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Ironwood Pharmaceuticals, Inc. Message Board

  • biomania_investor biomania_investor Sep 4, 2012 11:40 AM Flag

    Barrons - expect IRWD to rebound

    Credit Suisse

    The Food and Drug Administration's approval of linaclotide (Linzess) Friday sets the stage for commercialization of this product; building demand could take longer than expected but we continue to believe in long-term potential.

    Expectations from the [irritable-bowel-syndrome treatment] product are high (less than $1 billion in 2020 sales), and we expect that the Street will be watching closely the uptake of the product post-launch (fourth-quarter 2012).

    Based on our discussions with management at Forest Laboratories (ticker: FRX) we expect that Linzess will be priced competitively to help promote access.

    While we think that a slower-than-market-expected uptake is possible relative to high use of generics in the market and time required to get primary-care providers familiar with the data, we continue to believe in the long-term potential of the drug (about $1.3 billion in 2020 sales).

    Addition of pediatric safety warning and post-approval non-clinical pediatric development requirements a minor surprise, however, we do not see these impacting the commercial prospects of the drug. With the full label still to be available, we believe that this minor surprise was likely to blame for a decline in performance for Ironwood Pharmaceuticals (IRWD) on Friday.

    However, we are not concerned for several reasons: 1) Pediatric population is not the target population for this drug; 2) Pediatric safety warning based on preclinical work in young mice at extremely high doses, not clinical data; and 3) Large volume of clinical data in adults is reassuring on safety profile of the drug.

    Ongoing development activity could be source of future upside for the drug, not accounted for currently in Street models. Ironwood and Forest Laboratories are currently executing a Phase IIIb trial focused on treating abdominal symptoms (in chronic constipation).

    This trial could provide Linzess with a stronger label to treat abdominal symptoms, which is important as these symptoms often drive patients to the clinic.

    We anticipate investors being more positive on this trial as more specifics on its design and the drug's launch labeling emerge.

    This positive FDA decision takes away any regulatory overhang off the drug, and shifts focus to execution. This drug is obviously meaningful to Ironwood, and accounts for about 19% of the top line in fiscal 2020 for Forest Laboratories (lower impact to earnings-per-share due to shared economics with Ironwood).

    We continue to view Forest Laboratories as a multi-faceted, product overhaul story post Lexapro, and importantly not all products need to work in order for the story to work. Furthermore, approval for Linzess triggers an $85 million payment to Ironwood from Forest Laboratories, which will help further stabilize near-term cash position but Ironwood will still have to raise capital in the future owing to the large investment required in Linzess commercialization.

    -- Catherine J. Arnold
    -- Ronak H. Shah
    -- Ari Jahja

 
IRWD
14.85+0.44(+3.05%)Jul 11 3:59 PMEDT

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