Ironwood (IRWD) Surpasses Q4 Earnings And Sales Estimates

Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) reported fourth-quarter 2019 adjusted earnings of 30 cents per share, surpassing the Zacks Consensus Estimate of 22 cents. Earnings also came in higher than 4 cents recorded in the year-ago quarter.

Total revenues of $126.3 million comprehensively beat the Zacks Consensus Estimate of $109.7 million. However, revenues were down 3.4% year over year, primarily due to lower linaclotide API sales.

Ironwood’s shares rallied almost 4.9% on Feb 13, following the impressive results. However, shares of Ironwood have declined 14% in the past year compared with the industry’s decrease of 3.6%.

Quarter in Detail

As reported by partner Allergan plc (NYSE:AGN) , Ironwood’s sole marketed product — Linzess — generated net sales of $231.2 million in the United States, up 12.6% 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 $101.6 million in the fourth quarter, up approximately 24.5% year over year.

Per data provided by IQVIA, volume of prescribed Linzess capsules in the fourth quarter increased about 13% year over year.Ironwood stated on its earnings call that Linzess remained the most prescribed drug in its approved indications during 2019.

Sales of linaclotide API to Ironwood’s Japanese partner, Astellas Pharma, were $20.6 million compared with $45.9 million in the year-ago period. Ironwood recorded $4.1 million in linaclotide royalties, co-promotion and other revenues, compared with $3.2 million in the year-ago period.

We note that Ironwood amended its agreements with two partners — Astellas Pharma and AstraZeneca (NYSE:AZN) — related to development and commercialization of Linzess in Japan and China, respectively, in 2019. Per the amended terms of the agreements, Ironwood will stop supply of linaclotide API and will receive royalties on sales of Linzess in Japan and China, beginning 2020.

2019 Results

Ironwood posted full-year revenues of $428.4 million, representing year-over-year growth of 23.6%. Adjusted earnings per share were 55 cents against loss per share of 69 cents in the year-ago period.

Please note that the company’s operating cash flow turned positive in the third quarter of 2019, following the separation of its soluble guanylate cyclase (sGC) pipeline into another entity, Cyclerion Therapeutics (NASDAQ:CYCN) , in April 2019.

2020 Guidance

Ironwood provided its guidance for total revenues in 2020. The company expects full-year revenues in 2020 to be in the range of $360-$380 million. The Zacks Consensus Estimates for revenues stood at $418.64 million. The company expects adjusted EBITDA to be more than $105 million in 2020. It also expects net sales of Linzess to grow by mid-single digit percentage point.

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, including multiple abdominal symptoms in adult patients with IBS-C.

In May 2019, 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 companies have completed enrollment and expects to report top-line data by mid-2020.

Ironwood 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.

Our Take

Ironwood reported encouraging fourth-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. Moreover, amendments to collaboration agreement in China will likely lead to decline in operating expense going forward.

Moreover, since 2019, Ironwood and Allergan have settled patent litigations with five companies related to generic version of Linzess, restricting generic competition for the drug till February 2029.

With the separation of sGC pipeline in 2019, the new Ironwood entity has solid potential and its focus on the gastrointestinal product of the commercial portfolio and pipeline is impressive.

Zacks Rank

Ironwood currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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