Ironwood Pharmaceuticals Inc. Q1 2023 Earnings Call
Good day and welcome to the Ironwood Pharmaceuticals, Q1, 2023 Investor update conference call.
Today's call is being recorded.
After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question. During this time simply prestige star followed by the one on your telephone keypad.
Thank you I will now turn the call over to Matt Rhodes <unk> director of Investor Relations. Please go ahead.
Thank you Angela good morning, and thanks for joining us for our first quarter 2023 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 in our annual report on Form 10-K for the year ended December 31 2022.
And in our future SEC filings.
All forward looking statements speak as of the date of this presentation and 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 for 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.
<unk> <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.
So for those of you dialing in please go to the events section of our web site to access the accompanying slide separately with that I'll turn the call over to Tom. Thanks, Matt Good morning, everyone and thanks for joining us today.
Related to announce our first quarter results. This morning, we are off to a terrific start to the year as demonstrated by continued strong linzess demand growth progress of our clinical studies and another quarter of delivering robust profits and cash flow.
And Ironwood, we remain committed to advancing the treatment of Gi diseases, and redefining standard of care for Gi patients I believe the progress we've made across the organization in the first quarter demonstrate the steps that are taken to become the leading Gi health care company in the U S.
Let's begin on slide six with our strategic priorities.
Our strategy starts with maximizing Linzess Linzess continues to experience remarkable prescription demand growth and widespread adoption amongst health care practitioners is a leading branded prescription treatment for adults with Ibs C and product idiopathic constipation.
In the first quarter Linzess U S. Net sales growth increased 8% year over year prescription demand growth increased over 10% as compared to the first quarter of 2022, demonstrating that the momentum of the brand remains strong.
We believe there is still a significant opportunity to reach appropriate new patients and drive additional prescription demand growth, including a potential mid year indication for linaclotide in functional constipation for patients six to 17 years of age if approved.
Next we are focused on continuing to strengthen our progress our innovative Gi portfolio, starting with CMP, one O for a potentially disease modifying treatment for primary biliary cholangitis. The clinical study is ongoing and we continue to expect early data assessing the T cell response in the second half of the year.
From the patients enrolled in the studies, which will inform the timing of top line data.
Second IW 3300, we are continuing the proof of concept study in patients with interstitial cystitis bladder pain syndrome.
Finally, we continue to actively evaluate opportunities to strengthen our portfolio and we see several attractive opportunities in the market that we believe are accessible it could benefit from ironwood's expertise and capabilities in Gi.
Our third strategic priority is delivering sustained profits and generate cash flow, we delivered GAAP net income and adjusted EBITDA of $46 million and $60 million, respectively and ended the first quarter was 700 $740 million in cash and cash equivalents on the balance sheet.
With our unique profile as a profitable Gi focused biopharma company with a strong and growing cash balance. We believe we're well positioned to maximize linzess growth and continue to build an innovative gi portfolio to create the next growth horizon for the company.
Now, let's turn to the performance of Linzess on slide seven.
As you can see on the left side of slide seven Linzess performed exceptionally well in the first quarter as I mentioned, a few moments ago Linzess prescription demand increased 10% year over year, and net sales increased 8% year over year and generated $250 million in the quarter.
Over the first quarter, the adult Ibs C and chronic constipation prescription market experienced strong growth with linzess experiencing an all time high in new to brand new to brand patient volume to strengthen its position in the market as the number one prescribed brand for adults with Ibs C and chronic constipation.
Most importantly, we are proud to have had treated more than four and a half million unique patients since the launch of the brand over 10 years ago.
The growing number of patients that are actively seeking care and had been treated with linzess is evidence of the high treatment satisfaction expressed by both clinicians and patients.
We believe these market dynamics combined with class leading formulary access.
The clinical guideline recommendations from both Gi societies, and the strong commercial execution is driving the demand momentum that we continue to see.
And we expect this momentum to be augmented.
Mid year should FDA approved the pediatric functional constipation indication reinforcing the growth potential for the brand.
Looking ahead.
We're excited about the continued growth of Linzess.
The advancement of our clinical program in a stronger financial position as we advance ironwood's leadership in Gi.
In a few days, we will be presenting five abstracts at the digestive disease week meeting or EDW, including an oral presentation.
These abstracts will highlight new data that reinforce the potential of linaclotide to treat functional constipation in children and adolescence.
We look forward to DW, where each year, we have an important president's demonstrating our commitment to advancing Gi therapies, including expanding the clinical utility of Linaclotide.
Before handing it over to Mike to discuss the pipeline programs.
I'd like to take a moment to say a very big Thank you to Jason Richard for his leadership and an immense contributions to ironwood over the last 11 years.
Recently, serving as our chief operating officer and for helping make Ironwood the company. It is today.
Will it change like this is not easy as an organization committed to maximizing shareholder value. We continue to look for ways to streamline our team and align key functions and resources to meet our current and future needs and support ironwood through its next phase of growth.
I would also like to acknowledge all of the Ironwood employees, who have continued the momentum and strong execution against our strategic priorities as we continue to help make a remarkable impact in patients' lives.
I would now like to hand, the call over to Mike Mike.
Thanks, Tom and good morning, everyone. We continue to make progress across our three pipeline programs I'll begin with Ireland appetite Pizza program on slide nine.
We believe the pediatric opportunity if approved could expand the market potential for linzess as functional constipation affects roughly $6 million six to 17 year old children and adolescents in the United States. If our S. N da is approved by the FDA Linzess would be the first and only prescription therapy to treat this patient population.
And this is a population that is in need of better therapeutic options. We continue to work through the U S. NDA with the FDA and look forward to the June 14th at different dates.
As Tom mentioned, we'll be presenting pediatric data on the efficacy and safety profile of Linaclotide in trading functional constipation in this patient group at the upcoming <unk> meeting.
Next to CMP want a floor for the potential treatment of primary biliary cholangitis, which affects an estimated 133000 people in the United States.
A concept study is ongoing and given the strong science underlying this therapy, we plan to assess T cell responses in patients dosed with CMP one four in the second half of 'twenty three.
This will inform the timing of top line data and the potential option exercise, we expect to provide an update on the program at that time.
We're excited about CMP <unk> for it because it is truly a precision medicine, and then introduces a potentially new game changing asset for PBC patients and certain other therapies on the market today that address the root cause of this autoimmune destruction of the bio docs and PVC.
With respect to IW 3300, our wholly owned ironwood asset for the potential treatment of interstitial cystitis bladder pain syndrome, there's a significant unmet medical need in this area as this chronic condition affects millions of Americans. It there are very few treatment options currently on the market or in development last year, we successfully completed dosing.
In healthy volunteers and are currently executing a proof of concept phase II study interstitial cystitis bladder pain syndrome patients are being screened and dosed and site Activations are ongoing and going very well. We're excited about this program as it 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.
This area, we're looking forward to providing updates as studying continues to advance with that I'll turn the call over to sharpen.
Thanks, Mike and good morning, everyone. It's wonderful to be in a position to discuss such great financial performance with all of you I will begin with an update on Linzess, which is off to an impressive start to the year.
As shown on slide 11 U S. Net sales were $250 million in the first quarter of 2023 and.
An increase of 8% compared to the first quarter of 2022, driven by strong prescription demand growth of 10%, 10% year over year. We are excited about the strong start to the year.
The continued momentum of the brand.
Turning to Linzess brand profitability commercial margins in the first quarter of 2023 were 73% compared to 74% in the first quarter of 2022.
Moving to Ironwood revenues in the first quarter of 2023, Ironwood revenues were $104 million driven primarily.
Merrily by U S Linzess collaboration revenues of $102 million.
<unk> recorded $20 million of income tax expense the majority of which was noncash GAAP net income was $46 million and adjusted EBITDA was $60 million in the first quarter.
Next cash and capital allocation in the first quarter, we generated $80 million in cash flow from operations and ended the quarter with $740 million in cash cash equivalents. We believe we are positioning our company for future success by maximizing linzess growth and actively pursuing innovative highly differentiated Gi.
Assets to strengthen 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 while the potential to create value for our patients and our shareholders over the long term.
Next I'll review, our 2023 guidance on slide 12.
We are encouraged by the strong start to the year and reiterate our full year 2023 guidance across all metrics. We continue to expect Linzess U S. Net sales growth of between three 5% driven by high single digit.
Percent prescription demand growth. In addition, we expect to maintain our class leading payer access.
We expect ironwood revenues of between 420.
$435 million and adjusted EBITDA of greater than $250 million, which includes increased investment to advance our pipeline programs <unk> four and <unk> 3300.
To wrap up we had a strong start to the year and expect to build on the momentum with potential midyear pediatric functional constipation indication.
Our first quarter results reflect the continued execution against our strategic priorities we.
Remain we believe ironwood is well positioned for continued growth and we remain focused on maximizing linzess strengthening and progressing our innovative gi portfolio and delivering sustained profits and generating free cash flow.
We are excited about what's ahead this year and we'll continue to keep you updated on our progress.
I want to close by thanking all of our employees patients caregivers and advocates for their shared dedication to advancing and supporting therapies for Gi disorders.
Operator, you May now open up the line for questions.
At this time I would like to remind everyone. If you'd like to ask a question press star one on your telephone keypad.
Your first question comes from Ken Cheng.
Capital one.
Your line is open.
Hi, Thanks, Tom could you talk a little bit about just.
Obviously, the demand trends for Linzess are doing quite well and could you just talk a little bit about how you sort of see the rest of the year playing out for Linzess obviously.
It looks like Youre going to get our pediatric functional constipation indication.
How much additional growth do you think you'll you'll see with that indication longer.
Thanks, Tim.
Well I think you can you can hear we are quite excited about what we're seeing in the first half of this year. The first quarter of this year and we're continuing to see this demand growth moving.
Moving forward.
I think we'll we'll see we need a couple more data points to really understand how we think we're going to land the year. So that's the reason why we're kind of staying firm on our current guidance.
But I think the next the next month or so it will give us a really good idea as you know.
This this market tends to slow down a little bit in the summer and then accelerate growth in the back back half of the year, but we're not seeing that right now I mean, we're seeing the market grow and we are growing disproportionately.
<unk> in that market. So I think we're in a very very healthy place for the brand.
It's interesting we've seen this growth spike that seems to be coinciding with our new DTC ads as well as you know we've made some adjustments to the physician call plan with Abbvie, which we think is helping augment some of the growth we're seeing.
I think we're very optimistic about the pediatric population as Mike said, the other six to six 8 million kids out there that are suffering and I think the big opportunity here. Tim is the fact that these paid these kids are actively seeking care, which is very different than the adult population, where you know adults will struggle and try to self medicate, but if you did.
Have a kid, that's really disabled with abdominal symptoms in concert patient you're talking to a doctor probably multiple times, a year, which we're going to certainly see what we can do to help.
We're gonna be viewed be we're.
We're trying to be very thoughtful about how we're going to allocate the investment it will be running a series of pilots with our partner.
Abbvie to really assess how promotional responsive.
This pediatric market is which really will inform the investment for next year. So I don't know that we'll see a whole a whole lot of growth coming out of this market I hope I hope, we see growth, but I think the real impact will come.
And 24 and 'twenty five as we invest focus and invest in this market, but at this point in time, Tim We're really delighted with the performance of the drug.
Okay, Great. That's helpful and maybe just one question on CMT 104.
Mike you talked about T cell response.
What sort of threshold you need to see.
In this phase II study.
Yes, Thanks, Dan Thanks for the question. So as you know this is the first in human study with this technology in PBC. So we're going to learn a lot. It's one of the reasons why we actually did this said this deal because the science is strong and we think we feel we really do have an opportunity to understand how the drug may work by looking at the T cell responses.
You May also recall back in this in the Celiac study you know they had a pretty robust T cell response, meaning.
Using the nanoparticles with Glee of dinner gluten inside that reduced the T cell responses with treatment roughly like 88%. So that's it was pretty robust, but the key point is not necessarily a T cell reduction, but that it correlates with the biomarkers as well and in Sealy I could actually correlated with the epithelia all histology improvement so we're going to look at.
The T cell responses and we think we can get a really clear gauge on whether the drug is going to work by the T cell responses. The absolute percent will be remained to be seen but we're gonna have to look at the correlation with the biomarkers included in terms of liver function to really understand where that's going to play out in terms of the longer term clinical benefits, but we were really excited about the opportunity to look at the <unk>.
Cell responses early to really make an early read for further investment and for the business case downstream because we think the science is so strong they're just great opportunity to do that and Mike maybe you can comment also on.
You know which biomarkers.
Probably most relevant is how does the FDA look at that as an employee as far as drug response that the biomarkers are pretty fairly established because of prior regulatory engagement because of <unk> acid and <unk> assets and then those are programs at the agency focus on Alpha <unk>, which is not unreasonable outcome.
<unk> is a primary indicator of cholestasis, which is delayed or stopped bile flow and that's really what these <unk> liver diseases are about as delayed or stopped bile flow. So how fast is clearly there and then we also have things in there for liver function like bilirubin and other assessments transaminase. This as well and then importantly, we have in there.
<unk> two because you may recall, I'll say that our backlog as it needed to do a biopsy type study and that's because the agency wants to make sure the biomarkers correlate with real improved liver function.
Tobias the biopsy is sort of the standard today, but that's another reason why we think we're in a great position with this technology because the way. The agency is the biopsy and the other programs Israeli for objective evidence that the drug's working and not necessarily biomarker driven evidence, that's where the biopsy place, but that's why we like the T cells, because the T cells will be a really.
Strong objective assessment as well and to be able to get an early read on such a strong objective assessment that really is the underlying mechanisms. How the drug works is quite strong and very powerful and drug development.
Yeah.
Okay, Great. That's very helpful. Thanks, Mike Thanks, Tom.
Thanks, Tim.
Your next question comes from the line of David <unk> with Piper Sandler Your line is open.
Hi. Thanks. This is skyler on for David can you remind us how you are thinking about the physician target audience for the pediatric opportunity and the potential need to expand the sales force head count to support this opportunity. Thanks.
Sure.
As I mentioned earlier, we're gonna be riding a series of pilots there won't be any at this point there won't be any increase in selling effort.
Really.
The good news here is this is a fairly concentrated prescriber base.
You know like three or 4000 docs will generate 30% 40% of the volume. So we can easily fold those dogs into our existing call.
Call list.
Trade off those for kind of lower performing or lower less busy physicians and we'll let the data really guide or decision on this one so if we see some fairly significant response, there that will go back and take a look at do we think we need to.
Kris our selling effort at this point that's not the plan keep in mind. We're currently calling on about 35000 physicians.
Who generate the majority of the business. So this isn't a significant increase in the number of targets, but it will really give us a good line of sight with regard to.
How hard do we think we need to push to make to really effect and I'll come and then we'll come back and look at not only the selling effort, but the overall promotional mix, which we continue to refine as we balance both personal promotion with direct to consumer advertising and our direct to patient programs.
That's helpful. Thank you.
Your next question comes from the line of Boris <unk> with Cowen Your line is open.
Oh, great. Thanks for taking my question I guess for CMT, one of four I just want to clarify for approval. Ultimately can you get an approval in this indication based on some of these biomarkers like you just talked about or would you have to do or an actual study with a clinical outcome.
So prior history has kind of addressed that with a vertical like acid because they got approval based on the biomarker of improvement in our us and recall that's also been historic with ours, so deoxycholic asset or so.
That that class of compounds. So it has been down usually in that setting as happened in and they go vertical like asset case, they get a post marketing requirement to do another study like letter study, but they are on the market and that's clear.
Clearly because the benefit with those agents you they improve cholestasis patients do better and they should be on them and they're good products, but they don't address the root cause of the disease like we do with C. N P. One floor and that is also evident in what a responder is for a medical like asset because the al classes. The biomarker, but you don't have to.
Normalized out fast to actually be a responder in those programs.
So you can actually get to one five or 1.67 times normal, which still means you had roughly 50 or 67% of your liver function potentially abnormal because you're out fastest elevated to that degree. So how fast. This has been accepted by the agency for for a marker for success and does usually come with post marketing commitments.
And that's why we like the objectivity around the T cell response, because getting an early read on that I think gives us a real good insight into the opportunity more longer term.
So.
Mike.
Actual responder endpoint that is to reduce.
<unk> to a level, that's 115 times normal correct right okay.
And it just got bought us to go to another.
For or for <unk>.
Ultimate pivotal study could you get approved really on a placebo control or do you think you'd have to use an active control in this case it.
Standard of care.
Securities Your line is open.
Hey, guys good morning.
Good morning, guys.
Couple of questions.
And on the pricing headwind.
Headwind in the quarter I think the implied is it was down three.
Dynamics Youre seeing for the rest of the year because if there was anything that takes I think last year you guys had.
One time gross to net benefit in the first quarter of last year is that a similar dynamic.
You know, 8% net sales growth as you've kind of got two was driven by prescription demand of about 10% and the rest is sort of essentially a price headwind.
Expectations are for price over the course of the year. This is not similar to last year, which had a one time price benefit. This is really about where we ended up for.
For the quarter.
This quarter because of contracting and we align for the full year, it's a little better potentially than we anticipated, but I would say that.
We said low single digits in terms of sorry mid single digits is sort of the full year guidance that's implied for price.
We'll see where it comes out but I think we're really pleased with where we are today.
Okay and then on the.
The guidance.
Okay.
The first quarter was a little bit better from a demand standpoint like the weekly scripts look about the same so far in the second quarter pricing.
Pricing is a little bit better. So is there anything youre seeing in the back half of the year, that's giving you some pause in terms of the guidance.
I know, it's only one quarter in the bag and then like how much of the.
I looked at the pediatric functional constipation got indications that is that in there for the second half as well.
Yeah. So yeah. So let me start by saying look I think we're well.
But we're pleased with the momentum we have in the first quarter.
And on the price pieces as I was trying to just put a final point I'd like it can fluctuate from throughout the year first quarter was more moderate than we experienced in the course of 2022 and if it sustains itself I think we will we will be able to come back to you and give you a better sense.
Our guidance does and has always contemplated any contribution from pediatrics.
So I look I think we're about.
The optimistic and this is why we're kind of being a little carefully sure with regard to the upside of the pediatrics and this is reason why again, we're running these pilots to really understand.
A quick response, one way or the other I think will have a pretty good line of sight I think the one thing we've learned in this in this market. This category is one of these kids are actively seeking care as I mentioned, but also these physicians ended up to be quite pediatricians and up to and following clinical practice guidelines.
Standard of care and this is one where this will be the only drug actually approved for functional constipation, and we think that's a real asset.
The traditionally pediatricians don't like prescribing drugs off label for kids and you're going to have a drug that's approved for these kids I think you know it could be a real advantage, but let's stay tuned and we'll certainly keep you updated as far as what we see in the market as we launch the new indication.
Okay. Thanks, guys appreciate it.
Okay.
With no further questions. We will conclude today's conference. Thank you for your participation you may now disconnect.
Please wait the conference will begin shortly.
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