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Ironwood (IRWD) Q2 Earnings and Revenues Beat Estimates

Zacks Equity Research

Ironwood Pharmaceuticals, Inc. IRWD reported second-quarter 2019 adjusted earnings of 10 cents per share against the Zacks Consensus Estimate of a loss of 7 cents and the year-ago loss of 22 cents.

Total revenues of $102.2 million comprehensively beat the Zacks Consensus Estimate of $90.7 million. Revenues were up 26% year over year, primarily driven by higher linaclotide active pharmaceutical ingredient (“API”) sales.

On Apr 1, 2019, Ironwood completed its previously announced separation into two public entities.

Following the separation, Ironwood is focused on accelerating growth of Linzess and advancing the gastrointestinal pipeline. The new entity, Cyclerion Therapeutics, Inc. CYCN is focused on developing the Soluble Guanylate Cyclase (sGC) pipeline for treating serious and orphan diseases.

Shares of Ironwood have increased 1.6% so far this year compared with the industry’s rise of 7.5%.


Quarter in Detail

As reported by partner Allergan plc AGN, Ironwood’s key marketed product — Linzess —generated net sales of $196 million in the United States, up 2.2% year over year. Ironwood and Allergan equally share Linzess’ brand collaboration profits or losses.

Ironwood's share of net profits from sales of Linzess in the United States (included in collaborative revenues) was $75 million in the second quarter, up approximately 8.2% year over year. Total commercial profit in the reported quarter was $129.2 million.

Ironwood has a license agreement with Japan based, Astellas Pharma. Ironwood supplies linaclotide API to Astellas Pharma for manufacturing and developing Linzess for sale in Japan.

Sales of linaclotide API added $24.9 million, up more than 180% from the year-ago quarter, to revenues. However, the company expects growth in full-year sales of linaclotide API in 2019 to remain flat year over year. The company expects sales to decline in the future, as Astellas Pharma has purchased linaclotide API in significant amount in the past few quarters which may have contributed to high inventory.

The company earned $1.5 million from linaclotide royalties, co-promotion and other revenues.

Per data provided by IQVIA, volume of prescribed Linzess capsules in the second quarter increased about 13% year over year. However, lower realization of net prices unfavorably impacted sales of the drug.

2019 Guidance

Ironwood maintained its guidance for total revenues in the range of $370-$390 million for 2019. Net interest expenses are anticipated to be approximately $35 million. The company provided its earnings outlook for 2019 including the impact of the business separation. The company expects adjusted EBITDA to be more than $65 million. It also expects net sales of Linzess to grow by low-to-mid single digit percentage point.

The company expects to save $25 million over the next five years by shifting its headquarters to downtown Boston from its current location in Cambridge, MA. The relocation is expected to be completed by the end of this year.

Pipeline Updates

Linzess is approved in the United States for the treatment of adults with irritable bowel syndrome with constipation (IBS-C) and chronic idiopathic constipation. Ironwood and Allergan are looking to expand Linzess’ label into additional symptoms and develop the drug as a non-opioid, pain-relieving agent for IBS patients.

In June, Ironwood and Allergan announced positive top-line data from the phase IIIb study on Linzess for treating multiple abdominal symptoms in adult patients with IBS-C. The study met both primary and secondary endpoints with statistical significance and showed that Linzess improved the overall abdominal symptoms of bloating, pain and discomfort in adult patients with IBS-C as compared to placebo.

Linzess is marketed by Allergan for IBS-C in Europe and Canada under the brand name Constella.

In May, the companies initiated a phase IIb study for evaluating three once-daily doses – 300, 600 and 1,200 mcg – of MD-7246 (delayed release formulation of Linzess) to treat abdominal pain associated with IBS with diarrhea.

The company is also developing an interesting candidate called IW-3718. It is currently enrolling patients in two identical phase III studies, evaluating IW-3718 for treating gastroesophageal reflux disease. Results from both studies are expected in the second half of 2020.

Global Collaborations and Partnerships

In China, Hong Kong and Macau, Ironwood has a marketing agreement with AstraZeneca AZN for Linzess.

In January, Linzess was granted marketing approval by Chinese regulatory authorities to treat adults with IBS-C. Ironwood and AstraZeneca plan to launch the drug in China for IBS-Cin the second half of 2019.

Our Take

Ironwood reported encouraging second-quarter results with sales and earnings beating estimates. Linzess’ prospects look encouraging owing to strong demand trends and the drug’s expansion to new patient population and geographies.

The new Ironwood entity has solid potential and its focus on the gastrointestinal product of the commercial portfolio and pipeline is impressive. The second quarter was the first quarter in which the company recorded income.

Moreover, the company’s $98.9 million cash resources as of June-end, separation of sGC pipeline and a strong partner in Allergan bode well.

Ironwood Pharmaceuticals, Inc. Price, Consensus and EPS Surprise


Ironwood Pharmaceuticals, Inc. Price, Consensus and EPS Surprise
Ironwood Pharmaceuticals, Inc. Price, Consensus and EPS Surprise

Ironwood Pharmaceuticals, Inc. price-consensus-eps-surprise-chart | Ironwood Pharmaceuticals, Inc. Quote

Zacks Rank

Ironwood currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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