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Ironwood Slips into Loss in Q3

Zacks Equity Research

Ironwood Pharmaceuticals, Inc.’s (IRWD) third-quarter 2013 loss of 51 cents per share compared unfavorably with the year-ago earnings of 42 cents per share. Results were primarily hurt by lower revenues. The Zacks Consensus Estimate was at a loss of 58 cents per share.

Total revenues in the third quarter of 2013 declined to $4.9 million from $96.4 million in the year-ago period. In the third quarter of 2012, revenues were boosted by an $85 million milestone payment from its partner Forest Laboratories, Inc. (FRX). Revenues were below the Zacks Consensus Estimate of $7 million.

Linzess Update

Ironwood’s sole marketed product is Linzess indicated for irritable bowel syndrome with constipation (IBS-C) or chronic idiopathic constipation (:CIC). Ironwood co-markets the drug with Forest Labs. Forest Labs and Ironwood share Linzess revenues generated in the U.S. equally. Net sales of the drug, as reported by Forest Labs, came in at $34.4 million in the third quarter of 2013 as compared to $28.8 million in the preceeding quarter.

In the third quarter, the number of prescriptions filed increased by more than 40% to 178,000. The company is focusing on promoting the product to gastroenterologists and primary care physicians. The company is also working on expanding managed care access to Linzess and lowering the out-of-pocket cost borne by patients. Approximately 80% patients who are covered by commercial insurance plans have unrestricted access to Linzess, while approximately 60% have tier II ($30 co-pay) access as of Sep 2013. Ironwood’s Medicare part D plan covers approximately 15% – 20% of the targeted patient population.

Ironwood is looking to broaden Linzess’ label by expanding the targeted patient population and gaining approval for additional indications. The company is evaluating Linzess for abdominal symptoms in patients with CIC in a phase IIIb trial. Top-line data from the trial suggest encouraging efficacy. The study met its primary endpoint. Ironwood also intends to evaluate Linzess in pediatric patients and for opioid-induced constipation (phase IIa study expected to be initiated in the first half of 2014), both of which represent significant commercial opportunity.

In the EU, approval came in Nov 2012 under the trade name Constella. Ironwood is collaborating with Almirall, S.A. in the EU for the drug.

Ironwood is also working with its Japanese partner, Astellas, for the development of Linzess in Japan, South Korea, Taiwan, Thailand, the Philippines and Indonesia and with AstraZeneca (AZN) in China, Hong Kong and Macau. Currently, Astellas is evaluating the drug in a phase II trial for IBS-C with results expected this year (enrollment complete). Ironwood and AstraZeneca started enrolling patients in a phase III trial evaluating linaclotide in adult IBS-C patients in Aug 2013 with data expected in the first half of 2015.


During the third quarter of 2013, selling, general and administrative (SG&A) expenses surged 32.5% to $30.3 million. For 2013, Ironwood expects total investment in sales and marketing for Linzess on the lower end of the $250–$300 million range.

Research and development (R&D) expenses amounted to $23 million, up 0.7%. In 2013, Ironwood expects to invest in the lower end of the $60–$75 million range in R&D expenses not pertaining to linaclotide.

Ironwood carries a Zacks Rank #3 (Hold). We expect investor focus to remain on the market performance of Linzess. Currently, companies like Roche (RHHBY) look well positioned with a Zacks Rank #1 (Strong Buy).

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