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Ironwood Pharmaceuticals Provides Second Quarter 2015 Investor Update

August 5, 2015 4:01 PM

– LINZESS® (linaclotide) U.S. net sales of $112.1 million in second quarter 2015 –

– Total LINZESS prescriptions increased approximately 56% in second quarter 2015 compared to second quarter 2014 –

– Advanced innovative pipeline, including positive top-line Phase I data with sGC stimulator IW-1973 –

– Entered agreement with Allergan to co-promote VIBERZI™ (eluxadoline) for IBS-D –

CAMBRIDGE, Mass.--(BUSINESS WIRE)-- Ironwood Pharmaceuticals, Inc. (NASDAQ: IRWD) today provided an update on its second quarter 2015 and recent business activities.

“Ironwood made substantial progress in the second quarter of 2015, with continued strong performance for each of our key value drivers – LINZESS, our innovative pipeline and our strong commercial capabilities,” said Peter Hecht, chief executive officer of Ironwood. “LINZESS is the branded market leader in its category, with continued double-digit prescription growth and brand profitability in the U.S. We reported multiple positive data readouts from our pipeline including Phase I data from IW-1973, which provides the first evidence of the potential for our sGC stimulators platform to deliver blockbuster products targeting severe cardiovascular and fibrotic diseases with large unmet needs. We are committed to our goal of building a leading pharmaceutical company grounded in GI and guanylate cyclase innovation that delivers differentiated medicines to our patients and creates value for our shareholders, and we are very encouraged by our recent progress.”

Second Quarter 2015 and Recent Highlights

LINZESS® (linaclotide)

Research & Development

Ironwood continues to advance its innovative pipeline. The company now expects up to 12 ongoing clinical studies in 2015, including four Ironwood studies and eight with its partners. In addition, Ironwood expects five clinical data readouts in 2015, including the already reported positive top-line data from the IW-3718 Phase IIa study, the linaclotide Phase III trial for China, and the IW-1973 Phase Ia study.

Global Partnerships for Linaclotide

Commercial Capabilities

Corporate and Financials

Conference Call Information

Ironwood will host a conference call and webcast at 4:30 p.m. Eastern Time, on Wednesday, August 5, to discuss its second quarter 2015 and recent business activities. Individuals interested in participating in the call should dial (877) 643-7155 (U.S. and Canada) or (914) 495-8552 (international) using conference ID number 83522769. To access the webcast, please visit the Investors section of Ironwood’s website at www.ironwoodpharma.com at least 15 minutes prior to the start of the call to ensure adequate time for any software downloads that may be required. The call will be available for replay via telephone starting at approximately 7:30 p.m. Eastern Time, on August 5, running through 11:59 p.m. Eastern Time on August 12, 2015. To listen to the replay, dial (855) 859-2056 (U.S. and Canada) or (404) 537-3406 (international) using conference ID number 83522769. The archived webcast will be available on Ironwood’s website for 14 days beginning approximately one hour after the call has completed.

About LINZESS (linaclotide)

LINZESS® is the first and only guanylate cyclase-C (GC-C) agonist approved by the FDA and is indicated for the treatment of both irritable bowel syndrome with constipation (IBS-C) and chronic idiopathic constipation (CIC) in adults. LINZESS is a once-daily capsule that helps relieve the abdominal pain and constipation associated with IBS-C, as well as the constipation, infrequent stools, hard stools and incomplete evacuation associated with CIC. The recommended dose is 290 mcg for IBS-C patients and 145 mcg for CIC patients. LINZESS should be taken at least 30 minutes before the first meal of the day.

LINZESS is thought to work in two ways based on nonclinical studies. LINZESS binds to the GC-C receptor locally, within the intestinal epithelium. Activation of GC-C results in increased intestinal fluid secretion and accelerated transit and a decrease in the activity of pain-sensing nerves in the intestine. The clinical relevance of the effect on pain fibers, which is based on nonclinical studies, has not been established.

In placebo-controlled Phase III clinical trials of more than 2,800 adults, LINZESS was shown to reduce abdominal pain in IBS-C patients and increase bowel movement frequency in both IBS-C patients and CIC patients. Improvement in abdominal pain and constipation occurred in the first week of treatment and was maintained throughout the 12-week treatment period. Maximum effect on abdominal pain was seen at weeks 6-9 and maximum effect on constipation occurred during the first week. When a subset of LINZESS-treated patients in the trials were switched to placebo, they reported their symptoms returned toward pretreatment levels within one week, while placebo-treated patients switched to LINZESS reported symptom improvements. LINZESS is contraindicated in pediatric patients under 6 years of age. The use of LINZESS in pediatric patients 6 through 17 years of age should be avoided. In nonclinical studies, administration of a single, clinically relevant adult oral dose of linaclotide caused deaths due to dehydration in young juvenile mice. The safety and efficacy of LINZESS in pediatric patients under 18 years of age have not been established. In adults with IBS-C or CIC treated with LINZESS, the most commonly reported adverse event was diarrhea.

Ironwood and Allergan plc are co-promoting LINZESS in the United States. Linaclotide is marketed by Almirall, S.A. for the treatment of adults with moderate to severe IBS-C in Europe under the brand name CONSTELLA®. Ironwood also has partnered with Astellas Pharma Inc. for development and commercialization of linaclotide in Japan and with AstraZeneca AB for development and commercialization in China.

About CONSTELLA (linaclotide)

Linaclotide is a guanylate cyclase-C receptor agonist (GCCA) with visceral analgesic and secretory activities. Linaclotide is a 14-amino acid synthetic peptide structurally related to the endogenous guanylin peptide family. Both linaclotide and its active metabolite bind to the guanylate cyclase-C receptor, on the luminal surface of the intestinal epithelium. Through its action at GC-C, linaclotide has been shown to reduce visceral pain and increase GI transit in animal models and increase colonic transit in humans. Activation of GC-C results in an increase in concentrations of cyclic guanosine monophosphate (cGMP), both extracellularly and intracellularly. Extracellular cGMP decreases pain-fiber activity, resulting in reduced visceral pain in animal models. Intracellular cGMP causes secretion of chloride and bicarbonate into the intestinal lumen, through activation of the cystic fibrosis transmembrane conductance regulator (CFTR), which results in increased intestinal fluid and accelerated transit.

Linaclotide was discovered by scientists at Ironwood and is marketed by Almirall, S.A. for the treatment of adults with moderate to severe IBS-C in Europe under the brand name CONSTELLA, through a license agreement between the two companies.

About Ironwood Pharmaceuticals

Ironwood Pharmaceuticals (NASDAQ: IRWD) is focused on creating medicines that make a difference for patients, building value to earn the continued support of our fellow shareholders, and empowering our team to passionately pursue excellence. We discovered, developed and are commercializing linaclotide, which is approved in the United States and a number of other countries. Our pipeline priorities include exploring further opportunities for linaclotide, as well as leveraging our therapeutic expertise in gastrointestinal disorders and our pharmacologic expertise in guanylate cyclases to address patient needs across the upper and lower gastrointestinal tract. Ironwood was founded in 1998 and is headquartered in Cambridge, Mass. Connect with us at www.ironwoodpharma.com or on Twitter at www.twitter.com/ironwoodpharma; information that may be important to investors will be routinely posted in both these locations.

LINZESS® and CONSTELLA® are trademarks owned by Ironwood Pharmaceuticals, Inc. Any other trademarks referred to in this press release are the property of their respective owners. All rights reserved.

Important Safety Information

WARNING: PEDIATRIC RISK

LINZESS is contraindicated in pediatric patients under 6 years of age. In nonclinical studies, administration of a single, clinically relevant adult oral dose of linaclotide caused deaths due to dehydration in young juvenile mice. Use of LINZESS should be avoided in pediatric patients 6 through 17 years of age. The safety and efficacy of LINZESS has not been established in pediatric patients under 18 years of age.

Contraindications

Warnings and Precautions

Pediatric Risk

Diarrhea

Adverse Reactions

Please see full Prescribing Information including Boxed Warning: http://www.frx.com/pi/linzess_pi.pdf

This press release contains forward-looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements, including, but not limited to, statements about development, launch and commercialization plans for linaclotide and our product candidates; commercial efforts for linaclotide and the other products that we promote and the drivers, timing, impact and results thereof; market size, growth and opportunity, and potential demand for linaclotide, our product candidates and the other products that we promote, as well as their potential impact on applicable markets; the potential indications for, and benefits of, linaclotide and our product candidates; the anticipated timing of pre-clinical, clinical and regulatory developments; the design, timing and results of clinical and pre-clinical studies; the timing of filings with regulatory authorities; expected periods of patent exclusivity; the strength of the intellectual property protection for our product and product candidates; potential business development activity and the timing and impact thereof; profitability of the U.S. LINZESS brand collaboration with Allergan plc; and our company's financial performance and results, and guidance and expectations related thereto, including our projected 2015 operating expenses, revenue growth, operating leverage, and 2015 marketing and sales expense for LINZESS. Each forward‐looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such statement. Applicable risks and uncertainties include, but are not limited to, those related to pre-clinical and clinical development, manufacturing, and formulation development; the risk that findings from our completed nonclinical and clinical studies may not be replicated in later studies; decisions made by U.S. regulatory authorities, the U.S. Patent and Trademark Office and their foreign counterparts; the risk that we may never get sufficient patent protection for linaclotide and our product candidates; intellectual property rights of competitors or potential competitors; efficacy, safety and tolerability of linaclotide and our product candidates; competition in disease states; the commercial potential of linaclotide, our product candidates and the other products that we promote; the risk that our planned investments do not have the anticipated effect on our company revenues, linaclotide or our product candidates; the risk that we are unable to identify and execute on business development opportunities in a cost-effective and timely manner or that such opportunities do not have the impact expected; the risk that we are unable to manage our operating expenses over the year due to foreseeable or unforeseeable events or occurrences; and the risk that we and Allergan are unable to commercialize LINZESS within the guided range of expenses. Applicable risks also include those that are listed under the heading "Risk Factors" and elsewhere in Ironwood's Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, in addition to the risk factors that are listed from time to time in Ironwood's Annual Reports on Form 10‐K, Quarterly Reports on Form 10‐Q and any other subsequent SEC filings. Ironwood undertakes no obligation to update these forward-looking statements to reflect events or circumstances occurring after this press release. Except as otherwise noted, these forward-looking statements speak only as of the date of this press release. All forward‐looking statements are qualified in their entirety by this cautionary statement. Further, Ironwood considers the net profit for the U.S. LINZESS brand collaboration with Allergan in assessing the product’s performance and calculates it based on inputs from both Ironwood and Allergan. This figure should not be considered a substitute for Ironwood’s GAAP financial results. An explanation of our calculation of this figure is provided in the U.S. LINZESS Brand Collaboration table and related footnotes accompanying this press release.

Condensed Consolidated Balance Sheets

(In thousands)

(unaudited)

June 30,2015

December 31,2014

Assets
Cash, cash equivalents and available-for-sale securities $ 493,315 $ 248,334
Accounts receivable, net 27,049 25,839
Inventory - 4,954
Prepaid expenses and other current assets 6,595 9,180
Total current assets 526,959 288,307
Property and equipment, net 25,017 29,826
Convertible note hedges 90,314 -
Other assets 11,651 11,189
Total assets $ 653,941 $ 329,322
Liabilities and Stockholders’ Equity
Accounts payable and accrued expenses $ 31,125 $ 35,948
Current portion of capital lease obligations 1,203 1,152
Current portion of deferred rent 5,009 4,992
Current portion of deferred revenue 7,191 7,191
Current portion of PhaRMA notes payable 17,571 11,258
Total current liabilities 62,099 60,541
Capital lease obligations 1,959 2,571
Deferred rent 8,821 10,522
Deferred revenue 5,393 8,989
Other liabilities 3,845 -
Note hedge warrants 69,456 -
Convertible notes 214,292 -
PhaRMA notes payable 147,793 158,147
Total stockholders’ equity 140,283 88,552
Total liabilities and stockholders’ equity $ 653,941 $ 329,322

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(unaudited)

Three Months EndedJune 30,

Six Months EndedJune 30,

2015 2014 2015 2014
Revenue $ 27,744 $ 6,840 $ 56,676 $ 21,445
Cost and expenses:
Cost of revenue 8,150 10,518 8,162 12,442
Research and development (1) 28,648 22,142 55,289 49,286
Selling, general and administrative (1) 32,955 29,299 63,301 59,223
Total cost and expenses 69,753 61,959 126,752 120,951
Loss from operations (42,009 ) (55,119 ) (70,076 ) (99,506 )
Other expense, net (6,011 ) (5,238 ) (11,166 ) (10,477 )
Net loss $ (48,020 ) $ (60,357 ) $ (81,242 ) $ (109,983 )
Net loss per share—basic and diluted $ (0.34 ) $ (0.44 ) $ (0.57 ) $ (0.82 )
Weighted average number of common shares used in net loss per share —basic and diluted 142,098 138,315 141,690 134,053
(1) Non-cash compensation expenses reflected in the condensed consolidated statements of operations are as follows:
Research and development $ 2,691 $ 2,271 $ 4,745 $ 4,961
Selling, general and administrative $ 4,212 $ 3,741 $ 7,584 $ 7,125

U.S. LINZESS Brand Collaboration1

Revenue/Expense Calculation

(in thousands)

(unaudited)

Three Months EndedJune 30,

Six Months EndedJune 30,

2015 2014 2015 2014
LINZESS U.S. net sales $ 112,062 $ 62,746 $ 207,551 $ 123,558

Commercial costs and expenses2

77,840 79,424 135,991 139,340
Net profit (loss) on sales of LINZESS $ 34,222 $ (16,678 ) $ 71,560 $ (15,782 )
Ironwood’s share of net profit (loss) $ 17,111 $ (8,339 ) $ 35,780 $ (7,891 )

Ironwood’s selling, general and administrative expenses3

$ 8,314 $ 7,806 $ 16,002 $ 15,805
Profit share adjustment4 $ (1,150 ) $ 2,311 $ (2,370 ) $ 2,311
Ironwood’s collaborative arrangement revenue $ 24,275 $ 1,778 $ 49,412 $ 10,225

1 Ironwood collaborates with Allergan on the development and commercialization of linaclotide in North America. Under the terms of the collaboration agreement, Ironwood receives 50% of the net profits and bears 50% of the net losses from the commercial sale of LINZESS in the U.S. The purpose of this table is to present calculations of Ironwood’s share of net profit (loss) generated from the sales of LINZESS in the U.S. and Ironwood’s collaboration revenue/expense; however, the table does not present the research and development expenses related to LINZESS in the U.S. that are shared equally between the parties under the collaboration agreement. For the three months ended June 30, 2015, net profit for the U.S. LINZESS brand collaboration with Allergan was $15.0 million, calculated by subtracting $77.8 million in commercial costs and expenses and $19.3 million in research and development expenses, from LINZESS U.S. net sales of $112.1 million.2 Includes cost of goods sold incurred by Allergan as well as selling, general and administrative expenses incurred by Allergan and Ironwood that are attributable to the cost-sharing arrangement between the parties.3 Includes Ironwood’s selling, general and administrative expenses attributable to the cost-sharing arrangement with Allergan.4 Ironwood or Allergan may incur additional expenses related to certain contractual obligations, resulting in an adjustment to the company’s share of the net profits as stipulated by the collaboration agreement.

Ironwood Pharmaceuticals, Inc.

Media Relations

Trista Morrison, 617-374-5095

Director, Corporate Communications

[email protected]

or

Investor Relations

Meredith Kaya, 617-374-5082

Director, Investor Relations

[email protected]

Source: Ironwood Pharmaceuticals, Inc.

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