Ironwood Pharmaceuticals, Inc. (IRWD) Earnings Call Transcript & Summary

Good morning, everyone. Thank you for dialing in. Continuing on with our sessions for the day for our virtual health care conference, we have with us today management team from Ironwood. We have Tom McCourt, President; Gina Consylman, CFO; and Jeff Ruberti, Director, Corporate Strategy and Investor Relations. This is Balaji here, I cover spec pharma for Barclays, and this will be the last session from the spec pharma space. Also, a reminder that owing to the nature of this format, there will be no Q&A sessions after the presentation. With that, I hand it over to Gina.

Thank you. Thank you to Barclays for hosting us. We very much appreciate the invitation. And thank you for your time and interest in Ironwood today. I am Gina Consylman, the CFO of Ironwood Pharmaceuticals. Tom McCourt, our President, is also here with me today. We're going to go through the presentation together and are looking forward to giving you an update on several of our exciting catalysts that we have upcoming through 2020. Starting just very quickly on Slide 2, it is our safe harbor statement. I'm sure you all know the drill by now, but just a quick reminder that we will be using forward-looking statements today and non-GAAP metrics, and I refer you to Slide 2 for the full safe harbor statement. Turning to Slide 3, we are just shy of our 1-year anniversary of our spin-off. On April 1, 2019, we spun off our non-GI assets into Cyclerion Therapeutics. With the spin-off, Ironwood instantly transitioned into a profitable GI-focused health care company. We aim to become the leading U.S. gastrointestinal health care company, dedicated to advancing the treatment of GI diseases and redefining the standard of care of millions of GI patients. Moving on to Slide 4, we launched our GI-focused health care company with 3 priorities: to drive LINZESS growth; advance our late-stage pipeline; and deliver sustainable profits. We were able to deliver on all 3 last year. Most notably, we saw a 14% year-over-year LINZESS demand growth, which really is just amazing, given we were in our 7th year post launch. We will talk about our 2020 guidance in a couple of minutes, but I'm excited to say that we've also been able to guide to net stable price in 2020 with a mid-single-digit net sales growth expected. We made significant progress advancing our pipeline assets, 3718 in Phase III for refractory GERD, and our Phase IIb 7246 program, a potential non-opioid abdominal pain agent. And lastly, we delivered on profits, both on a GAAP and a non-GAAP basis for the first time in our 20-year history. On Slide 5 -- moving on to Slide 5, as exciting as 2019 was for us, so I must say that I'm even more excited about 2020. We have not 1, but 2 data readouts. 7246 is already fully enrolled, and we are expecting top line data mid-2020. And 3718 enrollment is progressing, with data expected in the second half of 3718 -- second half of 2020. We got off to a strong start in 2020, settling all the outstanding ANDA litigation, and we guided to solid net sales growth and stable price, a big turnaround from the price erosion we experienced in the past few years. And lastly, we continue to focus on delivering profit. As I mentioned earlier, we'll talk guidance in a few minutes, but a note of caution is that all guidance we provided this year does exclude the impact of -- for many COVID-19 impact. Moving on to Slide 6. LINZESS is now the #1 prescribed medicine for IBS-C, CIC on both a branded and generic basis. We already hit upon several of the points here, but let me call out the blue line is a true inflection point for unit growth that we saw just last year. It started with the withdrawal of prescription and generic MiraLAX at the end of 2018, and then continued with our Phase IIIb abdominal data readout in June last year. We believe both of these events will continue to drive the momentum in 2020. Here we have a snapshot of our late-stage pipeline -- oh, sorry about that. We are on Slide 7, I just need to remind myself to provide the page numbers. But I'm moving on to Slide 7. And this is the snapshot of our late-stage pipeline. 3718, just a reminder, is our wholly-owned asset, that's refractory GERD; and LINZESS and 7246 are partnered with Allergan. I'm going to turn it over to Tom to review each program in more detail over the next few slides.

Thanks, Gina. And I'm going to -- I'd just like to take a few minutes and make a few comments on where we are with LINZESS, both today and as we look to the future. As Gina mentioned, we're coming off a very, very strong year with 14% volume growth. And we're seeing very, very good momentum continuing into 2020, with, certainly, appears to be a stable price -- a more stable price situation than we've had in the past. And as we look to the future on LINZESS, it's important to keep in mind that we've only treated a very small portion of this patient population, roughly 3 million patients out of the 30 million or 40 million patients that continue to suffer. So as the market leader, our primary objectives are: one, how do we continue to grow the market and capture the market as the market leader, but also how do we continue to strengthen our brand and broaden the clinical utility of the brand. And obviously, the most recent data around the abdominal symptoms really allows us to better educate physician on who the appropriate patient is and broaden their view of who is the patient that should be placed on LINZESS, which continues to show very good promise. In addition, these initial symptoms, we believe, will activate a whole new patient population that we haven't been able to reach. Most patients, we know, don't identify specifically with abdominal pain and more closely identify with bloating and discomfort. And these additional claims will certainly allow us to educate and hopefully activate more patients to raise their hand and seek effective care. So we will be -- we introduced those data to the medical community, but we still have a lot of work there to increase awareness and recognition of the benefits of LINZESS to the prescribing community as well as in April, we'll be launching a new DTC campaign that will really communicate the benefits to the patient and, as I mentioned, hopefully activate even more patients to raise their hand and ask for LINZESS. In addition, as we look at the pipeline moving forward, certainly, we have had some very productive discussions with the FDA, and we're moving forward with -- both in IBS, but primarily a functional constipation indication for our pediatric population. And we certainly see our phase -- it's currently in Phase II, and we'll be reporting more on that in the upcoming year. I would like to take some time and talk a little bit more specifically about our refractory GERD program, which encompasses 3718 as well as our abdominal pain program of 7246. So starting with 3718, and I'm now on Page 8, which really is a significant opportunity. This is a large population, 8 million to 10 million Americans. They suffer from frequent and very problematic symptoms, both heartburn as well as regurgitation, 2 to 3x even 4x a week. They consume a significant amount of health care and really are a very mobile and active population. So what we know about this population is: one, they easily identify with the symptoms; two, they will raise their hand and ask for more effective therapy; and three, they tend to be very, very compliant as these symptoms tend to be frequent and recurrent. And certainly, PPIs were a significant advancement in care. But in spite of even double dose PPI use, these patients continue to suffer from some heartburn and particularly regurgitation, which many of the antisecretory agents don't effectively address. And it has been known for quite some time that bile is the problem. Back even before the antisecretory agent, this was a known problem. And when you combine acid and bile together, it's quite damaging to the esophagus and causes a lot of symptoms. But certainly suppressing acid improved the heartburn, but many of these patients had residual heartburn. And what we've learned is many of these patients continue to reflux bile, which is an irritant to the esophagus. But as we look closer at this, we've also learned that bile may be involved in the actual mechanics of GERD. We know it loosens the lower esophageal sphincter pressure, which may enable larger refluxate to move up into the esophagus. It also appears to delay stomach emptying. And both these mechanisms could really be affecting and exacerbating the symptoms of GERD. And certainly, the strategy has been, can we tie up the bile acid with a sequestering agent, a gastro-retentive sequestering agent, which is what 3718 actually is. So this is really the first advancement in refractory GERD or GERD in general in quite some time. And certainly, what we saw in the Phase II program was quite encouraging with regard to the relief of not only heartburn but also regurgitation. And as we think about moving forward, this really further solidifies us as a GI company. There's a great deal of overlap between physicians that prescribe and manage IBS patients and those that manage GERD, particularly refractory GERD across the GI community. As we move to Page 9, looking a bit more specifically at the IIb data from the 3718 trial at a dose of 1500 milligrams a day, we were able to define a responder endpoint with the FDA, in which these patients receive or experience a clinically meaningful improvement in heartburn. And when we define that, which was a 45% reduction in heartburn, we saw over half of these patients having a meaningful improvement in heartburn relief. In addition to the heartburn relief, 55% of these patients also experienced an improvement in regurgitation, which often is even more problematic for these patients than is heartburn. And this effect was even more pronounced when we looked at people that had more severe disease, and those patients that had erosive disease in addition to just heartburn and regurgitation. And the magnitude of benefit above PPI alone was even more dramatic than we saw in the general population. And of course, colesevelam has been around for a long time. We know it's safe. We know it's well tolerated. And so we feel very good about the data we're seeing. And in the clinical trials, over 95% of this population was compliant with therapy. But more -- looking more specifically at the regurgitation data, and as I mentioned earlier, this -- the GERD category as a whole has generally been characterized as heartburn, it's the primary symptom. However, regurgitation is actually often more problematic than actual heartburn. And as you can see, there's a dramatic improvement in regurgitation within the first couple of weeks. And in fact, what we saw across the population is over 1/3 of the patients -- or about 1/3 of the patients actually went from regurgitation 2 or 3 days a week to no regurgitation, which is, you can imagine, a dramatic improvement in symptoms. So currently, we are on track to deliver data in -- by the end of the year in both trials. These are very robust trials, focusing on refractory GERD. And we're, again, comparing 3718 plus PPI versus PPI alone. And so we're looking forward to sharing those data as they come in. Just to take a few minutes on our abdominal symptom data. So we're on Page 11. 37 -- 7246 is a non-opioid pain-relieving agent for patients with abdominal pain in certain GI disorders. And what we've been able to do is basically move forward -- excuse me, in -- I'm on Page 12, in directing the actual drug to the site in which we believe the organic origin of pain often comes from. So the current formulation of LINZESS is ingested and immediately released in the stomach, and certainly, we know it activates receptors along the intestinal wall, these GCC receptors, which has 2 effects: one, through increasing cyclic GMP, it activates more fluid, which allows the abdominal -- or excuse me, eases the constipation symptoms, but also acts directly on the afferent pain-sensing nerve to relieve pain. One of the observations that we've made is as the immediate-release LINZESS traverses through the intestine, proteases basically chew it up and break it up into amino acid and actually very little drug gets into the colon. And our hypothesis was if we could figure out a way to deliver more linaclotide to the colon, which we do believe is a significant origin of pain, we can actually amplify the pain benefit. And the second piece is, if we could specifically target it to the colon, could we actually minimize the effect on the bile habit and actually create a pain-relieving agent that has no effect on bile habit, and that's clearly what we saw in the Phase IIb trial, the results of which are on Page 13. And as you can see, when we look at the abdominal pain relief of 7246 compared to linaclotide, we saw a very comparable response to pain, but recognize that these patients that were treated with 7246 remain constipated. As you can see on the -- in the chart on the right, when you look at the effect, that complete spontaneous bile movements, basically the 7246 had no effect in increasing it. So these people were all constipated, yet saw a significant improvement in pain relief. Now as we look at the Phase IIb trial, which we have completed enrollment in, one of the things that we were able to do was focus on a new patient population. And what we wanted to do is, could we see if we could expand the clinical utility of the drug? So we're actually testing this in not IBS-C patients, but IBS-D patients, so those patients that have abdominal pain associated with diarrhea, and to see if we could relieve their pain effect. And we've completed enrollment, and we hope to see data in the middle of the year here. And we'll be reporting those data, certainly, in the upcoming months. But the other thing to point out is because we have been able to minimize the risk of diarrhea, it's also allowed us to push the dose. So we're actually evaluating doses up to 1,200 micrograms to really understand the full benefit as far as pain relief that these patients could realize. So as I look at kind of where we are today, linaclotide continues to perform very, very well with certainly a strong presence in the market as a market leader. We certainly see a lot of room for ongoing growth. We see some stability in price. We certainly don't see any major competitors out in front of us. And we're going to continue to strengthen the clinical profile and broaden the clinical utility of LINZESS. Certainly, we'll be looking forward to reporting the results from 7246 coming up here in the next couple of months with regard to the relief of pain associated with IBS-D, and finally the refractory GERD program, the Phase III program, which we'll read out at the end of the year. So with that, I'm going to turn it back over to Gina, and she's going to talk a bit more about our financial status.

Sure, Tom. I am on Slide 14, for those of you following along. As the CFO, this is certainly one of my favorite slides in the deck. To the left, in red, shows our net loss, while we were a consolidated company with Cyclerion. And to the right shows our immediate transition to profitability post separation. In addition to the transition to profitability, 2019, we were able to restructure our debt, we lowered our cash interest payments and better aligned our principal payments with the expected cash generation in the out years. We also restructured our OUS agreements to more traditional license agreements, and that provided us an opportunity to further streamline our business. And lastly, we added a new product to the bag. We are now promoting Alnylam's GIVLAARI and adding rare disease promotion to our GI expertise. So you can see that we were very busy in 2019 post our separation, and it is one of the reasons, because of the execution in 2019, that I believe we've set up for success in 2020. Moving on to Slide 15, this is our full year 2020 financial guidance slide. During our Q4 investor update in February, we guided to mid-single-digit LINZESS net sales growth, including stable net price, which to me means plus or minus a few percentage points. Our expected Ironwood revenue is between $360 million and $380 million. It is lower than 2020 versus 2019 due to our renegotiated OUS agreements, I mentioned earlier. But our core revenue stream, our LINZESS collaboration revenue, is part of this guidance and is growing faster than the LINZESS net sales due to the continued margin expansion that we expect. Our adjusted EBITDA is expected to be greater than $105 million. I recently mentioned earlier that this guidance excludes any COVID-19 impact. While the OUS component is not significant compared to our overall financial projections, the impact to the U.S. market is also uncertain at this time. Of note, we'd like to point out that Allergan is responsible for the manufacturing of LINZESS, linaclotide API. And at this time, they have not experienced any interruptions in the manufacturing processes. Their manufacturing locations are not currently located in high-risk areas, and we are continuing to monitor the impact to our business and expect to provide more details on the impact, if any, during our Q1 investor update. And lastly, just a comment on Q1. Just a reminder that Q1 typically experienced some seasonality dip in LINZESS net sales, and that's due to the resets on the high deductible plans, the changing health plans and also the usual channel burn we see in the quarter. Also a note that we continue to invest -- expect to invest heavily in R&D in 2020 as we head towards 2 data readouts. We expect total R&D expenses in 2020 to be more heavily weighted in the first half of the year due to the expected increase in enrollment in 3718 trials during this period. And wrapping it up on Slide 16. Really, it's a slide that gives us a visual of where we think Ironwood can be in just a few years. The close-out today, I'd like to leave you with this slide because LINZESS growth continues with our runway through early 2029. And as Tom mentioned, both 3718 and 7246 have patient populations in approximate size to LINZESS, and this really provides Ironwood with 3 meaningful revenue streams for many years to come. We are excited about our long-term potential and the catalysts we have this year. Thank you for your time and your interest in Ironwood today. And with that, it concludes our presentation.

Thank you, Tom, Gina and Jeff. I hope you have a great day -- wish you a great day, and hope you have some great meetings for the rest of the day. Thank you.

Thank you.

Bye-bye, Balaji.