Ironwood Drug Makes All-Flop List for 2020
- By Barry Cohen
Ironwood Pharmaceuticals Inc. (NASDAQ:IRWD) has the dubious distinction of owning one of the 10 biggest drug trial flops of 2020, according to FierceBiotech. The Boston-based company's once-promising treatment for gastroesophageal reflux disease was relegated to the trash bin in September when it failed a phase 3 study.
At one time, Ironwood was touting IW-3718 as a potential multibillion-dollar seller. That's because the size of the market is huge, and nearly 40% of patients aren't getting the relief they want from what's currently available. But the Ironwood drug failed to meaningfully improve heartburn in patients.
Shares of the company weren't affected dramatically on news of the demise of the GERD drug, in great part because it had been considered a longshot for years. As far back as July 2017, the treatment underwhelmed in a phase 2 study. At that time, Ironwood traded near $15. A month later, it hit more than $17 but hasn't come close to reaching that high-water mark since. Shares can now be picked up for just more than $10.
IW-3718 was the second pipeline disappointment for the company, coming on the heels of the failure of a delayed-release formulation of its only marketed drug, Linzess, for irritable bowel syndrome. With its late-stage pipeline empty, Ironwood is on the lookout for drugs it can license. During the company's third-quarter earnings call, CEO Mark Mallon said the company wants to stay within the field of gastroenterology and any licensed medication would have to be synergistic with Linzess.
Ironwood partners with AbbVie Inc.(NYSE:ABBV) on Linzess. The drug generated third-quarter sales of $221 million, with $100 million going to Ironwood, enough to give the company its sixth consecutive profitable quarter. That performance was even more impressive given the demand was tamped down due to the pandemic.
Ironwod has a market cap exceeding $1.6 billion and sells at a very reasonable price-earnings ratio of just under 15. The company's third-quarter 2020 adjusted earnings were 23 cents per share, which topped the Zacks Consensus Estimate of 14 cents per share. The company had reported adjusted earnings of 13 cents per share for the same period a year earlier.
Total revenue of $103.5 million also beat the Zacks consensus estimate of $93.5 million. However, revenue declined 21.5% year over year due to the absence of certain license and milestone payments recorded in third-quarter 2019.
Ironwood, which reports fourth-quarter and full-year results the second week of February, had raised its previous guidance, expecting total revenues of $370 million to $385 million and adjusted Ebitda to be more than $130 million versus more than $105 million a year earlier.
Estimates by analysts give the company expected earnings per share of 29 cents, with earnings raised to 72 cents for 2021 and $1.21 for next year.
Based on estimates by six analysts, five have rated Ironwood as a hold and one as a buy. Stock Register concluded that investors could take advantage and scoop up stock of the company.
Disclosure: The author has a position in AbbVie.
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This article first appeared on GuruFocus.
