Q4 2021 Ironwood Pharmaceuticals Inc Earnings Call
Okay.
Ladies and gentlemen, good morning, My name is Abby and I will be your conference operator today.
At this time I would like to welcome everyone to the Ironwood Pharmaceuticals fourth quarter and full year 2021, Investor update conference call.
Today's conference is being recorded and all lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
We'd like to ask a question. During this time simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one once again.
And I would like to introduce Matt Roche the director of Investor Relations. Mr. <unk> you may begin your conference.
Thank you Ed.
Good morning, and thanks for joining us for our fourth quarter full year 2021 investor update.
Our press release crossed the wire this morning.
We found on our website.
Today's call and accompanying slides include forward looking statements.
As mentioned involve risks and uncertainties that may cause actual results to differ materially.
A discussion of these statements and risk factors are available on the current safe Harbor statement slide as.
Well, so the heading risk factors on our quarterly reports on Form 10-Q .
Quarter ended September 32021.
And to add future SEC filings.
All forward looking statements this presentation.
Undertakes no obligation to update such statements.
Also included non-GAAP financial measures.
As a supplement to.
Substitute for or superior to GAAP measures.
Thank you the applicable please refer to the tables at the end of our press release for reconciliations of these measures to the most directly comparable GAAP measures.
During today's call Pulmicort our CEO .
With an overview will provide an update on our commercial performance, yes, Mike.
Mike <unk>, our Chief Medical Officer.
The internal pipeline.
<unk>, our chief Financial Officer.
Our financial results and guidance.
These webcasting slides.
For those of you dialing in please go to the events section of our website to access the accompanying slide seven.
With that I will turn the call over to Tom Thanks, Matt Good morning.
Everyone and thanks for joining us today.
When I became CEO last year I was energized about the commitment to developing innovative solutions in the area of high unmet need in Gi.
In 2021, we made significant progress against this important mission.
I'm proud today and with team even through the ongoing pandemic with resistant and their commitment to advancing the treatment of Gi diseases, and redefining standard of care for patients.
Thanks to their hard work and dedication we closed out the year with a lot to be proud of.
We started 2021 with a clear roadmap, which included three strategic priorities, one maximizing linzess to strengthening our innovative Gi pipeline and three deliver sustained profit and generate cash flow.
By the end of 2021 I'm excited to report that we made tremendous headway across all three of these key pillars.
Let's begin on slide six with a quick overview of some of our highlights and achievements in 2021.
Linzess has been an extraordinarily resilient market, leading brand that continues to deliver strong demand growth and profitability in 2021, I'm proud to share that linzess achieved blockbuster status exceeding $1 billion in U S net sales, representing 8% growth year over year.
Ascription demand grew a robust 12% year over year and commercial margins were 74%.
The continued impressive Linzess performance is no small feat and I wanted to acknowledge the dedication of our team who made this achievement of $1 billion in sales of reality.
In addition, we previously announced that the FDA approved the revised label for Linzess modifying the prior box warning, which included all children under 18 years of age.
The warning of a risk of serious dehydration and contra indication it gets used in children.
Less than two years of age. This label change is a significant accomplishment for the team as we continue to advance the pediatric program.
As a reminder, linzess does not currently approved for use in patients under 18 years of age.
Next we strengthened our pipeline by entering into a collaboration and license option agreement with <unk> pharmaceuticals to develop and commercialize <unk> 104.
Which if successful.
Pat you want to be the first approved disease modifying therapy for primary biliary cholangitis.
In addition, we advance IW 1300, <unk>, our wholly owned asset for the treatment of visceral pain conditions, and our Linaclotide pediatric development program in Ibs C and functional constipation, Mike will elaborate on these exciting pipeline updates in a few moments.
Finally, we ended the year with $528 million in GAAP net income, which includes the 338 million nonrecurring income tax benefit related to the release of valuation a valuation allowance in the second quarter of 2021.
Adjusted EBITDA of $234 million at $620 million in cash and cash equivalents, a significant increase from the end of 2020.
Also we initiated our board authorized share buyback program with $27 million of shares repurchased.
End of 2021.
Another important highlight in 2021 was the addition of several experienced leaders, including Andrew Davies, Our Chief Business Officer, John Monaco, Our Chief Legal officer, and most recently <unk>, our Chief Financial Officer, We're thrilled that Andrew John <unk>, who joined the team and I'm honored to be at the helm of a very talented.
But leaders uniquely capable of advancing our mission and ushering in a new era in growth and innovation at Ironwood as we look to continue to grow the company and our pipeline to address areas of Gi diseases.
Now, let's turn our attention to Linzess starting on slide seven.
Ironwood has had tremendous success with linzess from its inception to its recent achievement a blockbuster status.
And it continues to serve as the backbone of the company as I mentioned, a few moments ago Linzess prescription demand increased 12% year over year, and 2021, resulting in U S net sales of over $1 billion.
Linzess ended the year with approximately 44% total prescription share a new record high for the brand.
As you can see in slide eight new to brand prescription growth increased a robust 15% year over year, which outpaced the market. In addition, 90 day prescription growth has continued to increase over time, making up approximately 20% of the business as of the end of 2021.
Turning to slide nine.
It's not every day that a brand achieved blockbuster status and it doesn't happen by accident first Linzess has demonstrated an improvement in constipation, plus overall abdominal symptoms, which is important in the treatment for adults with Ibs C.
Who are often frustrated by bloating pain and discomfort. Additionally, the strong brand awareness has helped linzess become the number one prescribed branded treatment for adults with Ibs C and chronic constipation by Gastroenterologists and primary care physicians.
This robust momentum and market leadership position has enabled us to refine our overall marketing mix that investment overtime, while we continued to deliver strong demand growth and expand brand margins.
We expect to continue to grow linzess through patient activation refined professional promotion our class leading payer access.
Suing future lifecycle management opportunities.
Looking ahead, we're confident in our strategy and in the future and we will continue to focus on delivering value to our patients and shareholders. We believe the investments we're making in the brand and in our pipeline will position our company for long term growth.
Since joining the company in 2009.
Seen firsthand the outstanding capabilities of the Ironwood team in advancing our development and commercialization strategies as well as our unsurpassed level of commitment to making a positive difference for millions of patients affected by Gi diseases.
I'm very honored to lead this organization full of talented people and I look forward to continuing to build upon ironwood success as we plan for 2022 and beyond I will now turn the call over to Mike to discuss our pipeline and clinical development efforts.
Thanks, Tom.
We have expanded our pipeline as we seek to bring data potentially first in class therapies to patients suffering from Gi diseases and disorders, and we think we can impact and a clinically meaningful way I'll start with the Linaclotide pediatric program on slide 11.
Obstipation effects, an estimated $4 million to $6 million six to 17 year olds in the U S. And there are currently no FDA approved prescription pediatric therapy.
Installation labor late this is a significant opportunity to potentially expand the clinical utility of Linzess to this large patient population.
We're excited to continue to advance this program and we expect the functional constipation study in six to 17 year olds to readout in the second half of this year.
Next is an update on IW 300, I'm pleased to share that our clinical study is officially underway IW 300 is a <unk> agonist and a wholly owned asset for the potential treatment of visceral pain conditions, such as interstitial cystitis bladder pain syndrome in endometriosis.
Interstitial cystitis bladder pain syndrome affects an estimated four to 12 million Americans. According to the interstitial Cystitis Association. These diseases have a limited number of treatment options available and significantly impact patient quality of life.
Scientists are evidenced to date supports the opportunity for IW 300, and dig and Nicole in the offer of paying benefit to other vessel order against your mechanism that is crosstalk, perhaps talk is a biological phenomenon, where sensations of injury originating in one abdominal traditional Oregon and result in altered sensation in a nearby Oregon because.
Overlapping nerve pathways were.
Really excited about the launch of this phase one study as it will be the foundation to clinically tested to cross talk about enhancements for the first time later. This later this year next CMT. One therefore, we're tapping into external partners as we identify opportunities to meaningful advance novel treatments for patients, where we can leverage our <unk>.
<unk> and resources to help drive success, we're thrilled to collaborate with cooler on CMP <unk> for primary biliary cholangitis, which is a prime example of our strategic approach to enhancing our pipeline ABC is a slowly progressive and debilitating rare autoimmune disease to deliver that affects an estimated 133000 people.
The U S. Currently there is no approved therapy that addresses underlying pathology for root cause a buyout of destruction and PVC loss of bile ducts is fundamental to this disease and leads to decreased Bios accretion and the retention of toxic substances in the liver, resulting in continuous hepatic damage.
Which can ultimately requiring different trends.
Since signing the agreement with cooler CMP <unk> has been granted fast track designation by the U S. FDA underscoring the significant unmet medical need of patients with PBC.
We're also pleased to share that <unk> has initiated the clinical study CMT, one O floor, which will look at safety Tolerability pharmacodynamics and efficacy with the readout currently expected in 2023.
We recently participated in a virtual symposium with leading experts in guest urology herpetology discussed the impact of AVC and existing gaps in care and treatment. During this forum, many leading gastroenterologists that herpetologist, who treat PBC highlighted the importance of stopping the progression of liver biodot destruction that as foundation.
So this disease. So you can see why we're really excited about this clinical program. We believe <unk> has the potential to shift the treatment paradigm MTBC and could be the first truly disease modifying therapy for this condition X successful and potentially a real game changer for patient suffering with ABC. This collaboration.
With cooler allows us to expand our pipeline and leverage our deep relationships within the Gi community and advanced innovation and differentiated opportunities. We believe <unk> expertise in EMEA in programming and higher with development and commercial strength as well as reach in the Gi disease areas advance this exciting program.
And this is how we plan to focus our business development efforts on forward on assets that are highly differentiated clear unmet medical needs have an established mechanism action and providing clear decision points and we're seeking to identify more assets like this as we further build out our pipeline ill now turn it over to Charlotte to review our financial performance.
Thanks, Mike and good morning, everyone I'm excited to be part of such a team great team here at Ironwood and a great culture as the new CFO . It is fantastic to report such great numbers and see how much ironwood has strengthened its financial position over the past few years.
I would like to provide a few updates. This morning first I will highlight our fourth quarter and full year 2021 performance, then I will discuss our capital allocation strategy and finally, I will review our 2022 guidance.
Refer to our press release for our detailed financial information.
I'll start on slide 13, with Linzess U S. Net sales were $279 million in the fourth quarter of 2021, a slight increase over the fourth quarter of 2020 as a reminder, we saw fewer inventory channel fluctuations in 2021, which resulted in favorable net sales growth in the first half year resulted in.
A dampening of net sales growth in the second half.
Going forward, we expect quarterly inventory channels levels similar to 2021.
For full year 2021 U S. Linzess net sales were $1 billion $6 million eight.
8% increase compared to full year 2020.
Growth was mostly driven by robust prescription demand.
Turning to Linzess brand profitability.
Marshall margin in the fourth quarter of 2021 was 76%.
For full year 2021, commercial margins were 74% versus 72% for full year 2020.
Moving to Ironwood revenues.
In the fourth quarter Ironwood revenues were $117 million.
Full year 2021, Ironwood revenues were $414 million with U S. Linzess collaboration revenues of $400 million.
Ironwood U S. Linzess collaboration revenues increased 9% compared to full year 2020.
GAAP net income was $41 million in the fourth quarter of 2021 and $528 million for the full year.
This includes a nonrecurring income tax benefit of $338 million, which was recorded in the second quarter relating to the release of our valuation allowance against the majority of our deferred tax assets.
Adjusted EBITDA was $57 million in the fourth quarter of 2021, which includes $19 $5 million in expenses associated with the core option agreement adjusted EBITDA was $234 million for full year 2021.
Moving to cash and capital allocation priorities on slide 14.
We are in a unique position of being a profitable biotech company that is delivering meaningful cash flow.
In the fourth quarter, we generated $65 million in cash flow from operations and $262 million for the full year 2021.
And ended with year with $620 million in cash and cash equivalents.
From $363 million at the end of 2020.
We continue to execute our board authorized share repurchase program of up to $150 million that runs through the end of this year as previously mentioned and announced at the Jpmorgan Healthcare conference in January we repurchased $27 million of shares of our common stock as of December 31.
And we repurchased an additional $51 million of shares through February 15, 2022.
We believe we are positioning our company for future success, and maximizing linzess growth and actively pursuing innovative highly differentiated gi assets to bolster our portfolio. We continue to take a balanced and disciplined approach to capital deployment.
And we remain focused on identifying and investing in opportunities that we believe will create value for our patients and shareholders over the long term.
Next I'll review, our 2022 guidance on slide 15.
As we previously stated in January we expect Linzess net sales growth in the low single digits.
We again anticipate continued double digit prescription demand growth over time, we have continued to refine our investment in the brand to support demand growth improved brand margins and ultimately maximize ironwood cash flow in 2022, we made an investment to maintain broad payer access, which we anticipate will result in high single.
Digit price erosion this year.
We expect to manage price erosion to be more modest in 2023.
Next we expect total ironwood revenue of $420 million to $430 million.
And lastly, we expect adjusted EBITDA of greater than $250 million.
So as you can see we are pleased with the progress we made in 2021 successfully driving linzess growth leading into blockbuster status, adding CMP one O for a potential game changing asset to our pipeline advancing IW 3300, and then all of the <unk> pediatric program.
And initiating our share repurchase program.
With this momentum carrying us forward, coupled with our current balance sheet and skilled management team, we have confidence in our ability to pursue new Gi assets potentially will help us make a difference for patients and help grow our position as a leading Gi health care company in the United States.
We are excited about the work ahead of us and we'll continue to keep you posted on our progress.
Operator, you May now open up the line for questions.
Thank you and at this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad and we will pause for just a moment to compile the Q&A roster.
And we will take our first question from Boris <unk> with Cowen.
Good afternoon, good morning, yes.
Question on 3300 can you discuss what you need to see in the data update later this year to invest further in this drug and are there any kind of reference datasets for reference drugs that we should be considering when we're looking at this data.
Well good morning, Boris this is <unk> I'll hand, it over to Mike answer that question.
Yeah sure. So for 2022, we're actually again excited to kick off the program the clinical program as we set targets in quarter one 2022.
It's a significant undertaking but it's a very well established medical need so to your point through 2022, we're going to complete the phase one program. So we will have data available from a safety and Tolerability perspective, and we do plan to kick off what we call. The phase II proof of concept studies later this year, so that design of that study.
Is actually being worked on as we speak today, but it's also founded in other analogs. There are a couple of products approved for bladder pain syndrome. They don't work well from the information we get from external that's just clinical opinion, but and that's one of the reasons why we think the medical need is quite significant so using that.
Those analogs, where sort of designing the program and of course, we'll quantify the FDA to get their feedback as well, but it really is looking at the symptomatic improvement of patient suffering from visceral hypersensitivity bladder pain syndrome.
Got it.
And my last question is obviously the valuation of biotech have come down quite significantly you guys.
It seems to be actively buying back your own shares I'm just curious if with this new re value reevaluated environment are you being more aggressive in M&A is that an objective or are you happy with the pipeline you have right now more focused on just returning cash to shareholders via buybacks.
Yeah.
For Us look I think from where we stand today again I think we've said it a few times now that we're going to be pretty disciplined with our capital allocation strategy, whether that's deploying capital for future acquisitions or for rich.
Purchasing our own shares.
And I think part of that comes down to when we find the opportunity makes sense for us and we think creates value we will actively pursue it part.
Part of it's finding those opportunities, but we're open to whatever makes sense in the best interest of shareholders. Yes, Boris This is Tom.
Couple of other thoughts too I think the thing that's been really kind of remarkable to me is the resiliency to linzess and our ability to continue to refine the marketing mix.
And the investment so really drop bigger numbers. So the bottom line, which is going to set us up for the future and I think <unk> is a classic example of a really area a significant high unmet need and a potential game changer for the treatment of assets like that that we were.
We'd be excited to be able to bring on board and get through proof of concept to determine whether we continue to invest in the future. So.
We're very excited about where we are right now I think about where we were three years ago and I think the team has just done a really strong job in and kind of getting us on the right track.
Great. Thank you very much for taking my questions.
Yeah.
And we will take our next question from Eric Joseph with JP Morgan.
Hey, good morning, guys. Thanks for taking the questions.
Just picking up on the pediatric opportunity.
Any color that you.
It might be willing to share in terms of the type of uptake you would be expecting.
Within that.
Around 5 million patients.
Sure.
Patients are children with functional constipation that youre, saying here you have a sense of how many children are where the extent to which children are currently managed with OTC.
Laxatives.
Yes.
Well good morning, Eric and thanks for your question it's.
And it's Tom and then and Mike.
What I can share with you.
Is really kind of what we've learned in market research in this space and the reality is there's really not many good options for kids.
Nick mentioned really there's nothing actually currently approved for pediatric constipation Ibs.
There's a couple of sizable pieces to this market here one is the adolescent population, which was probably the most visible high need population that I think we can access very quickly. These these a lot of these patients are treated bolt by Cascade Gastroenterologists as well as primary care physicians and.
They are actively seeking care I think the one difference.
This population is when these kids are suffering theyre actively engaging physicians for help and I think to have a drug that's actually approved and cannot only improve constipation symptoms, but also improve abdominal symptoms.
It's a huge step forward for this population Mike maybe you can comment further.
Regard to kind of your clinical view of the need and the opportunity Yeah. I think similarly, the key is that constipation in general is a significant.
Medical morbidity for patients primarily actually in one of the populations who are studying it necessarily adult readout. Later this year is to six to 17 year olds. So from a functional constipation perspective from <unk> perspective, our ibs with patient perspective, another fairly prevalent conditions into pediatric population has as I mentioned as you have they just sort of rotate drill access.
Don't have really good alternatives and nothing is currently approved that's why we're really excited to see the data at the end of this year in the six to 17 year populations because moving forward with it.
Moving symptoms about frequency in patients with functional constipation, they provide a real good therapy for patients in this patient population one other closing Sade and as Eric mentioned.
There's always been this question as far as drug safety in the younger population and due to the hard work of Mark Mike and his team.
Really kind of resolved many of those concerns also with regard to the basic science.
As far as what was <unk>.
Hypothesized when we launched the drugs, but more importantly, what we're seeing in the clinical data that this drug does look like as well as effective and well tolerated we're going to continue to work with the FDA to make sure that.
It's going in the right direction, but we do see this as a very sizable commercial opportunity.
Yes.
Sure.
Oh go ahead.
So.
Okay.
Just kind of.
Mike to get a little more help sort of frame your expectations for a readout in the second half.
Which is.
Totals.
<unk> size.
What might be.
What the trial is powered to show in terms of improvements in SDN and.
And really whether those that data set if positive will be used for the purposes that we would fashion.
Yes. So the current study, which is a six to 17 year olds study looking at its looking at improving bowel function, obviously at 6% to 17 year olds with diagnosed functional constipation. So.
At that level and as with other constipation disorders, Thats really founded it in an improvement in bowel function.
Losing frequency spontaneous bowel movement at <unk>.
They are sort of the endpoints and what we're looking for improvement and downloaded function in those patients and Thats hopefully will give us a path to an indication for functional constipation.
See the data at the end of the year, we'll have discussions with the agency actually earlier this year to prepare for that.
Obviously be data driven and discussion with the agency endeavor to move that forward.
Okay.
Okay, Great final question, if I could.
Strong commercial margin for Linzess exited the fourth quarter.
How should we be thinking about the trend.
In 2022.
You've talked earlier about sort of additional spend for the franchise.
Yeah.
I guess to me.
<unk> of that commercial market that you'd be interested in.
Yeah. So first of all let me just take a step back Eric and just say look we're really.
Really proud of where Linzess is from a.
Profile perspective in terms of having a brand thats driving and being able to produce double digit prescription demand growth year over year.
10 years into its life cycle at the same time, we've been pretty prudent in terms of what goes into our commercial spend to maintain that and as Tom had mentioned and I think we talked about a little earlier, we've made some choices as to where to make those investments.
In either payer access marketing et cetera to manage and drive that prescription demand growth because we think thats. The ultimate driver of overall profitability and ultimate driver of overall cash flows for the company.
Specifically to your question, what I would say as well.
Look I think like every other CFO I'd be.
One thing I didn't mention that we're in an inflationary environment right and <unk>.
The broader economy were exposed to inflationary pressures.
Pressures in our business, whether that's labor and the like and so we continue to monitor that but.
But I think from where we stand today from a commercial margins perspective, I think we're going to hold steady about where we're at.
For 2022 and continue to drive profitability through.
Cost containment, yeah, just one other thanks Robin and just one other comment as I think about this as we talked about the momentum that this brand has in the market, which has allowed us to really tune up the marketing mix and as you know we have dramatically pulled back on personal promotion, which is one of the biggest ticket.
Items with regard to expense. So we haven't seen the demand growth waiver, which says a lot for the.
The effectiveness of this drug in the marketplace.
Growing growth, but obviously, we continue to look at promotional response, we look at investment a bolt on the consumer and the professional side and of course. The payer mix is also critically important which has continued to enable patients to easily access the drug.
Okay.
Okay excellent thanks, guys for taking my questions.
No problem.
Okay.
And we will take our next question from Tim Chiang with Northland Securities.
Thanks, Tom.
Tom just given the revaluation and a lot of pharma biotech names.
Have you guys considered looking at.
Their existing.
Approved products complement Linzess just given the fact that you already have a commercial infrastructure in place.
So.
Tim This is <unk> look I'll start by saying that we don't comment on business development activities.
Standard of course.
I'll say is look we are open from a from a strategic direction perspective to whatever creates the most amount of value for the company and we will evaluate any and all opportunities that we think can and drive that for us.
It's a broad answer to your question I appreciate that but we're not going to get specific about where and what we're looking at yes.
Additionally, I mean I agree I think this is the <unk>.
Environment is changing.
Which could create nice opportunities for us and the team is looking at a lot of different things right now Tim.
I think we have a number of opportunities in front of us that we're critically evaluating and working closely with our board to make sure that we're making very sound decisions.
For you as an investor.
Okay, Great and let me just follow up.
Just on I know you guys have provided 2022 guidance, which I think is.
Which is solid but.
Do you guys expect R&D expenses to ramp up this year or is it more.
More of a flat type of ear for R&D.
Yes, so just as a reminder, taking a step back.
Last year in 2022, and 2021 with respect to R&D expenses.
First of all one thing we don't give guidance on R&D expenses I think it is the first point, we just talk about EBITDA, but what I would say is our 2021 R&D expense.
Included about $19 $5 million associated with the core lie.
License option agreement and we don't expect those costs to recur in 2022.
At the same time, we've got some interesting things that we're looking to get Readouts on this year.
Specifically pediatrics and.
The progress, we're making on IW 300 and and.
And I'm, sorry, Sam do you want to pour itself so.
Yeah, I'd, just say that we won't have those recurring costs, we don't provide guidance on that.
Okay, great. Thanks.
And we will take our next question from Jacob Hughes with Wells Fargo.
Good morning, John Good morning, its Nick.
It's Nick transfer Jacob Thanks for taking the high neck, just want from US is there any update you can share on the Linzess OTC pathway and maybe what progress you expect into this year.
Well thanks for the question.
At this time, we don't have an update on the OTC pathway.
And.
We'll provide an update when we have one.
Yes, I would just comment I think thats spot on Trevor and we're still working through that obviously with our partner.
Look at.
The feasibility and the timing of that.
So right now we're primarily focused on getting moving the pediatric program forward and resolving any outstanding questions that the FDA may have on drug safety before we can even really move forward with the OTC assessment.
Got it thank you.
And ladies and gentlemen that concludes our question and answer session.
And this also concludes today's conference call. We do appreciate your participation and you may now disconnect.
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