Q3 2024 Ironwood Pharmaceuticals Inc Earnings Call
The End.
Sravan Emany, Michael Shetzline, Sravan Emany, Matt Roache
Luella: Thank you for standing by. My name is Luella and I will be your conference operator today.
Luella: At this time, I would like to welcome everyone to the Ironwood Pharmaceuticals Q3 2024 Investor Update Conference Call.
Luella: All lines have been placed on mute to prevent any background noise.
after the speaker's remarks.
Speaker Change: There will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Matt Roache, Director of Investor Relations. Please go ahead.
Matt Roache: Thank you, Luella. Good morning and thanks for joining us for our third quarter 2024 investor update. Our press release issued this morning can be found on our website.
Matt Roache: Today's call and accompanying slides include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and certainties that may cause actual results that differ materially.
Matt Roache: The 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, 2023, and in our subsequent SEC filings.
Matt Roache: All four looking statements speak as of the date of this presentation. We undertake no obligation to update statements
Matt Roache: 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.
David Amsellem, David Amsellem, David Amsellem, David Amsellem
Speaker Change: During today's call, Tom McCourt, our Chief Executive Officer, will begin with a brief overview and discuss the commercial performance of Lenz S. Mike Shetzline, our Chief Medical Officer, will discuss our pipeline, and Sravan Emany, our Chief Operating Officer and Chief Financial Officer, will review our financial results and guidance.
Speaker Change: 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 slides separately. With that, I'll turn the call over to Tom. Thanks, Matt. Good morning, everyone, and thanks for joining us today to review our third quarter 2024 financial results and business updates.
starting with Lizette.
Linzess continues to deliver robust year-over-year prescription demand growth.
in the third quarter.
Speaker Change: Prescription demand increased by 13%, driven in part by new-to-brand prescriptions.
Speaker Change: which also grew by 13%. This marks the 7th consecutive quarter of double-digit new-to-brand volume growth, as Linzess remains the preferred treatment option for both patients and providers.
Matt Roache: While prescription volumes remain very strong, Linzess is continuing to experience pricing headwinds, primarily due to the increase in Medicaid prescriptions as a percent of the overall Linzess business, as we highlighted on last quarter's call.
Matt Roache: Moving to our pipeline, over the past several months, we've been working towards an apiglutide NDA submission with a label focused on adult patients with short bowel syndrome who are dependent on parenteral support and remain on track to complete our filing in the first quarter of 2025.
Matt Roache: We continue to see significant unmet need and market opportunity in short bowel syndrome and we're excited about apiglutide's potential to support short bowel syndrome patients.
Matt Roache: Feedback from our phase 3 data from the experts in short bowel syndrome support our belief that if approved, apiglutide will be the drug of choice among physicians to treat adult patients with short bowel syndrome who are dependent on parenteral support.
Matt Roache: where our STARS Safety Abstract was the recipient of ACG's Presidential Poster Award. And our subgroup analysis was shared as an oral presentation, which we're very proud of and speaks to the interest in and the quality of the data.
Matt Roache: These findings, which Mike will discuss in more detail, build on our previously announced positive data from the Phase III Pivotal STARS trial and reinforce Afroglutide's strong clinical profile, including its demonstrated efficacy, tolerability, and once-weekly dosing convenience.
Matt Roache: Our team is focused on getting Apiglutide to market as soon as possible, and we look forward to providing more updates to our progress in the months ahead.
Moving to our pipeline programs.
Matt Roache: We routinely evaluate the risk and reward of our investments and seek to prioritize those which we believe drive most value long term.
Matt Roache: To this end, we made the decision not to exercise our option to acquire an exclusive license to CMP 104.
Matt Roache: And we also made the decision to end further recruitment in the IW3300 with Phase 2 proof-of-concept study in interstitial cystitis and bladder pain syndrome.
Matt Roache: and we'll follow the current study population for a full 12-week efficacy assessment which will inform next steps on the program.
Matt Roache: These business decisions allow us to focus our efforts on where we believe we can deliver the most value, including the anticipated launch of Apraglutite expected in 2026 and on maximizing Linzess profits and cash flow.
Moving to our third strategic priority.
Delivering Sustained Profits and Cash Flow
Matt Roache: In the third quarter, we generated $10 million of operating cash flow and delivered $26 million in adjusted EBITDA.
Matt Roache: Based on our third quarter performance, we are reiterating our full year 2020-2024 financial guidance.
Matt Roache: In addition, we amended our credit facility to strengthen our balance sheet, and we repaid $25 million of the outstanding principal balance on our revolving credit facility.
Matt Roache: From a financial perspective, even with continued LINZES pricing pressure, we believe we are in a good position with meaningful cash flow generation from LINZES and a capital structure to support continued execution of our strategic priorities over the coming years.
Matt Roache: Looking ahead, we are intently focused on managing Linz's pricing pressures to maximize profits and cash flow while simultaneously advancing Everglutide toward an NDA submission and commercial launch.
Matt Roache: Now let's let's take a moment to look at some additional details on the commercial performance of LINZUS on slide 7.
Matt Roache: In the third quarter, LINZ's U.S. net sales were $226 million.
Matt Roache: As I mentioned earlier, Linzess extended units and new-to-brand prescription each rose by 13% in the third quarter, respectively, compared to the third quarter in 2023, reinforcing that patients and healthcare providers continue to choose Linzess in a growing market.
Matt Roache: The strong volume growth was more than offset by continued pricing headwinds, primarily due to the increase in Medicaid as a percent of our business, driven by a combination of legislative and market factors.
Matt Roache: such as the AMP cap repeal, Medicaid redetermination, and state-by-state changes. That said, since the first quarter of this year, we have seen Medicare as a percent of our business remain relatively stable at the current levels.
Matt Roache: We continue to closely monitor Medicaid utilization and additional legislative changes such as the 2025 Medicare Part D redesign and its potential impact on Linzess.
Matt Roache: We remain focused on maximizing Lenz's brand profits and cash flow and optimizing the investments as we seek to mitigate the increased pricing pressures.
Matt Roache: We look forward to providing additional guidance on 2025 Lensless Demand and Pricing Expectation at the beginning of the year. With that, I'll hand it over to Mike to discuss our pipeline. Mike?
Mike Shetzline: Thanks, Tom. And good morning, everyone. I'll start with apiglutide for patients with short bowel syndrome who are dependent on parenteral support. As Tom mentioned, last week we presented new findings from a subgroup analysis of the primary endpoint of the STARS Phase III study at the ACG meeting.
Mike Shetzline: The additional data presented showed the positive treatment effects of apiglutide were consistent across baseline demographics including gender, age, body weight, region, race, ethnicity, and SPS characteristics such as length of remnant bowel anatomy.
Mike Shetzline: These are important results for patients given the established heterogeneity of adults with SPS who are dependent on parenteral support.
Mike Shetzline: In addition, moving to slide 9, a poster highlighting an in-depth analysis of the STARS Phase 3 program safety and tolerability data was presented at the meeting, which notably received the Presidential Poster Award from the ACG.
Mike Shetzline: The analysis focused on any treatment-emergent adverse event, or TEAE, and those of special interest in SBS.
Mike Shetzline: Importantly, no new safety signals were detected for apiglutide in this analysis.
Mike Shetzline: Of particular note were the TEAEs of special interest which have been seen with other GLP-2s in SBS, such as injection site reactions and GI hepatobiliary neoplasms.
which were similar in the apiglutide and placebo arms.
Mike Shetzline: These data further characterize the safety profile of apiglutide in this population of patients with Short Bell Syndrome who are dependent on parenteral support.
Mike Shetzline: This type of profile can be meaningful for patients to start and stay on therapy if approved.
Mike Shetzline: In regard to our NDA submission, we remain on track with our previous guidance and expect to fully complete the submission in the first quarter of 2025.
Mike Shetzline: We continue to be excited about the safety, efficacy, and tolerability demonstrated by apigrutide in the clinical trial and its once-weekly dosing convenience.
Mike Shetzline: Assuming approval, we believe these distinguishing factors have the potential to drive uptake and adherence and help improve the quality of life for patients with short bowel syndrome who are dependent on parenteral support.
Mike Shetzline: Moving to IW3300, our wholly owned asset for the potential treatment of interstitial cystitis bladder pain syndrome.
Mike Shetzline: We believe we have enrolled an adequate sample of patients to inform us of next steps and have decided to end further recruitment to complete an analysis of the data set for the patients currently enrolled. Based on this assessment, we expect to provide an update on the program in the first half of 2025. With that, I'll turn the call over to Sravan.
Thanks, Mike.
Sravan Emany: I will begin with the collaborative arrangements revenue on slide 11. LINZ's U.S. net sales, as reported by AVI, were $226 million in the third quarter.
Sravan Emany: In the third quarter, Ironwood recorded a $5.8 million positive adjustment to collaborative arrangements revenue to reflect Ironwood's estimate of Lindsay's gross to net reserves.
Sravan Emany: as of September 30, 2024. With this adjustment, Ironwood's U.S. collaboration revenue was $89 million in the third quarter.
Speaker Change: As Tom noted, we continue to closely monitor Medicaid utilization trends and other legislative changes and remain focused on maximizing LINZES profits and cash flows.
Moving to slide 12.
Sravan Emany: Linzess, U.S. net sales were down 19% year-over-year in the third quarter. On a year-to-date basis, U.S. net sales were down 13% compared with the third quarter of 2023, year-to-date.
Sravan Emany: Ironwood revenue in the third quarter was $92 million, a decrease of 19% year-over-year.
Sravan Emany: Gap net income was $4 million and adjusted EBITDA was $26 million.
Mike Shetzline: In September, we amended our credit facility, providing us with $50 million of additional liquidity and extending the maturity to December 2028, allowing for greater flexibility as we continue to evolve our capital structure and operate our business.
Mike Shetzline: In the third quarter, we also repaid $25 million of the outstanding principal balance on our revolving credit facility, ending the third quarter with $400 million drawn on the facility.
Mike Shetzline: We ended the quarter with 88 million dollars of cash and cash equivalents.
Mike Shetzline: And we continue to believe Windsor's cash flows will support our existing portfolio, including the potential Africa Glutide launch, further progress our development programs, and repay our debt. Moving to slide 13.
Mike Shetzline: Based on our third quarter performance, including continued stabilization and Medicaid utilization trends,
Mike Shetzline: We are maintaining our full year 2024 guidance that we had issued in the second quarter. We continue to expect Linzess U.S. net sales between $900 and $950 million.
Mike Shetzline: Ironwood Revenue of between $350 and $375 million and adjusted EBITDA of greater than $75 million.
Mike Shetzline: Discipline expense management remains priority as we seek to offset top-line revenue headwinds to optimize profits and cash flows.
Mike Shetzline: To summarize, Linzess demand growth is robust and the brand's market leadership position continues to strengthen. Our goal now, and for the future, is to focus demand growth to maximize Linzess profits and cash flow.
Mike Shetzline: In addition, we're making smart decisions in clinical development to focus on therapies with a clear path to market, such as apiglutide, that fulfill unmet patient needs.
Mike Shetzline: As such, we remain focused on advancing towards approval and commercialization of Afroglutide as soon as possible.
Mike Shetzline: The new data presented at ACG are further evidence of afl-glutide's strong clinical profile, not only for the potential treatment of adult SBS patients who are dependent on parental support, but also for the significant lifecycle management opportunities that lie ahead.
Mike Shetzline: 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 diseases.
Operator, you may now open up the line for questions.
Thank you.
Speaker Change: At this time, I would like to remind everyone in order to ask a question, press star, then the number 1 on your telephone keypad.
Speaker Change: Your first question comes from the line of Amy Lee with Jeffries. Please go ahead.
Amy Lee: Hey, thanks so much for taking my question. Just two, we noticed that the commercial margin for Linzess is slightly up quarter over quarter. Could we see this continue to expand going forward and help offset some of the pricing headwinds? And then finally, I wanted to get your latest thoughts.
Amy Lee: on the impact to Linzess from Part D redesign in 2025. How much do you actually expect Linzess to eat into the catastrophic phase given the annual WAC is around $6,500? Thanks so much.
Speaker Change: Yeah, thanks Amy. Good morning. So let me just start by saying we do believe there's going to be a pricing headwind in 2025. We haven't given specific guidance on 2025 at this point. We'll provide guidance full year next year, earlier in the year as we normally do. Just given how
Speaker Change: This year has kind of gone from a guidance perspective. We want to make sure we give the best possible guidance we can, and I think we'll be in a good position earlier next year.
Amy Lee: With respect to commercial margins, look, I think we're pleased with where the margins came out in the quarter, and we'll continue to manage track expenses.
Speaker Change: to draw as much profits out of the brand as we can. But right now, I think what you're seeing is a good predictor of where the brand will be for the year.
Perfect. Thanks so much.
David Amsellem, Thomas McCourt, David Amsellem, Thomas McCourt
Speaker Change: Your next question comes from the line of David Anselm with Piper Sandler. Please go ahead.
Thank you.
David Anselm: Hey thanks, so just a couple, maybe taking a step back on Linzess and just looking at contracting in general, is there the potential for taking a fundamentally different look at
Speaker Change: contracting with with payers as the product moves into towards the end of its
Speaker Change: commercial life. In other words, is there the potential for renegotiation such that you try to get better at net economics? Just trying to better understand what you can do to improve the gross to net.
Speaker Change: thinking beyond this year. So that's number one. And then number two, regarding the commercial margins,
Speaker Change: I mean is this a case where as the product nears the end of its commercial life there's going to be less spend?
Speaker Change: associated with Linzess, such that you're just sort of managing the brand for profitability. Maybe help us better understand how you're thinking about that. Not really a 2025 question, it's a sort of longer term through the LOE. Thank you.
Thank you. Bye.
Speaker Change: So I think as I I think about where we are where we're going
Speaker Change: I mean, we're at a point right now where the market is in a very, very strong...
Speaker Change: The product is in a very, very strong place in the marketplace.
Speaker Change: the dominant player, it continued to gain share even in spite of some emerging competition.
Speaker Change: And I think we're at a point now where, as we've mentioned earlier, we need to really look critically at how we continue to increase profits and cash flows. So as I look at the overall investment in the brand and I look at market access and contracting as part of that, the question is how do we balance ongoing growth
Investment in Promotion and Contracting
and we're critically looking at all those.
Speaker Change: There's no question at this point in time, the objective is to increase the margins and the profitability.
Speaker Change: So right now we're looking at everything from what we spend in media, to our selling effort, and how we contract.
Speaker Change: to really maximize, you know, what we can push to the bottom line. And there's no question, you know, we will look at, we continue to look and we'll, you know, other contracting strategies to really maximize that, including things like co-pay assistance.
Speaker Change: So, I think all of those things right now are on the table, and we're working very closely with Abby, who is absolutely aligned with us, to say it's time to really start looking at increasing profits in cash flow.
The End
Speaker Change: Your next question comes from the line of Jason Butler with Citizens JMP. Please go ahead.
Speaker Change: Hi, thanks for taking the question. Just another one, when you look forward through to LOE, how do you think about the drivers of demand growth and obviously promotions being one of them, but I guess I'm thinking more in terms of things like breadth and depth of prescriber base and you know not just market share but you know the patient profile of this receiving the drug. Thank you.
Speaker Change: Yeah, I'll take that, it's Tom. I think there's probably three pieces to that.
Speaker Change: You know, when you're the market leader, this is all about growing the market and capturing disproportionate share. And we've been doing that for the last several years.
Speaker Change: but we're at a point right now where the momentum is extremely strong both with regard to the market dynamics but also the presence of the brand.
Speaker Change: So, what we have seen over the past couple years is there's significantly more people seeking care, obviously in part that's due to increased awareness of the disease that has been driven, you know, by years of DTC campaigns.
and also physician's view of who the appropriate patient is.
Speaker Change: which is also something that we spent a great deal of time educating physicians on as far as who is the right patient and is the patient, you know, appropriate for the drug and of course adding the pediatric indications expanded that significantly.
Speaker Change: And as we move forward, you know, certainly we want to continue to drive demand.
Speaker Change: But we want to do that in a far more efficient way, which we're looking at, and also other life cycle management plays, such as OTC, which clearly is on the horizon and something that we are working with Avion to really understand kind of when that happens and how it happens, because as you know, it's a very large market.
Speaker Change: and these tend to be very durable brands over time over-the-counter.
Speaker Change: So I think, when I look at that, I think Linzess is in a very strong position to continue to grow. And I think we can, and I think the momentum itself will continue to carry it in the years to come. And we really need to focus on profits and cash flow.
Speaker Change: Great. Thanks, Tom. And then I just had one on apraglutide. You're obviously continuing to focus on presenting data at medical meetings. Can you maybe talk about the other aspects of the commercial readiness work that you're doing now and have planned for for the coming months during the regulatory review?
Speaker Change: Yeah, this is this has been ongoing for the last six to nine months You know this that you just don't turn on a switch and go to market as you know and everybody on this call knows This this really focuses on how do we prepare the market? How do we prepare the brand? How do we prepare the organization?
Speaker Change: And we are very diligent in moving all of those things forward, including, we're already out there in medical meetings.
Speaker Change: with the disease awareness program about what is short bowel syndrome and what are the current limitations of therapies.
Speaker Change: And as we prepare the market, obviously Mike and his team...
you know, are working towards.
pulling together the best possible label we can.
Speaker Change: And then, of course, you know, we have some significant things we need to create.
Speaker Change: as far as core capabilities in the organization, particularly things like a patient service hub, which really is going to be critical for pulling patients through the system, both with regard to getting them on the drug, but also keeping them on the drug, which, you know, is something that I think we'll be sharing in the upcoming months.
Speaker Change: with regard to our go-to-market strategy, but also the potential value of apiglutide, not only its attractiveness as the drug of first choice, but also the durability and the likely adherence to therapy, which then increases
Speaker Change: you know, the overall value of each patient that's treated. And, you know, the team is working on those, and as we complete that work and move it forward, we'll be sharing that with you in the months to come.
Thank you, Tom, and thanks for taking the questions.
Thanks, Chris.
question and I have two if you if I may
One is that, can you help us understand the...
The-
Speaker Change: It seems like the $30 million charge you took in the first quarter seems like a lot of that is reversing. Can you help us understand the dynamic here and why it is not impacting the guidance? Because it seems like a positive impact. And then the second question is...
Speaker Change: regarding the, I mean, it seems like the fourth quarter, if I do the math, fourth quarter, you are expecting a decent bump in your share of profits, not as much as the top-line number for lenses. Can you help us understand the dynamic that will play out here for fourth quarter here? Thank you very much.
Speaker Change: Yes, so Mohit, I don't necessarily understand the second question. Could you repeat that?
Speaker Change: So, like, if I look at the guidance, it's for for lenses, it is 352, 375 for your promotion pass profit. You did about 252 so far in nine months, so it seems like there is a bump, there is an inflection in fourth quarter. So, can you help us understand what is causing the inflation? It doesn't seem equal. Okay, thank you.
Speaker Change: Yeah, so first of all, Mohit, it's cyclical, right, and the brand's been historically cyclical that the fourth quarter tends to have more of the profit than other quarters, so that's the answer to the second question.
Speaker Change: With the first question, the first question was tied to just the adjustments we've taken.
Speaker Change: I would say that, look, there has been a small divergence about when and timing for the recording of these gross-to-net adjustments with respect to AVVI, and they will even out over the course of the full year. But that's all you're seeing is just timing differences at this point in time.
Got it. Helpful. Thank you.
David Amsellem, Naresh Chouhan, Thomas McCourt,
Speaker Change: Your next question comes from the line of Natalia Davis with Interim Health Research. Please go ahead.
and others. Thank you. Thank you. Thank you. Thank you.
Speaker Change: Hi, thank you for taking my question. Just on costs, should we expect a jump in SG&A associated with the pre-launch costs for APRA and how should we think about R&D going into 2025 compared to the current year? Thank you.
Speaker Change: We'll give guidance on where we think we will be next year for spend and launch and profitability when we give guidance.
All right, thank you.
Speaker Change: Again, if you would like to ask a question, press star 1 on your telephone keypad.
We will pause for just a moment.
Okay.
Speaker Change: Your next question comes from the line of Leerink Partners. Please go ahead.
Speaker Change: Hey guys, this is Matt Calperon for Festival Crusade. Thanks for taking my question. Just on afroglutide, how large of a sales force do you need here and how will this work between the current LIMSF team and afroglutide? Will the LIMSF team start selling afroglutide as well and or if so like how overlapping or not is the prescriber base? Thank you so much.
Speaker Change: Yeah, I think this is the real strength that we, you know, we bring to the table here is, you know, we have a very tenured and experienced sales force in gastroenterology. They continue to do a fantastic job with Linzess, as you well know.
Speaker Change: and there is a great deal of overlap with regard to the you know where we which offices
There may be slightly different prescribers.
But it's largely the same offices. Now, there will be...
some additions.
Speaker Change: to that such as large academic centers and in some other areas that we would focus. But keep in mind, this being a rare disease, this is also far fewer prescribers.
Speaker Change: than we're currently calling on. So I think we feel very strongly that we can easily fold APRA into our existing selling effort and be able to get up and running very quickly because of the strong access we have from day one.
Speaker Change: So I think it is one of the real towering strengths that Ironwood has and brings to the table in this space.
Great. Thanks for the insight and taking my question.
All right, thank you.
Speaker Change: We do not have any more questions at this time. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
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