Ironwood has increased total revenue by 16% year-over-year to $80 million, driven primarily by U.S. LINZESS collaboration revenue of $71 million.
BOSTON–(BUSINESS WIRE)–Ironwood Pharmaceuticals, Inc. (Nasdaq: IRWD), a GI-focused healthcare company, today provided an update on its first quarter 2020 results and recent business performance, as well as an update related to the impact of the COVID-19 pandemic on its business.
“As we navigate the unprecedented challenges caused by the COVID-19 pandemic, Ironwood is prioritizing the safety of our employees, patients, healthcare providers and communities,” said Mark Mallon, chief executive officer of Ironwood. “At the same time, we have remained steadfast in our vision of becoming the leading U.S. GI healthcare company and advancing care for millions of GI patients in need. During the quarter, we delivered on each of our core priorities including driving 11% growth in LINZESS prescription demand, advancing our two late-stage GI pipeline programs – IW-3718 and MD-7246, and generating our fourth consecutive quarter of profits. Our ability to deliver on these priorities is a testament to our remarkable employees. While the near-term environment is uncertain, we believe the fundamentals of our business, strategy and financials remain strong and position us well for long-term value creation.”
COVID-19 Business Impact
The impact of the COVID-19 pandemic continues to be far-reaching and unpredictable in the U.S. and around the world. Ironwood is taking important actions designed to help mitigate the impacts of the COVID-19 pandemic on its business and is following guidance from the U.S. Centers for Disease Control and Prevention (CDC).
- Protecting Ironwood Colleagues and Communities. Since March 16, all Ironwood employees, including customer-facing employees, have been working remotely. Ironwood suspended all in-person interactions with customers, including visits to physician offices, clinics and hospitals. Customer-facing employees are providing support virtually through a variety of telephone and web-based technologies.
– Ironwood has developed plans to resume in-person work practices as it is determined to be safe to do so and pending relevant health authority guidance.
- Maintaining Access to LINZESS. In collaboration with its U.S. partner, Allergan plc, Ironwood is focused on maintaining the availability of and access to LINZESS for adult patients in the U.S. suffering from irritable bowel syndrome with constipation (IBS-C) or chronic idiopathic constipation.
– LINZESS total prescription demand increased 11% in the first quarter of 2020 compared to the first quarter of 2019, per IQVIA. There was a higher rate of growth in LINZESS demand during the last two weeks of the first quarter of 2020, which is believed to be a result of patient stocking due to the COVID-19 pandemic; LINZESS prescription demand was otherwise not materially impacted by the COVID-19 pandemic during the quarter.
– To date, the COVID-19 pandemic has not caused significant disruptions to manufacturing operations nor supply of LINZESS in the U.S. Ironwood believes there is sufficient supply of LINZESS on hand to meet U.S. commercial needs at this time and continues to closely monitor the situation. Ironwood’s ex-U.S. partners are responsible for the manufacturing and supply of linaclotide in their respective territories.
- Continuing Clinical Development of GI Pipeline. Patient safety is one of Ironwood’s highest priorities and the company continues to work closely with clinical trial sites and investigators in an effort to protect the safety of all patients in its clinical trials.
– The COVID-19 pandemic is impacting enrollment in the Phase III clinical trials of IW-3718 for the treatment of refractory gastroesophageal reflux disease (GERD). Most of the clinical trial sites are no longer screening new patients due to the suspension of in-person procedures required to enroll patients, and the sites are also experiencing lower patient participation. The clinical trial sites are monitoring those patients already enrolled into the trials, most of whom are continuing in the trial. Ironwood remains committed to the Phase III program, but no longer expects to report top-line data in the second half of 2020. The company continues to assess the situation and plans to provide an update when it has more clarity.
– Ironwood and Allergan have completed patient dosing in a Phase II clinical trial of MD-7246 in patients suffering from abdominal pain associated with IBS with diarrhea (IBS-D). Top-line data from the Phase II trial are now expected during the second quarter of 2020, earlier than previous guidance of mid-2020.
- Update on Financial Guidance. During the first quarter of 2020, Ironwood did not see a material adverse impact to its financials as a result of the COVID-19 pandemic. Ironwood maintains its previously announced 2020 financial guidance of greater than $105 million in adjusted EBITDA. However, Ironwood is withdrawing the remainder of its 2020 financial guidance at this time due to uncertainties regarding the potential for and magnitude of certain COVID-19-related impacts on its financial performance, including any potential impact to U.S. LINZESS net sales.
First Quarter 2020 Financial Highlights1
(in thousands, except for per share amounts)
|
|
|
1Q 2020 |
1Q 2019 |
||
|
Total revenues |
$ 79,943 |
$ 68,730 |
|||
|
Total costs and expenses |
66,716 |
85,664 |
|||
|
GAAP net income (loss) from continuing operations |
3,345 |
(21,846) |
|||
|
GAAP net income (loss) |
3,345 |
(59,284) |
|||
|
GAAP net income (loss) per share – basic and diluted |
0.02 |
(0.38) |
|||
|
Adjusted EBITDA |
13,936 |
(8,028) |
|||
|
Non-GAAP net income (loss) |
6,811 |
(40,546) |
|||
|
Non-GAAP net income (loss) per share |
0.04 |
(0.26) |
|||
- Refer to the Reconciliation of GAAP Results to Non-GAAP Financial Measures table and to the Reconciliation of GAAP Net Income (Loss) from Continuing Operations to Adjusted EBITDA table at the end of this press release. Adjusted EBITDA is reconciled from GAAP Net Income (Loss) from Continuing Operations. There were no discontinued operations for the three months ended March 31, 2020. Refer to Non-GAAP Financial Measures for additional information.
First Quarter 2020 Corporate Highlights
U.S. LINZESS
- LINZESS U.S. net sales, as provided by Allergan, were $172.2 million in the first quarter of 2020, a 7% increase compared to the first quarter of 2019. Ironwood and Allergan share equally in U.S. brand collaboration profits.
– Total LINZESS prescription demand in the first quarter of 2020 included 34 million LINZESS capsules, an 11% increase compared to the first quarter of 2019, per IQVIA. The difference between LINZESS net sales growth and prescription demand growth is primarily due to a decrease in inventory, partially offset by net price improvement.
– LINZESS commercial margin was 73% in the first quarter of 2020 compared to 67% in the first quarter of 2019. See U.S. LINZESS Full Brand Collaboration table below and at the end of this press release.
– Ironwood recorded $71.1 million in collaboration revenue in the first quarter of 2020 related to sales of LINZESS in the U.S., compared to $64.3 million in the first quarter of 2019. See U.S. LINZESS Commercial Collaboration table at the end of the press release.
– Net profit for the LINZESS U.S. brand collaboration, net of commercial and research and development (R&D) expenses, was $110.2 million in the first quarter of 2020 compared to $94.4 million in the first quarter of 2019. See U.S. LINZESS Full Brand Collaboration table below and at the end of this press release.
– Ironwood and Allergan entered into settlement agreements with five generic drug manufacturers (Teva Pharmaceuticals, USA, Sandoz Inc., Aurobindo Pharma Ltd. and an affiliate of Aurobindo, Mylan Pharmaceuticals Inc. and Sun Pharma Global FZE) resolving all outstanding patent infringement litigation brought in response to their abbreviated new drug applications seeking approval to market generic versions of LINZESS prior to the expiration of Ironwood’s and Allergan’s applicable patents. Pursuant to the terms of the settlements, Ironwood and Allergan granted each of the five generic drug manufacturers a license to market their 145 mcg and 290 mcg generic versions of LINZESS, beginning as early as March 2029 (subject to U.S. FDA approval), unless certain limited circumstances, customary for settlement agreements of this nature, occur.
- Ironwood and Allergan previously entered into a settlement agreement providing Mylan a license to market its 72 mcg generic version of LINZESS beginning in August 2030 (subject to U.S. FDA approval), unless certain limited circumstances, customary for settlement agreements of this nature, occur. The settlement with Teva does not grant any license to Teva with regard to its 72 mcg generic version of LINZESS.
– In April 2020, Ironwood and Allergan announced that the United States Patent and Trademark Office issued Notices of Allowance for patent applications covering the formulation of the 72 mcg dose of LINZESS and methods of using the formulation. If these patent applications proceed to grant, they are expected to issue in 2020 and expire in 2031.
|
U.S. LINZESS Full Brand Collaboration1 (in thousands, except for percentages) |
Three Months Ended March 31, |
|
|
|
2020 |
2019 |
|
LINZESS U.S. net sales |
$172,163 |
$161,348 |
|
Allergan & Ironwood commercial costs and expenses |
47,227 |
53,315 |
|
Commercial margin |
73% |
67% |
|
Allergan & Ironwood R&D Expenses |
14,782 |
13,616 |
|
Total net profit on sales of LINZESS2 |
110,154 |
94,417 |
|
Full brand margin |
64% |
59% |
- Refer to the U.S. LINZESS Full Brand Collaboration table at the end of this press release.
GI Pipeline
- IW-3718. Ironwood is conducting two pivotal Phase III trials of IW-3718, its gastric retentive formulation of a bile acid sequestrant for the potential treatment of refractory GERD.
– As discussed above, the COVID-19 pandemic is impacting enrollment in the Phase III clinical trials of IW-3718 for the treatment of refractory GERD. Ironwood remains committed to the Phase III program, but no longer expects to report top-line data in the second half of 2020. The company continues to assess the situation and plans to provide an update when it has more clarity.
– Refractory GERD affects an estimated 8 to 10 million Americans who continue to suffer from heartburn and regurgitation despite receiving treatment with proton pump inhibitors, the current standard of care. There are currently no treatments available for the treatment of regurgitation associated with refractory GERD.
- MD-7246. Ironwood and Allergan have completed patient dosing in a Phase II clinical trial of MD-7246 in patients suffering from abdominal pain associated with IBS-D. Top-line data from the Phase II trial are now expected during the second quarter of 2020, earlier than previous guidance of mid-2020.
– MD-7246 is a delayed-release formulation of linaclotide designed to provide targeted delivery of linaclotide to the colon, where the majority of the abdominal pain is believed to originate, and to limit additional fluid secretion in the small intestine resulting in minimal impact on bowel function.
– MD-7246 is being evaluated as an oral, intestinal, non-opioid, pain-relieving agent for patients in the U.S. suffering from abdominal pain associated with certain GI diseases, including IBS-D. IBS-D affects an estimated 16 million Americans who suffer from frequent and bothersome abdominal pain with a limited number of treatment options available.
Global Collaborations and U.S. Promotional Partnerships
- U.S. Disease Education and Promotional Partnership with Alnylam Pharmaceuticals, Inc. In August 2019, Ironwood and Alnylam announced a U.S. GI disease education and promotional agreement for Alnylam’s GIVLAARI™ (givosiran), an RNAi therapeutic targeting aminolevulinic acid synthase 1 for the treatment of adults with Acute Hepatic Porphyria.
– Under this agreement, Ironwood will receive fixed payments and royalties in the mid-teens percent on net sales generated from prescriptions or referrals from certain physicians related to Ironwood’s promotional efforts.
– Alnylam reported GIVLAARI net product revenues of $5.3 million for the first quarter of 2020.
- LINZESS in Japan. In August 2019, Ironwood and its partner Astellas Pharma Inc. entered into an amended and restated license agreement relating to the development and commercialization of linaclotide in Japan. In 2020, Astellas will assume responsibility for linaclotide active pharmaceutical ingredient (API) manufacturing in Japan. Under the amended agreement, Ironwood receives royalties beginning in the mid-single-digit percent and escalating to the low double-digit percent, based on annual net sales of LINZESS in Japan. Ironwood recorded $0.4 million in royalties from Astellas in the first quarter of 2020.
- LINZESS in China. In September 2019, Ironwood and its partner AstraZeneca entered into an amended and restated collaboration agreement for the development and commercialization of LINZESS in China. LINZESS was approved by the Chinese National Medical Products Administration for adults with IBS-C in China in January 2019 and was launched in November 2019.
– Under the terms of the amended agreement, AstraZeneca obtained exclusive rights to develop, manufacture, and commercialize linaclotide in China (including Hong Kong and Macau) and is now responsible for all expenses associated with these activities beginning in 2020. Ironwood receives royalties beginning in the mid-single-digit percent and increasing up to 20 percent based on annual net sales of LINZESS in China.
First Quarter Financial Results
- Total Revenues. Total revenues in the first quarter of 2020 were $79.9 million, compared to $68.7 million in the first quarter of 2019, an increase of 16% year-over-year.
– Total revenues in the first quarter of 2020 consisted of $71.4 million associated with Ironwood’s share of the net profits from the sales of LINZESS in the U.S., $5.5 million in sales of linaclotide API, and $3.3 million in linaclotide royalties, co-promotion and other revenue.
- Operating Expenses. Operating expenses in the first quarter of 2020 were $66.7 million, compared to $85.7 million in the first quarter of 2019.
– Operating expenses in the first quarter of 2020 consisted of $36.5 million in SG&A expenses, $28.0 million in R&D expenses, and $2.2 million in cost of revenues.
– Operating expenses in the first quarter of 2019 consisted of $49.1 million in SG&A expenses, $32.2 million in R&D expenses, $3.3 million in restructuring expenses, and $1.0 million in cost of revenues. The separation of Ironwood and Cyclerion was completed on April 1, 2019. Certain costs related to Cyclerion have been reclassified to discontinued operations to conform with current period presentation.
- Interest Expense. Net interest expense was $6.4 million in the first quarter of 2020 primarily in connection with the company’s convertible senior notes. Interest expense recorded in the first quarter of 2020 included $1.8 million in cash expense and $5.4 million in non-cash expense.
– Net interest expense was $8.9 million in the first quarter of 2019, in connection with the 8.375% Notes due 2026 prior to their redemption in September 2019 and the outstanding 2022 Convertible Notes. Interest expense recorded in the first quarter of 2019 includes $5.0 million in cash expense and $4.6 million in non-cash expense.
- (Loss) Gain on Derivatives. Ironwood recorded a loss on derivatives of $(3.5) million in the first quarter of 2020 as a result of the change in fair value of the convertible note hedges and note hedge warrants issued in connection with the 2022 Convertible Notes and partially terminated in August 2019.
– Ironwood recorded a gain on derivatives of $3.9 million in the first quarter of 2019 related to the change in fair value of the convertible note hedges and note hedge warrants issued in connection with the 2022 Convertible Notes.
- Net Income (Loss).
– GAAP net income was $3.3 million, or $0.02 per share, in the first quarter of 2020, compared to GAAP net loss of $(59.3) million, or $(0.38) per share, in the first quarter of 2019.
– Non-GAAP net income was $6.8 million, or $0.04 per share, in the first quarter of 2020, compared to non-GAAP net loss of $(40.5) million, or $(0.26) per share, in the first quarter of 2019.
– Non-GAAP net income excludes the impact of mark-to-market adjustments on the derivatives related to Ironwood’s 2022 Convertible Notes, restructuring expenses and separation expenses. These adjustments are reflected in non-GAAP net income (loss) in the first quarter of 2020 and 2019 presented in this press release. See Non-GAAP Financial Measures below.
- Net Income (Loss) from Continuing Operations. Beginning in the second quarter of 2019, Ironwood recast historical Cyclerion-related operations as discontinued operations.
– Ironwood recorded $3.3 million in GAAP net income from continuing operations during the first quarter of 2020. Ironwood did not incur any Cyclerion-related expenses during the first quarter of 2020.
– Ironwood recorded $(21.8) million in GAAP net loss from continuing operations during the first quarter of 2019.
- Adjusted EBITDA. Adjusted EBITDA was $13.9 million in the first quarter of 2020.
– Adjusted EBITDA is calculated by subtracting net interest expense, taxes, depreciation, amortization, mark-to-market adjustments on derivatives related to Ironwood’s 2022 Convertible Notes, restructuring expenses, and separation expenses from GAAP net income (loss). See Non-GAAP Financial Measures below.
- Cash Flow Statement and Balance Sheet Highlights.
– Ironwood ended the first quarter of 2020 with $231 million of cash and cash equivalents.
– Ironwood generated $43.6 million in cash from operations in the first quarter of 2020.
Non-GAAP Financial Measures
Ironwood presents non-GAAP net income (loss) and non-GAAP net income (loss) per share to exclude the impact of net gains and losses on derivatives related to our 2022 Convertible Notes that are required to be marked-to-market. Ironwood also excludes restructuring, and separation-related expenses from non-GAAP net income (loss), if any. These adjustments, as applicable, are reflected in the non-GAAP net income (loss) in the first quarter 2020 presented in this press release. Non-GAAP adjustments are further detailed below:
- The gains and losses on the derivatives related to our 2022 Convertible Notes may be highly variable, difficult to predict and of a size that could have a substantial impact on the company’s reported results of operations in any given period.
- Restructuring expenses are considered to be a non-recurring event as they are associated with distinct operational decisions. Included in restructuring expenses are costs associated with exit and disposal activities.
- Separation expenses include costs associated with the spin-off of Cyclerion from Ironwood. These costs are considered non-recurring as the separation was a significant and unusual event. Certain of these expenses do not appear as non-GAAP adjustments used to calculate adjusted EBITDA, as such expenses are included as part of discontinued operations, and are therefore excluded from the calculation of GAAP net income (loss) from continuing operations.
Ironwood also presents adjusted EBITDA, a non-GAAP measure, as well as guidance on adjusted EBITDA. Adjusted EBITDA is calculated by subtracting net interest expense, taxes, depreciation, amortization, mark-to-market adjustments on derivatives related to Ironwood’s 2022 Convertible Notes, restructuring expenses, and separation expenses from GAAP net income (loss). The adjustments are made on a similar basis as described above related to non-GAAP net income (loss), as applicable.
Management believes this non-GAAP information is useful for investors, taken in conjunction with Ironwood’s GAAP financial statements, because it provides greater transparency and period-over-period comparability with respect to Ironwood’s operating performance. These measures are also used by management to assess the performance of the business. Investors should consider these non-GAAP measures only as a supplement to, not as a substitute for or as superior to, measures of financial performance prepared in accordance with GAAP. In addition, these non-GAAP financial measures are unlikely to be comparable with non-GAAP information provided by other companies. For a reconciliation of non-GAAP net income (loss) and non-GAAP net income (loss) per share to GAAP net income (loss) and GAAP net income (loss) per share, respectively, and for a reconciliation of adjusted EBITDA to net income (loss) from continuing operations on a GAAP basis, please refer to the tables at the end of this press release.
Ironwood does not provide guidance on GAAP net income (loss) from continuing operations or a reconciliation of expected adjusted EBITDA to expected GAAP net income (loss) from continuing operations because, without unreasonable efforts, it is unable to predict with reasonable certainty the non-GAAP adjustments used to calculate adjusted EBITDA including, without limitation, the mark-to-market adjustments on the derivatives related to its 2022 Convertible Notes. These adjustments are uncertain, depend on various factors and could have a material impact on GAAP net income (loss) from continuing operations for the guidance period.
Conference Call Information
Ironwood will host a conference call and webcast at 4:30 p.m. Eastern Time on Wednesday, May 6, 2020 to discuss its first quarter 2020 results and recent business activities. Individuals interested in participating in the call should dial (866) 393-4306 (U.S. and Canada) or (734) 385-2616 (international) using conference ID number 5494696. To access the webcast, please visit the Investors section of Ironwood’s website at www.ironwoodpharma.com at least 15 minutes prior to the start of the call to ensure adequate time for any software downloads that may be required. The call will be available for replay via telephone starting at approximately 7:30 p.m. Eastern Time, on May 6, 2020 running through 11:59 p.m. Eastern Time on May 20, 2020. To listen to the replay, dial (855) 859-2056 (U.S. and Canada) or (404) 537-4306 (international) using conference ID number 5494696. The archived webcast will be available on Ironwood’s website for 14 days beginning approximately one hour after the call has completed.
About Ironwood Pharmaceuticals
Ironwood Pharmaceuticals (Nasdaq: IRWD) is a GI-focused healthcare company dedicated to creating medicines that make a difference for patients living with GI diseases. We discovered, developed and are commercializing linaclotide, the U.S. branded prescription market leader for adults with irritable bowel syndrome with constipation (IBS-C) or chronic idiopathic constipation (CIC).
We are also advancing two late-stage, first-in-category GI product candidates: IW-3718 is a gastric retentive formulation of a bile acid sequestrant being developed for the potential treatment of refractory gastroesophageal reflux disease, and MD-7246 is a delayed-release formulation of linaclotide that is being evaluated as an oral, intestinal, non-opioid, pain-relieving agent for patients suffering from abdominal pain associated certain GI diseases.
Contacts
Investors and Media:
Meredith Kaya, 617-374-5082
Media:
Beth Calitri, 978-417-2031