Q3 2019 Earnings Call

Gentlemen, thank you for standing by welcome to the Ironwood Pharmaceuticals third quarter 2019, Investor update conference call.

Operator: Welcome to the Ironwood Pharmaceuticals 3rd Quarter 2019 Investor Update Conference Call. At this time, all participants are in a listen-only mode, and after the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I'd now like to turn the conference over to your speaker.

At this time all participants are in listen only mode and after the speakers presentation. There will be question and answer session.

Good question during this session you'll need to press star one on your telephone.

Please be advised today's conference is being recorded.

Your acquire any further assistance please press star zero.

Now I'd like.

Turning the conference over to your speaker today Meritas <unk>.

Operator: Turn the conference over.

Operator: Please go ahead, ma'am.

Go ahead.

Good morning, and thanks for joining us for a third quarter 2019 investor update.

Unknown Executive: Good morning, and thanks for joining us for our third quarter.

Unknown Executive: IronwoodPharma.com Today's call and accompanying slides include four forward-looking statements. Such statements involve risks and uncertainty.

Weve crossed the wire this money it can be found on their website www dot ironwood fiber dotcom.

Today's call it a company side because forward looking statements such statements involve risks and uncertainties that may cause actual results could differ materially discussion of these statements are sectors is available on the current safe Harbor statement as well as under the heading risk.

Unknown Executive: Discussion of these statements and risk factors is available on the current Safe Harbor Statements line, as well as under the heading Risk Factors, in our quarterly report on Form 10-Q for the quarter ended June 30, 2019, and in our future SEC filings. All four forward-looking statements speak as of the date of this presentation, and we undertake

And our quarterly reports on Form 10-Q for the quarter ended June Thirtyth 2019, and our teacher.

All forward looking statements other than they did this presentation and we undertake no obligation to update such things.

Unknown Executive: The Bulletproof Executive, 2013

Unknown Executive: Also included are non-GAAP financial measures, which should be considered only a supplementary measure.

Also included a non-GAAP financial measure what should be considered.

Unknown Executive: Transcripts provided by Transcription Outsourcing, LLC.

To substitute or superior to.

Unknown Executive: To the extent applicable, please refer to the tables at the end of our press release for reconciliation of these measures to the most directly comparable gaps. During today's call, Mark Mallon will begin with an overview of the quarter, Thomas McCourt will highlight our commercial and development progress, and Gina Kompelman will close by discussing third-quarter financial results and 2019 financial guidance. Mike Shetzline will also be available during the Q&A portion of the call. Additionally, we will be referring to slides via the webcast. For those of you dialing in, please go to the events section of our website to access the webcast slides.

The extensive cycle, we suffered in the tables at the end Democrats released a reconciliation of these measures to the most directly comparable GAAP measures.

During today's call Mark Mallon will begin with an overview of the quarter some important highly or commercial development partner Genie consulate close by discussing third quarter financial results in 2018 financially.

Yes, I will also be available during a given a portion of the goal.

We'll be referring besides via the webcast for those of you dialing it. Please go to the events actually very widely accessible Tessa.

Unknown Executive: With that, I will turn the call over to you.

Mark Mallon: Thanks, Meredith. Good morning, everyone, and thanks for joining us today. We are officially live from our new office in downtown Boston. Many colleagues worked tirelessly to ensure the smooth transition to Boston while creating an inspiring and collaborative workspace, and I'd like to thank all of those who contributed to this effort. It feels really good to be in our new space. Turning to our third quarter results, Ironwood had one of its strongest quarters to date, marked by continued execution across our three core priorities to accelerate LINZES, advance our pipeline, and continue to deliver profit. First, Lynceth.

I will turn the call over time.

Thanks Meredith.

Everyone and thanks for joining US today, we are officially life from our new office in downtown Boston. Many colleagues worked tirelessly to ensure the smooth transition to Boston, while creating an inspiring and collaborative work better and I'd like to thank all of those attributed to this effort. It feels really good to be an earnings growth.

Turning to our third quarter results I would had one of its strongest quarters today marked by continued execution across our three core priority to accelerate Lin said advance our pipeline and continue to deliver profit.

First let's says that says U.S. prescription demand continues to show double digit year over year growth hitting all time highs during the period and both extended units and new to brand.

Mark Mallon: Lynceth's U.S. prescription demand continues to show double-digit, year-over-year growth, hitting all-time highs during the period in both extended units and new-to-brand, translating into $215 million in sales in the third quarter. As a result of this continued momentum, we now expect mid-single-digit percent year-over-year growth in net sales. This compares to our previous guidance of low- to mid-single-digit growth. Second, our GI pipeline is advancing further into late-stage clinical studies. Top-line data for 7246, our product candidate in Phase 2 for the treatment of abdominal pain associated with IBSD, is now expected in mid-2020 instead of the second half of 2020 due to faster-than-expected enrollment. We are excited about both 7246 and 3718, our Phase 3 product candidate for the treatment of persistent GERD, as they each represent new and innovative potential treatment options for two large and underserved patient populations.

Translating into a $215 million so sales in the third quarter.

As a result of this continued momentum we now expect mid single digit percent year over year growth in net sales. This compares to our previous guidance up low to mid single digit growth.

Second our G.I. pipeline is advancing further into late stage clinical studies topline data for 70 246, our product candidate in phase two for treatment of a domino pain associated with IBSD is now expected in mid 2020, instead of the second half of 2020 due to faster than expected enrollment.

We are excited about both 70 246, and 30 718, our phase three product candidate for the treatment a persistent GERD as they each represent new and innovative potential treatment options for two large and under served patient population.

Mark Mallon: And third, we recorded GAAP and non-GAAP profitability for the third quarter, which was driven by strong operational execution, our amended ex-U.S. Lennarkel-type partnerships with Astellas and AstraZeneca, and disciplined investment. As a result, I'm pleased to announce today that we are raising our 2019 revenue and adjusted EBITDA from Continuing Operations Guidance. Gina will talk more about this later in the call, but again, I would like to congratulate the team for their hard work and continued focus on our business. Beyond these great results, we made significant progress across a number of other critical areas core to our strategy. In less than six months, we secured our second commercial partnership.

And third we recorded GAAP and non-GAAP profitability for the third quarter, which was driven by strong operational execution, our amended X U.S. when I could tie partnerships with this Dallas and Astrazeneca and disciplined investment.

As a result, I'm pleased to announce today that we're raising our 2019 revenue and adjusted EBITDA from continuing operations guidance do you will talk more about this later on the call, but again I would like to congratulate the team for their hard work. The continued focus on our business.

Beyond these great results, we made significant progress across a number of other critical areas core to our strategy.

We secured our second commercial partnership in less than six month. The team is thrilled to be working without an island to build awareness within the G.I. community about acute hepatic porphyria or HP and if approved we will help bringing El Nio Lynne do you built or do you also want to HIV patients who are in desperate need treatment.

Mark Mallon: The team is thrilled to be working with Allen Island to build awareness within the GI community about acute hepatic porphyria, or AHP. And if approved, we will be helping bring Allen Island's drug, Divosoran, to AHP patients who are in desperate need of treatment. The sales force is already increasing awareness among physicians about AHP, further enhancing their productivity in combination with their promotional efforts for lintels and vibros. Additionally, we are excited about the emerging area of digital therapeutics. Pair Therapeutics announced just yesterday that we entered into an agreement with them to explore developing their Innovative Prescription Digital Therapeutics, or PDTs, for the treatment of selected indications within the GI space. We believe digital therapeutics have the potential to become an important tool for patients in the future, and we're looking forward to working with Pair to evaluate PDTs specifically within GI.

The Salesforce is already increasing awareness among physicians about HP further enhancing their productivity in combination with their promotional efforts well. It says in fiber is it.

Additionally, we are excited about the emerging area of digital therapeutics pair therapeutics announced they just yesterday that we entered into an agreement with them to explore developing their innovative prescription digital therapeutics or PBT for the treatment of selected indications within the G.I. space, We believe digital therapeutics have the.

Potential to become an important tool for patients in the future and we're looking forward to working with pair devaluate pdcs specifically within GR.

Mark Mallon: Lastly, and importantly, we strengthened Ironwood by adding strong senior leaders in regulatory, biostatistics, finance, corporate development, and HR. Our leadership team is energized and committed to delivering on our mission to bring new medicines to patients living with GI disease. We've made significant progress since our launch as a new company last April, as evidenced by these achievements, but we recognize that we have more to do to deliver on the value creation potential of Ironwood. First and foremost, we must continue to execute on our core priorities. We believe there is tremendous value yet to be unleashed within our existing portfolio. Beyond that, our management team and board are exploring options to further strengthen our business and deliver on our mission. With that, I'll turn it over to Tom to discuss our commercial and pipeline performance. Tom?

Lastly, and importantly, we strengthened ironwood by adding strong simulators in regulatory bio statistics finance corporate development and HR.

You should team is energized and committed to delivering on our mission to bring new medicines to patients living with GE eye diseases.

We've made significant progress since our launch as a new company last April as evidenced by these achievements, but we recognize that we have more to do to deliver on the value creation potential of our I would first and foremost we must continue to execute on our core priorities. We believe there's tremendous value yet to be at least within our existing portfolio beyond that I'm isn't it.

Came aboard ARX <unk> options to further strengthen our business and deliver on our mission with that I'll turn it over to Tom to discuss our commercial and pipeline performance Tom.

Operator: Transcribed by https://otter.ai

It's mark [noise].

Operator: ...

Thomas A. McCourt: Our commercial performance during the third quarter was driven by the continued growth of Linzess. Lindsay's prescription demand increased by 15% compared to the third quarter of 2018. And impressively, our new-to-brand prescriptions were up 12% year-over-year during the third quarter. For the first time ever, during the third quarter, Linzess became the number one prescribed IBSC and chronic constipation treatment, meaning it is prescribed more than any other branded or generic option. Linzess U.S. sales grew nearly 5% to $215 million compared to this time last year. We attribute this growth to a number of factors, including the continued impact from the withdrawal of generic prescription marilax for occasional constipation from the market, the launch of our DTC campaign last April, and then the refreshed consumer materials introduced in September, and our positive phase 3B abdominal symptom data that we announced in June. Let me briefly talk about each one of them. First, the withdrawal of prescription Marilax last November was a major disruption in this category. Not only are patients now seeking different prescription options, but physicians are choosing Linzess for more of their IBSD and chronic constipation patients, and this

Our commercial performance during the third quarter was driven by the continued growth of Linzess.

Linzess prescription demand increased 15% compared to the third quarter 2018, and impressively, our new to brand prescriptions were up 12% year over year during the third quarter.

The first time, however, during the third quarter Linzess became the number one prescribing obviously in chronic constipation Friedman, meaning it is prescribed more than any other branded or generic option.

Linzess U.S. sales grew nearly 5% to 215 million compared to this time last year.

We attribute this growth through a number of factors, including the continued impact from the withdrawal generic prescription merrell luxfer occasional consultation from the Mark.

The launch of our DTC campaign last April and then the refresh consumer materials introduced in September and ER positive phase three be abdominal symptom data that we announced in June .

Let me briefly talk about each one of them.

First the withdraw the prescription Merrell acts last November was a major disruptions category not only are patients now seeking different prescription options. What physicians are choosing linzess for more of their IDFC, a chronic constipation patients.

And this kind of seems to be having it lasting effect.

Thomas A. McCourt: This seems to be having a lasting effect, contributing to the strong lens of growth that we have seen this year. Regarding our phase 3 abdominal symptom data, in July, our sales force began communicating to physicians about the benefit Lincest delivered in relieving overall abdominal symptoms of bloating, pain, and discomfort in patients with IBSC. We also refreshed our consumer materials in September to include the Z-State Information Route IVS-C, including a reference to abdominal symptoms including floating and discomfort. We plan to file a supplemental new drug application with the FDA later this year. Looking ahead, we believe that there are significant life cycle management opportunities to continue to grow the brand.

Attributing to the strong wins those growth that we've seen this year.

Regarding our phase three abdominal symptom data in July our Salesforce began communicating to physicians about the benefit linzess delivers in relieving overall abdominal symptoms of loading pain and discomfort in patients with IBSD.

We also refreshed our consumer materials in September to include disease state information around hobbies, IBSD, including a reference to the abdominal symptoms, including floating and discover.

We plan to file a supplemental new drug application with the FDA later this year.

Looking ahead, we believe that Theres significant lifecycle management opportunities to continue to grow the brand. We in Allergan are evaluating several including expanding our addressable patient population such as in pediatrics more possibly other indications and enhancing our understanding of the mechanism to continue to strengthen.

Thomas A. McCourt: We at Allergan are evaluating several, including expanding our addressable patient population, such as in pediatrics or possibly other indications, and enhancing our understanding of the mechanism to continue to strengthen the clinical utility of Linax. Turning to our pipeline, I'll start with 7246, our delayed-release formulation of linacotites that we at Allergan are developing as a non-opioid intestinal pain-relieving agent for patients suffering Estimates suggest that a significant portion of patients with GI conditions, including IBS, use opioids chronically to treat their GI pain. Given the risks associated with opioids generally and the potential adverse events specifically for patients with GI disorders, developing a non-opioid GI pain drug is of critical need. We are initially exploring 7246 for the treatment of pain associated with IBSD and initiated a Phase II study this past May. Enrollment in the study is going very well. And as a result, we are now expecting top-line data in mid-2020, versus our original expectation of data in 2020.

The clinical utility when I forgot.

Turning to our pipeline I'll start with 7246 or delayed release formulation when actually type that we are now again are developing as the non opioid intestinal painter, leaving agent for patients suffering from abdominal pain associated with certain Gi disorders.

Estimates suggest that a significant portion of patients with GE I conditions, including idea use opioids chronically to treat the g. I pay.

Given the risks associated with opioid generally and the potential adverse events, specifically for patients with GE I disorders, developing a non opioid g. I paint drug is of critical need.

We are initially exploring 7246 for the treatment of pain associated with IBSD and initiated a phase two study this past may.

Enrollment in this study is going very well and as a result, we're now expecting topline data in mid 2021st our original expectation of data in the second half of 20 Twond.

Thomas A. McCourt: The second half of 20. If these Phase 2 results are positive, we would expect to initiate a Phase 3 pivotal trial with 7246 as early as the end of next week. We presented data last weekend at the American College of Gastroenterology meeting showing that, as desired, 7246 did not impact bowel movement function or stool consistency in a Phase I study of healthy volunteers. These data complement our positive phase two data for 7246, relieving abdominal pain associated with IBSC, and further supports our rationale for exploring the effects of 7246 to relieve abdominal pain related to IBSC. Turning to 3718, our bile acid sequester for the potential treatment of persistent GERD.

If these days do results are positive we would expect to initiate a phase three pivotal trial with 7246 as early as the end of next year.

We presented data last week, the American College of Gastroenterology meeting showing that as desired 7246 did not impact while movement function or stool consistency consistency in a phase one study of healthy volunteer.

These data complement our positive phase two data for seven two forces relieving abdominal pain associated with IDFC and further supports our rationale for exploring this back to seven to four to relieve abdominal pain related to ideas.

Turning to starting to 30, 780 or bile acid sequestrant for the potential treatment a persistent or.

Thomas A. McCourt: The phase three trials continue to enroll patients. These trials are designed to evaluate safety and efficacy on the two most bothersome symptoms of persistent GERD, regurgitation, and heart failure. As a reminder, these are rigorous studies intended to ensure appropriate patients are enrolled in the trial. Patients are required to have a positive Bravo test, meaning they test positive for acid reflux, which requires an endoscopy.

The phase III trials continue to enroll patients. These trials are designed to evaluate safety and efficacy on the two most bothersome symptom is a persistent guard regurgitation and Harper as a reminder, these are rigorous studies intended to ensure appropriate patients enrolled in the trial.

Patients are required to have a positive problem, meaning they test positive for acid reflux, which requires and endoscopy.

Thomas A. McCourt: Additionally, we're enrolling both erosive esophagitis patients and non-erosive GERD patients. We have enrolled over half of the study to date, but due to the demands of the study, enrollment has been lower than we originally expected. At this time, we continue to target top-line data in the second half of 2020. We have already taken actions to further support enrollment, such as introducing central recruiting, and are monitoring it closely. We are also considering a number of additional opportunities to support enrollment and expect to continue to update you as we move forward. We are very excited about Split Tantrum for 3718, as we believe it represents an important opportunity to improve care for an estimated 10 million patients who continue to suffer from both heartburn and regurgitation despite taking standard of care PPI.

Additionally, we are enrolling both arose from a soft guidance patients and non erosive GERD patients.

We have enrolled over half of this study to date, but due to the demands will study enrollment has been slower than we originally expected.

At this time, we continue to target topline data in the second half a 20 twond we.

We have already taken actions to further support enrollment such as introducing central recruiting in our monitoring it closely.

We're also considering a number of additional opportunities to support enrollment and expect to continue to update you as we move forward.

We're very excited about potential for 30 780, as we believed that represents an important opportunity to group here for an estimated 10 million patients who continued to suffer from both heartburn and regurgitation. Despite pick in standard of care Oh PPI.

Thomas A. McCourt: We look forward to sharing more with you on this program as we move forward. As I mentioned, a team of us were at the ACG meeting, and the buzz around Ironwood and our GI portfolio was noticeable. There continues to be significant excitement about 3718, 7246, and LINZUS among both key opinion leaders and the broader GI community, further establishing Ironwood as a leading GI company. With that, I'll turn the call over to Gina to discuss our financial results for the quarter.

We look forward to sharing more with you on this program as we do move forward.

Yes, I imagine a team of us where DCG meeting and the buzz around Ironwood energy I portfolio was noticeable.

There continues to be significant excitement about 30, 718, 7246 and Linzess among both key opinion leader and the broader Gilat community further establishing ironwood as the leading G.I. company with that I'll turn the call over the gene to discuss our financial results for the quarter.

Gina Kompelman: Thanks, Tom. As Mark mentioned, the third quarter was one of our strongest quarters to date, and that is especially true as it relates to our financials. We recorded $131 million in total revenue, our highest revenue record ever, as well as $21 million in GapNet income from continuing operations and $76 million in adjusted EBITDA from continuing operations. In the next few minutes, I will outline the steps that we have taken to simplify our business, strengthen our capital structure, and continue to grow profits. Furthermore, I will review our updated 2019 financial guidance. Please refer to our press release for additional details on our financials for the quarter. First, we simplified our business by amending two of our ex-U.S. Linaclatai partnerships with Astellas in Japan and with AstraZeneca in China.

Thanks, Tom as Mark mentioned, the third quarter was one of our strongest quarters today and that has expressed the true as it relates to our financials. We recorded 131 million and total revenue our highest revenue recorded ever as well as 21 million and GAAP net income from continuing operations and 76 million in adjusted EBITDA from continuing.

Operations.

Over these next few minutes I will outline the steps that we have taken to simplify our business strengthen our capital structure and continue to grow profits.

I will review our updated 2019 financial guidance. Please refer to our press release for additional details on our financials for the quarter.

First we simplified our business by amending two of our ex U.S. Linaclotide partnerships with a stylists in Japan and with Astrazeneca in China. Both of these partnerships were amended with these objectives in mind.

Gina Kompelman: Both of these partnerships were amended with these objectives in mind, to eliminate manufacturing responsibilities and focus our strategy in the U.S., to enable strong partners like Allergan, Astellas, and AstraZeneca to bring lenacletide to patients globally, and to continue to share in the value creation from each of these opportunities. In aggregate, these amendments resulted in approximately $42 million in license and milestone revenue recorded during the third quarter. Starting with our partnership with Estella, beginning in 2020, Estella will assume full manufacturing responsibilities for linacletide in Japan, including the supply of linacletide API. In return, Estellas paid Ironwood a 10 million upfront payment recorded in the third quarter.

Eliminate manufacturing responsibilities and focus our strategy in the U.S. to enable strong partners like out again, SLS and astrazeneca to bring on an appetite to patients globally and should continue to share and the value creation from each of these opportunities.

In aggregate. These amendments resulted in approximately 42 million in license and milestone revenue recorded during the third quarter.

Starting with our partnership with Us Dallas.

Beginning in 2020, Astellas will assume food manufacturing responsibilities Berlin, ACO tied in Japan, including the supply of Linaclotide <unk>.

In return Astellas, Pete I hear what a 10 million upfront payment recorded in the third quarter Astellas will also pay I wouldn't royalties beginning in the mid single digit person and escalating to the low double digit percent based or an aggregate net sales of linzess and the territory.

Gina Kompelman: Estellas will also pay Ironwood royalties beginning in the mid single-digit percent and escalating to the low double-digit percent based on aggregate net sales of Linzeth in the territory. In 2019, Ironwood continues to expect revenue from Astellas to be approximately $55 million, including API sales and the $10 million upfront payment. As a reminder, we will no longer be supplying API to Astellas and, therefore, will not record API revenues in 2020 and beyond. Starting in 2020, we will only be recognizing revenues from royalties from Astellas. In China, AstraZeneca obtained exclusive rights to develop, commercialize, and manufacture linacletide.

In 2019, I would continues to expect revenue from Astellas to be approximately 55 million, including Apiay sales and the 10 million upfront payment as a reminder, we will no longer be supplying a P.I. to axcelis and therefore will not record apiay revenues in 2020 and beyond starting in 2000.

20, we will only be recognizing voice revenues from royalties from us Ellis.

In China, Astrazeneca obtained exclusive rights to develop commercialized and manufacture linaclotide.

Gina Kompelman: As a result, we will no longer be jointly funding the development and commercialization of linacletide or sharing in the net profit in China. In return, Ironwood will receive up to $125 million, including $35 million in non-contingent payments and up to $90 million in commercial milestone payments. We recorded approximately $32 million of the $35 million non-contingent milestones as collaboration revenue in the third quarter and will accrete the remaining $3 million as interest income through 2024. Additionally, Ironwood will receive tiered royalties beginning in the mid-single-digit percent and increasing up to 20% based on aggregate net sales of Linzess in China. We are excited about the launch of Linzess in China, which is expected to occur very soon. The product is already available, and the AstraZeneca field force has completed training. Moving toward that goal.

As a result, we will no longer be jointly funding the development and commercialization olin appetite or sharing in the net profit in China.

And return Ironwood will receive up to 125 million, including 35 million and non contingent payments and up to 90 million in commercial milestone payments. We recorded approximately 32 million of the 35 million Noncontingent milestones as collaboration revenue in the third quarter and will accrete the remaining 3 million as interest income.

Through 2024.

Finally, I would will receive tiered royalties beginning in the mid single digit percent, an increasing up to 20% based aren't aggregate net sales of Linzess in China.

We are excited about the launch of Linzess in China, which is expected to occur very soon product is already available and the Astrazeneca field force has completed training.

Moving to our debt.

In an effort to strengthen our capital structure and lower our cash interest expense over the next few years, we restructured our debt. This past August by issuing 400 million and convertible notes.

With these probe proceeds we paid off the remaining balance of our eight and three eight notes in their entirety and repurchased 215 million of our 2022 convertible notes. We are aware of their potential dilution effect with the convertible instruments and as a result have guided that we expect to settle the remaining principal amount of the 2020.

Gina Kompelman: In an effort to strengthen our capital structure and lower our cash interest expense over the next few years, we restructured our debt this past August by issuing $400 million in convertible notes. With these proceeds, we paid off the remaining balance of our 838 notes in their entirety and repurchased $215 million of our 2022 convertible notes. We are aware of the potential dilution effect with the convertible instrument and, as a result, have guided that we expect to settle the remaining principal amount of the 2022 notes in cash. Additionally, we believe that, based on our current cash projections, we will have the option to settle our 2024 and 2026 notes in cash as well. Our new debt structure lowers our expected cash interest payments considerably over the next few years, allows us to smooth out the maturities of our debt obligations over time, and enables investment in our core business while still maintaining strategic and operational flexibility.

Two notes in cash.

Additionally, we believe that based on our current cash projections, we will have the option to settle our 2024 and 26 notes and cash as well.

Our new debt structure lowers our expected cash interest payments considerably over the next few years allows us to smooth out the maturity of our debt obligations over time and enables investment behind our core business, while still maintaining strategic and operational flexibility. Please see our press release for the financial terms of these new converts.

Turning finally to our guidance for full year 2019, as Mark mentioned, we are thrilled to be able to raise our 2019 financial guidance as a result of our strong performance over the past two quarters. We now expect revenues in 2019 to be in the range of four tend to 420 million and for adjusted EBITDA from continuing operations.

Gina Kompelman: Please see our press release for the financial terms of these new converts. Turning finally to our guidance for full year 2019, As Mark mentioned, we are thrilled to be able to raise our 2019 financial guidance. As a result of our strong performance over the past two quarters, we now expect revenues in 2019 to be in the range of $410 to $420 million and for adjusted EBITDA from continuing operations to be greater than $130 million. This reflects the $42 million in license and milestones recorded during the quarter. Continuing on 2019 guidance, we also now expect separation expenses to be approximately $30 million, restructuring expenses to be approximately $4 million, and, as Mark mentioned earlier, we now expect year-over-year LINZES net sales growth in the mid-single-digits. With that, I will turn it back over to Mark for some closing comments before we begin our Q&A.

To be greater than 130 million. This reflects the 42 million and license and milestones recorded during the quarter.

Continuing on 2019 guidance. We also now expect separation expenses to be approximately 30 million restructuring expenses to be approximately 4 million and as Mark mentioned earlier, we now expect year over year Linzess net sales growth in the mid single digit percent with that I will turn it back over to Mark for some closing comments before.

Are we begin today.

Thanks, Jenna and thanks to the entire Ironwood team so were working so hard to achieve these excellent results.

In summary over the past seven months since the separation I would has demonstrated strong execution against our core priorities Linzess demand has continued to show strong growth and we are advancing both 30 718 and 70 246.

Finally, we've taken a number of decisive steps to strengthening our financial improving our operations and growing profits.

We believe we are well positioned to continue to advance toward our vision of becoming a leading G.I. company and look forward to sharing our continued progress without.

Mark Mallon: Thanks, Gina, and thanks to the entire Ironwood team for working so hard to achieve these excellent results. In summary, over the past seven months since the separation, Ironwood has demonstrated strong execution against our core priorities. Linzess demand has continued to show strong growth, and we are advancing both 3718 and 7246. And finally, we've taken a number of decisive steps to strengthen our finances, improve our operations, and grow profits. We believe we are well positioned to continue to advance toward our vision of becoming a leading GI company and look forward to sharing our continued progress with all of you. With that, I'll turn the call over to the operator, and we can begin the Q&A.

With that I'll turn the call over to the operator, we can begin the queuing it.

[laughter] at this time I'd like to remind everyone in order to ask a question. Please press star followed by the number one on your Touchtone phone.

Again, if you'd like to ask a question. Please press star one.

Your first question comes from the line of David Sleep, and David Liebowitz with Morgan Stanley Go ahead. Please your line is open.

Hi. This is this from a long for David Thank you for taking our questions.

First given the large population of patients some of the man and refractory GERD can you elaborate on what factors on the slower than expected enrollment for 30, 718, I'm an I've a follow up after that.

Okay. Thanks, Phil I'm going to ask Mike the Mike our head of R&D to take that question. Thank you, yes, certainly so thanks for the question as Tom mentioned earlier as well as a reminder, these are really too big studies with over 1300 patients that totally expected to be even though.

Operator: At this time, I'd like to remind everyone that in order to ask a question, please press star followed by the number one on your touchtone phone. Again, if you'd like to ask a question, please press star 1. And your first question comes from the line of David Leibowitz with Morgan Stanley. Go ahead, please; your line is open. Hi, this is Ishmael on behalf of David. Thank you for taking our question. First, given the large population of patients and the demand for refractory GERDs, can you elaborate on what factors are leading to slower than expected enrollment for 3718? And then I have a follow-up after that.

We designed the development program in a rigorous fashion to ensure we enroll appropriate patients in the trial.

That includes patients with established gesture shop reflex disease and that requires.

In addition patients require a braava and braava technology needs to be implemented to ensure they have continued SMB books. So due to this enrollment has been slower than originally expected at this time, we continue to talk a topline data for the end of 2020.

Okay Everett.

<unk>.

Operator: Okay, thanks Ismael. I'm going to ask Mike, our head of R&D, to take that question. Thank you.

And for my second question.

Of course on the abdominal symptoms data you mentioned that fits to your marketing communication.

Michael Shetzline: Yes, certainly. So thanks for the question.

And with the updated guidance. So mid single digit increases are not sales can you give details around.

Michael Shetzline: As Tom mentioned earlier, as a reminder, these are really two big studies with over 1,300 patients that are totally expected to be enrolled. We designed the development program in a rigorous fashion to ensure we enroll appropriate patients in the trial. That includes patients with established schist or soft gel reflux disease, and that requires an endoscopy. In addition, patients require a Bravo, and the Bravo technology needs to be implemented to ensure they have continued efficacy. So due to this, enrollment has been slower than originally expected. At this time, we continue to target top-line data for the end.

How you may have already fees. This did that help boost volumes and expectations moving forward. Thank you.

Well as Tom said, so that thanks, yeah. Thanks, Yeah, I think the it's gonna be driven by really two things initially we've been out since June I'm talking to physicians about these additional symptoms, which is clearly broadening their view of the appropriate patient and combined with the removal of prescription generic.

Alex we'd obviously is boosting sales as far as point of care decisions and I think that's really been initially or focal point is making sure that positions are fully aware of these expanded benefit to the drug and looking at you know a broader set of patients that would be appropriate for linzess and they're clearly making those choices.

Michael Shetzline: Okay, great. That was very helpful, and for my mobile question. Of course, on the abdominal symptoms data, you mentioned the updates to your marketing and communication, and with the updated guidance of mid-single-digit increases in net sales, can you give details around how you may have already seen this data help boost volumes and expectations moving forward? Thank you.

The second piece is certainly on the consumer side and this is a two pronged strategy.

First of all making sure patients are well aware that yeah. They are symptoms of abdominal discomfort imploding, which often are the most prevalent and problematic served as can be relieved and obviously educating those patients who are add pointing up here it will improve that dialogue between physicians and patients and further enhance.

Thomas A. McCourt: A nice time for you for that, thanks.

Thomas A. McCourt: Yeah, thanks. Yeah, I think that it's going to be driven by really two things. Initially, you know, we've been out since June, talking to physicians about these additional symptoms, which is clearly broadening their view of the appropriate patient and combined with the removal of prescription generic Miralax, which obviously is boosting sales as far as point of care decisions. And I think that's really been our focal point initially, making sure that physicians are fully aware of these expanded benefits of the drug and looking at, you know, a broader set The second piece is certainly on the consumer side, and this is a two-pronged strategy.

This is a choice the second piece of that strategy is the broader population suffers who were not actively seeking here, but suffering and that's in excess of probably 15 million patients were suffering from chronic.

Frequent abdominal symptoms associated constipation, and really couldn't can get relief and what we have seen is tremendous promotionally risk promotional response in the DTC efforts, so by adding those claims to them. They added initially we added it solely focused on the disease portion of the we'll be expanding that.

To make it more visible as we board as we move board as we get good.

Thomas A. McCourt: You know, first of all, making sure patients are well aware that their symptoms of abdominal discomfort and bloating, which often are the most prevalent and problematic symptoms, can be relieved. And obviously, educating those patients who are at the point of care will improve that dialogue between physicians and patients and further enhance Linzess as a choice. The second piece of that strategy is the broader population of sufferers who are not actively seeking care but are suffering. And that's in excess of probably 15 million patients who are suffering from chronic, frequent abdominal symptoms associated with constipation and can really get relief. And what we have seen is a tremendous promotional response to the DTC efforts. So by adding those claims to the ad, and initially, we added them solely focused on the disease portion of the ad, we'll be expanding that to make it more visible as we move forward, as we get approval and clearance from the FDA. So we're very, very excited about the opportunity that these new data provide us as far as helping patients and physicians.

The approval in clearance with the FDA. So we're very very excited about the opportunity that you know these new data provide us as far as helping patients and physicians.

Great. Thank you for taking my question.

And again as a reminder, Tosca question. Please press star one on your Touchtone phone and we do I have to allow everyone talks questions to limit yourself to two please. Thank you and your next question comes from the line of Jacobs Hughes from Wells Fargo Securities Go ahead. Please your line is open.

Hi, good morning.

Hi, Jane.

Hi, I'm the Linzess net sales growth guidance increase what what does the assumption there.

On the price erosion of the mid to high single digits changed versus prior but I just have a one follow up.

Yeah.

Got to ask Gina to comment or sure. Thank you for the question as you recall earlier in this year, we did guide to mid to high single digit price erosion for 2019, and we were definitely trending towards the higher end of that guidance.

Operator: Great, thank you for taking my question. And again, as a reminder to ask a question, please press star one on your touchtone phone, and we do ask that you allow everyone to ask questions, so please do not limit yourself. Thank you, and your next question comes from the line of Jacob Hughes from Wells Fargo Securities.

But as we have also said, though a lot of different times throughout these various causes that the cost and that does bounce around and.

Operator: Go ahead, please, your line is open. Hi, good morning. Hi Jacob. Hey, I'm the Linzess, net sales growth, guidance increase, what is the assumption there on price erosion, has the mid to high single digits changed versus prior, and then I just have one follow-up.

We were able to see a small uptick in price in third quarter versus Q2, and we're optimistic about where we will be for Q4 as well. So as a result, we are still guiding within that range or the mid to high single digit price erosion for 2019, and maybe just a further clarify where we're optimistic that will be.

Gina Kompelman: I'm going to ask Gina to comment or answer the question. Sure. Thank you for the question.

Gina Kompelman: Earlier in this year, we did guide to mid-to-high single-digit price erosion for 2019, and we were definitely trending towards the higher end of that guidance in the first few quarters of this year. But, as we have also said a lot of different times throughout these various calls, the growth net does bounce around.

Got to mitigate the price erosion somewhat in 2020 were working right now very closely with Allegan on our forecast for 2020, and we're optimistic that many of the items such as the consolidation competition in the mix of payments. So that really almost collided in in 2018 that that had the impact in 2019 that we guided to.

Gina Kompelman: We were able to see a small uptick in price in the third quarter versus Q2, and we're optimistic about where we will be for Q4 as well. So as a result, we are still guiding within that range, so the mid to high single-digit price erosion for 2019. And maybe just to further clarify, we're optimistic that we'll be able to mitigate the price erosion somewhat in 2020. We're working right now very closely with Allergan on our forecast for 2020, and we are optimistic that many of the items, such as the consolidation competition and the mix of payments that really almost collided in 2018 that had the impact in 2019 that we guided to will be lessened by that price erosion in 2020.

Okay understood and then secondly, I think of the Twoq call. You commented about an active redo that you're doing internally because more longer term oriented but has anything come out of that today.

So I think you're referring to whether it be said we're doing a.

We did reviewer and over a.

Operator: Okay, understood.

Operator: Secondly, I think on the 2Q call you commented on...

Celebrating our pipeline and delivering on and profit so the bar.

Operator: [inaudible]

Mark Mallon: So, I think you're referring to what we said; we did a review of the landscape from a GI perspective and saw where we see the diseases with the highest unmet need are, where we see breakthrough signs happening, and what kinds of assets are available. I think it's incumbent upon us as a leader in GI to make sure we're clear on sort of what that landscape is.

This high for any sort of business development activity that would pursue.

Getting regular request and then being seen by people that have assets that could be a partnered and so that's great to hear but we're going to and we'll continue to evaluate that to see if there's something that could deliver value to patient census shareholders.

Mark Mallon: At the same time, our focus remains on our three priorities, growing Lincez sales, accelerating our pipeline, and delivering on profit. Thus, the bar is high for any sort of business development activity that we pursue. We are getting regular requests and being seen by people that have assets that could be partnered. And so, that's great to hear, but we're going to, and, you know, we'll continue to evaluate that to see if there's something that could deliver value to patients and to shareholders. But in the meantime, we're staying focused on our core priorities.

Okay. Thanks.

Hey, guys. Thanks for taking my questions just the fall Hi, just a follow up on the on phase three recruitment with I 3718, and your comments around endoscopy isn't that you're experiencing a I guess ritter reluctance on the part of patients undergo a endoscopy compared to expectations or higher than expected.

You are we.

Post assessment that I've, a follow up Mike.

Yeah. That's good question and that the answer is actually both I mean as enrollment in clinical trials as I'm sure you're aware gets more challenging as patients have become more through more procedures. So the actual execution have gone through the procedure does sort of compromise the informed consent for some patients that they decide not to enroll and the other side of that in order.

Operator: Okay, thank you very much. Okay, thank you. Your next question comes from the line of Eric Joseph with JP Morgan. Go ahead, please; your line is open.

Operator: Hey guys, thanks for taking the questions. Hi, just a follow-up on phase three recruitment with IW3718 and your comments around endoscopy. Is it that you're experiencing, I guess, greater reluctance on the part of patients to undergo endoscopy compared to expectations or a higher than expected failure rate post assessment? And then I have a follow-up.

To pursue an overall GERD or reflux indication, we want us broad spectrum of patience and but we want them to have residual acid exposure as well say the Bravo technology. There sweats insurers patients had adequate acid tend to ensure they have GERD and so they have to pass that test so to speak and have a positive.

Michael Shetzline: Yeah, that's a good question, and the answer is actually both.

And that is one or the other thing said that actually compromises the ability to enroll patients in the study so thats correct on both fronts.

Michael Shetzline: I mean, enrollment in clinical trials, as I'm sure you're aware, gets more challenging as patients have to go through more procedures. So the actual execution of going through the procedure does sort of compromise informed consent for some patients, and they decide not to enroll. And on the other side of that, in order to pursue an overall GERD or reflux indication, we want a broad spectrum of patients, and what we want them to have is residual acid exposure as well. So the Bravo technology there is what ensures patients have adequate acid to ensure they have GERD. And so they have to pass that test, so to speak, and have a positive Bravo. And that is one of the other things that actually compromises the ability to enroll patients in the study. So that's correct on both fronts.

Yeah.

I guess related to that are you thinking any differently about the is the the sizing a beautiful country population in your experience or.

Patient the threshold for patient eligibility and a phase three trial itself.

Without question. This is the opportunity has not wavered at all in fact, I think re as we've got into the data we've learned more about but the role of while in the disease as well as our effect on our ability to improve the mechanics of GERD as well the symptoms.

I think we're even more optimistic with regard to potential and as I mentioned, we think there's eight to 10 million Americans that it continued to suffer from really problematic heartburn in regurgitation. In spite of taking PPI said I think the most striking piece that we're continuing to see is certainly the importance of Harper and I go.

Michael Shetzline: Okay, related to that, are you thinking any differently about the sizing of the addressable patient population in your experience? This is more of just about the

Operator: patient, the threshold for patient eligibility, and the phase three trial itself.

Thomas A. McCourt: Thank you, Mark. Without question, the opportunity has not wavered at all.

Operator: In fact, I think as we've got into the data and we've learned more about the role of bile in the disease, as well as our effect on our ability to improve the mechanics of GERD, as well as the symptoms, we're even more optimistic with regard to the potential. As I mentioned, we think there are 8 to 10 million Americans that continue to suffer from really problematic heartburn and regurgitation in spite of taking PPIs. And I think the most striking piece that we're continuing to see is certainly the importance of heartburn, but also regurgitation, which consistently is the more problematic symptom for the majority of these patients. And I think that's where 3718 really stands alone.

There's really nothing that has ever been seen before that really has this magnitude of benefit on regurgitation and if the phase three data mirror, what we saw in phase two I think we feel we're very very encouraged by the commercial opportunity. That's in front of us, but I do recognize you know we want to make sure that we conducted a study in a very rigorous fracture me.

Action and make sure that we have the appropriate patients in there as Mike said, it's challenging.

But we want to make sure we absolutely have the right patients at the to really be able to create the profile of the drug that will enable us to succeed commercially.

Operator: [inaudible]

Thomas A. McCourt: There's really nothing that has ever been seen before that really has this magnitude of benefit for regurgitation. And if the phase three data mirror what we saw in phase two, I think we feel, you know, we're very, very encouraged by the commercial opportunity that's in front of us. But I do recognize, you know, we want to conduct the study in a very rigorous way and make sure that we have the appropriate patients. As Mike said, it's challenging, but we want to make sure we absolutely have the right patients to really be able to create the profile of the drug that will enable us to succeed commercially.

I've had a chance to get out and is that a number of and.

And that's despite the challenging program for the insights to do and that's a big programs. So there's lots of patients being in screen and I think though and what they say is that these patients that are coming in I really suffering they need a new solution and then they're excited about the possibilities. These sites. Many decisiveness I guess, we're all just Anderson.

Mike you combine that vial and the role of playing and so all of that factored together I think just reinforces that the sort of quantitative numbers that we already know from our previous was about.

Mark Mallon: I just want to add one sort of qualitative thought. I've had a chance to get out and visit a number of sites, investigator sites, as have Mike and Tom and other members of the team. And I have to say, the enthusiasm for this program is really high, and that's despite the fact that it's a challenging program for sites to do, and it's a big program, so there are lots of patients on screen. And I think, and what they say is that these patients that are coming in are really suffering, they need a new solution, and they're excited about the possibilities. Many of these sites, of course, are gastroenterologists; they understand what might be behind the vial and the role it's playing, and so all of that factoring together, I think just reinforces the sort of quantitative numbers that we already know from our previous research about that these patients exist, and they really are significant in that need.

One quick one if I could be and I'll hop back in Q.

As you contemplate expanding the number of site design.

I'm going to be.

I'm only within North America, or do you look to bring on trolls outside of the you want to Canada.

It will stay in North America.

Thanks, a lot guys.

Thanks, Eric.

Your next question comes from the line of Tim Chiang with B T G.

Go ahead. Please your line is open.

Hi, Thanks, Jim.

Hi, Mark So you know just looking at your business model. It obviously, you're you're generating more EBITDA now you're focused on profitability I mean.

Focus items do you think you'll you'll really a target next year in terms of trying to optimize linzess, obviously pricing trends might improve some I sort of wanting to get your thoughts on that you know you can you get to positive pricing potentially next year with Linzess.

Operator: One quick one, if I could, and I'll hop back in queue. As you contemplate expanding the number of sites, is that going to be similarly within North America, or do you look to bring trials outside of the U.S. and Canada?

Operator: It will stay in North America. Thanks a lot, guys.

Operator: Thank you, Eric. Your next question comes from the line of Tim Chiang with BTIG. Go ahead, please, your line is open. Hi, thanks. Hi, Mark.

So let me take the second part I'll, let Tom answer the first first part so.

Operator: So, you know, just looking at your business model, obviously, you're generating more, but now you're focused on profitability. I mean, what sort of focus items do you think you'll really target next year in terms of trying to optimize Linzess? Obviously, pricing trends might improve some. I sort of wanted to get your thoughts on that. Can you get to positive pricing potentially next year with Linzess?

Again, we believe that we'll see a moderation of price erosion and 2020 from the level that we have today, but we don't.

Say that we're going to see price increase I think that than the current environment health care that that wouldn't be a realistic expectation. So but I think we you know as shown by our increase of the guidance or revenue. This year. If you have slower erosion, but those continued strong growth than I think we're going to be able to drop more.

Mark Mallon: So let me take the second part and let Tom answer the first part. So again, we believe that we'll see a moderation of price erosion in 2020 from the level that we have today, but we don't say that we're going to see a price increase. I think that in the current healthcare environment, that wouldn't be a realistic expectation. But I think we, as shown by our increase in the guidance for revenue this year, if you have slower erosion with this continued strong growth, then I think we're going to be able to drop more net sales to the bottom line, and we're certainly going to focus on that. And I'll turn it over to Tom to answer more specifics about where the levers are for 2020.

There's a lot of patients out there we know that these patients in this market is extremely promotionally responsive, we still see this as a growth brand and the companies are fully aligned as we're finalizing our plans for 2020 to invest in the brand as a growth brand. So I think there's still there's tremendous opportunity certainly on the can.

Tumor side, but I think the two things that have been striking in the physician's office is one you know these additional abdominal symptoms are clearly broadening physicians view of the appropriate patient and they're choosing more patients I think the other thing that we've also seen.

Thomas A. McCourt: I think we're really excited about how healthy the brand is right now. You think about the fact that we, in year seven, are seeing an acceleration in growth.

Thomas A. McCourt: We all know that there are a lot of patients out there. We know that these patients and this market are extremely promotionally responsive. We still see this as a growth brand, and the companies are fully aligned as we're finalizing our plans for 2020 to invest in the brand as a growth brand.

Thomas A. McCourt: So I think there's tremendous opportunity, certainly on the consumer side. But I think the two things that have been striking in the physician's office are, one, these additional abdominal symptoms are clearly broadening physicians' view of the appropriate patient, and they're choosing more patients. I think the other thing that we've also seen is the adherence to the program, this 90-day program, Tim, that we launched a year or so ago, which we initiated because we saw a large portion of patients discontinuing therapy in the first 30 days, and they're largely discontinuing because they're not getting adequate pain relief. And we know it takes six to eight weeks to have that happen.

We think we can continue to broaden positions through the appropriate patients and I think we're going to continue to try to hang onto these patients for longer periods of time, so each patient becomes more valuable I mean to Mark's point.

Thomas A. McCourt: And once we get them to six weeks, we increase overall adherence by over 40%. So what this 90-day program has done is it enables patients to realize that benefit. It increases over adherence, and it's driving the size of the prescriptions that you're seeing both reflected in the overall demand growth and also the annual days of therapy. So, as I look at next year, I think there are three things. One, we want to continue to expand and motivate patients to come in and seek care. We think we can continue to broaden physicians' view of the appropriate patients. And I think we're going to continue to try to hang on to these patients for longer periods of time, so each patient becomes more valuable.

We're being very realistic about what we think is going to happen with price I think we've done we've got everything in place to try to.

Hold the line on price, but there's always unforeseen things that happen and I think we just want to make darn sure. We're controlling the things that we can control that drive the overall growth in health of the brand.

Oh, that's really helpful. I had one follow up question So financial question for Gina.

Reissued new convertible debt at a much lower interest rate how much cost savings.

Is there where you could quantify that for next year I mean, obviously you use your guidance is around 35 mine doesn't net interest expense. This year I mean, what sort of figure should we expect for next year.

Oh, that's a great question and one other areas that I I'm, just reiterate and why I thought it was important for US is that the lower interest rates will provide lower cash payments as opposed to overall interest expense. So maybe just a couple of comments related to that I know you asked for 2020, but I'll give you a little bit of color for Tony 19 as well.

Thomas A. McCourt: I mean, to Mark's point, we're being very realistic about what we think is going to happen with price. I think we've got everything in place to try to hold the line on price, but there are always unforeseen things that happen. And I think we just want to make darn sure we're controlling the things that we can control that drive the overall growth and health of the brand.

Overall expense in 2019, it's about a million dollars less cash component of this is about $3 million last for us I'm just from August to the ended the year and then for 2020, we will be giving a actual guidance in early 2020, but to give you a an indication or the cash component I'm more than doubles offer the savings for next year.

Operator: That's really helpful. You know, I had one follow-up question.

Operator: It's a financial question for Gina. You know, obviously, you've... Reissued new convertible debt at a much lower interest rate. How much cost savings? Is there a way you could quantify that for next year? I mean, obviously, your guidance is around $35 million in net interest expense this year. What sort of figure should we expect for next year?

So probably closer to 7 million dollar savings as opposed to 3 million for this year.

And your next question comes from the line of Boris Peaker with Cowen Go ahead. Please your line is open.

Great just maybe a longer term question on Linzess. Several years ago, you had a target timeline for reaching a billion dollars an annual sales, which was done later pulled I'm just curious given kind of the current trajectory on your thoughts on pricing and discounting do you anticipate at some point reissuing a long term guidance.

Gina Kompelman: That's a great question, and one of the areas that I just reiterated and why I thought it was important for us is that lower interest rates would provide lower cash payments as opposed to overall interest expense. So maybe just a couple of comments related to that. I know you asked for 2020, but I'll give you a little bit of color on 2019 as well. The overall expense in 2019 is about a million dollars less, but the cash component is about $3 million less for us just from August to the end of the year. And then for 2020, we will be giving actual guidance in early 2020. But to give you an indication, the cash component more than doubles for the savings for next year, so probably closer to $7 million savings as opposed to $3 million for this year.

Linzess, reaching a blockbuster threshold.

Susan will need to know to help that probably value of the business, but at this point not ready to comment on that I'd say that our mission remains the same as is a huge unmet need whose number of patients that are not getting linzess, yet and so were aspiring still to the deliver on that billion dollar plus ambition.

Operator: And your next question comes from the line of Boris Peaker with Colin. Go ahead, please. Your line is open. Great.

Operator: Just maybe a longer-term question on Linzess. Several years ago, you had a target timeline for reaching a billion dollars in annual sales, which was then later pulled. I'm just curious, given kind of the current trajectory and your thoughts on pricing and discounting, do you anticipate at some point reissuing long-term guidance for Linzess reaching the blockbuster threshold?

Great and I'm looking at Tenda expansion for Linzess, just curious for the abdominal pain study that you're doing what do you need to see in phase two what kind of an effect size you need to see in order to moving forward into a phase three program.

So just to confirm or you're you're talking about 70 246, seven yeah, yeah yeah.

Mark Mallon: And so, you know, we're very excited with the strengthening growth of Linzess. And, and, you know, I think we are certainly aiming to make this a billion-dollar brand and, plus, I think, you know, whether we in the future issue guidance on that, but we will, you know, continue to discuss and think what investors will need to know to help appropriately value the business. But at this point, not ready to comment on that other than to say that our ambition remains the same, there is a huge unmet need, a huge number of patients that are not getting Linzess yet. And so we're still aspiring to deliver on that billion-dollar plus ambition.

Okay, I'll turn that over to Mike Yeah. So that's good question and the as you know that's that study the 7246 study and the 17 for six program is initially starting it IBSD and I'd be a C.

Missing on that pain benefit in IBSD. So that is an important nuance because other therapies and IBSD has focused on the bow pattern as well as the pain benefit so in effect, where in a new space I said pain therapeutics for four G.I. pain, and so we are trying to targeting a clinically meaningful benefit and that pops.

Operator: Great. And looking at the expansion for Linzess, I'm just curious, for the abdominal pain study that you're doing, what do you need to see in Phase 2? What kind of effect size do you need to see in order to move it forward into a Phase 3 program?

Relations, which we've estimated to be about 30% 'cause that's consistent with the benefit that you see in IBSD, where the products that they had the pain benefit as well as that about frequency benefit and as a phase two study again that will be worked on with the FDA as we designed the full development program. After hopefully a successful phase two study.

Operator: So just to confirm, are you talking about 7246?

Operator: ..

Michael Shetzline: Okay, I'll turn that over to Mike.

Michael Shetzline: Yeah, so it's a good question. And as you know, that's the study, the 7246 study, and the 7246 program is initially starting in IBSD. In IBSD, we're focusing on the pain benefit in IBSD. So that is an important nuance because other therapies in IBSD have focused on the bowel pattern as well as the pain benefit. So, in effect, we're in a new space as a pain therapeutic for GI pain. And so we are targeting a clinically meaningful benefit in that population, which we've estimated to be about 30%, because that's consistent with the benefit that you see in IBSD for the products that have the pain benefit as well as the bowel frequency benefit. And as a phase two study, again, that will be worked on with the FDA as we design the full development program after, hopefully, a successful phase two study.

From a commercial perspective, you know what we will be if you look at the existing treatments that are out there nobody's really achieved that pain all the endpoint I mean my versus the is the global endpoint the composite endpoint with it but neither sites accidental or vibrancy, we're able to hit this responder endpoint for pain and and that's where.

We see a huge unmet medical need first an ivy I see our ideas IBSD, but certainly having a drug that we know can relieve pain has really no effect on ball habit and appears to be quite say you know the utility beyond IBSD is really quite significant it and that's the work that we're currently doing it.

As we see data come out of this I viewed as the question study now the challenges where do we go next.

Thomas A. McCourt: And I think from a commercial perspective, you know, if you look at the existing treatments that are out there, you know, nobody's really achieved that pain-only endpoint. I mean, diversity is the global endpoint, the composite endpoint was hit, but neither Zyfaxan or Divergy were able to hit, you know, this responder endpoint for pain. And that's where we see a huge unmet medical need, first in IBSC or IBSD, but certainly having a drug that we know can relieve pain has really no effect on bowel habits and appears to be quite safe. You know, the utility beyond IBSC is really quite significant, and that's the work that we're currently doing as we see data come out of this IBSC study. Now the challenge is where we go next because this is a very, very large opportunity for us. It creates a whole new area for growth, you know, for linoacridine.

So just to confirm you the target is 30% improvement on a pain score just make sure I understand the response.

It's it's 30% of Furman responder and quite 30% improvement for patients responding.

Gotcha, Okay, great. Thanks, taking my question.

And again as a reminder to ask a question. Please press Star then one on your telephone Keypad. Your next question comes from the line of Ram Selvaraju with H.C. Wainwright go ahead. Please your line is open.

Hi, Thanks, So am I wrong, taking my question Hi, Thanks, very much I wanted to ask specifically about the I'd go Saran partnership with Alnylam I would it would be helpful. If you could perhaps give us maybe some background on the dual surround market opportunity.

Thomas A. McCourt: So just to confirm, the target is 30% improvement on a pain score? Just to make sure I understand your response.

Just recap the partnership metrics and how that relationship is going to work.

Operator: It's 30% improvement and a responder at the end point. 30% improvement per patient who responds.

And also maybe give us an idea of what the pricing situation would be for that product.

Operator: [inaudible] Gotcha. Okay, great. Thanks for taking my question.

Operator: Thanks, Boris.

Operator: And again, as a reminder, to ask a question, please press star, then one on your telephone keypad. Your next question comes from the line of Ram Salvarju with H.C. Wainwright. Go ahead, please. Your line is open.

And what the prescriber overlap is likely to be relative to what your Salesforce is currently doing and if you could also confirmed that the PDUFA date is in fact separately fourth of 2020, and then I had one follow up thanks.

Operator: Hi, thanks so much for taking my question. I wanted to ask specifically about the DevoSeren partnership with Alnilam. It would be helpful if you could perhaps give us some background on the DevoSeren market opportunity, recap the partnership metrics and how that relationship is going to work, and also maybe give us an idea of what the pricing situation would be for that product and what the prescriber overlap is likely to be relative to what your sales force is currently doing. And if you could also confirm that the PDUFA date is indeed February 4th of 2020. And then I had one follow-up question. Thanks.

We've got to defer those two out on island.

The scope of their responsibility or I'll, let Tom talk a little bit about sort of the market opportunity and why we see such an exciting sort of synergy with the work that we're doing and then Janet will brief recap the but we'd share around the details of the park.

Thanks, Mark as you know this is a rare disease I mean is extremely but the build hitting the season and the reason why this is attractive to us and why an island saw the value of us getting involved the partnership is the primary symptom that these people suffer from its really severe in track toward nominal.

Operator: [inaudible]

Thomas A. McCourt: This is a rare disease. I mean, it's an extremely debilitating disease. And the reason why this is attractive to us, and why Aniline saw the value of us getting involved in the partnership, is that the primary symptom that these people suffer from is really severe, intractable abdominal pain. And most people don't even think about acute hepatic hypoperia as an option as far as the underlying cause is concerned. And almost all of these patients are seen by a gastroenterologist multiple times during their patient journey. So there is a clear opportunity for us to play a role educating our current customers on the disease, which we're actively doing right now, as well as, as the drug gets approved, the benefits of the drug. So our Now, the challenge here with any orphan disease or rare disease is, where are those patients, and how do we identify them? You know, so, you know, we're working very closely with an ILM to do that. So, you know, there's a pretty broad range of estimates of the overall price.

And most people don't even think about acute hepatic.

Broke area as an option.

As far as the the underlying cause so in almost all of these patients are seen by Gastroenterologist multiple times a in there in their patient journey. So there was a clear opportunity for us to play a role educating our current customers on certainly the disease, which were actively doing right now as well.

As a drug gets approved the benefits of the drought. So our role primarily is to identify patients now the challenge here with any any orphan disease are rare diseases, where are those stations on how do we identify that yeah. So we're working very closely with an island your to do that so theres a.

He pretty broad range of estimates of the overall prevalence of the disease and it's really quite unknown and I think for US we see opportunities to help our customers improve care for some very very debilitating disease. It also creates the opportunity for us.

Thomas A. McCourt: And it's really quite unknown, and I think, you know, for us, we see an opportunity to help our customers improve care for a very, very debilitating disease. It also creates the opportunity for us to learn about how to market for rare diseases or orphan diseases as we look at future opportunities for the company. So I think we're very excited about the opportunity. The collaboration with Enilum is going very, very well. The response that we've already heard in the field is extremely encouraging with our existing customers, which we got not only engagement but the belief that they probably do have symptoms or patients there that they just haven't properly evaluated. So as we move forward, obviously, we'll learn a lot more in the next year or two with regard to the overall commercial opportunity, but I'll turn it over to Gina to talk more specifically about our financial arrangement.

Yes to learn about how to market in rare disease or orphan diseases as we look at future opportunities for the for the company.

So I think we're very excited about the opportunity the collaboration with an island, it's going very very well. The response that we've already heard in the field is extremely encouraging with our existing customers, which we got not only the engagement, but the belief that the probably do have symptoms or patients there that they just haven't properly evaluate it.

So as we move forward, obviously, we'll we'll learn a lot more in the next year or two with regard to the overall commercial opportunity, but I'll turn it over the agenda to talk more specifically about kind of our financial arrangement sure and actually you'll be able to see what we are expecting to file our 10-Q later today and you'll be able to.

Gina Kompelman: Sure. And actually, you'll be able to see what we are expecting to file in our 10-Q later today, and you'll be able to see a bit more detail as well. But until that time, just to share a few things with you.

A bit more detail as well, but.

Until that time, just a share a few things with you a one just the contract term is August 2019 through December 22.

Gina Kompelman: One, just the contract term is August 2019 through December 22, and that includes about $9.5 million in total fixed payments. So that's part of our contract consideration, and then there are also royalties in addition to that. And to give you a little bit of insight about what we expect to recognize on a quarterly basis, this is our first quarter with the co-promote. It was a partial quarter, and we recognized approximately $700,000 of revenue this quarter.

And that includes about nine and a half million dollars of total fixed payment. So that's part of our contract consideration and then there's also royalties. In addition to that and to give you a little bit of insight about what we'd expect to recognize on quarterly basis. A this is our first quarter with the co promote it was a partial quarter and we recognized approximately $700000.

Gina Kompelman: Okay, great. And then just one follow-up, which is not related to Joe Zeran.

Okay, Great and then just one follow up which is not really Joel it's around.

Operator: Can you just give us a sense of when you expect clacanatide generics to enter the market? And if you are anticipating the introduction of generics for that product significantly ahead of generics for linaclotide? And if that is the case, approximately how far in advance of the introduction of generics for linaclotide do you expect the availability of clacanatide to be?

Can you just give us a sense of when you expect cana tied generics to enter the market and if you are anticipating the introduction of generics for that product significantly ahead.

Thomas A. McCourt: So, as far as, you know, I really can't comment on Plocanitide and their IP status, but, you know, obviously, when I look at where we are in the marketplace, they have a minimum.

Oh, so as far as.

I really can't comment I cant died and their IP status, but obviously when I look at where we are in the marketplace. They they have a minimal presence in the marketplace. I think we've demonstrated that would appetite as a very very strong brand profile and the reason.

Thomas A. McCourt: presence in the marketplace. I think we've demonstrated that Linaxatide has a very, very strong brand profile. And the reason that it continues to perform so well is obviously the overall satisfaction that we're seeing from both patients and physicians, as well as what we've been able to do with payers. So certainly, we know we will have IP into, you know, 2030. We're going to continue to raise the bar with regard to the clinical profile. As far as, you know, censored IP, I really can't comment on that. But I think we, as a market leader, need to, you know, have to continue to stay the course to grow this market as fast as we can, continue to differentiate the brand, and expand the clinical utility of what we have with Linaxatide, which we've already started to do, both with regard to additional symptoms, the dosage formulation, the life cycle management plan, and the overall strength of the product. And that's really what we've got to stay focused on.

Well as far as you know plecanatide guys.

Pete I really can't comment on.

It should plan.

And in all the overall strength of the product and that's really what we got to stay focused on.

Thank you very much.

Operator: Your next question comes from the line of Patrick Cruccio with Bernberg Capital. Go ahead, please. Your line is open. Hi Patrick.

Hi, good morning, Hi.

Operator: Hi, so just a follow-up question on MD-7246 and a follow-up on Linzess. So first, on Linzess, the commercial margin this quarter increased to 70% on the collaboration. Can you tell us what is driving the increase?

So just a follow up question on 7246, and a follow up on Linzess. So just first on the.

So the commercial margin this quarter increased to 70%.

On the collaboration can you tell us what is driving them.

Thomas A. McCourt: Patrick, we lost you. Are you still there?

Patrick We lost do you still there.

Operator: Yeah, I'm still...

Operator: Yeah, so you're asking about what's driving the improvement in the brand margin and the commercial margin, is that correct? Because you broke up at the end.

I'm still.

Yeah, So you're asking about what's driving the improvement in the brand margin a commercial margin is that correct. Because you broke up at the end.

Thomas A. McCourt: Yes, sorry. So the commercial margin for Linzess increased to 70% this quarter. I'm just wondering what's driving that improvement and what could drive further improvement in the fourth quarter and in 2020. And then if there's a peak margin, what we should expect over the long term.

Yeah, sorry.

Commercial margin for Linzess increased to 70% this quarter I'm, just wondering what's driving that men and what to drive further improvement in the fourth quarter and in 2020.

If there is a peak margin we should expect over the long term.

Thomas A. McCourt: I think what we've seen over the last several years is the level of investment has been pretty steady while revenues continue to grow, which is really what's driving the overall margin. And we see that continuing.

Yeah, Tom I'll go ahead, I mean, I think what we've seen over the last several years is the level of investment it's been pretty steady while revenues continue to grow which is really what's driving the overall margin and and we see that continuing that being said you know we're going to continue to invest in the brand I mean this.

Thomas A. McCourt: That being said, we're going to continue to invest in the brand. I mean, this is a huge market. The brand's doing extremely well, but we still see this as a growth brand. I think we're going to continue to invest in the brand. I think if we do see opportunities to accelerate growth, which we see some opportunities already that we're taking a look at to say, knowing that we have IP to 2030 and we've got a long way to go, this is still about driving demand. And with that, I think we believe we will continue to see growth, healthy growth in the margin and profitability of the brand.

IP you know to 2030 or we got we got a long ways to go. This is still about driving demand and a with that I think we believe we will continue to see growth healthy growth in the March into profitability of the brand.

Operator: So, you know, the program's moving fast, and you've discussed the potential for additional indications. So I'm wondering, as you evaluate those additional indications, this compound, would you be able to move immediately into Phase 3 studies, or should we also anticipate Phase 2 studies in those additional indications?

Yes.

So the [laughter].

Steven.

So you know the programs moving.

Hi.

<unk>.

I'm wondering as you evaluate those additional indications. This compound would you be able to me was immediately into phase three studies, where should we also anticipate phase two studies in those just on vacations.

Operator: Bye.

Mike Yes.

Michael Shetzline: Yeah, that's a good question. So, as you were alluding to, we're starting with IBSD, and again, we have the Phase 2 study in IBSD. The Phase 2 study by itself is a fairly robust Phase 2 in terms of the size and duration of therapy, so we do expect to be able to go as quick as we can to Phase 3 in that program. But to address your question directly, in parallel, we have active considerations for additional indications. We have a broad dose range being explored in Phase 2 for IBSD, so we'll need to look at that closely and the applicability of that dose finding for the other indications we're pursuing. But currently, we don't necessarily anticipate having to repeat Phase 2 at this stage. We do think some of our proposed secondary indications will not require that, but we'll need to work that out further and clearly have discussions with the FDA to get clarity on that in order to move forward with other development programs.

Our allegedly have active considerations for additional indications we have a broad dose range being explored in phase two and IBSD. So we'll need to look at that closely and the applicability of that dose finding for the other indications we're pursuing but currently we don't necessarily anticipate after repeats ace two at this stage, we do think some of our.

Proposed.

Secondary indications will not require that wasn't that need to work out that further and clearly have had discussions with the FDA to get clarity on that in order to make to move forward with other development programs. We're currently working closely with allergy and to identify other proof of concept studies you know pending a positive outcome you know with the key.

Thomas A. McCourt: And we're currently working closely with Allergan to identify other proof-of-concept studies, you know, pending a positive outcome with the current Phase II program, you know, that would, you know, broaden the clinical utility, possibly in other forms of IBS, as well as other chronic GI pain disorders, such as, you know, organic diseases or more organic diseases, such as chronic pain related to inflammatory bowel disease and diverticular disease You know, to really establish that this drug has a non-opioid intestinal analgesic that could have broad application across multiple GI conditions.

Current phase two program, you know that would broaden the clinical utility, possibly in other forms of ideas as well as other chronic.

Gee I paid disorders, such as organic diseases are more organic diseases, such as chronic pain related to inflammatory by excuse me inflammatory bowel disease and the diverticula disease.

It's a really establish that this drug as a non opioid intestinal analgesic they could have broad application across multiple G.I. conditions.

And there are no further questions at this time, we'd like to turn call back over to our presenters.

Operator: And There are no further questions at this time. I'd like to turn the call back over to our presenters.

Mark Mallon: So, I just want to thank everybody for their time and continued interest in Ironwood. And, of course, I want to recognize the team again and the entire company for the great results they achieved here in Q3. We still have plenty of work to do ahead to unlock value for patients and for shareholders, and we'll be very focused on doing that. Thanks, everybody.

So just want to thank everybody for their time and continued interest in I would and the Chris I want to recognize the team again.

And though that entire companies for the great results. They achieved everything Q3, we still have plenty of work to do a head to unlock value for patients and to shareholders and we'll be very focused on doing that thanks everybody.

This concludes todays conference we do thank you for your participation you may now disconnect.

Operator: This concludes today's conference. We do thank you for your participation. You may now disconnect.