Ironwood Pharmaceuticals Q3 2023 Earnings Call Transcript

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November 9, 2023

There are 9 speakers on the call.

Operator

Thank you for standing by. My name is Aaron, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Ironwood Pharmaceuticals Q3 2023 Investor Update Conference Call. And answer session. Q3.

Operator

I would now like turn our call over to Matt Roche, Director of Investor Relations. Matt, please go ahead.

Speaker 1

Thank you, Aaron. Good morning and thanks for joining us for our Q3 2023 investor update. Our press release issued this morning can be found at our website. Today's call and accompanying slides include forward looking statements. Such statements involve risks and uncertainties that may cause actual results to differ materially.

Speaker 1

A discussion of these statements and risk factors is available on the current Safe Harbor statement slide as well as under the heading Risk Factors annual report on Form 10 ks for the year ended December 31, 2022 and in our quarterly report on Form 10 Q for the Q2 ended June 30, 2023 in our subsequent SEC filings. All forward looking statements speak as of the date of this presentation. We undertake no obligation to update such statements. Also included are non GAAP financial measures, which should be considered only as a supplement to and not a substitute for or superior to GAAP measures. To the extent applicable, Please refer to the tables at the end of our press release for reconciliations of these measures to the most directly comparable GAAP measures.

Speaker 1

During today's call, Tom McCourt, our Chief Executive Officer will begin with a brief overview. Mike Schechselin, our Chief Medical Officer will discuss our pipeline and Shravan Imani, our Chief Financial Officer, provide a commercial update and review our financial results and guidance. Today's webcast includes slides. So for those of you dialing in, please go to the Events section of our website to access the accompanying slides separately. With that, I'll turn the call over to Tom.

Speaker 1

Thanks, Matt, and good

Speaker 2

morning, everyone, and thanks for joining us today. As we approach the end of the year and look back on the progress we've made across our strategic priorities. We are pleased with the strides taken towards realizing our vision to become the leading GI Healthcare company in the industry. As you've come to expect from us over the years, we continue to maximize LINZESS by driving robust demand growth and expanding its clinical utility while generating strong cash flows. We are on track to deliver on our LINZESS net sales guidance growth between 6% 8% this year and remain encouraged about the future growth potential of LINZESS based on its continued strong performance in the Q3.

Speaker 2

But importantly this year, we have also strengthened and progressed our GI portfolio in areas of high unmet need. Earlier this year, we acquired Vectabio, including its lead investigational asset, apraglutide, in development for the treatment of short bowel syndrome with intestinal failure, which we believe has the potential to achieve $1,000,000,000 in peak net sales and extend the growth horizon for our company into the 2030s. We couldn't be more excited about the potential for pragmatide. And just a few weeks ago, at the United European Gastroenterology Week, we presented positive final 52 week data from the Phase 2 STARS Nutrition Study in short bowel syndrome with intestinal failure and colon incontinuity, For eparab glukai to be the best in class GLP-two analog for the whole spectrum of patients in short bowel syndrome and intestinal failure, including dose with colon incontinuity and reinforces our high conviction for the STARS clinical program. In addition, we're also excited about the progress of CMP-one hundred and four, a potentially disease modifying therapy for the treatment of primary biliary cholangitis or PBC.

Speaker 2

The design of the CMP-one hundred and four program and the structure of the license option agreement with Core Pharmaceuticals are examples of our disciplined approach to building and progressing our development portfolio. The sound scientific rationale for CMP-one hundred and four and the specificity of the target, the PDCE2 antigen provided an opportunity to review the early effect on T cell response. This assessment showed evidence of T cell responses in patients treated with CMP-one hundred and four, which is very encouraging. Together, these positive developments across to our pipeline, reinforce our confidence in the tremendous opportunity we have in front of us with multiple programs that have the potential to improve standard of care and improve quality of life for patients managing GI diseases. And we also have key upcoming data that will help clarify our path forward.

Speaker 2

Our commitment and optimism to develop and advance innovative GI assets is as strong as it's ever been. We believe the positive momentum across our GI pipeline programs combined with the continued strong performance of LINZESS uniquely positions us on our mission to be the leader in GI. We're looking forward to a strong finish in 2023 and are very excited about the key catalysts ahead in 2024, which we believe will propel Ironwood's growth and ability to create value for patients and shareholders for the years to come. I would now like to turn it over to Mike, who will review our pipeline in more detail. Mike?

Speaker 2

Thanks, Tom,

Speaker 3

and good morning, everyone. I'm delighted to provide an update on our pipeline programs starting with Ipaglutide and short bowel syndrome with intestinal failure or SBSIF on Slide 8. Short bowel syndrome with intestinal failure results from severe organ failure due to reduction in intestinal function below the minimum sorry for normal nutrient and fluid absorption, leading to dependence on lifelong parenteral support or intravenous administration of fluid and nutrients to maintain health, growth and survival. SPS IF is associated with increased mortality, significant morbidity, high economic burden and reduced quality of life. On Slide 8, we highlight 2 distinct patient populations within SPSSIF that have different metabolic needs.

Speaker 3

They are stoma and colon in continuity, often referred to as CIC. Patients with stoma often have a higher degree of fluid loss and dehydration than those with colon and continuity. Since the lack of colon makes sufficient fluid reabsorption more challenging. These patients are often dependent on lifelong parenteral support and may require parenteral support infusions for up to 10 to 15 hours a day for 7 days a week. Patients with colon and continuity typically require more nutritional support than absolute fluid volume.

Speaker 3

Colon and continuity patients due to the presence of a functional colon, may have a better opportunity to achieve enteral autonomy, which is the elimination of parenteral support altogether. SVS IF patients with CIC represent greater than 50% of the SVS IF market and our distinct patient population currently underserved by available treatments. Now to Slide 9. As Tom mentioned, we're excited about the positive final 52 week data from the open label Phase 2 STARS Nutrition study. STARS Nutrition is the first ever dedicated study designed to evaluate the clinical benefit of a GLP-two analog, specifically in short bowel syndrome with intestinal failure with colon incontinuity.

Speaker 1

As you

Speaker 3

can see on Slide 10, parenteralsport volume reduction reached a statistically significant 40% at week 24 and the effect was maintained with a 52% volume reduction at week 52. And as shown on Slide 11, All patients were clinical responders defined as those achieving a parenteral support volume reduction of at least 20%. At week 52, 7 of the 9 patients or 78% achieved at least one day off parenteral support. At week 52 patients gained 2.1 days off parenteral support per week compared to a mean of 5.2 days per week at baseline, a significant improvement which allows patients more independence. Moving to Slide 12, the STARS Phase 3 study is the largest GLP-two trial ever conducted in SBSIF with 164 patients and has been designed to evaluate efficacy in both stoma and colon and continuity patient population.

Speaker 3

The STARS Phase 3 study's primary endpoint, which includes stoma NCIC patients is relative change from baseline and weekly parenteral support volume at week 24. We believe apraglutide has the potential to improve the standard of care as the only once weekly GLP-two therapy for SBSIF, if successful and approved. We're looking forward to the top line data expected in March 2024 and we'll keep you updated as the study continues to advance. On Slide 13 is an expanded view of our portfolio. In addition to evaluating apraglutide for short bowel syndrome with intestinal failure, We're also evaluating the asset as a potential treatment for patients with graft versus host disease or GvHD.

Speaker 3

Graft versus host disease is immunologically mediated and occurs in individuals undergoing allogeneic hematopoietic stem cell transplant where donor immune cells react against the host recipient. The gastrointestinal tract is among the most common sites affected by GvHD and severe manifestations of GVHD, we tend to poor prognosis in these patients. Enrollment is completed and data is expected from this open label Phase 2 study in the Q1 of 'twenty four. Now to CMP-one hundred and four for the potential treatment of primary biliary cholangitis. PBC is a slowly progressive and debilitating rare disease driven by an autoimmune response to the PDCE2 antigen in which auto reactive T cells destroy the bile ducts, commonly can lead to irreversible damage and scarring of the liver, ultimately requiring liver transplant.

Speaker 3

As Tom mentioned, Given the strong science behind this clinical program, we had the opportunity to assess peripheral T cells. We completed an early assessment, which showed evidence of favorable T cell responses in patients treated with CMT-one hundred and four, supporting the mechanistic rationale for this asset, which we believe could potentially impact disease progression in TBC. We're encouraged by the T cell response and we expect top line data results in the Q3 of 'twenty four. As a reminder, The primary endpoint in Phase 2 study includes safety, tolerability, plus change in apline phosphatase. We're excited about CMP-one hundred and four because it is Truly Precision Medicine and it introduces a potentially new game changing therapy for PBC patients as there are no therapies on the market that address the root cause of this progressive liver disease.

Speaker 3

Moving on to IW3300, a wholly owned Ironwood asset for potential treatment of interstitial cystitis and bladder pain syndrome. There's a significant unmet need in this area as this condition affects millions of Americans There are very few treatment options currently on the market or in development. We're currently executing a proof of concept Phase 2 study, which is progressing. We're excited about this program as it is the first time the crosstalk hypothesis will be tested in humans and we're proud to be at the forefront of clinical development in this area. Over the past couple of years, we've evolved Ironwood into a leading GI company with a robust pipeline that addresses serious organic GI diseases with high unmet patient need.

Speaker 3

We're looking forward to an exciting and potentially transformational year for Ironwood with several catalysts in 2024, highlighted by the top line data from the STARS Phase 3 study in March in short bowel syndrome with intestinal failure and top line data from the ongoing Phase 2 study in CMP-one hundred and four in the Q3 of 2024. With that, I'll turn it over to Sravan to review LINZESS performance.

Speaker 4

Thanks, Mike, and good morning, everyone. I'll begin on Slide 15. In the Q3, LINZESS delivered another quarter of impressive volume growth, increasing 8% versus the Q3 of 2022. New to brand prescriptions were strong once again, growing 16% year over year, reinforcing that patients and drive additional prescription demand growth, including the roughly 6,000,000 children and adolescents ages 6 to 17 who suffer from functional constipation. Since the June FDA approval in this pediatric population, we have been promoting LINZESS pediatric gastroenterologists specific geographies and we'll continue to assess future promotional expansion based on market response from these efforts and we have received great feedback so far.

Speaker 4

Additionally, at the recent North American Society For Pediatric Gastroenterology, Hepatology and Nutrition Annual Meeting, We met with a number of healthcare professionals. We're excited by the ability to prescribe LINZESS to help this pediatric patient age group, which is very encouraging. We look forward to providing updates as we continue to gain more insights into this opportunity, which will help inform the investment level and net sales potential in 2024. Next, I'll provide a brief update on the Vectiv Bio transaction. The integration of Ironwood and Vectiv Bio business operations is ongoing and progressing as planned.

Speaker 4

As we continue to integrate, We remain focused on ensuring business continuity, learning from our new colleagues and progressing afraglutide expeditiously. As a reminder, Q3 financial results, notably operating expense and cash flows, include the 1st full quarter impact from the Vectiv Vio acquisition. We also continue to take the necessary steps to effect a squeeze out merger under Swiss law to acquire the remaining 2% of outstanding Vectiv Bio shares. We expect this process to be completed by the end of this year and we will provide additional updates once this process is completed. 2019.

Speaker 4

Next, I'll provide additional details on our Q3 financial performance starting with LINZESS. As shown on Slide 16, U. S. Net sales were $279,000,000 an increase of 7% year over year driven by strong LINZESS subscription demand growth of 8% versus the prior year quarter, in line with our full year guidance. Commercial margins were 72% compared to 74% in Q3 of 2022.

Speaker 4

Ironwood revenues were $114,000,000 driven primarily by U. S. LINZESS collaboration revenues of $110,000,000 Ironwood recorded $18,000,000 of income tax expense in the Q3, the majority of which was non cash. In addition, Ironwood recorded $10,000,000 in interest expense and other financing costs and generate $2,000,000 in interest investment income. GAAP net income was $14,000,000 and adjusted EBITDA was $49,000,000 In the Q3, we generated approximately $33,000,000 in cash flow from operations and ended the Q3 with $110,000,000 in cash and cash equivalents after we're paying $75,000,000 of the outstanding principal balance on our revolving credit facility in cash.

Speaker 4

As of the end of September, the outstanding drawn balance on the revolver was $325,000,000 Moving forward, we continue to maintain our focus on generating profits and meaningful cash flows. We will prioritize investments to maximize the value of LINZESS, progress our development portfolio and manage our capital structure through debt pay down, while maintaining the flexibility to evaluate additional opportunities for capital deployment. Next, I'll review our 2023 guidance on Slide 17. We are reiterating our full year 2023 financial guidance as we remain confident in the continued strength of LINZESS. We continue to expect LINZESS U.

Speaker 4

S. Net sales growth of between 6% 8%, Ironwood revenue between $435,000,000 $450,000,000 and an adjusted EBITDA loss of approximately $900,000,000 which includes a one time charge of approximately $1,100,000,000 from the acquisition of Actifio. Excluding the impact of the one time charge, adjusted EBITDA is an approximate representation of operating cash flows. To wrap up, we are pleased with our 3rd quarter results and we are looking forward to a strong finish to the year. We are well positioned for continued growth and remain focused on maximizing LINZESS, We are excited about continued strong LINZESS performance and the key pipeline catalysts ahead of us, which we believe will help launch Ironwood's next phase of growth.

Operator

To ask a question today. 2019. Our first question comes from the line of Jason Butler. Your line is live.

Speaker 5

Hi, thanks for taking the question and congrats on the quarter. Just 3 for me. First on LINZESS, can you speak to what if any impact The label expansion had on LINZESS in the quarter and what you're seeing into the Q4. 2nd on apraglutide, can you speak to How improvements in enteral autonomy can help by the pricing leverage or reimbursement? And then just lastly on CMP-one hundred and four, can you speak to the magnitude of the T cell responses and how that might speak to the predictive value for clinical outcomes.

Speaker 5

Thanks. Yes.

Speaker 4

So, I'll answer the first one, Jason, and I'll hand them over Mike to get the 2nd and third. With respect to our 2023 guidance, we're extremely excited to be able to Offerlands S as the 1st and only approved prescription therapy, for pediatric patients suffering from functional constipation, for patients ages 6% to 17. Our sales guidance of 6% to 8% for the full year includes any impact from the pediatric indication. So it's in the guidance that we've already given. And, as a reminder, I think we've stated this before, we expect minimal contribution from pediatrics in 2023 as we focus on these promotional pilot programs and as we kind of assess where we're at and we'll come back at the start of next year when we give guidance for 2024 as to what we think the opportunity size really will be, for next year.

Speaker 4

Mike, you want to take the question?

Speaker 3

Yes. The question was on the enteral autonomy for the apiglutide program. I think it's an important question because patients who suffer from SBS I F and require parenteral support actually have a huge sort of economic burden with their disease because they have to connect themselves to this IV administration of fluid and nutrients oftentimes as we said for 12 hours in a day for 7 days a week. So your question is on enter autonomy but we need to remember that even reducing that requirement by a day or 2 is a significant economic improvement because for these things happen every day it's a huge burden on the patient but also a financial burden. Is where you remove completely the need for parenteral support.

Speaker 3

So that's why enter autonomy in a way is curative related to parenteral support need because you no longer need to tether yourself to the IV fluid administration every day. So that's why we think it's a very, important consideration in this population. It's also important to understand that prior products haven't really focused on the colon and continuity patient population and with our approach, we think we have a great opportunity in that population to potentially achieve enteral autonomy.

Speaker 4

And then lastly on the CMP sorry.

Speaker 2

The other part of the question that I thought I heard And what's hot as this lend to really the pricing opportunity. And obviously the value proposition here is very, very strong. As Mike mentioned, this is a really burdensome disease. These patients are very costly to manage. And there's certainly a price point out there already established with the currently available therapy, which is sizable.

Speaker 2

So I think we're looking at bringing a very strong clinical profile to the table that can basically manage probably a broader patient population in a more significant way, which obviously is going to put us in a pretty good position as far as Where we would enter the market and how we would enter the market. And maybe, Mike, you can you can talk specifically about the T cells or

Speaker 3

Yeah. Sure. So It's a good question, and I can tell you what we can tell you, okay, from a T cell response magnitude. I mean, remember, as Tom alluded to this as well, The reason we did this deal was because of the strong science behind the clinical study and the chance to assess the potential opportunity by analyzing peripheral T cells. And recall this is a peripheral T cell look for a disease that's confined to the liver and the bile ducts.

Speaker 3

So, we completed the early assessment which showed evidence of T cell responses, which really support the mechanistic rationale for CNP, which we believe could potentially impact disease progression. But it was a very small unblinded review, which was to determine if we could see this effect on T cells. So while we're encouraged by the early look and by the favorable findings. We do need to remember that as a reminder, the primary endpoint for the Phase 2 has safety tolerability as well as Alkfaas and we're really looking forward to that data set to better understand what these changes in the peripheral T cells mean on clinical endpoints. Thanks, Jason.

Operator

Thank you for the questions. Our next question is from the line of David Amsellem with Piper Sandler.

Speaker 6

So just had a couple of commercially oriented questions on Aplutide. Can you just remind us of the the stoma subgroup. That's number 1. Number 2 is, what is the approximate If you have this patient footprint or number of patients that are on Gattex, And what's your estimate of the patients, the number of patients over time that have cycled through it? That's number 2.

Speaker 6

And then lastly, Just latest thoughts on, how you're thinking about pricing of evobrutide to the extent that a generic Epagatix materializes? Thank you.

Speaker 4

All right. So I think I'll start on the first one and then Mike you got you check me on this. Our our estimates are right now are that the market is essentially fifty-fifty between, stoma patients and and, TIC patients. The overall market size is roughly, globally is 17,000 patients. And so, and it's roughly fifty-fifty between the two subsets.

Speaker 4

Number 2, with respect to the patient footprint on GATX and the number of patients treated. I think our, again, this is all public information and this is, you know, it's to be checked. I think our understanding is that it's about 2,000 patients in the U. S. That have been treated by GATEX.

Speaker 4

And so that's the number that we have. And then 3rd, David, on pricing. I think Tom already answered this question. I think we're going to the Gattex already has a number that's out there. With respect to the idea of 2023.

Speaker 4

I think our view is we're going to come with a very interesting and compelling data package here hopefully in that, we'll find out in a few months. But hopefully we'll have a compelling data package to bring to the market and something that will be quite competitive. And then I think on top of that, the idea of a generic, we don't really see the generic that viable here. Just there's not, that much patient population. As you can see from Gas X only having treated 2,000 patients in the United States.

Speaker 4

It's not an asset forum, a disease state we think is heavily managed, and there isn't a lot of volume to go get from Massive reduction in price in this one.

Speaker 2

And I think we also feel that there's probably it's not a real high probability that we'll see a generic. Certainly, there's been an end of file, but nobody's really acted on it. And obviously, these you're going to have to maintain a program, etcetera. So this is a and there's a lot of mechanics to be able to launch a generic and support the generic. So I do think that and I think when you look at the fact that about 50% of patients discontinued therapy on Gattox within the 1st year.

Speaker 2

I think it speaks to the limitations of the drug. And I think having a drug to move from like daily injections to once a week injections and a drug that's certainly more potent in longer acting really could help a broader patient population, particularly BCIC patients. Thanks, David. Thank you.

Operator

Thank you for your question. Our next question is from the line of Boris Peaker with TD Cowen. Your line is live.

Speaker 7

Great. A couple of questions for me. First on 104, just curious why aren't disclosing the T cell data or maybe another way to ask it is when will we see the actual T cell data? And then on the apaglutide, If we look at Zealand's lepaglutide, they showed a 14% of patients become independent of parenteral nutrition. I'm just curious how important is that in terms of kind of assessing the apraglutide data.

Speaker 4

Yes. Thanks, Boris, for your questions. On the first question, I'll take it and then Mike again obviously add additional color. I don't think we ever this I think our plan is always to run this trial to completion before we read out any results and we've always contemplated that being a 2024 event. I think at this point in time, we're able to say that we think we'll be able to I have a readout in the Q3 of 2024 for the trial.

Speaker 4

And I think that's when you'll see a more complete data set around the primary endpoint. Mike, I don't know if there's anything else you want to add?

Speaker 3

I think it's fair.

Speaker 4

All right. And then the second question, do you want to take the second one?

Speaker 3

Yes. So for the antral economy question, it's a good question. Clearly, there was antral economy achieved, in the CALAPA program. That's in the public domain. And you may have seen from our presentation at the UEG meeting on the SARS nutrition data that we had intra autonomy achieved in the nutrition study as well.

Speaker 3

It may have to be a higher percentage in the 14% that Gleboclutide has published, but nonetheless, it's a small open label study. So, we're just looking forward to the Phase 3 data to better define those outcomes for the patient populations we have in the STAR study.

Speaker 7

Great. Thanks for taking my question.

Operator

Thank you for your question. Tone keypad. Our next question is from the line of Tim Chiang with Capital One. Your line is live.

Speaker 8

Hey, thanks. Since we're almost done with 2023, obviously, you're doing still quite well with LINZESS. I sort of wanted to Your thoughts on how you sort of look at growth rates for LINZESS for next year. Obviously, you'll probably provide some guidance at the beginning of next year, but How do you guys think LINZESS is situated at this point?

Speaker 4

Thanks, Tim. Good Talk to you. I think as we've said already, we're excited about the performance of LINZESS right now and the volume growth we've had in 2023. The fact that we're near 11 of the drug still driving high single digit demand growth is just a great outcome. And so we think that there A lot of unpaid untreated patients continue to be in a growing market, so we're excited about that.

Speaker 4

With respect to future guidance, I think we'll give guidance at the appropriate time, which is next year, in the early part like we always do.

Speaker 2

Yes. I think, Tim, this is Tom. It's been really remarkable over the last 3 years how steady the growth year over year has been. And certainly, This year has actually been stronger than we've seen in a long time. And what's probably the most important lead indicator here Is the volume increase in new to brand patients.

Speaker 2

We're at 15%, 16% increase year over year, which is always probably the most the best predictor of future growth. So we're certainly not signing up for a 15% increase number for next year. But certainly it's looking very, very strong and certainly we're still assessing the upside from the pediatric indication. There's no question we're seeing some growth there and we really need to really understand kind of how much we should be investing in that growth opportunity. But I think Things look bright, and I think we're very confident in what we'll see next year.

Speaker 8

Maybe just one follow-up. Obviously, We all get a lot of questions about the GLP-1s, about the weight loss drugs. Have you seen any impact? I mean, is there any impact to LINZESS from these GLP-one drugs for weight loss.

Speaker 4

Mike, do you want to kind of take this?

Speaker 3

Yes, I mean it's a fair question and we do get questions on it as well on our side. I mean because as you know, I mean the GLP-1s Are definitely, being heavily used and it's also true that, obese patients also suffer from constipation quite regularly too. So there is a lot of concomit use. I mean the actual impact though that you really want to get at, it's hard to nail that down at present, But we certainly appreciate the question. There may be some things there.

Speaker 3

We're looking into it, but we don't really have a direction right now to how to impact that.

Speaker 8

20 20. Okay, great. Thanks.

Operator

Thank you for your question. And ladies and gentlemen, that will conclude today's Ironwood Pharmaceuticals Q3 2023 Investor Update Conference Call. Thank you all for joining. You may now disconnect.

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