Loss Widens at IRWD on Higher Costs

Zacks

Ironwood Pharmaceuticals, Inc.’s (IRWD) fourth-quarter 2012 loss of 41 cents per share compared unfavorably with the year-ago loss of 7 cents per share. Results were hurt by higher selling, general and administrative (SG&A) and collaboration expense. The Zacks Consensus Estimate hinted at a loss of 50 cents per share.

Total revenues in the final quarter of 2012 were down 16.1% year-over-year to $27 million. Revenues were above the Zacks Consensus Estimate of $18 million.

Full year 2012 loss was 68 cents per share compared to year-ago loss of 65 cents per share. Loss was narrower than the Zacks Consensus Estimate of loss of 78 cents per share. Revenues in 2012 jumped 128.1% from the previous year to $150.2 million.

Linzess Launch Quarter Sales

The company and partner Forest Laboratories, Inc. (FRX) reported Linzess (linaclotide) net product sales of $19.2 million in the fourth quarter of 2012. Linzess sales primarily consisted of initial trade stocking.

We remind investors that on Dec 17, 2012, the companies announced the US launch of their drug Linzess. The launch followed the approval of the drug by the US Food and Drug Administration (:FDA) in Aug 2012 for the treatment (once-daily) of adults suffering from irritable bowel syndrome with constipation (IBS-C) or chronic idiopathic constipation (:CIC).

In the EU, approval came in November 2012 under the trade name Constella. Ironwood Pharma is collaborating with Almirall, S.A. in EU for the drug. The product is expected to be launched in the EU in the first half of 2013. Ironwood Pharma is also working with its Japanese partner, Astellas Pharma Inc. for the development of linaclotide in Japan and other Asian countries.

To further analyze the effect of Linzess on abdominal symptoms in patients suffering from CIC, Forest Labs and Ironwood Pharma have initiated a phase IIIb clinical trial. Results from the trial are expected in the second half of 2013.

Other Expenses

During the quarter, SG&A expenses surged 139% to $33.3 million. The massive increase was primarily attributable to Linzess commercialization costs. For 2013, Ironwood Pharma expects total investment in sales and marketing for Linzess to be in the range of $250-$300 million.

Research and development (R&D) expenses amounted to $28.3 million, an increase of 16.7%, reflecting investment in its pipeline, which includes IW-9179 (phase II) for patients with functional dyspepsia.

We currently have an Outperform recommendation on Ironwood Pharma. The stock carries a Zacks Rank #2 (Buy) in the short run. We expect investor focus to remain on the market performance of the lead product, Linzess.

Pharma stocks, which currently look very attractive, are Targacept Inc. (TRGT), Aeterna Zentaris (AEZS) and Valeant Pharmaceuticals (VRX). These companies carry a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on IRWD

Read the Full Research Report on FRX

Read the Full Research Report on TRGT

Read the Full Research Report on VRX

Read the Full Research Report on AEZS

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