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Ironwood (IRWD) Q3 Earnings Beat on Solid Linzess Sales

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Zacks Equity Research
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Ironwood Pharmaceuticals, Inc. IRWD reported third-quarter 2020 adjusted earnings of 23 cents per share, which beat the Zacks Consensus Estimate of 14 cents. The company had reported adjusted earnings of 40 cents per share in the year-ago quarter.

Total revenues of $103.5 million also beat the Zacks Consensus Estimate of $93.46 million. However, revenues were down 21.5% year over year due to the absence of certain license and milestone payments recorded in third-quarter 2019.

Shares of Ironwood were up 7.3% in after-market hours on Nov 5, following the earnings release. However, the company’s shares have declined 24.8% so far this year compared with the industry’s decrease of 4.3%.

Quarter in Detail

As reported by partner AbbVie ABBV, Ironwood’s sole marketed product — Linzess — generated net sales of almost $241 million in the United States, up 10% 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 $100.2 million in the third quarter, up approximately 18.4% year over year.

Per data provided by IQVIA, volume of prescribed Linzess capsules in the third quarter increased about 7% year over year.

Revenues also include $1.8 million in linaclotide royalties, $1.1 million in co-promotion revenues, and $0.4 million in other revenues.

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 Raised

Ironwood raised its previous guidance for 2020 on the back of strong demand for Linzess despite COVID-19. The company expects net sales of Linzess to grow in high-single digit percentage points (previously mid-single digit). Total revenues are anticipated in the range of $370 million-$385 million compared with the previous expectation of $360 million-$380 million. The company expects adjusted EBITDA to be more than $130 million versus more than $105 million earlier.

Restructuring Initiatives

In September, Ironwood announced that IW-3718 failed to meet primary endpoint in one of the two identical phase III studies, evaluating it in refractory gastroesophageal reflux disease ("GERD") patients. Based on the study data, Ironwood discontinued development of IW-3718 and announced an organizational restructuring.

The company plans to reduce headcount by approximately 100 full-time employees during the fourth quarter. The company expects the initiative to result in total cost savings of approximately $95 million.

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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