Q3 2022 Ironwood Pharmaceuticals Inc Earnings Call
Okay.
Hello, My name is Lisa and I will be your conference operator today at this time I would like to welcome everyone to the Ironwood Pharmaceuticals third quarter Investor update call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
If you'd like to ask a question. During this time simply press Star then the number one on your telephone keypad.
If you would like to withdraw your question Press Star one again.
I would now like to turn the call over to Mr. Matt Roche Director of Investor Relations. Please go ahead Sir.
Thank you Lisa.
Good morning, and thanks for joining us for our third quarter 2022 investor update our.
Our press release issued this morning 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.
<unk> 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 annual report on Form 10-K for the year ended December 31, 2021, and in our future SEC filings.
All forward looking statements speak as of the date of this presentation.
We undertake no obligation to update such statements.
Also included are non-GAAP financial measures, which should be considered only as a supplement to and not a substitute for or superior to GAAP measures.
To the extent applicable please refer to the tables at the end of our press release are reconciliations of these measures to the most directly comparable GAAP measures.
During today's call Tom Mccourt, our CEO , who will review our strategic priorities.
And provide an update on the commercial performance of Linzess, Mike <unk>, Our Chief Medical Officer will discuss our pipeline and Shriven Armani, Our Chief Financial Officer will review, our financial results and guidance.
Today's webcast includes slides so for those of you dialing in please go to the events section of our website to access the accompanying slide separately with that I'll turn the call over to Tom. Thanks.
Thanks, Matt Good morning, everyone.
Thanks for joining us today, as we share our third quarter results.
As we approach the end of the year and look back on the progress we've made across our strategic priorities. We are very pleased with the strides we have made to advance treatment and Gi diseases redefine standard of care and bring important medicines Gi patients.
As we move forward, we remain committed to unlocking new opportunities for Linzess and strengthening our portfolio within a bit of Gis as well continuing to deliver sustained profits and cash flows.
I'll begin with a brief overview of our strategic priorities on slide six.
Our strategy begins with maximizing linzess in the third quarter. We're pleased to report the brand delivered double digit extended unit prescription demand growth year over year and for the first time exceeded 1 million total prescriptions in the quarter.
A remarkable achievement.
Based on the continued strong performance of Linzess through the third quarter. We remain we have maintained our full year net sales guidance of low single digit percent growth.
Going forward, we believe there is still a significant opportunity to reach appropriate new adult patients and drive additional prescription demand growth.
Second.
We are seeking to build an innovative portfolio both through the development of our internal assets.
Through the enlighten acquisition of external assets that target serious organic Gi disease that we believe will position our company for continued growth.
In the third quarter, we advanced our pipeline programs highlighted by the exciting positive topline data from the phase III trial of Linzess 72, microgram in pediatric patients aged six to 17 with functional constipation.
The results of this study add to the body of data supporting the safety of Linzess in this population and brings US one step closer to being able to potentially expand the clinical utility of linzess to this critically but underserved patient population.
As an estimated 4% to $6 million six to 17 year old children and adolescents in the U S suffer from functional constipation.
Mike will discuss the top line data in a few minutes and we look forward to sharing more detail on the potential market opportunity at a future investor update we along with Abbvie are planning to submit a supplemental NDA by the end of the year.
Next the phase II proof of concept study for CMT, one O four for the potential treatment of primary biliary cholangitis continues to progress.
And we are continuing studies startup activities for.
For IW 3300 phase phase II proof of concept study in patients with interstitial cystitis bladder pain syndrome.
And finally, we continue to generate profits and <unk>.
We ended the third quarter with $574 million in cash and cash equivalents in the balance sheet.
We're pleased with the progress across our three strategic priorities and believe that we will continue to position ourselves for growth moving forward.
Now, let's turn to some additional details on the commercial performance of Linzess on slide seven.
Linzess continues to see high utilization among health care practitioner.
Further reinforcing our position as the number one prescribed branded medicine in the U S for the treatment of adults with Ibs C and chronic constipation.
Impatient access.
Finally, we're committed to advancing opportunities to broaden the clinical utility of Linzess and help more patients in need of treatment as evidenced by the recent positive phase III data and or 617 year old pediatric program, a bunch of bunker functional constipation.
As part of our commitment to leadership in G. I I'm also excited to share that recently, we attended the American College of Gastroenterology are ACG meeting.
Which included a symposium on updated Ips treatment guidelines and their their recommendations.
We're proud that in June Princess was the only therapy to receive a strong recommendation for the treatment of adults with IBSA, you'll be updated a J treatment guidelines, a powerful reinforcement that linzess could help adults living with a highly frustrating symptoms of IBSA.
We couldn't be more excited about strong position, we're in today and the opportunities ahead of us.
I would like to say a very big Thank you to all iron with employees, who have laid the foundation for a continued momentum and strong execution against our strategic priorities as we continue to help make a real impact impatience lives.
I would now like to hand, it over to Mike will discuss our pipeline programs right.
Thanks, Tom and good morning, everyone. We continue to make progress across our three pipeline programs I became with a positive top line data that was announced in September from the phase three clinical trial evaluating <unk> 72 micrograms once daily in pediatric patients aged six to 17 with functional constipation.
We're really pleased with the positive results of the phase III trial, which showed that an appetite improved frequency of spontaneous bowel movements and still consistency and was well tolerated and S safety in the study population.
Functional constipation is one of the most common G. I complaints in this age group and we have a significant impact on a patient's quality of life. We're excited about the potential for <unk> to become the first F. D. A approved prescription therapy for <unk> for children ages, six to 17 with functional constipation.
A brief summary of the top line results are shown on slide nine.
A total of 330 patients eight six to 17 to fulfil modified round three criteria for child adolescent functional constipation randomized in a one to one ratio between the lack of tied or placebo.
Top line data indicated that Linaclotide 72, micrograms showed a statistically significant and clinically meaningful improvement compared to placebo in 12 week spontaneous bowel movement frequency right, who are spm's per week. The primary endpoint linaclotide traded patients demonstrated a greater than two fold.
Lee squared main changed from baseline N spm's per week compared to placebo at one point O. Five still consistency is accessed as assessed by the Bristol still form scale was a key secondary endpoint and shared and improved minute wait 12, with an appetite compared to placebo.
Overall, an appetite was generally well tolerated the most frequently reported treatment emergent adverse event was diarrhea, which occurred in 4.3% of an appetite treated patients versus 1.8% in the placebo group, adding additional data to the existing pediatric safety data in this population.
Turning to slide 10, the strong data are encouraging and further our understanding of the safety profile of an appetite in pediatric patients aged six to 17 with functional constipation and demonstrate evidence of its potential to in to provide therapeutic benefit to these patients suffering from this disorder.
As Tom mentioned, we along with our partner have the plan to submit a supplemental new drug application by the end of this year will request a priority review based on the data in the unmet patient need we plan to submit a detailed top line did we plan to submit detailed top line data to the digestive disease week meeting planned for May of next year.
Next IW 3300, <unk> agonists and a wholly owned iron wood asset for the potential treatment of facial pain conditions, such as interstitial cystitis bladder pain syndrome, or I C. D. P. S. Since successfully completing the face when dosing studies and healthy volunteers earlier this year we're continue.
Study startup activities and plan to finalize the phase two proof of concept study design this year and we expect to enroll patients beginning in early 2000 twenty-three we plan to provide additional details on the study design early next year.
And finally C N P. One O four for the potential treatment of primary biliary cholangitis for pharmaceuticals continues to recruit patients in the clinical study with C. M. P. One O four and we expect to see data in the second half of 2023 I had the opportunity to attend to 20 twenty-two primary biliary cholangitis patient Education conference.
For the first time in October where PBC patients family members and clinicians came together to raise awareness and provide education and support for family members and friends of people diagnosed with PBC at this meeting investigators in connection to like we're excited by Coors novel Nanoparticle platform to potentially help cure this devastating disease.
We believe C. N P. One O four has the potential to significantly shift the treatment paradigm and P. B C targeting the root cause and if successful b. The first truly disease modifying therapy for patients with that I'll now turn it over to <unk> to review our financial performance.
Thanks, Mike Good morning, everyone. We had a strong third quarter driven by continued impressive double digit linzess demand growth based.
Based on our performance to date remain on track to achieve financial guidance, we put forth the beginning of this year.
These refer to our press release for a detailed financial information.
Now.
That's U S net sales for $261 million in the third quarter of 2022, a three per cent increase compared to the third quarter of 2021 <unk>.
Strong lenses prescription demand growth was partially offset by net price erosion versus the prior year.
You're to date through the third quarter Linzess prescription demand is up 10% year over year and that sales growth is up 2% year over year.
For the full year, we continue to expect Linzess U S. Net sales growth in the low single digits driven by double digit prescription demand.
Turning to Linzess brand profitability commercial margin in the third quarter of 2022 with 74%.
Moving to Iron Wood revenues in the third quarter of 2022, Ironwood revenues were $109 million driven primarily by U S. Windsor.
Linzess collaboration revenues of $105 million.
Next income tax expense and profitability during the third quarter of 2022, Ironwood recorded $20 million of income tax expense.
<unk> net income was $50 million and adjusted EBITDA was $69 million in the third quarter 2022.
Turning to our cash and capital allocation priorities in the third quarter degenerate $69 million in cash flow from operations and ended the quarter with $574 million in cash and cash equivalents.
Capital allocation priorities continue to be focused on investing to maximize lenses and actively pursuing innovative highly differentiated G. I acids to add to our portfolio. We can see to take a thoughtful and disciplined approach to capital allocation, we maintain a high bar as we value of potential investments and aimed to create.
Value for patients and shareholders over the long term.
We are in a fortunate and unique position of being a profitable biofog confirm accompany with strong cash flow generation.
We have deployed roughly $270 million over the past 12 months, but bleeding or $150 million share repurchase program.
And $121 million principal repayment of our 2022 convertible notes to strengthen our financial position and we are on track to end the year with greater than $600 million of cash and cash payments on the balance sheet.
Turning towards 2022 guidance on slide 13.
We are reiterating our full year 2022 financial guidance as we remain confident in the continued strength of linzess with expectations of double digit prescription demand growth.
We continue to expect U S. Linzess net sales growth in the low single digits per cent.
Ironwood revenue 420 $430 million.
Which includes approximately $10 million and royalty and other revenues <unk>.
And adjusted EBITDA upgraded and $250 million.
We believe our company as well positioned for continued growth and remained focused on advancing are three strategic priorities. We are excited about the opportunities ahead of us to improve the lives of G I patience and deliver shareholder value.
Want to close by thanking Oliver employees <unk>.
Patients caregivers and advocates for their sheer dedication to advancing and supporting therapies for G I disorders.
Operator, you May know open up the lines questions.
At this time I would like to remind everyone. If you would like to ask a question. Please faster than the number one on your telephone keypad.
Yeah first question comes from David Asthma, I first handler.
Hey, guys. This is Isaac for David Thanks, So much for taking our questions.
Just one on the <unk> can you give us a sense for how the 20th 20th from you pay your conversations have been playing out so far.
And what what can we expect for net realized price next year relative to this year.
Secondly.
We saw one of our generic tears by actress recently file IPR against Barouche on <unk>.
So.
<unk>, how do you think about the impact of a potential early generic entering.
You know on on the address.
And then my last question.
Is on your you know update it it's really appetite for BT and M&A in this environment given the state of your capital structure.
Would you let her up to some extent for commercials play jazz that or maybe an asset that have visibility into a very near term launch.
Where you can of course leverage our existing sales infrastructure. Thanks, so much.
Thanks for your questions Isaac let me start by I'll I'll tackle the price question and then we'll go into the generic question and then overall I think beating an eminent yet.
Process at the moment.
First on the notion of price book I wanted to be clear, where this is the third corps to call or not in a position today to provide guidance for 2023, yet hopefully do that at an Investor conference in early January look forward to doing that at that time, and we will come back with greater detail. What I think we can say as a couple.
Things.
One.
We're pleased with the strong growth of Linzess and the important driver in our mind of that growth has always been our class leading payer access market access is really.
The reason, we're unable to drive double digit demand growth.
Has been our ability to make it easily prescribing hold by the caregivers and easily obtainable by our patients and so we are very heavily focused and on driving.
Ease of access to demand growth.
So what I will say is I think we said we're gonna have high single digit price erosion. This year in 2022, and then at the start of the year I think we communicated that we believe that 2023 would be moderate moderator <unk> bless moderate or more moderate relative to that high single <unk>.
<unk> year over year decline Uhm, there's nothing in our negotiations that would suggest that is different we still think it'll be better than 2022, but we're not ready to communicate what that is until probably when we give guidance in early January .
Okay and then on the second question about early generic entrants maybe time you want to just comment on that.
Robin.
I think it's important first of all we can't comment on obviously their IP real estate, but what I can share with you is obviously, we were able to settle all of our end does.
In a reasonable manner and I would expect the ball should be able to do the same thing obviously they're pattern.
Real estate is very very.
Very similar to ours with regard to substance of matter I also think it's important to remember.
<unk> is a very strong position in the market places you know and we've been playing it on a generic market from day, one when we launched the market leader was generic peg certainly amitiza has gone generic there have been several entrance into the market, but you know this product is continued to thrive and it continues to thrive because.
Cause of the strong clinical profile and the very high satisfaction, but also the broad pier access we have so obviously, we take all threats very seriously, but you know our job as a market leader is to continue to grow the market and capture a disproportionate share of that you know to continue to drive the growth because really.
The lifeblood of of lenses is demand growth and and we continue to refine our marketing mix from promotion computer access you know to continue to support that growth because we just don't see it changing keep in mind you know as successful as this brand has been.
There's 30 thought 30 million people out there suffering in with this do pediatric indication that adds another four to 6 million patients. So we can we expect to see continued growth in demand and we just need to be able to maintain that momentum.
I think the last question around B D and M&A thought processes the moment so.
As we've noted in our priorities one of them is filled out an.
Innovative Gi portfolio and I think we remain committed to that so we have a as an organization. We certainly have the gold bringing more acids into the portfolio. We are taking a very disciplined approach, though on capital allocation and we have set a really high bar for evaluating completing transactions.
Especially in this environment and want to make sure. The deals we do create value. We are actively evaluating opportunities and I think from our perspective, you know the third pillar that we have in our overall strategy is around generating profits and sustainable free cash flows I don't see a transaction that we.
Do jeopardy, jeopardizing, our ability to do that or severely impairing our ability to do that and so I think.
We're we're looking for assets and.
Will circle back to the market with women, if we can find something that meets our requirements and hurdle rates.
Very helpful. Thanks.
Mmm.
This question comes from the line of Forest Peter.
Good morning, a couple of questions for me, maybe first on pediatric functional constipation curious if you could quantify the size of that market and also how much. That's current prescription is written by pediatricians and the second question is on one O. Four if you could maybe set some expectations of how should we should.
Interpreting data, even though I know, what's coming next year, just to help us kind of a bookmark clinical expectations.
Alright, great. Thanks Sports, maybe we start with the second question on C. N P. One O four and then we'll go to the pediatrics.
Alright, so Michael and so the insurance. Thanks for the question more so in terms of data for CMP, one O four they're actually two aspects I mean, one we benefit from regulatory history and precedent here as you know their current products on the market N P. B C and they do use the end point around affluent phosphatase uhm and there there are metrics within.
Improvement in Apple My phosphatase that are.
Got to be clinically meaningful so clearly alkaline phosphatase is one of the endpoints in our.
Phase two safety Colorability Pharmacodynamic, an efficacy study. So that's what we would do obviously for preparing for granted dilatory interactions, but it's also important to realize that with this new technology. The other key component. We're gonna look at is the impact on the immune response in patients with P. B C.
Again, as we mentioned in prior calls you know the science around this is is quite amazing and we now have the opportunity to literally measure the T cell auto immune response in patients with auto immune diseases and P. B C is an auto immune disease, driven by really unique antigen. The P. D C.
E. Two antigen that might've <unk> enzyme complex that we've also talked about earlier, so having the opportunity to take that very objective tangible readout gives us a lot of power in a in a sense for being able to interpret the data and so we are going to look at the T cell responses in this study as well because.
That will really give us a real tangible index of the drug's efficacy, but also a very likely read in to the clinical benefit downstream because that's you know one of the real challenges and P. B C or liver disease in general is how these biomarker changes like alkaline phosphatase translate.
And the histologic or liver function improvement.
And the ability to focus on these immune targets really gives us to think in a nice opportunity for an additional read in clinical benefit.
Right and then and then.
And I think on the Paediatric everytime once you're dressing room.
So as far as the songs as we've mentioned this is not really prevalent disorder.
Basically we estimate four to 6 million.
Kids suffer from.
From functional constipation from six to 12, which is really I think the real kind of attractive market.
Target that we have I mean these.
These are highly symptomatic diseases.
One of the top reasons why my parent takes a child to see the physician.
All they have available to them really is paralyzed, which isn't even approved and kids and which is you know a mere lines basically liquefy stool. So it's it's a little it's a little tricky to manage these patients I mean, what we've seen in market research. So far is a very very positive response to the clinical profile, particularly with our ability profile, which is very encouraging.
It isn't going to require an additional dose it'll be basically 72, microgram dose, which can be sprinkled on food or or or or dissolved in water. So it'll be very easy to administer unlike you know.
The the liquid mirror Lex.
As far as current utilization.
There is some use out there a particularly with the pediatric gastroenterologist, but it's a very concentrated prescriber base and you know overall, but there isn't much utilization to date, there's been a couple of publications around this but I I think this is a real upside opportunity.
You know, we're still kind of evaluating it and this is where I think we're really going to let the data guide us.
To see how Promotionally responsive you know the market is which certainly we know it's very promotional responsible for adults. We expect the same thing for kids.
And then we can really determine what level of investment you know, it's going to be required, but we don't see a dramatic increase.
In the investment it's really refighting, the marketing mix in terms of who we are targeting and what communication channels are we going to leverage that educated positions and drive patient demand.
Alright, Thank you very much for taking my question.
Thanks for us.
Once again, if you would like to ask a question. Please press star and the number one on your telephone keypad.
Your next question comes from the line of Daniel J P. Morgan.
Good morning, guys. Thanks for taking my question two questions first and they're prepared to Mark you mentioned, an exploration of new prescription observed and thank you, what's driving that growth and second given that P. B CS and autoimmune disease. Historically why do you think it's been a been a challenging indication.
Not highly <unk> has been highly responsive to conventional immunosuppressive drugs. Thank you.
Yeah, So maybe I'm, Mike you can tackle the second component there on a.
A b C.
Sure.
I think I said, a really good question.
<unk> you're talking about the.
Sort of inability to date at least for uhm available immuno suppressive agents to really wrestle with the pathology M. P. B C and I think we've learned a lot about the immunologic processes you know in the last three or four decades, and then a lot of those approaches have gotten you know great therapy, whether they're anti T N.
Extra more specific side of kind of purchase but the reality of a lot of pass allergy is it doesn't <unk>.
Interplay with those pathways and certainly for auto immune diseases. It is a little bit of it.
Different approach sometime in terms of the pet biology. So all I can say is that your statement is accurate right. Those those immunotherapies have been proved beneficial in C. B C and it's probably likely to the unique features of that auto immune disease, which is driven by a very specific subtype of T cells C. D. Four and C. D. A T cells that respond.
To the specific P. D C U two antigen. So it's a very focused sort of immune attack and it's actually focus just on the bile duct epithelium cells and given that focused more other reaching immune suppressive agencies I haven't been able to impact that enough for a clinical benefit but that the flip side of that is that's what makes those.
Diseases, so right if I could use that word for the approach that core hesitate with the nanoparticle technology because that is a very specific approach that gets to target a specific antigen that that could be or in this case is the root cause of the disease like P. B C and that's what I mentioned that P. D C. Two antigen.
So I think the flip side is really a positive and a tolerance platform because it gives us a very focused attack for the past allergy of P. B C and that's why we're quite excited about that program.
Thanks, Mike and then.
And I think I think Tom in.
In his opening remarks is pretty clear.
There we were again there are three things that are really driving nudibranch rose I think they're the foundation of what's made linzess. So successful long run it's strong clinical profile.
Real strong customer satisfaction with the drug there's focused investment that we have on the consumer side and also on the professional side in terms of brand promotion and then lastly, I think the thing we've been talking about all along on our call, which is leaving formulary coverage is class, leading and and help support our.
Or a pet or providers and then our patients as well if there's anything else that you think that but I think those are the big drivers as of new to Brian Grossman the corner criminal if you've got spot on I think the other thing to keep in mind.
We presented data.
W. A year ago, showing that the actual prevalence of idea see cause increased pretty significantly.
Being out of the pandemic, nobody really understands why that'd be good.
Certainly.
Certainly a lot of distress, which we know does trigger.
This is probably inherit that so I think we're seeing wanted to increase the number of patients presenting to the physician's office <unk> appointment, we continued to refine our marketing mix.
Bolt on consumer activation and primarily consumer activation bin.
Successful as we continued to evolve them or who makes particularly in the digital space, where we know there's a real heavy traffic a patient's looking for some help so I think.
<unk> earlier I think this is about a lot of suffering patients or suffering patients actively seeking here too. We've got a very strong brand, it's easy to prescribe and we also know that this drug continues to be very promotionally sensitive.
As we push it grows.
Very helpful. Thank you.
Thank you.
Next question comes from the line of 10 sang with capital one.
Hi, Thanks, Mike.
Phone question on C. M P. One O four.
Is is is this targeted would you classify this as a targeted.
She'll medicine, I mean is there a specific biomarker you're going after in T. B C.
Yeah first I think Tim that's S. That's really a great question because it's also one of the things that makes this.
Really so scientifically amazing because the whole root cause of P. B C is that.
Mitochondrial antigen the P. D C E two patients with P. B C. If I could say it this way has a P. D. C E. Two problem the problem with that is their immune system reacts to this post antigen P. D C too.
And takes that and destroyed <unk> cells with that so it's a native protein in the in the mitochondria ADC too that the patient's immune system looks at as an enemy UFO and it reacts to it and kills the biotech cells.
That really is the hallmark of P. B C and that's what makes it very unique and to your point a very targeted opportunity. So it really is this antigen because you diagnose P. B C. I looking for an anti mitochondrial antibody inpatients. That's one of the diagnostic criteria for P. B C and.
Anti mitochondrial antigen is the body's response to P. D. C E. Two in patients with P. B C. So they have an altered immune response to this house antigen and it's a very unique antigen that really lets us target that antigen and these patients. So I I agree with this principle approach.
Addressing which is this is kind of almost quintessential precision medicine, you're giving a P. D. C. Eight two directed therapy patients with a P. D C E two problems.
Okay No that's helpful like.
You know in in your study is there and actually is there actually an essay that you guys are.
Or of course using.
As part of this is part of the trial.
Well for collecting serum samples for the trial and we have and points around T cell responses into your point that those are driven by unique assay that will query the T cells and their response to the P. D. C. U two antigen. So yesterday unique assay to gauge the T cell responses to P. D C too.
Okay, So what I'm like that.
Very helpful and then traveling I I noticed that.
Commercial margins on the Linzess J V. I think they recovered right there 74%.
Do you think this is sort of the ballpark range as to where the commercial margin will will set for the remainder of the year.
Well. Thanks at 10 for the question I'd say it looked like they were Super pleased with the commercial margin here today. Your date through the third quarter commercial margin sort of in line with World War 2021, and we would expect for your commercial margins are also be roughly in line with last year.
So we continue to focus and refine the marketing mix is Tom and talked about earlier and in an effort to optimize brand profits and a commercial margin is you know can fluctuate like we add and it looks like for the last time, we talked about.
Sorry, the second part of early this year, we talked about the reasons cited fluctuated and and why it's back to 74% this quarter.
I think that was a pizza attempt to us.
We believe is pediatric markets, a sizeable opportunity we're still evaluating it but we don't see that you know even though it's you know there's a lot of overlap with the existing targeted physicians will probably identify identified some high potential pediatricians, we'll trade off because it could be higher higher potential <unk>.
<unk>.
But we don't see a dramatic change in the overall investment in the brand even though.
Adding another four to 6 million patients that won't be targeting.
So you know we're running a series of pilots out of the gate, both with regard to professional promotion to see how promotional responsibilities as well as you know there's a very very innovative channels out there both targeting.
Targeting parents with kids kids.
As well as you know.
Pediatric judiciary.
It will also be probably but again I think this is where the data will really help guide us with regard to what is the right level of investment to drive on going growth.
Okay got it that's very helpful. Thanks, Tom.
Thanks to.
At this time there are no further questions.
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