Q4 2022 Ironwood Pharmaceuticals Inc Earnings Call
Okay.
Good day and welcome to the Ironwood Pharmaceuticals, Q4, and full year 2022, Investor update conference call today's call is being recorded.
All lines have been placed on mute to prevent any background noise and after the Speakers' remarks, there will be a question and answer session. If he would like to ask a question. During this time simply press star one on your telephone keypad. If he would like to withdraw your question. Please press star one again.
And I would now like to turn the conference over to Matt <unk> Director of Investor Relations. Please go ahead.
Thank you Savannah.
Good morning, and thanks for joining us for our fourth quarter and full year 2022 investor update.
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.
Discussion of these statements and risk factors is available on the current safe Harbor statement slide.
As well as under the heading risk factors.
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.
As substitute for or superior to GAAP measures to.
To the extent applicable please refer to the tables at the end of our press release for reconciliations.
These measures to the most directly comparable GAAP measures.
During today's call Tom Mccourt, our CEO 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 <unk> <unk>, Our Chief Financial Officer will review, our financial results and guidance.
Today's webcast includes slides so for those of you dialing in Dalian. Please go to the events section of our web site to access the accompanying slide separately with that I will turn the call over to Tom. Thanks, Matt Good morning, everyone and thanks for joining us today as.
As we begin 2023, our commitment to developing and advancing innovative solutions in the area of high unmet need.
<unk> is as strong as ever.
Looking back in the past year, we've made we've made important progress in advancing the treatment of Gi diseases, while redefining standard of care for patients.
I'm very proud of the Ironwood team.
Thanks to their hard work and dedication we closed 2022 with a lot to be proud of.
You've heard us talk about our focused approach based on three strategic priorities, where we seek to maximize linzess strengthened.
<unk>, our innovative Gi portfolio, and delivering sustained profits and generate cash flow.
I'm delighted to say that we continue to drive strong linzess prescription demand growth delivered on our full year adjusted EBITDA guidance and we made strides across all three of our key strategic pillars.
I remain confident in our strategy and believe we are well positioned for even greater success in 2023.
Let's begin on slide six.
With a quick overview of some of the key achievements against our strategic priorities for 2022, and what we expect in 2023.
First maximize linzess.
Linzess continues to see strong prescription demand growth profitability and widespread acceptance among healthcare health care practitioners as the leading branded prescription treatment for adults with Ibs C in chronic idiopathic constipation.
In 2022 prescription demand increased more than 9% year over year the brand.
Continue to demonstrate market leadership by achieving an all time high in new patient starts which is a lead indicator for each future growth potential and.
Growing <unk> market share, which reached an all time high of 45% as at the end of December .
As we announced earlier this week.
We are pleased that the FDA granted priority review of our S. N da for functional constipation in pediatric patients ages six to 17 and assigned a <unk> date of June 14th 2023.
We're particularly excited about the potential to expand the clinical utility of Linzess to this underserved patient population.
We plan to leverage a focused investment to drive growth and improve brand margins overtime.
Next strengthen it progress our innovative Gi portfolio, starting with CMP, one O for the potential disease modifying treatment for primary biliary cholangitis.
In 2022 core pharmaceuticals initiated a proof of concept study in PBC, which will assess the safety tolerability pharmacodynamic effect and efficacy.
We also kicked off study start activities at the end of 2022 for IW 3300, ironwood's wholly owned GCC agonist towards the potential treatment of visceral pain conditions, such as interstitial cystitis.
Bladder pain syndrome.
We anticipate several exciting opportunities to advance the value potential of our pipeline. This year first we expect early data in the second half of the year from patients enrolled in the clinical study for <unk> for <unk>.
We expect to begin patient dosing for a proof of concept study in interstitial cystitis bladder pain syndrome for IW three 300 in the near term.
Finally, we continue to actively evaluate opportunities to strengthen our portfolio and we see several potential attractive opportunities in the market that could benefit from ironwood's expertise in Gi.
Our third strategic priority is to deliver sustained profits and generate cash flow.
We delivered on our guidance of over $250 million and adjusted EBITDA.
<unk> ended the year with $656 million in cash and cash equivalents on the balance sheet after deploying nearly $250 million in 2022.
By by completing our share repurchase program and repaying the principle on our 22 convertible notes.
We are in a fortunate position of being a profitable Biopharma company with a highly skilled and experienced team and the management of gastrointestinal diseases, and a strong and growing cash balance.
We believe we're well positioned to execute on our strategy as we strive to become the leading GI health care company in the U S.
Now, let's talk a bit more about the performance of Linzess in slide seven.
As you can see on the left side of slide seven.
The performance of Linzess has been remarkable.
As we continue to see a robust linear growth trajectory.
Overtime.
The strong prescription demand growth for Linzess has been supported by a combination of high treatment satisfaction updated clinical guideline support a class leading formulary access.
We continue to see an acceleration of appropriate new adult patient starts and anticipate this will be augmented in the future should the FDA approve an indication for functional constipation in patients aged six to 17.
We believe the pediatric opportunity if approved could expand the market potential for Linzess is functional constipation effects roughly $6 million six to 17 year old children and adolescents in the U S.
This is incremental.
They need that still exists amongst approximately 40 million adults in the U S that suffer from Ibs and chronic constipation.
Linzess is well positioned to be the branded market leader across both its current and potential future indications.
Looking ahead we're.
We're confident in our strategy and in our future. We believe the investments, we're making in the branded and our pipeline positioning our company for long term growth.
I'd like to say a very big Thank you to all of the Ironwood employees, who have laid the groundwork for continued momentum and strong execution against our strategic priorities.
As we continue to make meaningful impact on patients' lives.
I would now like to turn the call over to Mike to discuss our pipeline Mike.
Thanks, Tom and good morning, everyone. We continue to make progress across our three pipeline programs I'll begin with Ireland appetite pediatric program on slide nine.
As Tom mentioned, we're thrilled that the FDA granted priority review for the Linzess S. N da for functional constipation in children and adolescents six to 17 years of age, which could potentially lead to a commercial launch and Jan if approved linzess would be the first and only prescription therapy to treat this patient population.
New pediatric indication with further reinforced the strong clinical profile of Linzess I'm proud of the team's accomplishments as we continue to seek opportunities to broaden the clinical utility of Linzess and redefine the standard of care for this patient group.
We look forward to presenting the phase III data at the digestive disease week meeting in May of this year.
A&P went up for next for the potential treatment of PBC, which affects an estimated 130000 people in the U S. As we've discussed previously the strong immunology underpinning. The CMP program is focused on targeting a specific PDC E. Two antigen responsible for the Panther algae.
PVC. Therefore, there is an opportunity to assess PDC to specific T cell responses, which should be a lead indicator of clinical benefit we.
We expect to assess T cell responses in patients dosed with <unk> in the second half of 2023. This early T cell data will inform the timing of top line and potential option exercise.
We're excited about the CMP for because it is truly a precision medicine and is introduced as a potentially new game changing asset for PBC patients as Jarrett and other therapies on the market today that address the root cause of the autoimmune destruction of the bile ducts N. P. B C. We will provide updates on the program progress throughout this year.
Moving on to ITW 3300, wholly owned Ironwood asset for the potential treatment of interstitial cystitis bladder pain syndrome.
There is a significant unmet medical need in the area of IC bps as it affects an estimated four to 12 million Americans yet there are very few treatment options currently on the market or in development.
In 2022, we successfully completed dosing studies in healthy volunteers and we kicked off study start activities for the phase II proof of concept study we're prepared to begin dosing patients in the near term. This study has been thoughtfully designed to evaluate the potential impact of IW 300, plus visceral pain in patients with <unk>.
<unk> status and bladder pain syndrome. This trial will enroll patients with moderate to severe pain in a randomized double blind placebo controlled study over 12 weeks patients will receive IW 300 administered once daily efficacy will be assessed based on change from baseline in the worst abdominal pain, using an 11 point numeric rate.
Scale, along with monitoring of Europe , urinary symptoms, another weekly and monthly assessments.
We're excited to begin patient dosing and we look forward to providing updates. This study continues to advance. This is the first time the cross talk hypothesis will be tested in humans and we're proud to be at the forefront of clinical development in this area.
With that I'll turn the call over to Shannon.
Thanks, Mike and good morning, everyone I'll start with an update on Linzess performance.
Linzess U S. Net sales were $260 million in the fourth quarter of 2022, a decrease of 7% compared to the fourth quarter of 2021.
Strong prescription demand growth of 9% was more than offset by price and inventory channel fluctuation.
For full year 2022, as shown on slide 11, Linzess U S. Net sales were $1 billion 2 million, a slight decrease as compared to full year 2021.
While full year net sales growth came in lower than our expectations for 2022, primarily due to inventory fluctuations in the retail channel. We remain confident in the long term growth potential linzess based on the strong prescription demand that we continue to see.
Turning to Linzess brand profitability commercial margins in the fourth quarter of 2022 were 74% compared to 76% in the fourth quarter of 2021.
For full year 2022, commercial margins were 73% versus 74% for full year 2021.
Moving to Ironwood revenues in Q4, Ironwood revenues were $107 million driven primarily by the U S. Linzess collaboration revenues of $105 million.
For the full year Ironwood revenues were $411 million with Linzess U S collaboration revenues of $399 million.
In the fourth quarter and for the full year, Ironwood recorded $23 million and $77 million of income tax expense respectively.
The majority of which is noncash GAAP.
GAAP net income was $49 million in the fourth quarter and $175 million for the full year.
Adjusted EBITDA was $69 million in Q4 and $252 million for the full year.
Throughout the year, we remain focused on our commitment to deliver strong profits and cash flows by driving continued robust linzess prescription demand and demonstrating disciplined expense management.
As a result, I am pleased that we were able to achieve our initial adjusted EBITDA guidance of greater than $250 million that we issued beginning 2022.
Next.
Cash and cash cash and capital allocation in the fourth quarter of 2022, we generated $79 million in cash flow from operations.
And $274 million full year.
We ended 2022, but $656 million in cash and cash equivalents after deploying nearly $250 million during the year completing our share repurchase program and repaying the principal amount of our on our 2022 convertible notes.
We believe we are positioning our company for future success by 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, we remain focused on identifying and investing in opportunities that we believe will create value for patients and shareholders over the long term.
Turning to our 2023 guidance on slide 12.
As previously stated in January we expect Linzess U S net sales growth.
Between three and 5% driven by high single digit percent prescription demand growth. In addition.
We expect to maintain our class leading payer access with mid single digit price erosion.
We expect ironwood revenue of between 420, and $435 million and adjusted EBITDA of greater than $250 million, which includes increased investment to advance our pipeline programs <unk> and <unk> 3300.
Okay.
To wrap up we believe ironwood is well positioned for continued growth and we remain focused on advancing our three strategic priorities of maximizing linzess strengthening in progressing our innovative Gi portfolio.
And delivering sustained profits and generating cash flow.
We have.
Buster Brandon Linzess to continues to deliver impressive demand growth with the potential to expand the market with a pediatric functional constipation indication beginning this year if approved in.
An emerging pipeline with anticipate exciting milestones ahead.
Our strong balance sheet with over $650 million of cash and cash equivalents.
And an accomplished management team with strong Gi commercial drug development and M&A expertise. We are excited about the work ahead of us as we strive to make a difference for patients living with Gi diseases.
And to deliver shareholder value.
Operator, you May now open up the line for questions.
Thank you and as a reminder, it is star one if you would like to ask a question.
Our first question will come from David <unk> with Piper Sandler.
Please go ahead.
Thanks, and I just had a few so first.
With the the guidance in mind can you talk about your level of confidence that you'll see more <unk>.
Stable more stable trajectory for net realized price per per Rx and just talk about the dynamics.
That are driving a more stability.
Or less in the way of erosion.
In 2023 versus 2022 that's that's number one.
And then secondly can you talk about your work on Linzess regarding.
Children under the age of two or two and under and just how you're thinking about making progress towards the eventual romo.
The removal of the box warning.
That's my second question and then just lastly, how do you frame up the pediatric opportunity the six to 17.
And particularly what I'm getting at is what's your view on the extent to which that could drive.
Accelerated.
Growth in volumes post approval. Thank you.
Good morning, David Thank you for the questions look I'll start with the <unk>.
Your first question on price.
Second question regarding the <unk> the.
Children under the age of two I'll hand to Mike and then we cannot well I think we may have you restate. The third question, which I think Tom will answer.
Okay with respect to the for 2023 as you know Linzess is a high volume and value prescription brand and.
We are really excited that we're in the 11th year of of.
Of the drug's lifecycle, and we're still growing high single digits with the drug.
And so we've made significant investments over the course of the last several years with Payors.
To establish and maintain the class leading payer access that we have.
And in 2023, we did not need to make the same level of investment to maintain that access as we did in 2022.
As you know, we continually evaluate price and volume trade offs, we strive to maximize performance of Linzess.
And try to generate profits for the company and for the brand.
And so as a reminder, linzess at preferred on 10 out of 10 of the top two.
Top commercial programs, our commercial plans and covered on I think seven out of the seven top Medicare part D. Plans. So you know as we've entered the negotiations over the past year. I think we entered 2022 came in line from a price perspective, where we thought we were going to be based on expectations. We each have in.
Visibility just based on the volumes and our negotiations with payers and so just.
Where we sit today, we feel pretty good about.
That mid single digit accretion for 2023.
I think the bottom line that drove it is we have great visibility into the contracts. So we saw that last year, we predicted at high single digit and we came in within probably half a percent of what we expected I think we have similar confidence here.
We didn't see as much.
Aggressive price erosion in the contracting process.
We're projecting mid single digits. So I think we do have fairly good.
Things can happen, but I think we have reasonable confidence that we're going to be in the mid single digits.
Mike Yes, sure. So in regards to the question you had about the younger kids, including the less than two but also around the box in general it's good to recall that the original institution of the label when the drug was originally launched that box warning was due really to the theoretical risk of adverse events in kids under the age of 18.
We then worked with the agency with the post marketing requirements in our clinical studies to put together a plan to generate that data and as you saw in 2021, we had a significant box revision, which took the warning from 18 and below pretty much encompassing all the populations down to just two and below which is where it currently is and that's just because we've had the opportunity to generate data in.
Those pediatric populations and you can see that's actually what got the six to 17 year olds S. NDA that we submitted at the end of last year and the prior to review, we just talked about during the call. So we have a very robust data set in <unk> to your point directly.
Continuing its conditional paid studies, we have an additional study going on in two to five year olds. That's part of our working with the agency and we're also planning a study in less than two year olds from six months to see where else with our partners Abbvie and we certainly believe with to generate further clinical data, we have a path and discussions with the agency to continue to have the Lai.
Will manifest a real clinical profile of Linzess, which to date has been very safe and well tolerated.
And maybe I'll take the this is Tom I'll take the pediatric opportunity and obviously to Mike's point, we have great confidence in the safety and Tolerability of this drug and the clinical data on the pediatric onto the pediatric phase III program is really remarkable one it's clearly demonstrates efficacy, but what's been with.
Striking was how well the drug was tolerated, which is a real challenge with currently available therapeutic and therapeutic options you know when I look at the pediatric opportunity we talked about the 6 million patients that are suffering chronic lead from from functional constipation, but one of the things to keep in mind, which is different from.
Kids from adults is seeking care behavior that you got a kid, that's really suffering youre going to see a doctor. So the percent of care seeking patients is a much much higher present and they generally present multiple times a year and not just one or two times. So it's a very available population.
We also know that in a while there's a lot of pediatricians out there, it's a pretty concentrated prescriber base. So we think that we can get to a lot of the top prescribers with our existing selling effort. So we talk about this concentrated promotional effort because we really wanted to first understand.
How promotional <unk> sensitive the drug will be in the marketplace, which will then inform further investment. So we're not just looking at.
Personal promotion, we're also looking at other communication channels in which we can educate these physicians on a better choice.
For for managing their patients and everything we've seen in market research it looks very encouraging with regard to the target product profile and the clinical profile of drug and the willingness to try as I look at.
The upside over time, obviously, we're going to we hope to get the indication in June .
There's going to be there could be some upside in 2023, as we really evaluate to promotional response, but the real value creation. We believe will start in 'twenty four 'twenty five but I think we all believe that based on the size of the population.
Unmet medical need and the clinical profile of the drug that linzess will be well positioned to help an awful lot of kids.
Yeah.
Okay very helpful. Thanks, guys.
Thank you Dave.
Okay.
Our next question will come from Dan <unk> with J P. Morgan. Please go ahead.
Good morning, guys.
Two questions from me.
One on <unk> can you clarify for us what you will see versus what the street, we'll see when early data and we saw it in the second half 2020 P. M is it just an internal readout, where you'll announce to opt and assuming positive data on T cell response or would you be able to release the data to the street.
And then second question is if we're going to see some data we would just be on T. Cell response or is there potential to include changes in serum alkaline phosphatase levels. I guess my question is is it possible to see serum alkaline phosphatase level changes data this year.
Yeah, I can address that thanks, thanks for the opportunity to clarify.
Just to be clear too that is reported in Glen Charles stock up you know the trial was always planned to extend in 2024 till 2024, and what we're trying to do is we're trying to add clarity by acknowledging the opportunity to get data in the second half of 'twenty three that will inform us on the timing for the full study readout of top line data.
In addition, our objective in any of the clinical programs is to use all the data we can to inform business decisions as early as possible. So in the second half of 'twenty three we expect to see the early data focused on T cell responses from an enrolled patients and based on the strong science around CMP, one of where we really think that the T cell response is potentially alere.
Lead indicator for clinical responses and you mentioned, specifically how fast how fast is a level of liver biomarker right and again, it's not it is still a biomarker for.
For products approved without fast they often have to do post marketing commitments to actually show that the alpha provides a meaningful benefit to patients. We actually think the underlying pathology of PBC driven by the.
The PTC two antigen is more specifically addressed by looking at the auto reactive T cells.
So that's where we focus we're really trying to focus on the second half of 'twenty three as I mentioned in the prepared remarks, we really expect to see early data on the T cell responses in the second half of 2023, and it will inform us on the timing, but at that point, we will give you an update on the status of the program.
Okay. So just just to clarify is that internal read out or will you be able to release that T cell response data to the street.
Yeah again, we weren't going to make an early assessment is a small group in a very controlled fashion just to make internal business decisions. When we see the data and we understand the relevance at that point, we'll make a decision to update the program further and decide what to do.
Great. Thank you very much.
Our next question will come from Tim Chiang with capital one.
Please go ahead.
Alright. Thanks.
Mike I wanted to follow up on some of the comments on the <unk> 104, I think in prior discussions we've had you you've made the comment that I.
I guess in preclinical.
And what about a 90% reduction T cells T.
T cell response that you've seen is that right or I mean, obviously there is some preclinical data out there on the <unk> 104, and you know.
I wanted to ask you.
What leads you to think that this should have a very very positive reduction in T cells.
Comments here.
Yes, that's a good question and there is preclinical data there is a preclinical and animal model for PBC, which core has interrogated that does show that with the treatment with CMT one of where you get a reduction in his auto reactive T cells in that animal model, but the 90% number you referred to is the number you've heard me say.
In regards to the proof of technology study in celiac disease that was that was run by Takeda actually that uses the coeur platform and the nano particles there encapsulate a gluten and then it gets degraded the deaminated glare and peptides, that's the autoantigen in celiac and see.
Patience and this was published in Gastro in June of 2021.
Then celiac patients the two week two treatments over an eight day period in celiac patients. So a 90% reduction in the auto reactive T cells in celiac patients.
And that also translated into a meaningful improvement and got epithelia structure. The histology. So again, that's the sort of downstream effect of reducing this autoreactive T cells. So as we've said and you might have heard me say before too if we see a similar response you know in PBC that would be quite impressive and potentially game changing for.
For the opportunity to help patients with PBC, but that's where we get we see the data the preclinical evidence is in PBC directly.
Clinical evidence you hear about the 90% ish from of Celiac study done by Ed That's published by another company, but Mike.
I've heard you say in the past that if we do see you know a.
A dramatic reduction in T cells.
Clearly a strong indicator of what you would expect to see as far as overall clinical response with regard to probably the impact on <unk> and by ourselves or bile duct destruction, yeah exactly because we really think we based on the science that this approach CMT one of four and targeting the.
<unk> auto antigen of PBC, which is the PDC two antigen that that is targeting the root cause of the pass allergy of PVC, which is the bile duct destruction that T cells. The Autoreactive T cells destroy the bile ducts. If we can decrease those T cells, then we should reduce floor.
Potentially eliminate the bile duct destruction of PBC patients and again, the celiac data and proof from proof of technology and proof of concept in patients actually showed that their decrease in auto reactive T cells, I mean, celiac patients did improve that epithelium histology.
No that's helpful. Mike.
Can you maybe just one follow up then the dosing in the Celiac study is that comparable in the dosing that you're running in the PBC study is I mean is there anything comparable there.
Yeah, I think it's a great question and that's why we're studying two doses in the current PBC patients. So I think clearly there's a reason to make the association, but I. Just think it's also fair that different diseases made that may have a different.
Pharmacodynamic response to doses. So we're clearly are open minded in terms of as we do this study to be cognizant that we want to find the right dose in PBC patients and that similarly, I'm sure with what's happening in the CLEC space as well.
Okay, great. Thanks, a lot Mike.
Okay.
And as a reminder.
One if you would like to ask your question. Our next question will come from Boris <unk> with Cowen.
Please go ahead.
Great. Thanks for taking my question one question on our CMT one O four.
You mentioned that the market is about 130 patients. If I heard you are 130000 patients. If I heard you correctly can you break that down based on disease severity and if there is any particular subgroup that are one off or will be targeting.
Yeah. So I think it's a good question I think as with most liver diseases. This aspect of disease severity is important.
Fact, you probably know that with a better call like I said the label as that.
Indicated around aspects of liver disease severity in terms of not being advised in patients with cirrhosis or decompensate of liver disease. So so are our program because it's obviously innovative and new in patient populations is ads is starting with that more early liver disease patients with PBC.
<unk>.
But the reality is the underlying mechanism should be broadly applicable to all patients with PBC because again, we're targeting the immunology behind the bile duct destruction.
And using semi synthetic biologics and other approaches you could see a reason and as is demonstrated with some of the semi synthetic biologics at labeling that there might be.
A reason to have concern with some more severe liver disease patients, but if we're if the science plays out and were able to reduce those autoreactive T cells that should be applicable to the broad population of patients now again, we're in proof of concept study, we got a long way to go getting data, but again, that's why we like the program because it's really grounded in the science of the real root cause.
A P B C.
Great and then my second question is.
Maybe you could comment on your thoughts on the impact of inflation reduction Act on Linzess.
Yeah.
Sure.
<unk> I'll take that.
I look at it with any proposed legislation will follow the developments closely here and we're.
We're working with our partner Abbvie to assess any potential impact.
On our business at this stage is throw my Super.
A wide number of unknowns around certain aspects of this legislation and thinking about the potential impact here to Linzess. It's important note we've been working with Medicare part D for years and for many years as a core aspect of our strategy has been to ensure broad coverage and patient access so from a negotiation standpoint.
From a discounting standpoint, none of this is new to us.
And so I think we're at.
We'll come back to you when we have a better sense of what that looks like.
Right now I think that's what we can say.
And I think we're reasonably confident I mean, you were providing very significant discounts currently to Medicare I mean, which is the reason why we're seeing some price erosion here because we are working closely with.
The Medicare payers as well as the commercial payers to ensure a very broad payer access. So you know you know could it have some impact yeah, but I think of all the brands that are out there that theyre going to be focusing on you know we're already in the game and actively negotiating with the major payers so well.
We'll have to wait and see but I think we feel pretty good about the position we're in.
Alright, thanks for taking my questions.
Yes.
Yeah.
And with no further questions. We will conclude today's conference. Thank you for your participation and you may now disconnect.
Please wait the conference will begin shortly.
Okay.
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