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Ironwood (IRWD) Q2 Earnings Beat on Solid Linzess Sales

Zacks Equity Research

Ironwood Pharmaceuticals, Inc. IRWD reported second-quarter 2020 adjusted earnings of 16 cents per share, which beat the Zacks Consensus Estimate of 8 cents. The company had reported adjusted earnings of 10 cents per share in the year-ago quarter.

Total revenues of $89.4 million also beat the Zacks Consensus Estimate of $83.67 million. However, revenues were down 12.5% year over year due to the absence of linaclotide API sales.

Shares of Ironwood have declined 24.6% so far this year compared with the industry’s decrease of 4.1%.

Quarter in Detail

As reported by partner AbbVie ABBV, Ironwood’s sole marketed product — Linzess — generated net sales of almost $219 million in the United States, up 5.4% year over year. Ironwood and AbbVie 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 $86.5 million in the second quarter, up approximately 15.3% year over year.

Per data provided by IQVIA, volume of prescribed Linzess capsules in the second quarter increased about 9% year over year.

Revenues also include $1.8 million in linaclotide royalties, $0.9 million in co-promotion revenues, and $0.2 million in other revenues.

On its second-quarter earnings call, Ironwood stated that the COVID-19 pandemic has not caused significant disruptions to manufacturing operations nor supply of Linzess in the United States. The company has enough supply of Linzess to meet U.S. demand in 2020.

Sales of linaclotide API were $9,000 compared with $24.9 million in the year-ago period. The significant decline was due to amended of agreement with its partners.           

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 re-issued its outlook for 2020 after withdrawing the same on the first-quarter earnings call due to uncertainty related to COVID-19 pandemic.

The company expects net sales of Linzess to grow in mid-single percentage points. Total revenues are anticipated in the range of $360 million-$380 million. The company expects adjusted EBITDA to be more than $105 million.

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 AbbVie 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.

Meanwhile, the companies were developing a delayed-release version of Linzess — MD-7246. In May, the companies announced that the phase II study evaluating the candidate for treating abdominal pain associated with irritable bowel syndrome with diarrhea failed to meet the primary endpoint. The companies decided to discontinue development of MD-7246, following the failure.

Ironwood is also developing an interesting candidate called IW-3718 for treating gastroesophageal reflux disease in two identical phase III studies — IW-3718-301 and IW-3718-302. However, COVID-19 impacted enrollment in these studies.

In July, Ironwood announced that it has updated the design of the two identical phase III studies evaluating IW-3718, following a discussion with the FDA. The company stated that the primary endpoint has been changed from the previous responder endpoint to a continuous endpoint for both studies.

In line with the new FDA guidance on statistical considerations for clinical studies impacted by COVID-19, the company stopped enrollment in the IW-3718-302 study. It plans to conduct an early assessment of IW-3718-302 study, which will be assessed by an independent data monitoring committee. Data from this early assessment is expected in the fourth quarter of 2020.

Based on the outcome of this assessment, the company will decide on continuation of both studies. The company expects to report top-line data from both studies in the first half of 2021, upon positive data from early assessment of IW-3718-302 study.

Please note that the company spun-off of its soluble guanylate cyclase segment into a separate, publicly traded company, Cyclerion Therapeutics CYCN in 2019.

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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