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Ironwood (IRWD) Misses Q1 Earnings and Revenue Estimates

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Zacks Equity Research
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Ironwood Pharmaceuticals, Inc. IRWD reported first-quarter 2020 adjusted earnings of 4 cents per share, which missed the Zacks Consensus Estimate of 11 cents. The company had incurred an adjusted loss of 26 cents in the year-ago quarter.

Total revenues of $79.9 million also missed the Zacks Consensus Estimate of $86.8 million. However, revenues were up 16.3% year over year due to higher sales of Linzess as well as linaclotide API.

Shares of Ironwood have declined 21.8% so far this year compared with the industry’s decrease of 9.9%.

Quarter in Detail

As reported by partner Allergan plc AGN, Ironwood’s sole marketed product — Linzess — generated net sales of $172.2 million in the United States, up 6.7% year over year. Ironwood and Allergan equally share Linzess’ brand collaboration profits or losses.

Ironwood's share of net profits from sales of Linzess in the United States (included in collaborative revenues) was $71.4 million in the first quarter, up approximately 11% year over year.

Per data provided by IQVIA, volume of prescribed Linzess capsules in the first quarter increased about 11% year over year.

On its first-quarter earnings call, Ironwood stated that it observed a higher rate of growth in Linzess sales during the last two weeks of the first quarter of 2020, which the company believes was due to patient stocking amid COVID-19 pandemic.

Sales of linaclotide API were $5.5 million compared with $2.6 million in the year-ago period. Ironwood recorded $3.3 million in linaclotide royalties, co-promotion and other revenues, compared with $1.8 million in the year-ago period.

We note that Ironwood amended its agreements with two partners — Astellas Pharma and AstraZeneca AZN — related to the development and commercialization of Linzess in Japan and China, respectively, in 2019. Per the amended terms of the agreements, Ironwood stopped supplying linaclotide API to these companies and has been receiving royalties on sales of Linzess in Japan and China, beginning 2020.

2020 Guidance

Ironwood stated that the COVID-19 pandemic has not caused significant disruptions in manufacturing operations and supply of Linzess in the United States. However, the extent of future impact is uncertain. Hence, the company withdrew its previous guidance for 2020 except that for adjusted EBITDA.

The company continues to expect adjusted EBITDA to be more than $105 million in 2020.

Pipeline Updates

Linzess is approved in the United States for the treatment of adults with irritable bowel syndrome with constipation (IBS-C) and chronic idiopathic constipation. Ironwood and Allergan are looking to expand Linzess’ label into additional symptoms and develop the drug as a non-opioid, pain-relieving agent for IBS patients, including multiple abdominal symptoms in adult patients with IBS-C.

The companies have completed enrollment in a phase IIb study evaluating three once-daily doses — 300, 600 and 1,200 mcg — of MD-7246 (delayed release formulation of Linzess) to treat abdominal pain associated with IBS with diarrhea. They expect to report top-line data during the second quarter of 2020, earlier than the previous expectation of mid-2020.

Ironwood is also developing an interesting candidate called IW-3718 for treating gastroesophageal reflux disease.

It is currently enrolling patients in two identical phase III studies on IW-3718. On its earnings call, the company stated that the COVID-19 pandemic is impacting enrollment in these studies and the company does not expect to report top-line data in the second half of 2020 any longer. It will provide an update when it has more clarity.

Our Take

Ironwood reported dismal first-quarter results with sales and earnings missing estimates. Moreover, Linzess’ near-term prospects look uncertain amid the COVID-19 pandemic.

However, we note that demand trends for Linzess remained strong in the first quarter and long-term potential of the drug appears solid. Moreover, since 2019, Ironwood and Allergan have settled patent litigations with five companies related to the generic version of Linzess, restricting generic competition for the drug till February 2029.

Following the separation of the Cyclerion Therapeutics CYCN in 2019, the new Ironwood entity has solid potential and its focus on the gastrointestinal product of the commercial portfolio and pipeline is impressive.

Ironwood Pharmaceuticals Inc Price, Consensus and EPS Surprise


Ironwood Pharmaceuticals Inc Price, Consensus and EPS Surprise
Ironwood Pharmaceuticals Inc Price, Consensus and EPS Surprise

Ironwood Pharmaceuticals Inc price-consensus-eps-surprise-chart | Ironwood Pharmaceuticals Inc Quote

Zacks Rank

Ironwood currently has a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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