Ironwood Pharmaceuticals, Inc.
) reported a loss of 38 cents per share (excluding a one-time
write-down of inventory) in the second quarter of 2014, much
narrower than the year-ago loss of 57 cents per share but wider
than the Zacks Consensus Estimate of a loss of 36 cents. Ironwood's
share price jumped approximately 1.9% on the news.
Ironwood Pharmaceuticals, Inc - Earnings
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Revenues decreased 29.2% year over year to $6.8 million. Revenues
were much below the Zacks Consensus Estimate of $15 million.
Revenues were also down more than 53% on a sequential basis due to
a change in wholesaler inventory levels. In the second quarter, the
company had 2 to 3 weeks of inventory as compared 4 to 5 weeks in
the preceding quarter.
Ironwood's sole marketed product is Linzess (EU trade name:
Constella) indicated for irritable bowel syndrome with constipation
(IBS-C) or chronic idiopathic constipation (CIC). Ironwood
co-markets the drug with Actavis (
). Net sales of the drug, as reported by Actavis, came in at $62.7
million in the second quarter of 2014, up 3% sequentially.
Number of prescriptions filled increased 36% to approximately
326,000 driven by new patient addition and continued demand for
Linzess. The company is focusing on promoting the product to
gastroenterologists and primary care physicians.
Ironwood has launched a direct-to-consumer campaign which boosted
Linzess prescription growth in the reported quarter.
The company is also working on expanding managed care access to
Linzess and lowering the out-of-pocket cost borne by patients. More
than 70% of the patients who are covered by commercial insurance
plans and Medicare Part D patients have unrestricted access to
Linzess. Meanwhile, approximately 70% had tier II ($30 co-pay)
access as of Jun 2014.
Meanwhile, Ironwood's EU partner Almirall has launched the product
in 10 European countries including the U.K. and Italy. More
launches are expected in 2014. However, Almirall has recently
announced its decision to suspend commercialization of Constella in
Germany from May 2014. The company has taken this decision after it
was unable to reach an agreement with the German National
Association of Statutory Health Insurance Funds regarding a
reimbursement price for Constella.
Linzess is well protected by patents and is unlikely to face
generic competition before 2031. Ironwood and Actavis are working
to strengthen the patent further.
Ironwood is looking to broaden Linzess' label by expanding the
targeted patient population and gaining approval for additional
indications including opioid-induced constipation (plans to
initiate phase II study in the third quarter of 2014, data should
mature in the second half of 2015), pediatrics and prevention of
Some other interesting pipeline candidates at Ironwood include
IW-9179 (functional dyspepsia and gastroparesis) and IW-3718
During the second quarter of 2014, selling, general and
administrative (SG&A) expenses fell 5.1% to $29.3 million.
Research and development (R&D) expenses amounted to $22.1
million, down 8.1%.
2014 Guidance Maintained
For 2014, Ironwood continues to expect operating expenses in the
range of $215 million to $245 million (R&D expense of $105
million to $120 million and SG&A expense of $110 million to
For 2014, Ironwood estimates total investment (including Actavis'
share) in sales and marketing for Linzess in the $240 million to
$270 million range.
We are pleased with Linzess' uptake rates and believe that it has
the potential to be a blockbuster product in the long run. Although
the wider-than-expected loss and below expectation revenues
reported in the second quarter are a bit disappointing, we believe
that revenues will pick up from the next quarter on the back of
price increases. Ironwood and Actavis have increased the price of
Linzess from $7.70 per pill to $8.43 per pill, effective Jul 1.
Ironwood carries a Zacks Rank #2 (Buy). Other well-ranked stocks in
the health care sector include Salix Pharmaceuticals (
) and Endo International (
). Both carry a Zacks Rank #1 (Strong Buy).
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