Ironwood Pharmaceuticals, Inc. IRWD reported a loss of 34 cents per share in the second quarter of 2015, much wider than the Zacks Consensus Estimate of a loss of 23 cents but narrower than the year-ago loss of 44 cents.
Revenues in the quarter came in at $27.7 million, up substantially (305.6%) from the year-ago quarter but falling significantly short of the Zacks Consensus Estimate of $38.3 million. On a sequential basis, revenues declined 4.1%.
The Quarter in Detail
Ironwood’s sole marketed product is Linzess (EU trade name: Constella). Ironwood co-markets the drug with Allergan AGN. Net sales of the drug in the U.S., as reported by Allergan, came in at $112.1 million in the second quarter of 2015, up 17.4% sequentially and 78.6% year over year.
The number of prescriptions filled increased 10.9% sequentially and crossed 510,000. Demand was driven by the company’s new direct-to-consumer (DTC) campaign as well as seasonal market growth. Since the company launched a DTC campaign in Apr 2014, total prescription market share has grown by about 80% and the market has grown by more than 30%. Ironwood said that growth is mostly coming from patients on OTC laxative with more than 65% of new Linzess patients switching from OTC.
More than 70% of the patients who are covered by commercial insurance plans or Medicare Part D patients had unrestricted access to Linzess as of May 2015.
Ironwood is looking to broaden Linzess’ label by expanding the targeted patient population and gaining approval for additional indications including chronic idiopathic constipation (phase III data on 72 mcg dose expected in the fourth quarter of 2015 with regulatory filing expected in the first half of 2016) and opioid-induced constipation (phase II study, data expected in the fourth quarter of 2015). Two colonic release formulations have also been selected for evaluation in a phase IIb study in adults with irritable bowel syndrome with constipation. The study is scheduled to commence in the fourth quarter of 2015 with data due in the second half of 2016.
Some other interesting pipeline candidates at Ironwood include IW-9179 (diabetic gastroparesis symptoms, phase IIa study with data expected in the first half of 2016) and IW-3718 (refractory GERD, the company intends to start a phase IIb dose-ranging study in early 2016).
During the second quarter of 2015, selling, general and administrative (SG&A) expenses were up 12.5% to almost $33 million. Research and development (R&D) expenses amounted to $28.6 million, up 29.4%.
In a separate press release, Ironwood announced an agreement with Allergan to co-promote the latter’s Viberzi in the U.S. Viberzi is approved for the treatment for adults suffering from irritable bowel syndrome with diarrhea. As per agreement terms, Ironwood's clinical sales specialists will co-promote Viberzi to approximately 25,000 health care practitioners, who currently promote Linzess and Cologuard. Ironwood will be compensated for the co-promotion based on the volume of calls delivered by its sales force, as well as agreed upon performance metrics. There will be no incremental investment on the part of Ironwood. On the other hand, Allergan will be solely responsible for all other costs related to the commercialization of Viberzi. Ironwood will begin co-promotion once Viberzi is launched.
We remind investors that in March this year, Ironwood had inked a deal with Exact Sciences Corporation EXAS for the co-promotion of the latter’s Cologuard (the first and only FDA-approved noninvasive stool DNA screening test for colorectal cancer).
2015 Guidance Maintained
For 2015, Ironwood continues to expect operating expenses in the range of $220 million to $250 million (R&D expenses of $105–$120 million and SG&A expenses of $115–$130 million). Ironwood estimates total investment (including Allergan’s share) in sales and marketing for Linzess in the range of $230–$260 million.
Our Take
Ironwood’s second-quarter results were disappointing with the company reporting a wider-than-expected loss and revenues falling significantly short of expectations. However, we are positive on the deal with Allergan. The deal will provide Ironwood with a third product and additional funds and expand its reach among primary care physicians and gastroenterologists.
Ironwood expects a lot of pipeline related events in 2015 and 2016. We expect investor focus to also remain on Linzess’ performance as well pipeline related updates from the company.
Ironwood is a Zacks Rank #3 (Hold) stock. Actelion Ltd. ALIOF is a better-ranked stock in the health care sector carrying a Zacks Rank #1 (Strong Buy).
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