Q2 2021 Ironwood Pharmaceuticals Inc Earnings Call

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Operator: Good day, and thank you for standing by. Welcome to the Ironwood Pharmaceuticals 2Q 2021 Investor Update Call.

Good day, and thank you for standing by and welcome to the Ironwood Pharmaceuticals, <unk> 2021, Investor update call. At this time, all participants are in a listen only mode.

Operator: At this time, all participants are in a listen-only mode. After this speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will 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 0. I wouldn't like to have the conference over to your speaker. today, Matt Aroach, Director of Investor Relations. Please go ahead.

After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will 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 and I wasn't I like to hand, the conference over to your speaker today, Matt approach director of it.

Mr Relations. Please go ahead.

Matt Roache: Thank you, Whitney. Good morning, and thanks for joining us for our second quarter 2021 investor update. Our press release crossed the wire this morning. It can be found on our website. Today's call and accompanying slides include forward-looking statements. Such statements involve risks and uncertainties that may cause actual results to differ materially.

Thank you Whitney and good morning, and thanks for joining us from our second quarter 2021.

And better.

Our press release crossed the wire and this morning and can be found on our website.

Today's call and accompanying slides include forward looking statements.

Such statements involve risks and uncertainties that may cause actual results to differ materially.

Matt Roache: A discussion of these statements and risk factors is available on the current Safe Harbor Statement slide, as well as under the heading, Risk Factors, in our quarterly report on Form 10Q for the quarter-ended March 31, 2021, and in our future SEC filing. All forward-looking statements speak as of the date of this presentation. We undertake no obligation to update such statements, which also include our non-gap financial measures, which should be considered only as a supplement to and not a substitute for or superior to gap measures.

A discussion of these statements and risk factors is available on the current safe Harbor statement slide as well as under the heading risk factors and our quarterly report on form 10-Q for the quarter ended March 31.2021.

And our future SEC filings and.

Matt Roache: To the extent applicable, please refer to the tables at the end of our press release or reconciliations of these measures to the most directly comparable gap measures. During today's call, Tom McCourt, our CEO, will provide a brief overview and review our strategic priorities and commercial performance at Lindess. Jason Rickard, our chief operating officer, will then review our second quarter financial results and provide updated guidance for the year. Mike Schetline, our chief medical officer, will also be available for the Q&A portion of the call.

Matt Roache: We will be referring to slides via the webcast. For those of you dialing in, please go to the event section of our website to access the slides. With that, I will now turn the call over to Tom. Thanks, Matt. Good morning.

Thomas A. McCourt: Thanks, Matt. Good morning, everyone, and thanks for joining us today. We had a very impressive second quarter driven by double-digit lends us prescription demand growth. As a result of the company's strong commercial performance, we are raising our financial guidance for the fiscal year 2021, which Jason will cover in more detail later on the call. Working alongside the highly talented Ironwood team, we continue to execute against our strategy of maximizing Linzest, building our innovative GI pipeline, and delivering sustained profits and generating positive cash flow.

Cash flows.

Thomas A. McCourt: I am very proud of everyone's work thus far in 2021 and will continue, as we continue to strive to redefine the standard of care for patients and drive value for our shareholders. Now, let me share a brief overview of our strategic priorities.

And I'm very proud of everyone's worked thus far and 2021 and continue as we continue to strive to redefine standard of care for patients and drive value to our shareholders.

Now, let me share a brief overview of our strategic priorities.

Thomas A. McCourt: First, we are proud that in the second quarter, Linz delivered 14% prescription demand growth year-over-year and U.S. net sales of $259 million, reinforcing its position as the number one prescribed brand in the U.S. for the treatment of adults with IBSC and chronic constipation. We are also pleased to report that new to brand prescription growth increased 26% versus the second quarter of last year, a record high, demonstrating that a growing number of healthcare practitioners are choosing LINDS for their patients.

And we're proud that and the second quarter Linzess delivered 14% prescription demand growth year over year and U S. Net sales of $259 million reinforcing its position as the number 1 prescribed brand in the us for the treatment of adults with Ibs C and chronic constipation.

We're also pleased to report that new to brand prescription growth increased 26% versus second quarter last year, a record high demonstrating that a growing number of health care practitioners are choosing linzess for their patients.

Thomas A. McCourt: Second, we continue to advance our efforts in building our GI portfolio. We are maintaining a disciplined approach to exploring and assessing innovative GI assets by applying a focus set of predefined criteria and setting the bar high for any potential deals that we may consider.

Second we continue to advance our efforts on building our Gi portfolio.

We are maintaining a disciplined approach to exploring and assessing innovative gi assets by applying a focused set of predefined criteria and setting the bar high for any potential deals that we may consider we believe this approach will drive our success further faster and provide great benefits to patients we conserve.

Thomas A. McCourt: We believe this approach will drive our success further, faster, and provide great benefits to patients we can serve. For example, IW 3,300, our wholly owned asset for the potential treatment of visceral pain conditions. We remain on track to submit an I&D by the end of this year and expect to begin a clinical program in early 2022. And third, we delivered significant growth on the bottom line and had another quarter of strong cash flow generation.

On IW 3300, our wholly owned asset for the potential treatment of visceral pain conditions, we remain on track to submit an IND by the end of this year and expect to begin a clinical program in early 2022 and third we delivered significant growth on the bottom line and had another quarter of.

Strong cash flow generation.

Thomas A. McCourt: We ended the second quarter with $493 million in cash and cash equivalence on the balance sheet, providing us with the financial flexibility to execute on our strategic priorities for the remainder of the year and beyond. We continue to take a thoughtful and disciplined approach to capital allocation in an effort to maximize return to our shareholders as we aim to bring innovative therapies to GI patients. Now, a few corporate updates.

We ended second quarter with $493 million and cash and cash equivalents on the plant balance sheet, providing us with the financial flexibility to execute on our strategic priorities for the remainder of the year and beyond we continue to take a thoughtful and disciplined approach to capital allocation and an effort to maximize return to our shareholders.

As we aim to bring innovative therapies to Gi patients.

Turning to a few corporate updates.

Thomas A. McCourt: I was honored to be appointed chief executive officer by the board of directors this quarter. Since joining the company in 2009, I've been consistently impressed by the organization's talent and focus on our strategic priorities and our mission to redefine the standard of care for the GI community we faithfully serve. I look forward to building on our successes as we move forward. I also want to mention that Jason Rickard, our senior vice president and chief operating officer, was designated principal financial officer, which was previously held by Gina Consulman, our former CFO.

I was honored to be appointed Chief Executive Officer by the board of directors this quarter since joining the company and 2009 I've been consistently impressed by the organization's talent and focus on our strategic priorities and our mission to redefine standard of care for the GI community. We faithfully serve I look forward to bill.

<unk> on our successes as we move forward.

I also want to mention that Jason record, our senior Vice President and Chief operating Officer.

And as designated principle financial Officer, which was previously held by China console and our former CFO.

Thomas A. McCourt: We're appreciative of Jason taking on this additional role in the interim while we conduct a comprehensive retained search process to identify our next CFO. In addition, Ron Silver, our corporate controller, was designated principal accounting officer, and John Minardo recently joined Ironwood as chief legal officer. We're thrilled to have John join the team and to have Ron take on his new role. Now, let's move our focus to the commercial performance of Linzah. Linz performed exceptionally well in the second quarter.

We're appreciative adjacent taking on this additional role and the interim while we conduct a comprehensive retained search process to identify our next CFO. In addition, Ron silver our corporate controller with designated principal accounting Officer, and John Minardos recently joined Ironwood as Chief legal officer.

We're thrilled to have John join the team.

And they have run take on his new role.

Now, let's move our focus to the commercial performance of Linzess Linzess performance.

<unk> performed exceptionally well and the second quarter.

Thomas A. McCourt: As I mentioned a few moments ago, prescription demand growth grew 14% year over year. Linsust continues to be the market leader within this category with 42% total market share at the end of the second quarter, an all-time high for the brand. New to brand prescription growth increased 26% from the second quarter of 2020, which also is an all-time high. In addition, we saw a 13% increase in new prescribers in the first half of the year compared to the same period a year ago. We believe our second-quarter performance was driven by a few key factors. First, the growth we are experiencing in the U.S.

As I mentioned as I mentioned, a few moments ago prescription demand growth grew grew 14% year over year Linzess continues to be the market leader within this category with 42% total market share.

And at the end of the second quarter and all time high for the brand new.

New to brand prescription growth increased 26% from the second quarter of 2000.22020, which also is an all time high.

In addition, we saw a 13% increase and new prescribers and the first half of the year versus the same period a year ago.

We believe our second quarter performance was driven by a few key factors first.

And the growth of our.

The growth we are experiencing in the US continues to be the result of strong execution of our commercial strategy and.

Thomas A. McCourt: Continue to be the result of strong execution of our commercial strategy and the positive experience that patients and physicians have had with Linses. We also benefited from broad payer access and reimbursement. Second, we believe we benefited significantly from our sales and marketing efforts, including our refreshed consumer campaign, which incorporates the IBSC overall abdominal symptom data. Also, our in-person sales calls to healthcare practitioners throughout the quarter are now returning and nearing pre-COVID levels.

And the positive experience that patients and physicians have had with Linzess and we also benefited from broad payer access and reimbursement.

We believe we benefited significantly from our sales and marketing efforts, including a refreshed consumer campaign, which incorporates the Ibs C. Overall abdominal symptom data also our in person sales calls to health care practitioners throughout the quarter are now returning and nearing pre COVID-19.

Levels.

Thomas A. McCourt: Third, we continue to see year-over-year increases in online searches and clicks for constipation-related terms, and we're also seeing higher traffic to the Linthess website, suggesting more patients are seeking treatment options for their IVSE and chronic constipation. Finally, we continue to see encouraging signs of market growth, which may be attributed in part to an increase in adult IVSC disease prevalence, including IBSC. Data from the National GI Survey 2 showing increased IBS prevalence were presented at the DDW meeting in May.

Third we continue to see year over year increase and online searches and clicks for constipation related terms and we're also seeing higher traffic to the Linzess website, suggesting more patients are seeking treatment options for their ibs C and chronic constipation.

Finally, we continue to see encouraging signs of market growth, which may be attributed in part 2 and increase and adult Ibs C disease prevalence, including Ibs C.

Data from the National GI Survey to show an increase Ibs prevalence were presented at the <unk> meeting in May.

Thomas A. McCourt: Looking ahead, we're on track to exceed a billion dollars in U.S. net sales in the near term. Our strong performance in the quarter, coupled with additional lifecycle management opportunities, reinforces the long-term growth potential for the brand. In the second quarter, the American Journal of Gastrintriology published full results from our Phase 3B clinical trial evaluating Linzus 290 micrograms on multiple abdominal symptoms in adult patients with IBSC. The results demonstrated that linnaclytide 290 micrograms administered orally once daily to adult IBSC patients was associated with a statistically significant and clinically meaningful improvement in overall change in abdominal score, which comprises the symptoms of bloating, pain, and discomfort compared to placebo.

Looking ahead, we are on track to exceed $1 billion and U S. Net sales in the near term our strong performance and the quarter, coupled with additional lifecycle management opportunities reinforce the long term growth potential for the brand.

In the second quarter, the American Journal of Gastroenterology published full results from our phase III <unk> clinical trial evaluating Linzess 290 micrograms on multiple abdominal symptoms and adult patients with Ibs C.

The results demonstrated that Linaclotide 290, micrograms administered orally once daily to adult Ibs C patients was associated with us statistically significant and clinically meaningful improvement and overall change in abdominal score.

Which comprises of symptoms of bloating pain, and <unk> and discomfort compared to placebo. We reported topline results of this trial in June 2019, and following the U S. FDA approval of a supplemental NDA based on the date of this trial the Linzess U S. Prescribing information was updated in September last year to re.

Thomas A. McCourt: We reported top-line results of this trial in June 2019, and following the U.S. FDA approval of a supplemental NDA based on the date of this trial, the LINS prescribing information was updated in September last year to reflect the clinical impact LinsS is expected to have on overall abdominal symptoms in adult IBSC patients. Research shows that approximately 95% of surveyed adults with IBSD report experiencing bothersome abdominal bloating, pain, or discomfort. The majority report that they experience these symptoms once a week or more.

Flex the clinical impact linzess to having on overall abdominal symptoms and adult Ibs C patients.

Researchers show and approximately 95% of surveyed adults with Ibs C report experiencing bothersome, abdominal bloating pain and or discomfort with the majority reporting they experienced these symptoms once a week or more.

Thomas A. McCourt: Our data suggests that LensS may provide meaningful improvement of overall abdominal symptoms associated with IBSC, a condition that impacts an estimated 11.5 million adults in the U.S. Moving along, we will discuss our IP. Ironwood, along with Abby, entered into a settlement agreement with Tava Pharmaceuticals, providing a license to Teva for its generic version of the 72 microgram lens dust in the U.S. beginning March 31, 2029, subject to FDA approval and certain other limited customary exceptions.

Our data suggests that Linzess may provide meaningful improvement of overall abdominal symptoms associated with Ibs C. A condition that impacts and estimated $11.5 million adults and the us.

Moving on along 2 and update on our IP.

Ironwood, along with Abbvie entered into a settlement agreement with Teva pharmaceuticals, providing a license to Teva for its generic version of the 72 microgram Linzess and the U S. Beginning March 31, 2029 subject to FDA approval and certain other limited customary exceptions.

Thomas A. McCourt: With this settlement agreement, we have settled with the filers of all known andes to date seeking approval to market generic versions of LinzSSS and preserved the majority of the LinzS patent coverage for all three dose strengths. As we look ahead, we understand that GI diseases affect one in five Americans and remain a large unmet need with a highly symptomatic patient population. These diseases can be severe and debilitating and often have limited or no treatment options, creating an urgency around the need for new and innovative treatment.

With this settlement agreement, we have settled with the filers of all known and US to date seeking approval to market generic versions of Linzess and preserve the majority of the Linzess patent coverage for all 3 dose strength.

As we look ahead, we understand that Gi diseases affect 1 and 5 Americans and remain a large unmet need with a highly symptomatic patient population. These diseases can be severe and debilitating and often have limited or no treatment options, creating and urgency around the need for new and innovative treatments.

Our experienced and specialized team continues to focus on pursuing innovative assets and Gi diseases with significant unmet need and strong scientific rationale, we're committed to generating more value, creating opportunities to leverage our strong gi capabilities and experience now and in the future.

Thomas A. McCourt: Our experience and specialized team continues to focus on pursuing innovative assets in GI diseases with a significant need and strong scientific rationale. We're committed to generating more value-creating opportunities to leverage our strong GI capabilities and experience now and in the future. I would like to thank all of our employees, patients, caregivers, and advocates in the GI community for their shared dedication to this underserved market. I'll now turn the call over to Jason to review our financial performance. Jason?

I would like to thank our all of our employees patients caregivers and advocates and the Gi community for their share dedication and this underserved market on.

And now I'll turn the call over to Jason to review, our financial performance Jason.

Jason Nicholas Butler: Thanks, Tom. It's a pleasure to be on the call this morning to discuss our strong second quarter results. I have three main updates to provide. First, I'll walk through our second quarter financial proposal. Then I'll discuss our capital allocation strategy. And finally, we will review our updated financial guidance. Please refer to our press release for our detailed financial information. In the second quarter of 2021, Ironwood revenues were 104 million, which is up 16% year over year, driven primarily by Lenz's U.S. collaboration revenues of 100 million, also up 16% versus the second quarter of 2020. Now, let's move to Lenzi.

Thanks, Tom it's a pleasure to be on the call us oriented discuss our strong second quarter results I have 3 main updates to provide first I'll walk through our second quarter financial performance, then I'll discuss our capital allocation strategy and finally I'll review, our updated financial guidance for the year. Please.

Please refer to our press release for our detailed financial information.

And the second quarter of 2021, Ironwood revenues were $104 million, which were up 16% year over year, driven primarily by Linzess U S collaboration revenues of $100 million also up 16% versus the second quarter of 2020.

Let's move to Linzess.

Jason Nicholas Butler: U.S. net sales grew 18% compared to the second quarter of 2020, driven by robust prescription demand growth and favorable inventory channel fluctuation, partially offset by net price erosion. For the balance of the year, we anticipate healthy prescription demand, and we continue to expect mid-single-digit net price erosion. We also expect fewer channel fluctuations versus the prior year, resulting in a dampening of net sales growth for the second half of 2021 when compared to the first half of the year. Turning to Lundest Brand profitability, commercial margins in the second quarter were 72% versus 75% in the second quarter of 2020.

<unk> net sales grew 18% compared to the second quarter of 2020, driven by robust prescription demand growth and favorable inventory channel fluctuations, partially offset by net price erosion.

For the balance of the year, we anticipate healthy prescription demand and we continue to expect mid single digit net price erosion.

We also expect fewer channel fluctuations versus the prior year, resulting in a dampening of net sales growth for the second half of 2021, when compared to the first half of the year.

Turning to Linzess brand profitability commercial margins and the second quarter was 72% versus 75% and the second quarter of 2020.

Jason Nicholas Butler: I'd like to point out that the lower commercial margin versus last year was primarily the result of an increase in selling expense in the second quarter of 2021 versus the second quarter of 2020 when we did not execute as many in-person details due to the COVID-19 restriction. As you may recall, our selling expenses related to virtual call details and overhead during the first two quarters of 2020 were adjusted in the fourth quarter of last year.

I'd like to point out that the lower commercial margin versus last year was primarily the result of an increase and selling expense and the second quarter of 2021 versus the second quarter of 2020, when we did not execute as many in person details due to the COVID-19 restrictions.

As you may recall, our selling expenses related to virtual call details and overhead during the first 2 quarters of 2020 were adjusted and the fourth quarter of last year.

Before moving on I'd like to provide and update on an accounting item reflected and the second quarters results the release of our valuation allowance against the majority of our.

Jason Nicholas Butler: Before moving on, I'd like to provide an update on an accounting item reflected in the second quarter. The release of our valuation allowance against the majority of our deferred tax assets, including the net operating loss carry forwards from losses incurred by our business through 2019 resulted in a one-time recognition of an income tax benefit of $338 million in Q2 and a $338 million non-current deferred tax asset that is expected to be used to It's important to note that this valuation allowance release is a non-cash, non-recurring event and, as such, is reflected in an adjustment to our non-gap net and, Please refer to our quarterly filing for more information about the valuation allowance.

Deferred tax assets, including the net operating loss carryforwards from losses incurred by our business through 2019 resulted in a onetime recognition of an income tax benefit of $338 million in Q2, and a $338 million non current deferred tax asset that is expected to be us to offer.

Net future cash taxes it's.

It is important to note that this valuation allowance release, and the noncash nonrecurring event and as such as reflected in and adjustment to our non-GAAP net income.

Please refer to our quarterly filing for more information about the valuation allowance release.

Yes.

Jason Nicholas Butler: Now to Ironwood's profitability. We delivered a gap net income of 391 million, which includes the 338 million non-recurring income tax benefit associated with the release of the valuation allowance that I just mentioned. Adjusted ebeta was $65 million, a 32 million increase versus the prior year quarter. Moving to cash and capital allocation. In the second quarter, we generated $49 million in cash flow from operations and ended the quarter with $493 million in cash and cash equivalents, up from $363 million at the end of 2020.

Net of Ironwood profitability, we delivered GAAP net income of $391 million, which includes the 338 million nonrecurring income tax benefit associated with the release of the valuation allowance and I just mentioned adjusted EBITDA was $65 million up $32 million versus the prior year quarter.

Moving to cash and capital allocation priorities.

And the second quarter, we generated $49 million and cash flow from operations and ended the quarter with $493 million and cash and cash equivalents up from $363 million at the end of 2020, we.

Jason Nicholas Butler: We maintain a disciplined and thoughtful approach to capital. As you know, in the second quarter, our board authorized a share repurchase program under which the company may repurchase up to $150 million of its outstanding shares of common stock through December 2020. Although we did not repurchase any shares in the second quarter, we continue to remain committed to deploying capital and supporting our strategic priorities, so we believe we can drive the greatest value for our shareholders. Knowledge Review will be updated in 2021.

We maintain a disciplined and thoughtful approach to capital allocation.

As you know and the second quarter, our board authorized a share repurchase program under which the company may repurchase up to $150 million.

And its outstanding shares of common stock through December 2022.

Although we did not repurchase any shares and the second quarter. We continue to remain committed to deploying capital in support of our strategic priorities, where we believe we can drive the greatest value for our shareholders.

Now lets review, our updated 2000 and 'twenty 1 guidance.

Jason Nicholas Butler: As Tom highlighted earlier, as a result of the strong growth of U.S. Lundas prescription demand, we are raising our 2021 financial guidance. We now expect U.S. Lenz net sales growth of 6 to 8%, which is up from our previous guidance range of 3 to 5%, total iron win revenue of 390 to 410 million, which is up from 370 to 385 million, and adjusted EBITDA of greater than 210 million, which is up from greater than 190 million.

As Tom highlighted earlier as a result of the strong growth of U S. Linzess prescription demand we are raising our 2021 financial guidance. We now expect U S. Linzess net sales growth of 6% to 8%, which is up from our previous guidance range of 3% to 5%.

Total ironwood revenue of $390 million to $410 million, which is up from $370 million to $385 million.

And adjusted EBITDA of greater than $210 million, which is up from greater than $190 million.

We believe our continued financial performance and strong balance sheet and disciplined approach to capital allocation and positions us well to continue to invest and our business and pursue additional opportunities and the Gi space I'll now turn the call back over to Tom Thanks, Jason.

Thomas A. McCourt: We believe our continued financial performance, strong balance sheet, and disciplined approach to capital allocation positions us well to continue to invest in our business and pursue additional opportunities in the GIC. I'll now turn the call back over to Tom. Thanks, Jason. I'm extremely proud of our performance this quarter and the team's continued dedication to our vision of becoming a leading GI healthcare company. We're looking forward to continuing our momentum in the upcoming months. The Ironwood team will also be attending the Wells Fargo Healthcare Conference and the Morgan Stanley Global Healthcare Conference in September, as well as the American College of Gastroenterology meeting in October. We look forward to speaking to all of you then. Operator, you may now open up the line for questions. As a reminder,

And I'm extremely proud of our performance this quarter and the team's continued dedication to our vision and are becoming a leading Gi health care company. We're looking forward to continuing our momentum and the upcoming months within net neuro Gastroenterology meeting later this month as well as the Ironwood team will be.

We'll also be attending the Wells Fargo Healthcare conference and the Morgan Stanley Global Healthcare Conference in September.

As well as the American College of Gastroenterology meeting in October we look forward to speaking to all of you. Then operator, you may now open up the line for questions.

As a reminder to ask a question you will need to press star 1 on your telephone.

Operator: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Your first question is from the line of Eric Joseph with J.P. Morgan. Good morning. This is Hannah on for Eric. Thanks for taking the time to ask a big question. Just a couple from us. So with Lynn's ask now on pace to reach over a billion dollars in revenue in 2021, just thinking about what do you now see as the peak sales potential of the product and how much red room do you currently see for respect to market share growth? Yeah, I think so.

On the drawing a question first the power and Keith Please stand by while we compile the Q&A roster.

Your first question is from the line of Eric Joseph from Jpmorgan.

Good morning, and.

Anna on for Eric Thanks for taking my questions just a couple from us.

Linzess is now on pace to reach over $1 billion in revenue and 2021.

And just thinking about what do you now see at the peak sales potential on the product and how much headroom do crown C, but us.

Back to you.

And market share growth.

Yes, I think effect and say thank you and.

Thomas A. McCourt: Yeah, I think, thank you. And, you know, we're remarkably impressed with how the growth is accelerating, as you've seen. There's been a clear inflection point for the brand. And, you know, the outlook looks very promising. I mean, you think about it, there are still 30 million patients out there suffering. We've treated, you know, less than 10% of those patients.

We're remarkably impressed.

And with how the growth is accelerating as you've seen there's been a clear inflection point of the brand.

And the outlook looks very promising I mean, you think about it there's still 30 million patients out there suffering we've created less than <unk>.

And <unk>.

10% of those.

Those patients so there's a lot of room to grow the other thing that we're also seeing us us tremendous increase in activity a patient's raising their hand looking for health and leveraging.

Thomas A. McCourt: So there's a lot of room to grow. The other thing that we're also seeing is this tremendous increase in activity of patients raising their hands, looking for help, and leveraging, you know, web activity as well as telemedicine to get care, all of which is, I think, boosting what we're seeing in the marketplace. So I think we're very encouraged about kind of where we are and where we're going. I think you certainly see the brand going significantly over a billion dollars in sales.

The web activity as well as tele medicine to get care all of which is I think boosting what we're seeing and the marketplace. So I think we're very encouraged of kind of where we are and where we're going I think we certainly see the brand.

Significantly over $1 billion and sales and a lot of it now becomes how do we continue to invest in the brand to continue to push that growth.

Thomas A. McCourt: And a lot of it now becomes, you know, how do we continue to invest in the brand to continue to push that growth, as well as, you know, pulling through some of the large life cycle management programs such as the pediatric program, which is a very large underserved community where there's no approved drugs, really, right now. So we're, I think, as far as the long term, you know, we haven't provided those numbers, you know, yet, but I think we're far more encouraged right now than we were a year ago.

As well as pulling through some of the large lifecycle management programs such as the pediatric program, which is a very large underserved community where there is no approved drugs really right now so I think as far as long term, we haven't provided those numbers, yet, but I think.

We're far more encouraged right now than we were a year ago.

Great and I'm sorry.

Jason Nicholas Butler: Great. And so just thinking a little about timing for BD. So last quarter, you announced the $150 million share buyback through 2022. So can we assume that this will be the primary focus for surplus cash during this timeframe? And what timelines do you have in mind for potentially selecting the pipeline? Looking at a few years, yeah, looking a few years, like, ahead, just what do you see the pipeline looking like?

So just thinking a little about timing for BD and the last quarter, you announced Atlantic and radars.

For 2020.2 so can we assume that this will be the primary so it gets from surplus cash during this timeframe and what timeline do you have and lines cross country select and the pipeline is limited.

And the only 1.

Yeah, and looking at 3 years. It had just why do you see the pipeline looking like.

Great. Thanks, Hanna for the question and all.

Jason Nicholas Butler: Great, thanks, Hannah, for the question. And I mentioned it in the script a bit. I'll reference our capital allocation strategy. We believe we're in a fortunate position to be able to invest behind the Linsest brand to continue the growth that Tom outlines. As you know, we have a desire to continue to grow the GI portfolio with innovative assets for organic GI disease.

And I mentioned it in the script and that al referenced our capital allocation strategy. We believe we are and are fortunate position to be able to invest behind on Linzess brand to continue the growth that Tom outlined.

As you know we have a desire to continue to grow the Gi portfolio with innovative assets for organic and Gi disease and to generate cash and sustained profitability and.

Jason Nicholas Butler: And to generate cash and sustain profitability. And we'll continue to assess those opportunities and make judgments about how to allocate capital over that period. And we don't see the announcement of the share buyback program as contrary to any of those priorities.

And we'll continue to assess those opportunities and make judgments about how to allocate capital.

And over that period, and we don't see the announcement of the share buyback program as contrary to any of those priorities and we believe we can execute against each of them and the way that's going to create value for shareholders.

Jason Nicholas Butler: And we believe we can execute against each of them in a way that's going to create value for shareholders. You know, when it comes to corporate development, you know, we know. We maintain a high bar, but we also see a lot of opportunity in the GI space. And there's innovation out there, and we believe we've got the right team to be able to assess those assets, attract them, and pursue them in the event that we find something that's attractive. I can't speculate on the timing of that. As you know, deals take their own form. So we'll be updating you as we go on the corporate development front. That's helpful.

When it comes and corporate development.

We maintain a high bar and but we also see a lot of opportunity in the Gi space and Theres innovation out there and we believe we've got the right team and be able to assess those assets attract them and prosecute them and the case that we find something that's attractive I can't speculate on the timing of that as you know a deal.

<unk> I would take their own form so we will be updating as we go on.

On the corporate development from.

Great. That's helpful. Thanks for taking my question.

Unknown Attendee: Great, that's helpful. Thanks for taking the questions.

Okay.

When these and my questions.

Okay.

With me and Yeah, I'm, sorry, I was on mute. Your next question is from the line of Tim Chiang.

Operator: Do we need any more questions?

Operator: Whitney and yet? I'm sorry, I was on mute. Your next question is from the line of Tim Chang.

Oh, Hi, Tom.

Hi, Tim.

And.

Timothy Chiang: I I'm having a good quarter by the way, I you know, I I jumped on late so I apologize if these questions are even asked, but I sort of you know look at your updated guidance for US investment sales growth around 6 to 8% for this year, and that's still pretty good.

Good quarter by the way.

I jumped on late so I apologize if this question's already been asked but I sort of look at your updated guidance U S. Linzess net sales force around 6% to 8%.

And for this year and that's still the 2.

Generally lower than what Abbvie has been reporting and in terms of sales growth could you just sort of.

Timothy Chiang: really lower than what Abbe has been reporting in terms of sales.

Timothy Chiang: I thought, could you just sort of talk about that a little bit? And I apologize.

Talk about that a little bit on and I apologize if you've already explained that.

Timothy Chiang: I apologize if you've already explained Well, Tim, I think we're very much aligned with Abby. You know, we work side by side.

Well, Tim I said I think we're very much aligned with with Abbvie.

Thomas A. McCourt: You know, we set the targets on a quarterly basis and update the year-end and long-range plan, you know, quarterly. So, you know, we should probably go back and check out what they put out. But, you know, as far as our guidance is concerned, we had previously provided, you know, the three to five percent sales growth. And we're, as Jason mentioned, raising that. The six to eight, you know, which is a pretty healthy increase.

And with we work side by side.

And we set the targets on a quarterly basis and update the year end and and long range plan on.

Early so.

We should probably go back and check what they put out but as far as our guidance. We had previously provided that the 3 to 5 net sales growth and we're as Jason Mitchell raised and that the 6 to 8.

<unk>, which is a pretty healthy increase so you know we're we're certainly all pleased with the growth we're seeing but we should be pretty consistent. So thanks for the heads up I'll certainly, we'll certainly reach over to Abbvie to make sure we're talking the same language.

Thomas A. McCourt: So, you know, we're, you know, we're certainly, you know, all pleased with the growth we're seeing, but we should be pretty consistent. So thanks for the heads up. I'll certainly, we'll certainly, uh, reach over to have you to make sure we're talking the same language.

Thomas A. McCourt: Well, Tom, I'm just referring to the fact that I think Advi reported, what, 18% over your U.S. net sales growth? Yes, very much so.

Well, Tom I'm, just referring to the fact that I think abbvie reported what 18% year over year U S net sales growth and the other convertible debt right.

Thomas A. McCourt: In the second quarter, is that right? That's true. Go ahead. Just to clarify, 15% year to date versus we're guiding to 6 to 8% full year. For you.

That's true go ahead, and just to just to clarify a 15% year to date versus we're guiding to 6% to 8% all year for year and reference my comments and the script related to lower inventory and the second half of the year.

Jason Nicholas Butler: And reference my comments in the script related to lower inventory in the second half of the year, dampening the net price growth over that period. Basically, we saw a boost this quarter due to, you know, how the inventory is being managed now, where, as you know, it was seasonal in the past where, you know, we saw burn in the first half of the year, and then they would accelerate the inventory in the back end of the year. And what they've done, what they've been doing is keeping a more leveled, predictable inventory, which makes it easier to kind of predict where net sales will land. But you're absolutely right.

Dampening the net price growth over that period.

So basically and we think we saw a boost this quarter due to how the inventory is being managed out.

Where as you know it was seasonal and the past, where we saw burn and the first half of the year and then they would accelerate the inventory and the best bet on.

The back end of the year and what they've done what they've been doing us keeping a more level set predictable us inventory, which makes it easier to kind of predict where net sales will land, but you're absolutely right for the quarter. It was 18%, but that was a combination of the <unk> 14 per cent demand growth as Jason mentioned us.

Thomas A. McCourt: For the quarter, it was 18%, but that was a combination of the 14% demand growth, as Jason mentioned, as well as the boost in inventory, which was partially offset by, you know, net price erosion in the mid-single digits.

Well is the boost in the inventory, which was partially offset by net price erosion and the mid mid single digits.

And.

Thomas A. McCourt: And how do you see demand growth? I mean, do you see this sustainable at around 14%?

And how do you see the demand growth I mean, do you see this sustainable and around 14%.

Thomas A. McCourt: at around 14%. Yeah, I mean, I think this brand continues to surprise us as far as its growth is concerned. I mean, as you know, you do not see many brands like this in categories where you see linear growth like we have been seeing. And, you know, you think about, you know, we were looking at 10, it's 11% growth a couple years ago. But, you know, really, for the last four years in a row, we've seen north of 12% demand growth.

Yes, I mean.

I think this brand continues to surprise us.

As far as its growth I mean, as you know you do not see many brands like this in categories, where you see linear growth that we have been seeing and you think about we were looking at tenants, 11% growth a couple of years ago, but really for the last 4 years and are always seen north of <unk>.

Thomas A. McCourt: And this year it is going to be north of that, we believe. So, you know, this branch just continues to perform. And I think, as I mentioned earlier, when I look at, you know, the tens of millions of patients that are still out there suffering, and we've only treated 10% of the patient population, and I don't see a real competitor in the future, it's believable that we're going to continue to see this kind of growth over time.

<unk> percent demand growth and this year, it's going to be north of that we believe so.

This this this brand just continues to perform and I think as I mentioned earlier when I look at the tens of millions of patients that are are still out there suffering and we've only treated 10 per cent of the patient population and and I don't see a real competitor and the future.

Yes, it's believable that we're going to continue to see this kind of growth over time.

Mhm.

Timothy Chiang: Okay, good. Well, it's a good place to be. Yeah, what's the lightning?

Uh-huh.

Okay. Good well, it's a good place to be yeah. Congrats on work related.

Thomas A. McCourt: Yeah, we're with the lightening.

Thomas A. McCourt: Thanks for the comments, Tom.

Thanks for the Com and stuff.

Operator: Again, to ask a question, please press star 1. And your next question is from the line of David Lieberwitz.

Thanks, Tim.

And again to ask a question. Please press star 1.

And your next question is from the line of Dave David Leibowitz.

Hi, This is avatar Jones on for our games, Inc.

David Lieberwitz: Hi, this is Avatar Jones on for David. Our question is in regards to the volumes, and I apologize if I missed it. Where are those coming from? Is that impacted by the Phase 3 publication? Is this something more organic, is it 90-day scripts, can you sort of provide some color mine? I mean, it's probably all the above. I do think certainly we're seeing a higher level of activity by the patient.

Our question is in regards to the volume side and I apologize if I missed this but where are those coming from us that.

Impacted by the Phase III publication is this.

Just something more organic and 90 day scripts can you sort of provide.

Provide some color behind us.

I mean, it's probably all of the above.

Do think certainly we're seeing a higher level of activity.

David Lieberwitz: When we talk about the activity as far as online searches go, as well as, I mean, we're seeing four and 500,000 unique visitors to our website, which is, you know, really strong, which is showing, you know, ongoing growth. So I think part of it is an overall awareness of the disease. I think it's the ability of patients to raise their hand. I do think, to your point, you know, what we see is if we can get patients on, you know, 90-day scripts, there's better adherence to therapy because they realize the full benefit of the drug.

The patient when I, we talk about the activity as far as online searches as well as I mean, we're seeing and 4 and 500000 unique visitors a month to our website, which is you know really strong which is showing ongoing growth.

So I think part of it as an overall awareness of the disease I think is the ability of patients the razor and.

I do think to your point.

What we see us when we if we can get patients on 90 day scripts, there is better adherence to therapy, because they realize the full benefit of the drug.

David Lieberwitz: And I do think, you know, this ability to describe multiple abdominal symptoms as opposed to just abdominal pain really speaks to a broader community who are now raising their hands. So I think it's probably all of those things.

And I do think this ability to describe multiple abdominal symptoms as opposed to just abdominal pain really speaks to a broader community who now are raising their hand, so I think it's probably all of those things.

Thomas A. McCourt: and they're all kind of growing very nicely, including overall awareness. And we still have work to do here. You know, when you look at unaided awareness, it's still around 10 to 12 percent. So, you know, there's still an awful lot of opportunity to make patients aware that there is a better treatment option out there for them, out there for them, that we need to continue to push on. Understood, thank you.

And and they're all kind of growing very nicely.

And including the overall awareness and we still have work to do here.

When you look at unaided awareness is still around 10% to 12%.

So there's still an awful lot of opportunity to make patients aware.

And that there is a better treatment option out for them on.

And out there for them you know that we need to continue to push on.

Understood. Thank you and if I.

David Lieberwitz: And if I could, a follow-up question. I know there's been a question asked about business development. Are there any specific therapeutic areas of interest, and can you sort of

And a follow up question and I know there there's been a question and ask on business development, but just are there any specific therapeutic areas of interest and non U.

No.

David Lieberwitz: provide us with guidance as to what

Sort of.

Provide us a guidance as to what when and shrinking.

David Lieberwitz: As to what intrigues me, maybe I'll ask Mike Chessline, who's online here, and, you know, he's leading the charge and kind of looking at the GI terrain. You know, we're seeing a lot of opportunities, but, you know, where we are focused right now and the molecules we are currently evaluating. Mike, would you comment on that?

Maybe I'll ask I know my my chest lies on line here.

And he is leading the charge and kind of looking at the Gi terrain, and we're seeing a lot of opportunities, but where we're focused right now and.

And the molecules. We are currently evaluating Mike would you comment on that.

Michael Shetzline: Sure, sure, Tom, thanks. So, firstly, we're obviously addressing the medical needs of patients suffering from GI disease and disorders, and we're really trying to prioritize those that are really. managed by gastroenterology, with a particular focus on organic diseases where we kind of know the mechanisms and we can really do clear and decisive proof-of-concept studies because we want to target innovation and we also want to be first-in-class, best-in-class with differentiated opportunities. And we do think, to Tom's point, we have a great opportunity list, so to speak.

Sure sure Tom. Thanks, So firstly, we're obviously addressing the medical needs of patients suffering from Gi diseases and disorders, and we're really trying to prioritize those that are really managed by the gastroenterologists.

With a particular focus on organic diseases, where we've kind of day was the mechanisms and we can really do clear and decisive proof of concept studies, because we want to target and innovation and we also want to be first in class best in class with differentiated opportunities and we do think to Tom's point, we have a great opt.

<unk> list so to speak the disease areas, where we are.

Michael Shetzline: The disease areas are, we're not trying to boil the ocean, okay, but we do have a fair amount of opportunity given the medical need. But things like, you know, liver injury or liver failure, there's a huge medical need in the hepatology space. Celiac disease is another hugely underserved population. You may hear that people feel that it can be cured with a gluten-free diet. I mean, it is true.

We're not trying to boil the ocean, okay, but we do have a fair amount of opportunity given the medical need but things like.

Liver injury and liver failure, you know, there's not a huge medical need and and the hepatology space celiac diseases and other very hugely underserved population you may hear that people feel that it can be cured with a gluten free diet I mean, it is true patients could benefit from a gluten free diet, but if you talk to patient groups. They they are really under served and still have.

Michael Shetzline: Patients can benefit from a gluten-free diet, but if you talk to patient groups, they are really underserved and still have a lot of morbidity related to their celiac disease, so there is a huge opportunity there. There are other entities like puritis. Puritis is an itch, right?

A lot of morbidity related that are celiac disease. So a huge opportunity. There there are other entities like pure itis apparatus is H right.

Michael Shetzline: It's actually an indication for a liver transplant. So there is a huge medical need there from a liver function perspective. And something like pancreatitis. Pancreatitis is bread and butter medicine, but a GI disorder that really has no medical therapy. Today, still, when a patient comes into the hospital with pancreatitis, they get IV fluid and pain management.

Actually and indication for liver transplant, so a huge medical need there from us.

The liver function perspective, and something like pancreatitis pancreatitis is bread and butter of medicine, but a gi disorder that really has no medical therapies today still when a patient comes into the hospital with pancreatitis, They get IV fluid and pain management, that's quite sad. When you think of all day innovation in this space and immunology and inflammation and then.

Michael Shetzline: That's quite sad when you think of all the innovation in this space around immunology and inflammation and then things like even rare diseases. A lot of rare diseases are hepatological in origin.

And so I keep on rare diseases, so a lot of rare diseases.

Apology and origin. So we really do have a broad landscape and a lot of opportunity, but as mentioned, we really have a high bar and we want to make sure we make the right choice at the right time.

Michael Shetzline: So we really do have a broad landscape and a lot of opportunity. But, as I mentioned, we really have a high bar. We want to make sure we make the right choice at the right time.

Michael Shetzline: Thank you. Thank you. Much about.

Thank you. Thank you much appreciate it.

David Lieberwitz: Thank you. Thank you. I much appreciate it.

Thanks, Mike.

Yeah.

And at this time, there and no further questions.

Operator: And at this time, there are no further questions. I would like to thank everyone for joining today's call. You may now disconnect.

I would like to thank everyone for joining today's call you may now disconnect.

Okay.