical Officer, will discuss our pipeline and Sravan Emany, our Chief Financial Officer, will review our financial results and guidance. Today’s webcast includes slides. So for those of you dialing in, please go to the event’s section of our website to access the accompanying slide separately.

With that, I’ll turn the call over to Tom.

Tom McCourt: Thanks, Matt. Good morning, everyone and thanks for joining us today. I’m delighted to announce our first quarter results this morning. We are off to a terrific start to the year as demonstrated by continued strong LINZESS demand growth, progress of our clinical studies and another quarter of delivering robust profits and cash flow. At Ironwood, we remain committed to advancing the treatment of GI diseases and redefining standard of care for GI patients. I believe the progress we’ve made across the organization in the first quarter demonstrate the steps that we’re taking to become the leading GI Healthcare Company in the U.S. Let’s begin on Slide 6 with our strategic priorities. Our strategy starts with maximizing LINZESS.

LINZESS continues to experience remarkable prescription demand growth and widespread adoption amongst healthcare practitioners as a leading branded prescription treatment for adults with IBS-C and chronic idiopathic constipation. In the first quarter, LINZESS U.S. net sales growth increased 8% year-over-year. Prescription demand growth increased over 10% as compared to the first quarter of 2022, demonstrating that the momentum of the brand remains strong. We believe there’s still a significant opportunity to reach appropriate new patients and drive additional prescription demand growth, including a potential midyear indication for linaclotide in functional constipation for patients six to 17 years of age, if approved. Next, we are focused on continuing to strengthen and progress our innovative GI portfolio starting with CNP-104, a potentially disease-modifying treatment for primary biliary cholangitis.

The clinical study is ongoing and we continue to expect early data assessing the T-cell response in the second half of the year from the patients enrolled in the studies, which will inform the timing of top line data. Second, IW-3300. We are continuing the proof-of-concept study in patients with interstitial cystitis and bladder pain syndrome. Finally, we continue to actively evaluate opportunities to strengthen our portfolio. And we see several attractive opportunities in the market that we believe are accessible and could benefit from Ironwood’s expertise and capabilities in GI. Our third strategic priority is delivering sustained profits and generate cash flow. We delivered GAAP net income and adjusted EBITDA of $46 million and $60 million respectively and ended the first quarter with $740 million in cash and cash equivalents on the balance sheet.

With our unique profile as a profitable GI-focused biopharma company with a strong and growing cash balance, we believe we’re well positioned to maximize LINZESS growth and continue to build an innovative GI portfolio to create the next growth horizon for the company. Now let’s turn to the performance of LINZESS on Slide 7. As you can see on the left side of Slide 7, LINZESS performed exceptionally well in the first quarter. As I mentioned a few moments ago, LINZESS prescription demand increased 10% year-over-year and net sales increased 8% year-over-year and generated $250 million in the quarter. Over the first quarter, the adult IBS-C and chronic constipation prescription market experienced strong growth with LINZESS experiencing an all-time high in new to brand patient volume to strengthen its position in the market as the number one prescribed brand for adults with IBS-C and chronic constipation.

Most importantly, we are proud to have had treated more than 4.5 million unique patients since the launch of the brand over 10 years ago. The growing number of patients that are actively seeking care and have been treated with LINZESS is evidence of the high treatment satisfaction expressed by both clinicians and patients. We believe these market dynamics, combined with class-leading formulary access, the clinical guideline recommendations from both GI societies and the strong commercial execution is driving the demand momentum that we continue to see. And we expect this momentum to be augmented midyear should FDA approve the pediatric functional constipation indication, reinforcing the growth potential for the brand. Looking ahead, we’re excited about the continued growth of LINZESS, the advancement of our clinical program and our stronger financial position as we advance Ironwood’s leadership in GI.

In a few days, we’ll be presenting five abstracts at the Digestive Disease Week meeting or DDW, including an oral presentation. These abstracts will highlight new data that reinforce the potential of linaclotide to treat functional constipation in children and adolescents. We look forward to DDW, where each year, we have an important presence demonstrating our commitment to advancing GI therapies, including expanding the clinical utility of linaclotide. Before handing it over to Mike to discuss the pipeline programs, I’d like to take a moment to say a very big thank you to Jason Rickard for his leadership and events contributions to Ironwood over the last 11 years, most recently serving as our Chief Operating Officer and for helping make Ironwood the company it is today.

While a change like this is not easy. As an organization committed to maximizing shareholder value, we continue to look for ways to streamline our team and align key functions and resources to meet our current and future needs and support Ironwood through its next phase of growth. I would also like to acknowledge all the Ironwood employees who have continued the momentum and strong execution against our strategic priorities as we continue to help make a remarkable impact to patients’ lives. I would now like to hand the call over to Mike. Mike?

Mike Shetzline: Thanks, Tom. Good morning, everyone. We continue to make progress across our three pipeline programs. I’ll begin with our linaclotide pediatric program on Slide 9. We believe the pediatric opportunity, if approved, could expand the market potential for LINZESS as functional constipation affects roughly 6 million six to 17-year-old children and adolescents in the United States. If our sNDA is approved by the FDA, LINZESS would be the first and only prescription therapy to treat this patient population. And this is a population that’s in need of better therapeutic options. We continue to work through the sNDA with the FDA and look forward to the June 14 PDUFA date. As Tom mentioned, we’ll be presenting pediatric data on the efficacy and safety profile of linaclotide in treating functional constipation in this patient group at the upcoming DDW meeting.

Next is CNP-104 for the potential treatment of primary biliary cholangitis, which affects an estimated 133,000 people in the United States. The proof-of-concept study is ongoing and given the strong science underlying this therapy, we plan to assess T-cell responses in patients those with CNP-104 in the second half of ’23. This will inform the timing of top line data and the potential option exercise. We expect to provide an update on the program at that time. We’re excited about CNP-104 because it is truly precision medicine and it introduces a potentially new game-changing asset for PBC patients as there are no therapies on the market today that address the root cause of this autoimmune destruction of the bile duct in PBC. With respect to IW-3300, our wholly owned Ironwood asset for the potential treatment of interstitial cystitis and bladder pain syndrome.

There is a significant unmet medical need in this area as this chronic condition affects millions of Americans if there are very few treatment options currently on the market or in development. Last year, we successfully completed dosing in healthy volunteers and are currently executing the proof-of-concept Phase II study. Interstitial cystitis and bladder pain syndrome patients are being screened, dosed and site activations are ongoing and going very well. We’re excited about this program as is the first time that crosstalk hypothesis will be tested in humans, and we’re proud to be at the forefront of clinical development in this area. We’re looking forward to providing updates as the study continues to advance. With that, I’ll turn the call over to Sravan.

Sravan Emany: Thanks, Mike and good morning, everyone. It is wonderful to be in a position to discuss such great financial performance with all of you. I will begin with an update on LINZESS, which is off to an impressive start to the year. As shown on Slide 11, U.S. net sales were $250 million in the first quarter of 2023, an increase of 8% compared to the first quarter of 2022 driven by strong prescription demand growth of 10% year-over-year. We are excited about the strong start to the year and the continued momentum of the brand. Turning to LINZESS brand profitability. Commercial margins in the first quarter of 2023 were 73% compared to 74% in the first quarter of 2022. Moving to Ironwood revenues. In the first quarter of 2023, Ironwood revenues were $104 million, driven primarily by U.S. LINZESS collaboration revenues of $102 million.

Ironwood recorded $20 million of income tax expense, the majority of which was noncash. GAAP net income was $46 million and adjusted EBITDA was $60 million in the first quarter. Next, cash and capital allocation. In the first quarter, we generated $80 million in cash flow from operations and ended the quarter with $740 million in cash and cash equivalents. We believe we are positioning our company for future success by maximizing LINZESS growth and actively pursuing innovative highly differentiated GI assets to strengthen our portfolio. We continue to take a balanced and disciplined approach to capital deployment and remain focused on identifying and investing in opportunities that we believe while the potential to create value for our patients and our shareholders over the long term.

Next, I’ll review our 2023 guidance on Slide 12. We are encouraged by the strong start to the year and reiterate our full year 2023 guidance across all metrics. We continue to expect LINZESS U.S. net sales growth of between 3% and 5%, driven by high single-digit percent prescription demand growth. In addition, we expect to maintain our class leading payer access. We expect Ironwood revenue of between $420 million and $435 million and adjusted EBITDA of greater than $250 million, which includes increased investment to advance our pipeline programs CNP-104 and IW-3300. To wrap up, we had a strong start to the year and expect to build on the momentum with potential midyear pediatric functional constipation indication. Our first quarter results reflect continued execution against our strategic priorities.

We remain — we believe Ironwood is well positioned for continued growth and we remain focused on maximizing LINZESS, strengthening and progressing our innovative GI portfolio and delivering sustained profits and generating free cash flow. We are excited about what’s ahead this year and we’ll continue to keep you updated on our progress. I want to close by thanking all of our employees, patients, caregivers and advocates for their shared dedication to advancing and supporting therapies for GI disorders. Operator, you may now open the line for questions.

Q&A Session

Operator: [Operator Instructions] Your first question comes from Tim Chiang with Capital One.

Operator: Your next question comes from the line of David Amsellem with Piper Sandler.

Operator: Your next question comes from the line of Boris Peaker with Cowen.

Operator: Your next question comes from Jacob Hughes with Wells Fargo Securities.

Operator: With no further questions, we will conclude today’s conference. Thank you for your participation. You may now disconnect.