Ironwood Pharmaceuticals Inc (IRWD) 2011 Q2 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Ironwood Pharmaceuticals second-quarter 2011 investor update.

At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions). As a reminder, this conference call is being recorded.

I would now like to turn the call over to your host, Halley Gilbert. You may begin.

Good morning and thank you for joining us for our investor update for the second quarter of fiscal year 2011. Joining me for today's call are Peter Hecht, our Chief Executive Officer, Mark Currie, our Chief Scientific Officer, and Michael Higgins, our Chief Operating Officer and Chief Financial Officer. We also have Tom McCourt, our Chief Commercial Officer, and Jim DeTore, our Vice President of Finance, available for the question-and-answer portion of the call.

By now, you should have a copy of our press release which crossed the wire this morning. If you need a copy of the press release, you can go to our website at www.Ironwoodpharma.com to find an electronic copy.

Some of the information discussed in today's call, particularly the information related to Linaclotide, is based on information as of today, August 11, 2011, and contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set forth in such statements. We do not undertake any obligation to update any forward-looking statements made during this call or contained in the accompanying slides as a result of new information, future events or otherwise. For a discussion of these risks and uncertainties, you should review the forward-looking statement disclosure in our press release as well as the rest under the heading Risk Factors in our annual report on Form 10-K for the year ended December 31, 2010, or Form 10-Q for quarter ended March 31, 2011, and any of our future SEC filings.

I would now like turn the call over to Peter.

Thank you Halley. Welcome to all of you who are joining us for this discussion. On today's call, Mark Currie will provide updates on the NDA submission, Ironwood's collaboration with Depomed, and our publication today in the New England Journal of Medicine detailing the effect of Linaclotide for the treatment of patients with chronic constipation. Michael Higgins will brief you on the progress we've made regarding the manufacturing supply chain.

Before I turn the call over to Mark, let me briefly review some second-quarter and recent highlights. As we noted in our press release this morning, we're very excited to announce the recent submission of Linaclotide NDA. There was outstanding effort by many groups across both the Ironwood and Forest organizations to accomplish this goal, bringing us one step closer to our mission of providing this important drug to millions of patients.

Our European partner, Almirall, continues to work with us toward the MAA submission which is on track for submission in the second half of this year. Also noted in the press release, the Phase III results from the chronic constipation trial are published in today's New England Journal of Medicine.

Alongside the NDA submission, commercial preparations continue throughout our organization. The commercial and manufacturing operation team here in our shop and at our commercial partners, Forest and Almirall, as well as our supply-chain partners, Roche, PPL and Elmac, are all working together closely across a global network to ensure integration in our planning and preparation for the launch and commercialization of Linaclotide.

While we remain highly focused on Linaclotide, we continue to advance our pipeline, which includes product candidates and research efforts focused on gastrointestinal disease, pain and inflammation, respiratory disease, and cardiovascular disease. All of our product candidates to date, including Linaclotide, have been internally discovered.

Mark will discuss the deal we recently signed with Depomed.

We ended the quarter with approximately $201 million in cash and cash equivalents. Our view of year-end cash north of $150 million has not changed.

I would now like turn the call over to Mark.

As Peter outlined, it has been a very busy time for the R&D team with the Linaclotide NDA submission, our highest priority.

Before going into more detail about our recent efforts, I want to acknowledge and express my thanks to the many individuals at Ironwood and Forest who have worked tirelessly to advance the Linaclotide NDA submission. Across all parts of the Linaclotide team, individuals have worked intently over the last few months, sacrificing nights and weekends to complete this major milestone.

Additionally, we have worked with many external consultants, contract research organizations, and contract manufacturing organizations that have provided critical expertise and joined us enthusiastically on our goal to advance Linaclotide for patients. To all of the above I offer my sincere thanks.

Our goal since the initiation of the Linaclotide program has been to provide patients with an agent that addresses the very bothersome and life-altering symptoms of abdominal pain, bloating and discomfort, along with the constipation symptoms. Throughout the past few years, we have been driven to get this potential breakthrough drug to patients as soon as possible with extensive supporting efficacy and safety data.

Now let's go through some of the details of the Linaclotide NDA, which is quite extensive and robust. The NDA contains safety and efficacy data from a total of four Phase III trials for the two indications, IBSC and chronic constipation. The quality and robustness of the effect of Linaclotide are reflected by the demonstration of statistical significance or improvement of all prespecified primary and secondary endpoints across these trials.

It should also be pointed out that Linaclotide decreased abdominal pain over the entire 26 weeks in the IBSC trial, a major finding for an area that is well-known for marked placebo effects. Additionally, data are included from over 3000 and 200 patients who were enrolled in our open label long-term safety studies, including over 1100 patients who were treated with Linaclotide for over a year.

With respect to the drug supply, the NDA contains the supporting data from three peptide manufacturers that enable a flexible and extensive supply chain. For the drug product, the formulation stability data submitted supports a room temperature product that will enhance patient convenience and compliance. This NDA submission represents an important step on a long continuum of an ongoing dialogue in collaboration with the FDA over the years as we have moved towards approval. The next step for the team is to prepare for future interactions with the FDA and Forest advisory panel, should there be one.

As indicated in the press release for this conference call, we had an important event occur today with the publication of the Phase III chronic constipation data in the New England Journal of Medicine. We are honored and excited that the prestigious New England Journal of Medicine selected the Phase III chronic constipation results for publication. It's truly been a phenomenal week. This article describes in detail the improvements observed with Linaclotide treatment in chronic constipation patients. The trials included a robust responder endpoint and multiple secondary endpoints which were all improved versus placebo. This publication will greatly enhance the growing awareness of Linaclotide in the broad medical community and provide greater insight to the beneficial effects and potential of Linaclotide for the treatment of patients with chronic constipation.

You'll note in the New England Journal of Medicine, as well as in this morning's investor update press release, that the numbers representing the intended commercial dose strength of Linaclotide has changed. First, let me assure you the physical amount of Linaclotide in the capital has been fixed in Phase IIb. It has not changed. Only the method using -- used for measuring dosage strength has changed due to improved and involving analytic methods for peptide measurements. So simply said, the only change is the designation of the dose strength based upon improvement of measurement methodology with no impact or implication on the manufacturing process, formulation stability, or this NDA submission.

The improved method utilizes the latest in peptide analytical technology and reflects the state-of-the-art and is consistent with a recent 2002 [by] 2010 guidance from the European Union for measurement of synthetic peptide therapeutics. The numbers for the two-dose strength utilizing this method are now finalized at 145 micrograms and 290 micrograms.

Now, turning to our recent press release that announced our collaboration with Depomed, I would like to take you through a couple of points. We continue to build a portfolio of development candidates through both internal and external R&D efforts. As part of our plan to augment our pipeline beyond Linaclotide, we recently licensed worldwide rights to utilize Depomed's Accuform gastric retentive drug delivery technology to advance an early-stage development program. Depomed will assist with initial product formulation and Ironwood will be responsible for all development and commercialization of the product. Finally, we are very excited about this collaboration and have already begun active interaction with our Depomed colleagues.

With that, I will turn the call over to Michael Higgins, our CFO and COO.

Thanks Mark.

As Peter noted at the beginning of the call, preparations and readiness for commercialization continue throughout the organization and throughout our partners' organizations.

Today, I'd like to provide you with a brief summary of our progress in the area of commercial manufacturing. It is our goal to consistently and reliably produce and supply the highest quality drugs to our patients on a worldwide basis. In order to accomplish this goal, we are building redundancy into each critical step of the manufacturing process.

We currently produce Linaclotide through a combination of independent third-party organizations and our collaboration partners. We believe that we have sufficient in-house expertise to lead and manage the global supply chain for Linaclotide to meet worldwide patient demand.

Towards these goals, the manufacturing operations team has made great strides this year on ensuring excess capacity and establishing redundancy throughout the manufacturing supply chain. For the API, or drug substance, we and Forest entered into a commercial supply agreement in June 2010 with polypeptide laboratories for the manufacture of Linaclotide that will be used in North America. In May of this year, we expanded that relationship to include supply for the rest of the world. In March of this year, we and Forest signed a commercial supply agreement with Roche Colorado for API that will also be used to support North America. Then we subsequently expanded that agreement in April to include API for the rest of the world.

For drug product manufacturing, each of our collaboration partners, Forest, Almirall, and Astellas, is responsible for Linaclotide drug product manufacturing in its respective territory. In May, we entered into a supply agreement with Elmac for drug product that will be used to support international filings and, if approved, will be sold commercially in the rest of the world in partner territories. This agreement further ensures continuity of drug product supply in partner territories. We are pleased that we've been successful in establishing partnerships worldwide to form a global network that we believe will be prepared to supply Linaclotide to patients around the world.

Now, before we open the line for questions, I have a quick comment on the financials. As Peter mentioned in the opening, we expect to end the year with $150 million. As part of that, we expect a milestone payment of $20 million in Q4 for the acceptance of the NDA. After that $20 million, there will be a remaining $150 million of precommercial milestones that we anticipate as we move forward with Linaclotide.

I'll now ask the operator to open up the call for questions and answers.

(Operator Instructions). David Friedman, Morgan Stanley.

Thanks for taking my question. The question is about the manufacturing supply chain and if you could just explain the process by which the FDA inspects and signs off on this now-expanded supply chain. Is that something that happens at the time of drug approval? Is that something that happens much before then? What steps do they have to take to manufacture -- or sorry, to inspect the facilities?

It's Michael. Let me just give you a quick answer. There is a process that the FDA goes through and all regulatory authorities will go through. Essentially, it's a preapproval process that all of the sites are preparing for at this stage. We expect they'll all be fully ready for those inspections. So it's a well trodden path and the team is prepared for it.

Just one point of clarity -- all of the partners and suppliers that Michael mentioned are in the NDA with the exception of Elmac, which will not be part of the NDA review process.

Okay. Is there -- does the FDA tend to sign off earlier rather than later on these things, or is this something that happens in the late stages of their review?

It's always hard to predict what FDA is going to do, and it happens in a variety of stages. From the experiences we've had, it happens at all different stages.

Great, thank you.

Geoff Meacham, JPMorgan.

This is [Anu Panorama] in for Geoff Meacham. I just wanted to be clear that we should assume that the FDA and EMEA is aware and approved of the methodology for the revised dosing? I guess not revise dosing, but the (inaudible) [clinical] methodology to how you get to a new dose?

Yes, the designation of the dose strength. So yes, regulatory authorities are aware, and, again, we're following the EU guidance pretty much on that. We've also involved the FDA in our interactions and pre-NDA meetings.

Okay. I guess the second question is, in previous slide presentations, you've really done a good job of highlighting the unmet need here in the US, but with the EU filing coming up next, can you talk about maybe similarities and differences between the CC and IBSC markets between the US and EU?

Yes, this is Tom McCourt. We've actually looked at this extensively. The populations look very, very similar as far as their prevalence, the level of suffering and the unmet medical need, as well as the general awareness of the disorder.

Now, because there's really never been a drug approved in the EU for IBS, certainly we have some work to do there to make sure that the docs are adequately diagnosising and treating the patients, but I think it looks like a very, very significant opportunity for us commercially.

If I can follow on with one additional comment, as you know, we also have retained rights in some very important other territories. We see, again, a very similar pattern of prevalence and medical unmet need really globally around the world. In particular, we're doing quite a lot of work in China, understanding the unmet need there and trying to figure out how we can help suffering patients in China as well.

Mario Corso, Caris & Co.

Thank you. Good morning and congratulations on your major accomplishments. Just a couple of things I wanted to ask about. Number one, given the tumultuous market environment we're in, I was wondering if you could talk a little bit more about your uses of cash over the next year or so. I know you talked about, again, ending the year at $150 million or so. What the kind of what the major incremental expenses are, qualitatively at least, in the second half of this year? Then if you care to comment on anything as we look out a little bit further on what your cash needs maybe.

Then secondly, just on logistics for the Linaclotide review, at this point, should we be expecting a six-month review time and an advisory panel? I assume those are fair assumptions at this point? Thanks very much.

Michael, can you take the first question?

Certainly. Let me just touch on a couple of things, and then you can follow up if I miss on some of the detail you're looking for. But I'll reiterate the $150 million at the end of the year, as we discuss and as you mentioned, and say it again that we, in addition to that $150 million we'll end the year with, we have another $150 million in precommercial milestones that will be coming in in the near term. The combination of those two we believe puts us in a great place not only to launch the product but actually we have the ability to get to profitability with the combination of those and with the other assets that we have. As you know and we've mentioned a number of times in the past, we have rights to Linaclotide on a global basis. There's many different ways we're evaluating proceeding from a commercial point of view in those other parts of the world. So we may be able to access capital in a variety of ways in addition to the money we have.

So our expectation is that we're in a mode now where we're in a great shape financially, not only to get through the process here in preparing for launch, but to do a very robust launch with the product. So we're feeling quite good about the financial position.

It's Peter. again, one additional piece of color. Also as you know, we continue to invest in our pipeline of development candidates. We have the ability both to modulate our level of investment in that pipeline depending on the success and quality of the data we see in those development compounds and also as they develop -- as those create both potentially partnerable value and financable value. So we feel like we have quite a lot of operating flexibility and levers that we can pull in any financial environment.

Mark, can you take the second question about the review cycle?

Yes, thanks for the question. We're not expecting the six-month priority review. We're expecting the more standard review which would be more consistent with the ten-month review period.

Keay Nakae, Chardan.

Thank you. Peter, I wonder if you can comment on the pipeline a little bit. First of all, what level of development will trigger you guys to talk more specifically about any specific candidate?

By and large, we hope to get compounds to proof of concept state in the clinic at a point where we believe we will have created investment value and shareholder value for those compounds, and then to talk about those compounds and our development and investment plans for them going forward. To date, Linaclotide is the only compound that's past that hurdle.

I think the one exception to that rule would be in the situation where we form partnerships with companies and because of the needs of the partnership or the partnership disclosure, we feel an obligation to elaborate more fully, we'll do that as well.

With respect to the collaboration with Depomed, does this help unlock a -- obviously you did it for a reason, but does this help unlock something you've been looking at for a while and this is the final piece of the puzzle to really advance it for a specific compound or maybe more than one specific compound?

I don't know if I would quite characterize it as unlock, but I think what we look -- viewed it as, as a potential real enhancement of the product we're trying to develop. So having the gastric retentive technology that Depomed has we think offers the product potential a greater likelihood of success and also a greater likelihood to serve the needs of the patients in a more specific manner.

Okay. So congrats on your success, and we'll look forward to hearing more about the pipeline going forward.

Irina Rivkind, Duncan-Williams.

Thanks for taking my question. In thinking about the 10 million patients that you've previously outlined with constipation and abdominal pain, does this encompass also patients that have opioid-induced constipation? Do you think that drugs for opioid-induced constipation will either compete directly with Linaclotide or do you think Linaclotide instead will cut into the use of those other products?

Thanks for the question. When we designed the model, the patient model, we excluded patients that had constipation due to opioid-induced constipation. So they were not included in that 10 million.

As far as other drugs that are currently available for opioid, obviously they're not indicated for chronic constipation, IBS, and they act in a very different manner. So I really can't comment on their overall efficacy. I think we do know they won't be indicated for these patients. So, I think it's unlikely, based on the lack of efficacy as well as the mechanism of action, that you probably won't see a lot of use in constipation of those types of agents.

Then just a follow-up on the European market. Do you expect constipation patients also to use Linaclotide and not just IBS? Could you remind us why you're not pursuing a constipation indication in Europe?

Sure. I think the main reason why we're going to lead with IBS is a reimbursement question. I think, with the reference pricing landscape there, we felt that we were much better positioned to secure a more favorable reimbursement by leading with IBS.

As far as utility beyond IBS into chronic constipation, as you know, it's a pretty gray line between chronic constipation and IBS. A lot of these people that would be defined as IBS have very significant abdominal symptoms. Based on the research we have done so far, physicians clearly recognize the need for a drug that can benefit these patients that have significant bloating and discomfort that may not be actually IBS patients by definition. So again, we can only promote the drug for what we're indicated for, but obviously it's up to the physicians to treat the patients appropriately.

Okay, thank you.

Catherine Arnold, Credit Suisse.

Thanks a lot. Good morning everyone. I wanted to ask you a couple of quick questions if I could. Michael, you had referred to the opportunity to partner and there's obviously some regions where the drug is still not partnered. I guess I wondered if that's something you think is a reasonable expectation in the next 12 months and that we'll be hearing about, and if the data package you would assume, based on the filings in those regions, would be able to be turned around pretty quickly.

I also wanted to ask just a technical question about the New England Journal of Medicine article. On the abdominal discomfort scale, I would assume that there would have been incorporation of the frequency of events in terms of pain and distention, so if a patient on the safety side had reported pain or distention, that would be reflected in the net results that you saw in the positive relative compared to placebo in abdominal discomfort (inaudible) you know what I mean.

I'll let Michael take the first question.

As you know, depending on the region that you're talking about, the utility of the US filing varies. So I think, for our purposes, the way we think about it -- and I'll address your question directly with regard to the exact timing of that -- we are evaluating the specific regions around the globe to determine whether or not our best long-term value is to carry and build -- hold on to a program longer, develop it further before we consider partnering. I think in most of the territories around the globe, we're going to need some sort of partner. The question is how long you hold on, because you tend to be able to build value and you can move into more of a commercial relationship the longer you hold. But we're evaluating all those right now.

Actually, what we're really trying to determine is the best way to create long-term value. So I'd say, right now, I wouldn't suggest that you build in anything expecting a deal in the next 12 months. We'll certainly, if we head in that direction, we will certainly apprise everyone of it and explain why we're doing it. But our view right now is we want to build significant long-term value and we're evaluating exactly why.

I'll give you one example. The path forward in China, we've done a fair amount of work there. We have a pretty good read on what's required to move forward. We're now really trying to establish the best method for actually getting not only completing the regulatory requirements but actually maximizing long-term value. So there is work to be done, so I would say just be aware that the value there is -- the value exists in the rest of the world but I wouldn't expect anything in the very near term.

Yes, and with respect to the abdominal discomfort question, Tom indicated what we see with the chronic constipation patients, they do have a broad spectrum of symptoms very -- albeit abdominal symptoms. I think, if I understood your question correctly, what we see in these patients is there are patients with the abdominal symptoms in the more abdominal symptoms as far as pain, bloating, discomfort. In all of those patients, we tend to see the same track. If they have those symptoms and the more severe they are, the larger improvement effect we see with Linaclotide. Obviously, with patients that have very modest to no -- none of those symptoms. And you're right, those particular patients are essentially -- we are treating the constipation symptoms. But those patients who have broad abdominal discomfort, pain, bloating, the larger they come in on the baseline of having those symptoms, the greater effect we see with Linaclotide.

So you're essentially capturing those symptoms in both the efficacy and the tolerability scales?

Sure. The tolerability scale, typically if we see discomfort in those patients, that's typically related to the diarrhea.

This is Tom. One of the things to keep in mind when you look at the data across all the trials, the consistency of how Linaclotide performs is quite remarkable across all abdominal symptoms. So even though there is a difference in absolute gains, the percent reduction in pain is remarkably consistent between 40% and 50% reduction in pain over the treatment period, which I think is very, very encouraging for us when we think about the benefits for the patient.

Tom, may I ask a follow-up question?

Sure.

Could you describe a bit of what you guys are doing between now and June of 2012 in regards to physician/clinician education? Obviously having this publication in hand should be a handy tool in that process. I wonder if you could talk about how those efforts are gaining momentum between now and presumed your approval.

Yes, things are, as you can imagine, things are in high gear right now. First, on the medical affairs side, certainly we will continue to support kind of independent educational activities and certainly our medical affairs takes the lead on that. There seems to be an enormous pent-up demand and request for support in those areas. So we think educating the medical community is important through those means.

Commercially, what we are really focusing on is what are all the key channels that we want to be able to leverage to communicate our more promotional branded message. So the teams are working closely together with our commercial partners to make sure that we have a very aligned, consistent message to the key -- our key constituents and customers. So I think, right now, we're primarily focused on, one, making sure that the data is out and is effectively communicated with regard to the unmet medical need, as well as the benefits of Linaclotide in an appropriate fashion. Does that answer the question?

Yes, thank you.

David Nierengarten, Wedbush Securities.

Hey, thanks for taking the call. I just had a little bit of a technical question regarding the methods in measuring Linaclotide. Did you guys look back at the doses in the clinical trial on saved material, or I'm just wondering how you got to the conclusion that the doses were actually higher and how you reconcile that with the FDA. Thanks.

So yes, we certainly have measured across all of our clinical trial saved material. Again, there's no difference in any of the materials if we used the previous technology, so 266 is still measured 266 with the previous technology, and the 290 -- the methodology we're using to define it as 290, again, which is an improved technology, it -- again, we certainly measured the clinical trial material and it's yielding that amount.

With respect to the FDA, we, again, we brought to them what we think is the latest in technology. Peptide analytics have been evolving pretty dramatically over the last ten years. And so we brought what we think is the latest technology and provided them with the background and why we believe that it's the most accurate and precise measurement for the formulation. We got, in those interactions, they certainly thought it was a reasonable approach.

Just to reiterate for the avoidance of any kind of doubt, we haven't changed a thing. The capsules that we used in Phase IIb, the dose strengths, the dose the patients received in Phase IIb and in all of our Phase III studies and what will be launched commercially if the drug is approved is the same drug. We're not changing anything. We're not changing dose strength or needing a bridging study or changing the formulation. It's all the same capsules. They've been the same for a number of years.

So is it fair to say it's more stable than what you thought, or how --

It's not a stability --

It's the same? Okay.

It's analytic methods for detecting Linaclotide peptides specifically within a mixture of peptides.

Okay. Thanks.

(Operator Instructions). Juan Sanchez, Ladenburg.

Good morning guys, Congratulations on getting this. The first question is I know you're going to be ready to launch the product prior to approval, as soon as you get approval in June. You want to launch in June, or are you going to wait a couple of months?

The second question is, of the $150 million in milestones, or what the (inaudible) are US related versus European related.

The third question is what would be the R&D project if you want [to exclude] something to do with Linaclotide.

This is Tom. The first question was (multiple speakers) oh launching. Yes, I'm sorry. So I think what we will follow, as you mentioned we can't speak for the exact date in which FDA will approve the drug launch. I think we will certainly go out with a [PI] launch as soon as we can, which hopefully once we train the sales force and put them on the street, we'll go out with what we're calling a scientific launch in which the reps will have certainly a package insert as well as samples. Follow that -- once we get Ddmac feedback, which is generally taking 90 to 100 days, we'll launch a full commercial promotional effort.

Michael, the financial question?

So you breakdown -- specifically the one that we have disclosed in detail is the major payment comes from the US. There's maybe a $5 million payment that comes out of the US approval and the balance come out of Europe and Japan.

The other question you wanted to know is about the non-Linaclotide R&D spend.

Yes.

We've talked for some time about that, as we've been investing last year and this year and we expect to continue going forward, that we are investing in the range of $40 million to $50 million in non-Linaclotide R&D. That's our expectation would be to continue in that range. Obviously those numbers vary as we go forward, vary as the success of the programs changes in we move into later stage development. That's what triggers increases in that area.

Perfect, thanks a lot.

I'm showing no further questions at this time. I would now like to turn the call back over to Peter Hecht.

Thank you very much, and thanks for joining us this morning. We're looking forward to continuing to update you as we move Linaclotide toward the market and advance our development pipeline. Obviously, we're very pleased with the quality and the timing and the effort put in by ourselves and our partners, Forest, around the NDA submission. Thanks again and have a wonderful Thursday.

Ladies and gentlemen, this concludes today's conference. Thanks for your participation and have a wonderful day.