Ironwood Pharmaceuticals: Near-Term Share Price Gain?

Ironwood and its US partner Forest Labs are poised for one of the biggest new product launches in years. Linzess (linaclotide), FDA-approved in August and set for US launch in December, addresses the millions of patients globally with chronic constipation disorders so has the potential to achieve >$1bn in peak annual sales. Ironwood’s $1.4bn market cap reflects already high investor expectations, so near-term share price gains largely depend on how Linzess performs out of the gates.

The stage is set
Linzess has been approved to treat chronic idiopathic constipation (CIC) and constipation-predominant irritable bowel syndrome (or IBS-C), conditions estimated to affect as many as 45m in the US alone. Initial focus will be on the estimated 10m US patients actively seeking alternatives to dietary/lifestyle changes and/or OTC laxatives. In clinical studies, Linzess has been shown to be effective at relieving constipation and associated abdominal pain, and generally safe and well tolerated.

Heavy promotional effort required
With just 6-8% of patients using prescription drugs to treat constipation disorders, a major promotional effort is required. Key factors in driving broad use will be: sales promotion (1,400-1,500 reps will detail to primary care and GE specialists); pricing (Linzess $7.10/day is ~25% discount to Sucampo’s Amitiza, the only other Rx available); access/reimbursement; and marketing (digital DTC campaign planned).

Global opportunities
Aside from Forest in the US, Ironwood has secured partnerships for linaclotide with Almirall in Europe (CHMP recommended approval for IBS-C in September 2012 and launch as Constella expected in H113) and Astellas Pharma in Japan (Phase II ongoing in 500 IBS-C patients). More partnerships are also anticipated, particularly in Brazil and China, two of the faster-growing global pharmaceutical markets.

Valuation: Stock appreciation depends on launch success
Stock performance over the next 12 months will depend on Ironwood and Forest’s success in executing the US launch, and the shape of Linzess’s initial launch trajectory. Quarterly sales updates now become key catalytic events. Further global partnerships offer potential for non-dilutive funds to support Linzess’s US roll-out.

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