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Ironwood's Q3 Loss Wider than Expected, Revenues Miss

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Ironwood Pharmaceuticals, Inc.IRWD reported a loss of 25 cents per share in the third quarter of 2015, much wider than the Zacks Consensus Estimate of a loss of 20 cents but narrower than the year-ago loss of 30 cents.

Ironwood Pharmaceuticals Inc. (IRWD) - Earnings Surprise | FindTheCompany

Revenues in the quarter came in at $39.6 million, up substantially (almost 134%) from the year-ago quarter but falling short of the Zacks Consensus Estimate of $42 million. On a sequential basis, revenues shot up 42.6%.

The Quarter in Detail

Ironwood's sole marketed product is Linzess (EU trade name: Constella). Ironwood co-markets the drug with Allergan plc AGN . Net sales of the drug in the U.S., as reported by Allergan, came in at $117.5 million in the third quarter of 2015, up 4.8% sequentially and 47.5% year over year.

The number of prescriptions filled increased 7.8% sequentially and crossed 550,000. Demand was driven by the company's new direct-to-consumer (DTC) campaign. Since the company launched a DTC campaign in Apr 2014, total prescription market share has grown by over 80% and the market has grown by more than 30%. Ironwood said that growth is mostly coming from patients switching from OTC laxative to Linzess.

More than 70% of the patients who are covered by commercial insurance plans or Medicare Part D patients had unrestricted access to Linzess as of Oct 2015.

Ironwood is looking to broaden Linzess' label by expanding the targeted patient population and gaining approval for additional indications including chronic idiopathic constipation (CIC; reported positive top-line phase III data on the 72 mcg dose in Oct 2015 with regulatory filing expected in the first half of 2016) and opioid-induced constipation (phase II study, data expected in the fourth quarter of 2015). Two colonic release formulations have also been selected for evaluation in a phase IIb study in adults with irritable bowel syndrome with constipation (IBS-C). The study has been initiated with data due in the second half of 2016.

Some of the other interesting pipeline candidates at Ironwood include IW-9179 (diabetic gastroparesis symptoms, phase IIa study with data expected in the first half of 2016) and IW-3718 (refractory GERD, the company intends to start a phase IIb dose-ranging study in early 2016).

During the third quarter of 2015, selling, general and administrative (SG&A) expenses were up 6.7% to $30.4 million. Research and development (R&D) expenses amounted to $25.8 million, up 2.8%.

In Oct 2015, Allergan acquired exclusive rights for the development and commercialization of Linzess in the EU, Switzerland, Turkey and the Commonwealth of Independent States from Almirall, S.A. for the treatment of IBS-C, CIC and other gastrointestinal conditions. In addition, Allergan reacquired all rights from Almirall to Linzess in Mexico. The amended deal with Allergan could see Ironwood receiving launch- and sales-based milestones plus royalties on net sales of Linzess in these countries.

2015 Guidance Maintained

For 2015, Ironwood continues to expect operating expenses in the range of $220 million to $250 million (R&D expenses of $105-$120 million and SG&A expenses of $115-$130 million). Ironwood estimates total investment (including Allergan's share) in sales and marketing for Linzess in the range of $230-$260 million.

Our Take

Ironwood's third-quarter results were disappointing with the company reporting a wider-than- expected loss and revenues falling short of expectations. However, we are positive on the amended deal with Allergan. Ironwood expects a lot of pipeline related events over the next 15 months. We expect investor focus to also remain on Linzess' performance as well pipeline related updates from the company.

Ironwood is a Zacks Rank #4 (Sell) stock. A couple of better-ranked stocks in the health care sector are Actelion Ltd. ALIOF and Baxalta Incorporated BXLT . Both carry a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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