Cantor Fitzgerald downgraded Ironwood Pharmaceuticals (NASDAQ: IRWD) from Hold to Sell with a price target of $10.00 (from $11.00). Analyst Irina Rivkind Koffler sees downside as sentiment deteriorates.

"We are lowering our PT to $10 from $11 based on DCF valuation since we assume increased R&D expense in 2015. More importantly, we believe that sentiment may turn even more negative if risky clinical programs fail and there is heightened anticipation of additional financing needs. Because there is a greater potential for downside, in our view, we are downgrading the stock to SELL from HOLD. We are also not expecting an imminent sale of the business nor accretive licensing deals," said Rivkind Koffler.

"Ironwood reported Linzess revenues of $16.9M and loss per share of ($0.30), vs. FactSet consensus of $21.3M and ($0.32). Linzess sales of $79.7M were lowered by $8M due to inventory destocking and co-pay accounting. The bottom line is that the company still needs to give away a lot of free product via samples/ vouchers, which hurts profitability," continued the analyst.

"Ironwood is initiating a Phase III constipation trial of Linzess in a 72 mcg dose. We view this study as an attempt to rectify diarrhea-related compliance and persistence in the real world. Phase II constipation trials were somewhat encouraging (8.9% diarrhea for 150 mcg vs. 5.1% in 75 mcg) but Phase II IBS-C trials failed to demonstrate lower diarrhea rates for the 75 mcg dose (12.2% for 150 mcg vs. 11.4% 75 mcg). We think this trial may be expensive, with limited upside (like the bloating study), especially if diarrhea rates are not meaningfully lower in the 72 mcg dose," she added.

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Shares of Ironwood Pharmaceuticals closed at $12.59 yesterday.