Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) Q1 2024 Earnings Call Transcript May 9, 2024
Ironwood Pharmaceuticals, Inc. misses on earnings expectations. Reported EPS is $0.08927 EPS, expectations were $0.18. Ironwood Pharmaceuticals, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you for standing by. My name is Kath, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ironwood Pharmaceuticals First Quarter 2024 Investor Update Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to Matt Roache, Director of Investor Relations. Please go ahead.
Matt Roache: Thank you, Kath. Good morning, and thanks for joining us for our first quarter 2024 investor update. Our press release issued this morning can be found on our website. Today’s call the accompanying slides include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual results to differ materially. A discussion of these statements and risk factors is available on the current safe harbor statement slide, as well as under the heading Risk Factors in our annual report on Form 10-K for the year ended December 31, 2023, and in our subsequent SEC filings. All forward-looking statements speak as of the date of this presentation, and we undertake no obligation to update such statements.
Also included are non-GAAP financial measures, which should be considered only as a supplement to, not a substitute for or superior to GAAP measures. To the extent applicable, please refer to the tables at the end of our press release for reconciliations of these measures to the most directly comparable GAAP measures. During today’s call, Tom McCourt, our Chief Executive Officer, begin with a brief overview; Mike Shetzline, our Chief Medical Officer will discuss our pipeline; and Sravan Emany, our Chief Financial Officer, will provide a commercial update to review our financial results and guidance. Today’s webcast includes slides. So for those of you dialing in, please go to the Events section of our website to access the accompanying slide separately.
With that, I’ll turn the call over to Tom.
Tom McCourt: Thanks, Matt. Good morning, everyone, and thanks for joining us. We are pleased to be here to discuss our significant advancements that we’ve made across our portfolio so far this year and our mission to become the leading GI health care company. I always like to start with the three strategic priorities, which are: maximize LINZESS; advance our GI pipeline; and deliver sustained profits and cash flow. In the first quarter of 2024, LINZESS maintained its strong demand momentum with prescription volume increasing 10% year-over-year, supported by a robust new to brand prescription growth of 18% versus the prior year, marking the fifth consecutive quarter of double-digit new to brand growth. As you may have seen in our press release this morning, based on information provided by AbbVie, we recorded an adjustment to the first quarter collaborative arrangement revenue as a result of a gross to net change in estimate for LINZESS related to the year ended December 31, ’23 which led to our revised full year ’24 outlook.
Sravan will provide more detail on the impact of this one-time adjustment later on the call. Moving to our pipeline. We made important progress across our development programs in the quarter. Most notably, we believe we have transformed our company with a positive topline results in February from the Phase III STARS trial, evaluating the efficacy and safety of apraglutide in patients with short bowel syndrome with intestinal failure. These positive Phase III results demonstrate the potential of apraglutide as the first and only weekly GLP-2 therapy for the treatment of adults with short bowel syndrome who are dependent on parenteral support, if approved. Following the topline results shared in late February, we have continued to analyze a robust data set of the STARS Phase III and new data was submitted as a late breaking abstract and selected for an oral presentation at the upcoming Digestive Disease Meeting.
These data further strengthen the clinical profile of apraglutide, which we’re eager to share with the broader GI medical and scientific community. Based on the combination of demonstrated efficacy, tolerability and once weekly dosing, we are confident that apraglutide has a high probability of approval. We believe these three distinguishing factors will drive uptake, compliance and improvement in quality of life for patients, reinforcing our belief that apraglutide has the potential to achieve $1 billion in peak net sales. We are now focused on ensuring a successful path forward to commercialization, an area where we have significant expertise and a track record of success. We are working swiftly and plan to file the NDA as soon as possible with a label focused on adult SBS patients who are dependent on parenteral support and continue to expect a commercial launch in 2025.
We estimate that there’s approximately 17,000 adult patients across the United States and Europe who suffer from short bowl syndrome with intestinal failure, with a significant portion of these patients still untreated by GLP-2s. We have the commercial infrastructure already in place and expect only incremental investments needed to launch apraglutide successfully. We are well on our way with the launch planning and believe we are equipped to commercialize apraglutide, if approved, with a strong sales presence already established in the offices of GI specialists across the United States. We are confident the positive results from the STARS trial coupled with our proven track record of effective commercial execution position us uniquely in the market.
We’re excited to leverage our expertise to maximize the potential for apraglutide and drive meaningful impactful outcomes for patients with short bowel syndrome who are dependent on parenteral support. So to wrap up, we are poised for future growth for the following reasons: First, LINZESS continues to deliver robust demand growth and is driving meaningful cash flows for Ironwood, which we expect to continue until generic entry in 2029. Second, we believe we have transformed our company with a positive Phase III results from the STARS trial, which reinforce our conviction in apraglutide’s high probability of approval and long-term revenue and profit growth potential. Finally, we’re excited to see the Phase II topline results from CMP-104 later this year.
We believe CMP-104 has the potential to be a disease modifying therapy for the treatment of primary biliary cholangitis. With that, I’ll hand it over to Mike to discuss apraglutide and our pipeline in more detail. Mike?
Mike Shetzline: Thanks, Tom, and good morning, everyone. We’re pleased with the progress we made across our pipeline programs in the first quarter. I’ll begin with apraglutide for short bowel syndrome in patients dependent on parenteral support. We’re very proud of the positive results from the pivotal global Phase III STARS study which is the largest ever GLP-2 trial in short bowel syndrome with intestinal failure, generating a robust data set across 68 sites and 18 countries. An important aspect of the STARS Phase III study design was the rigorous optimization of parenteral support volumes prior to treatment. That resulted in a low placebo rate, which intern generated a robust treatment effect for apraglutide in this patient population.
Apraglutide is the only once weekly GLP-2 to meet its primary endpoint of relative change from baseline in actual weekly parenteral sport volume at week 24 with a 2 times treatment effect relative to placebo, driven by both stoma and colon in continuity populations. As a clinician myself, I’m thrilled about apraglutide’s strong profile, including the convenience of once weekly administration and its potential to benefit a patient community in need of new treatment options. Summarized on Slide 9, I’m excited by the demonstrated efficacy in the primary endpoint in both stoma and colon in continuity patient populations at 24 weeks. With further analysis of the data, we’re also excited by the rapid onset of treatment effect observed at week eight and onward throughout the study.
The fact that some patients in both stoma and colon in continuity populations reached enteral autonomy or a complete weaning off of parenteral support and the low prevalence of reported injection site reactions and abdominal distension, which are in line with placebo. Overall, we believe apraglutide’s differentiated profile, including its demonstrated efficacy and tolerability and convenience of once weekly dosing support our belief in apraglutide’s high probability of approval and potential to improve the standard of care for patients with short bowel syndrome who are dependent on parenteral support. We’re very much looking forward to the upcoming DDW meeting and presenting data, which we believe further supports and enhances the clinical profile of apraglutide.
We also look forward to continuing to evaluate the robust data set from the largest ever GLP-2 study in short bowel syndrome with intestinal failure, and plan to disclose further findings at additional meetings later this year. In addition to the positive Phase III results from apraglutide in short bowel syndrome with intestinal failure, we also announced positive results from our exploratory STARGAZE trial of apraglutide in patients with steroid refractory, gastrointestinal. acute graft versus host disease. The primary objective of the trial was to evaluate the safety and tolerability of once weekly apraglutide in steroid refractory acute GVHD patients treated with standard of care. Results up to day 91 showed that apraglutide in acute GVHD was well tolerated with an acceptable safety profile, the study’s primary objective.
In addition to evaluating safety, secondary endpoints assessed efficacy via lower GI and all organ responses. The majority of patients responded to treatment by day 28 and day 56, all lower GI responders at day 28 maintained their response through day 56 and 91. We’re encouraged by the data on safety, tolerability and maintenance of response and expect to present additional data at a future medical congress. The STARGAZE study will continue through its two year endpoint when apraglutide will be evaluated for safety and efficacy. Moving to CNP-104 on Slide 10. In the first quarter, COUR completed patient enrollment for the Phase II proof-of-concept study in patients with PBC and are on track to report topline results in the third quarter of this year.
The CNP-104 Phase II study is of 42 patient placebo-controlled study evaluating the safety, tolerability, pharmacodynamics and efficacy of CNP-104 in patients with PBC who are unresponsive to UDCA and/or Ocaliva. Top prime results will be based on data through day 120 of treatment. The strong immunology underpinning the CNP program is focused on targeting the specific PDC-E2 antigen and responsible for the T cell driven pathology of PBC. Last year, we saw early data showing favorable PDC-E2 specific T cell responses in patients treated with CNP-104. In the topline results anticipated in the third quarter, we’re looking for a demonstrated T cell response, which we believe is a leading indicator of clinical benefit. The study will also evaluate several markers of liver function, a positive signal on liver function markers in addition to the T cell response could further support the potential for CNP-104.
We believe CNP-104 has the potential to be the first disease modifying therapy for patients suffering with PBC as there are no therapies on the market today that address the root cause of the T cell-driven immune destruction of the liver bile ducts. With that, I’ll turn it over to Sravan.
Sravan Emany: Thanks, Mike, and good morning, everyone. I’ll begin on Slide 12. As Tom mentioned earlier, LINZESS carried the positive demand momentum into the first quarter. This is now the 12th year on market for LINZESS. And as you can see, prescription demand remains remarkably strong. LINZESS volume rose 10% year-over-year in the first quarter, while new to brand prescriptions increased 18% compared with the first quarter of 2023, reinforcing that patients and healthcare professionals continue to choose LINZESS. We believe the strong demand momentum and success of LINZESS will continue as a result of high treatment satisfaction with both patients and healthcare professionals, combined with increased utility from the pediatric syndication, class leading formulary access, guideline recommendations, focused commercial execution and new patient start acceleration.
I’d like to take a moment to provide additional details on the LINZESS gross to net change an estimate that was reflected in the first quarter of 2024 on Slide 13. In the first quarter, AbbVie reported U.S. net sales of $257 million, an increase of 3% year-over-year. Based on information subsequently provided by AbbVie, Ironwood estimates a $60 million adjustment to LINZESS U.S. net sales, representing the difference between AbbVie’s gross to net estimates made in 2023 and actual subsequent payments made. As a result of this change in estimate, Ironwood recorded a $30 million reduction to collaborative arrangements revenue. With this adjustment, total Ironwood revenue in the first quarter was approximately $75 million, down 28% year-over-year.
Turning to our first quarter financial performance slide on — performance on Slide 14. Q1 LINZESS U.S. net sales, as reported by AbbVie, were $257 million, an increase of 3% year-over-year. LINZESS’ commercial margin, excluding the gross to net change in estimate, was 71% in the first quarter of 2024 compared to 73% in the first quarter of 2023. As I noted a few moments ago, Ironwood revenue was $75 million, driven primarily by U.S. LINZESS collaboration revenue of $72 million. Revenues in Q1 were lower year-over-year primarily due to the $30 million change in estimate recorded to collaborative arrangements revenue. As a result, GAAP net loss was $4 million, and adjusted EBITDA was $13 million. In the first quarter, Ironwood generated approximately $45 million in cash flow from operations, and ended the quarter with $122 million in cash and cash equivalents.
After repaying $25 million of the outstanding principal balance on our revolving credit facility in cash. As of the end of March, the outstanding drawn balance on the revolver was $275 million. In the near term, we continue to expect to settle our 2024 convertible notes that mature on June 15, through a combination of cash on hand and undrawn revolver capacity. Regarding capital allocation. We are in a fortunate position with meaningful cash flow generation for LINZESS, which we believe will be sufficient to fund all ongoing operations, and we do not anticipate the need to access the capital markets for incremental funding to support the potential apraglutide launch and further progress our development programs. Next, I’ll review our updated 2024 guidance on Slide 15.
As a result of LINZESS’ gross to net change in estimate in the first quarter, for full year 2024, we now expect LINZESS U.S. net sales decline in the mid-single digits percent. Ironwood revenue of between $405 million and $425 million, and adjusted EBITDA of greater than $120 million. To wrap up, we made significant advancements across our portfolio in the first quarter. We look forward to sharing additional detail from the apraglutide STARS Phase III study at Digestive Disease Week later this month, which we believe will further enhance its clinical profile of apraglutide. With the positive STARS data readout, we believe we are well on our way to diversifying our portfolio and extending our growth horizon beyond LINZESS. Looking ahead, we are focused on moving quickly to get apraglutide approved and to patients with SBS who are dependent on parenteral support as soon as possible and executing across our strategic priorities by advancing our other GI pipeline assets, driving robust LINZESS demand growth and delivering sustained profits and cash flow.
I want to close by thanking all of our employees, patients, caregivers and advocates for their shared dedication to advancing and supporting therapies for GI diseases. Operator, you may now open up the line for questions.
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