On Auguest 4, 2016 Ironwood Pharmaceuticals, Inc. (NASDAQ: IRWD), a commercial biotechnology company, reported an update on its second quarter 2016 results and recent business activities (Press release, Ironwood Pharmaceuticals, AUG 4, 2016, View Source [SID:1234514298]).
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
"During the second quarter of 2016, Ironwood continued to deliver strong operational performance, resulting in a near-doubling of Ironwood revenue, year-over-year. We are well-positioned to advance our four priority franchises, including the launch of two new products in the next nine months, and we remain on track to become cash flow positive in 2018," said Peter Hecht, chief executive officer of Ironwood. "Our flagship product LINZESS demonstrated solid growth as the branded prescription market leader in adult patients with IBS-C or CIC and is on track to exceed $1 billion in net sales by 2020, with increased commercial margins driven by strong demand."
Second Quarter 2016 and Recent Highlights
Irritable Bowel Syndrome with Constipation (IBS-C) / Chronic Idiopathic Constipation (CIC) Franchise
LINZESS. U.S. net sales, as provided by Ironwood’s U.S. collaboration partner Allergan, were $150.5 million in the second quarter of 2016, a 34% increase compared to the second quarter of 2015. Ironwood and Allergan share equally in brand collaboration profits or losses.
More than 650,000 total LINZESS prescriptions were filled in the second quarter of 2016, a 29% increase compared to the second quarter of 2015, according to IMS Health. Since launch, more than 5 million prescriptions for LINZESS have been filled by more than 1 million unique patients, making LINZESS the branded prescription market leader in IBS-C and CIC.
Net profit for the LINZESS U.S. brand collaboration, including commercial and research and development (R&D) expenses, was $58.3 million in the second quarter of 2016, a 289% increase compared to the second quarter of 2015. LINZESS commercial margin was 52% in the second quarter of 2016, compared to 31% in the second quarter of 2015.
Ironwood and Allergan expect to launch a 72 mcg dose of linaclotide in early 2017 that, if approved, can increase physician prescribing of LINZESS within the large, heterogeneous adult CIC patient population. The companies announced during the second quarter of 2016 that the U.S. Food & Drug Administration (FDA) accepted the supplemental new drug application filing for this dose.
Linaclotide Colonic Release. Ironwood and Allergan completed enrollment in a Phase IIb clinical trial and expect data later this year; if positive, the companies anticipate initiating a Phase III trial in 2017. This second-generation guanylate cyclase-C (GC-C) agonist product candidate has the potential, if approved, to provide greater and faster abdominal pain relief in adult IBS-C patients, expand the IBS-C and CIC markets, and extend patent protection to the mid-2030s.
Uncontrolled Gout Franchise
ZURAMPIC. Ironwood expects to launch FDA-approved ZURAMPIC in October 2016 for use in combination with a xanthine oxidase inhibitor (XOI) for the treatment of hyperuricemia associated with uncontrolled gout. Gout is a form of inflammatory arthritis, and an estimated two million patients in the U.S. suffer from uncontrolled gout in which traditional first-line XOI treatment alone is not sufficient to achieve target serum uric acid (sUA) levels. Many of these patients experience painful flares due to hyperuricemia despite treatment with an XOI. In two Phase III clinical trials, the combination of the XOI allopurinol, which decreases production of uric acid, and ZURAMPIC, which increases excretion of uric acid, demonstrated nearly a two-fold increase in the percentage of patients reaching target serum uric acid levels under 6 mg/dL over allopurinol alone at month six. ZURAMPIC is not recommended for the treatment of asymptomatic hyperuricemia and should not be used as monotherapy. Ironwood closed the transaction with AstraZeneca for the exclusive U.S. rights to all products containing lesinurad during the second quarter of 2016.
Lesinurad-allopurinol fixed-dose combination product. The fixed-dose combination of lesinurad and allopurinol is expected to be submitted for FDA review during the second half of 2016.
Refractory Gastroesophageal Reflux Disease (rGERD) Franchise
IW-3718. Ironwood continues to enroll patients in a dose-ranging Phase IIb clinical trial of IW-3718, a wholly-owned asset for the potential treatment of rGERD. Data are expected in 2017. IW-3718 is a novel, investigational gastric retentive formulation of a bile acid sequestrant designed to work with a proton pump inhibitor (PPI) to reduce the detrimental effects of bile and acid on the esophagus. An estimated 10 million people in the U.S. suffer from rGERD and continue to experience heartburn symptoms despite treatment with PPIs.
Vascular and Fibrotic Franchise
IW-1973. Ironwood generated positive topline data from its Phase Ib multiple ascending dose study of IW-1973. The data were consistent with previous preclinical and Phase Ia findings and support advancement of IW-1973 into Phase II clinical trials, expected to begin later this year. Specifically, in the Phase Ib study, IW-1973 demonstrated characteristics that Ironwood believes could be important pharmacokinetic differentiators in the field of soluble guanylate cyclase (sGC) stimulators, including a narrow peak-to-trough ratio indicative of the potential to maintain a durable and consistent therapeutic effect; a profile that indicates suitability for once-daily dosing; and a volume of distribution consistent with penetration beyond the vasculature and into the tissues.
IW-1701. Ironwood completed enrollment in a Phase Ib multiple ascending dose study, with data expected later this year and a Phase II trial expected to begin before year-end.
Global Collaborations and Partnerships
Linaclotide is currently under review by the Pharmaceuticals and Medical Devices Agency (PMDA) in Japan for potential approval for the treatment of adult patients with IBS-C. Additionally, Ironwood’s partner Astellas Pharma Inc. initiated a Phase III clinical trial of linaclotide in Japan for adults with chronic constipation.
Ironwood continued co-promoting Allergan’s VIBERZI (eluxadoline) for adults suffering from IBS with diarrhea (IBS-D) and Exact Sciences’ Cologuard noninvasive stool DNA screening test for colorectal cancer, in the U.S.
Corporate and Financials
Collaborative Arrangements Revenue
Collaborative arrangements revenue was $54.4 million in the second quarter of 2016, compared to $27.7 million in the second quarter of 2015. Revenue primarily consisted of $48.3 million in revenue associated with Ironwood’s share of the net profits from the sales of LINZESS in the U.S., compared to $24.3 million in the second quarter of 2015.
Operating Expenses
Operating expenses were $69.7 million in the second quarter of 2016, compared to $61.6 million in the second quarter of 2015. Operating expenses in the second quarter of 2016 consisted of $31.7 million in R&D expenses; $36.9 million in selling, general and administrative (SG&A) expenses; and $1.1 million in acquired intangible asset amortization expenses resulting from Ironwood’s U.S. licensing agreement with AstraZeneca for the exclusive rights to all products containing lesinurad.
Other Expense
Interest Expense. Net interest expense was $9.5 million in the second quarter of 2016, in connection with the $175 million debt financing executed in January 2013 and the approximately $336 million convertible debt financing executed in June 2015. Interest expense recorded in the second quarter of 2016 includes $6.2 million in cash expense and $3.6 million in non-cash expense. Both the cash and non-cash components of the 2022 convertible notes are recorded quarterly.
Gain/Loss on Derivatives. Ironwood records a gain/loss on derivatives related to the change in fair value of the convertible note hedges and note hedge warrants issued in connection with the convertible debt financing in June 2015. A gain on derivatives of $3.1 million was recorded in the second quarter of 2016.
Net Loss
GAAP net loss was $21.7 million, or $0.15 per share, in the second quarter of 2016, compared to $48.0 million, or $0.34 per share, in the second quarter of 2015.
Non-GAAP net loss was $23.8 million, or $0.16 per share, in the second quarter of 2016, compared to $47.8 million, or $0.34 per share, in the second quarter of 2015. Non-GAAP net loss excludes the impact of mark-to-market adjustments on the derivatives related to Ironwood’s convertible debt and the amortization of acquired intangible assets related to Ironwood’s U.S. lesinurad license. See Non-GAAP Financial Measures below.
Cash Position
Ironwood ended the second quarter of 2016 with $325 million of cash, cash equivalents and available-for-sale securities, a decrease of $109 million from the end of the first quarter of 2016. This figure includes the $100 million upfront payment to AstraZeneca from cash on hand under the lesinurad licensing agreement. Cash used in operations was $6 million, a 77% decline from the $26 million used during the same period a year ago.
2016 Financial Guidance
With the completion of its U.S. licensing transaction for all products containing lesinurad and support of the anticipated launch of FDA-approved ZURAMPIC in October 2016, Ironwood is updating its guidance for 2016. Ironwood expects:
R&D expenses to fall within a range of $140 million to $150 million, (previously $130 million to $145 million),
SG&A expenses to fall within a range of $170 million to $180 million, (previously $125 million to $140 million), and
Amortization of intangible assets to be $8 million (not applicable prior to the U.S. lesinurad license).
Consistent with its guidance following the announcement of the U.S. lesinurad license, Ironwood continues to expect to use less than $70 million in cash for operations in 2016.
Allergan and Ironwood continue to expect total 2016 marketing and sales expenses for LINZESS to be in the range of $230 million to $260 million, and the companies now expect these expenses to be in the mid to higher end of this range.
Non-GAAP Financial Measures
The company presents non-GAAP net loss and non-GAAP net loss per share to exclude the impact of net gains and losses on the derivatives related to our convertible notes that are required to be marked-to-market, and the amortization of acquired intangible assets. The derivative gains and losses may be highly variable, difficult to predict and of a size that could have a substantial impact on the company’s reported results of operations in any given period. The acquired intangible assets are valued at the time of acquisition and are amortized over their estimated economic useful life, and management believes excluding the amortization of acquired intangible assets provides more consistency with internally developed intangible assets for which research and development costs were previously expensed. The company has presented non-GAAP net loss and non-GAAP net loss per share in prior calendar quarters, and this is the first calendar quarter in which the company has amortization of acquired intangible assets that can be excluded from such non-GAAP financial measures. Management believes this non-GAAP information is useful for investors, taken in conjunction with Ironwood’s GAAP financial statements, because it provides greater transparency and period-over-period comparability with respect to Ironwood’s operating performance. These measures are also used by management to assess the performance of the business. Investors should consider these non-GAAP measures only as a supplement to, not as a substitute for or as superior to, measures of financial performance prepared in accordance with GAAP. In addition, these non-GAAP financial measures are unlikely to be comparable with non-GAAP information provided by other companies. For a reconciliation of these non-GAAP financial measures to the most comparable GAAP measures, please refer to the table at the end of this press release.