Ironwood Pharmaceuticals Inc (IRWD) 2011 Q4 法說會逐字稿

Good day, everyone, and welcome to the Ironwood Pharmaceuticals fourth quarter 2011 investor update conference call. As a reminder, today's presentation is being recorded. At this time, I would like to turn the conference over to Ms. Halley Gilbert. Please go ahead.

Thank you. Good afternoon, and thank you for joining us for our investor update for the fourth quarter of fiscal year 2011.

Joining me to for today's call are Michael Higgins, our Chief Operating Officer and Chief Financial Officer and Tom McCourt, our Chief Commercial Officer. We also have Peter Hecht, our Chief Executive Officer, Mark Currie, our Chief Scientific 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 afternoon. If you need a copy of the press release, you can go to our website, at www.ironwoodpharma.com, to find our electronic copy.

Some of the information discussed in today's call, particularly the information related to linaclotide, is based on information as of today, February 28, 2012, 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 statements disclosure in our press release, as well the risks under the heading Risk Factors in our quarterly report on Form 10-Q for the quarter ended September 30, 2011 and any of our future SEC filings.

I would now like to turn the call over to Michael.

Thanks, Halley, and welcome to all of you who are joining us for this discussion. On today's call, I will provide updates on linaclotide, our pipeline and our cash position. In addition, as we've done in the past, we would like to use today's call to frame for you our view of the linaclotide launch and share lessons learned from other successful launches. Tom McCourt will lead this portion of the discussion.

Before I turn the call over to Tom, let me briefly review some fourth quarter and recent highlights. As many of you already know, our new drug application for linaclotide is presently under review at the FDA. Earlier this month, we and our US partner Forest Laboratories, were notified by the FDA that the agency will not schedule an advisory committee meeting in connection with its review of the NDA. We and Forest continue to work with the FDA to address their questions during the review process. The PDUFA target action date is in June of this year. In September of 2011, our European partner Almirall submitted a marketing authorization application to the EMA for linaclotide for the treatment of irritable bowel syndrome with constipation. Almirall also continues to work with the EMA to address their questions during the MAA review process. Earlier this year, we were informed that 14 abstracts were accepted for presentation at the Digestive Disease Week annual meeting, which will be held in San Diego from May 19 to 22. One of the abstracts will be available through an oral presentation and the other thirteen will be available through poster presentations.

Commercial preparations continue throughout the organization. The commercial and manufacturing operation teams here at Ironwood and at our partners, Forest and Almirall, as well as our supply chain partners, are all working closely across the global network to insure integration in our planning and preparation for the launch and commercialization of linaclotide. Finally, with respect to linaclotide, we continue to assess life cycle management opportunities in order to ensure that we are maximizing the potential value of the product. Given that the NDA for linaclotide for the treatment of adult patients with IBS-C, or chronic constipation, is pending at the FDA, it is difficult to assess either the scope or timing of these activities. However, based on our preliminary efforts to date, we anticipate these activities will include the exploration of the potential for linaclotide in the pediatric population, as well as in other indications.

We remain highly focused on linaclotide -- while we remain highly focused on linaclotide, we continue to advance our pipeline, which include early development candidates focused on gastrointestinal disease, central nervous system disorders and respiratory disease. Our pipeline includes IW-9179, our second-generation GCC agonist, that is in early development for the treatment of painful disorders of the small intestine, such as dyspepsia and gastro paresis. We expect to initiate phase 2 clinical studies with IW-9179 in 2012. Our pipeline also includes IW-2143, a novel early development candidate being developed for the treatment of anxiety that we recently end licensed from Bionomics Limited. Bionomics approach to this compound is BNC210. Data from several pre clinical studies indicate that IW-2143 has anti-anxiety activity without the sedative side effects that are typically -- that are typical of the benzodiazepine's, the class of drugs currently used to treat anxiety. As you can see from my brief comments, there is a great deal of activity in our pipeline. In total, we anticipate spending approximately $60 million to $70 million in 2012 on our non-linaclotide R&D efforts.

Now shifting to some corporate and financial updates. We ended 2011 with approximately $164 million in cash. In February, we raised an additional $85 million in net proceeds through a public offering of just over 6 million shares of our class A common stock. We intend to use these proceeds for general corporate purposes, including funding expenses related to the expected launch of linaclotide, if it is approved by the FDA. As we have mentioned in the past, we have several remaining pre clinical -- pre commercial milestones for linaclotide from our partners. These milestones include $85 million from Forest upon NDA approval, and up to $20 million from Almirall upon commercialization in five of the primary countries in its territory.

Let me turn the call over to Tom now.

Thanks, Michael.

As mentioned earlier, we would like to continue sharing some of our insights on the potential commercial opportunity in terms of how we view the patient, the customer and the market, as Ironwood and our global commercial partners prepare to hopefully launch linaclotide. Today, we will briefly review some of the data presented during previous calls to make sure that we are grounded on the market opportunity and to share some of the observations from some primary care launch analogs and relevant learnings that appear to be applicable to the launch of linaclotide.

The IBS-C and CC patient population experience a continuum of symptoms, with all patients experiencing difficult and infrequent bowel movements, with over 30 million patients suffering from additional bothersome abdominal symptoms including pain, discomfort, bloating, and fullness. In a large epidemiology study involving over 10,000 individuals, the patient landscape was comprehensively characterized in terms of the prevalence, symptoms experienced, health care seeking behavior and treatment. These 32 million IBS and chronic constipation patients suffer from a variety of frequent abdominal and constipation symptoms, experiencing individual symptoms over 100 days annually; but in fact, 70% of patients report suffering from some symptom every day, and the majority of patients describe their symptoms as extremely to very bothersome, with pain as the primary reason why patients seek care. These patients take a variety of medication to manage both abdominal and constipation symptoms. These patients report using laxatives as rescue medication when straining gets difficult, but avoid taking laxatives daily, as laxatives often exacerbate abdominal pain, bloating, and cramping. So it is not surprising that over 70% of patients are not completely satisfied with these treatments. Yet, they still take laxatives 90 to 100 days a year.

This slide outlines the patient flow we just discussed and identifies the patients that we will be focusing on at launch. There are about 15 million patients suffering from both abdominal and constipation symptoms who are actively seeking care and treat it, with more than 10 million patients not satisfied, which could represent a significant potential for an effective therapy. Based the results from the clinical program to date, the emerging profile for linaclotide looks very promising. Linaclotide is a first-in-class, local acting, minimally absorbed peptide that acts on both pain sensing nerves and intestinal fluid to improve abdominal pain, bowel symptoms, and patient satisfaction.

It is also important to note that in our Phase 3 IBS and chronic constipation trial, symptoms return within a week after patients discontinue therapy. Diarrhea was the most common adverse event, reported in about 20% of patients. These data were from the 26-week IBS-C trial and are representative of all four Phase 3 trials. 90% of patients experiencing diarrhea reported the episode as mild to moderate, with 50% of reported events occurring within the first week of treatment. It is also important to note that 4% of patients discontinued the trial due to diarrhea and no serious adverse events reported as diarrhea.

Overall satisfaction is a key indicator of clinical performance and often reflects the real-life discussion between patients and docs, as they assess the treatment response. Over 50% of patients receiving linaclotide reported to be quite to very satisfied. This is quite comparable to the level of satisfaction reported by patients taking proton pump inhibitors. It is important to note that this comparison is a cross study and uses a slightly different five point scale. But directionally, this is very encouraging. In an independent third-party research study, physicians were exposed to a blinded clinical profile similar to linaclotide, and they reported a high likelihood to prescribe linaclotide if it was approved for treatment. According to the study, about 20% to 25% of gastroenterologists and PCPs would prescribe linaclotide immediately after launch, with another 50% to 60% of physicians expressing a willingness to prescribe linaclotide once they're comfortable with its post marketing safety profile.

In a separate quantitative market research study conducted by Ironwood, physicians were asked, what percentage of IBS-C and chronic constipation patients would they treat with an agent having this profile? This profile is quite similar to linaclotide. These physicians reported that they would potentially prescribe linaclotide to 40% to 50% of the IBS-C and chronic constipation patients. And up to 60% to 65% were not fully satisfied with prior treatment. Now we must recognize that these estimates are often overstated, based on historical correlations between market research stated intent and the actual physician prescribing behavior. But the intent to prescribe, again, looks very encouraging.

We would also like to share some of our work and current thinking around possible adoption and uptake of linaclotide at launch. It is important to note that primary care and specialty product launches are very different. First, the population of patients for primary care products tend to be much larger and managed by far more physicians. Second, there are generally far more components in the primary care treatment process to progress from a physician's decision to treat to chronic management of the patient. For the most part, these patients need to go to the retail pharmacy each and every time they need to get the drug, and often face a significant co-pay, which can impact treatment adherence. This is in sharp contrast to the specialty drug market, where there are generally fewer patients seeing fewer physicians who are often receiving the drug in the office, which is scheduled and actively monitored. Finally, there is generally higher costs associated with specialty drugs, thus sales uptake curves tend to be steeper and plateau faster, as opposed to the primary care drugs.

We have previously mentioned that proton pump inhibitors in gastro esophageal reflux disease, or GERD, appear to be a reasonable analogue as we chart the course for linaclotide's launch. First, GERD, IBS-C, and chronic constipation are generally not considered serious disorders. However, they can be very difficult for the patient. The prevalence of GERD is quite similar to that of IBS-C and chronic constipation. The frequency, bothersomeness of symptoms, and the poor level of satisfaction with pre-existing treatment are also very comparable.

Prilosec, like linaclotide, was a first-in-class innovation in a market that needed to be developed, in terms of patients and physicians' awareness of the level of suffering; and most important, it provided the opportunity to improve patient's lives. Prilosec served as a catalyst to advance the understanding of the science and patient care. It provided a real-life experience for physicians and patients to better communicate and together, relieve their symptoms. The simplicity of owning, relieving and preventing heartburn drove the success of Prilosec. Prilosec was the market leader for over 10 years, experienced steady growth, and built the entire GERD market in excess of $12 billion in sales. Prilosec alone exceeded $30 billion in accumulative sales in the US alone.

We recently examined all primary care launches since 2005. The uptake and success of these launches varied widely. The most successful launches appeared to have some significant similarities. To no one's surprise, we observed a number of common themes that were largely grounded in the existence of a significant unmet medical need, often highly symptomatic disorders, and a level of product differentiation that could be easily recognized and soundly justified.

First, physicians clearly recognized the need for better treatment. Patients could easily be identified and physicians exhibited a greater urgency to switch, once convinced the new drug provided an incremental improvement with minimal hassle to their office staff and to patients.

Second, patients were generally actively involved in the treatment process. They were either highly symptomatic or very concerned about their health disorder. And patients taking these drugs tended to quickly recognize a positive treatment experience, leading to better adherence to therapy. And third, payers demonstrated a stronger willingness to serve the unmet needs that patients experienced and made access to the drug.

Prilosec and Zelnorm serve as reasonable, but not perfect, analogues for linaclotide and the GCC category. As you can see, both Prilosec and Zelnorm experienced steady and comparable growth over the first 12 to 18 months. For Prilosec, this growth was driven by the ability to effectively relieve heartburn, thus capturing patient share. And these patients tended to adhere to treatment, which further accelerated the growth of the product. And the entire market was fueled by new patients entering physicians' offices hoping to get relief of their heartburn. On the other hand, the growth of Prilosec was hampered by initial safety concerns, including a box warning, narrow indication, limitations on duration of therapy, a poor understanding of GERD, and early managed-care restrictions.

The initial growth of Zelnorm was fueled by a highly visible, outspoken patient population actively seeking care in asking for effective relief of their symptoms. The growth of Zelnorm slowed at 18 months, following a Dear Doctor letter communicating a safety concern. The growth was further hampered by a narrow indication initially limiting the use of Zelnorm to women only with IBS and constipation under the age of 65, and a limitation on the duration of use. In addition, there was relatively low adherence, likely caused by a very marginal improvement in abdominal symptoms. Yet Zelnorm was still on track to exceed $1 billion in sales.

Now shifting back to linaclotide. Assuming that our NDA with the FDA gets approved, we and Forest plan to launch linaclotide in the US as soon as possible. Based on our experience and current timelines, this will likely take place 100 to 120 days after we receive approval from the FDA and we finalize product label. This timing hinges on a few items. First, we will need to pre-clear all promotional messaging materials with the Office of Prescription Drug Products, formerly known as DD-MAC; and once feedback is received from OPDP, we will need to modify all promotional, educational, digital and training materials. Second, we will need to stock all retail channels to ensure that we have sufficient quantities to ensure successful commercial launch. And finally, we will need to prepare and educate our sales force on how to effectively promote the product in an efficient and compliant manner.

We and our commercial partners are completely focused on the launch of linaclotide. We are aligned on one global brand strategy, and together, we will be collaborating and coordinating the implementation of the brand messaging and tactical plans, assuming linaclotide is approved. The combined Forest and Ironwood selling effort will call on 70,000 to 80,000 physicians to maximize the growth of linaclotide. To ensure we are able to reach these physicians, 1,200 to 1,400 sales specialists will be required. Forest's primary care sales force will provide great access to these prescribers and effectively deliver the message to a vast number of physicians they are already calling on that are potential prescribers for linaclotide. Ironwood will create a GI specialty sales force of 150 to 200 reps who will complement the Forest selling effort and accelerate educational efforts. A robust physician educational effort will be implemented through live speaker and online programs to ensure a comprehensive understanding of the disease, patient, and linaclotide. Sales force and educational programs will help physicians identify appropriate patients and demonstrate the clinical profile of linaclotide.

The patient plays a critical role in the overall management of these disorders, and the communication with physicians is core to adequate care. Based on our research, these suffering patients are actively seeking information, particularly online. This presents an efficient means to educate patients on the importance to accurately describe their symptoms and treatment history to their physicians, so their physicians can determine if linaclotide is appropriate treatment option.

Finally, the payor team will be focusing on establishing a strong value proposition for the various public and private payors, based on the burden of illness, unmet needs, benefits of linaclotide and associated costs. Based on our research and typical marketing experience, expenses for gastrointestinal primary care launches range from about $70 million to $100 million for the first full year, excluding the cost to hire, train, and employ a sales force.

In summary, linaclotide looks promising and we have a lot to do. Based on our market research, there is a clear recognized unmet need with many IBS and chronic constipation patients who are easily identified by physicians who, in turn, express an urgency to improve care. Patients are actively seeking help and will take action, once they understand effective treatment is available. Payors recognize the need for effective treatment, and a strong value proposition will be needed to establish and secure access and reimbursement. Finally, we are working very closely with our strong commercial partners to ensure that we are prepared to orchestrate a successful launch of the product -- if the product is approved in the various countries.

With that, I will open it up for questions.

Thank you. (Operator instructions) Geoff Meacham, JP Morgan.

Thanks for taking the question. Got a pipeline one for you, and a commercial one. I guess the commercial one, maybe for Tom or Michael. With your market research or your experience with other GI launches, what does that tell you about the use of the drug from a safety perspective? I guess what I'm getting at is, is there a threshold to a number of patients or duration on the market that makes the doc switch from an occasional prescriber to a high prescriber?

Hello, Geoff. This is Tom. Thanks for the question, and it is a great question.

I think there are a couple of pieces to this. One, we know that this category has been hampered by withdrawals. And there is a significant safety hangover from that. And I think it is going to be the first thing we're going to have to resolve up front, is to make sure the physicians are comfortable with the safety profile of the drug. I think once we get by that, I think the first piece that the physicians will learn is that the drug will relieve the symptoms. But what I think really accelerate the uptake is when they understand that they can manage the symptoms over time with chronic use. And I think that is also parallel with what the patients learn over time, which is really, at the end of the day, really drives the overall adherence rate and annual days of therapy. And I think it is the one thing we learned with Prilosec, is you move from acute manage of symptoms to chronic management of symptoms, in a effort to prevent symptoms from reoccurring.

As far as the threshold is concerned, I think what we are seeing from the market research is, there is a significant pent-up demand and a recognition that they do need more effective therapy. And I think that comes through in a lot of the market research with regard to willingness to prescribe.

I will turn it over to the pipeline question.

Thanks for that, Tom. So on 9179, maybe just talk through how different it is versus linaclotide mechanistically, and if you could speak to perhaps the receptor distribution, upper versus lower GI. Thanks.

Geoff, this is Mark. Thanks for the question. So, linaclotide and 9179 both work on the GCC receptor. What we have really done is design 9179 so that it will have its greatest efficacy in that upper GI, particularly in the duodenum, lower stomach. We think that, that's where the functional dyspepsia, a large amount of the symptoms are originating, based on a large amount of data that is out in the literature now. So the molecule actually will allow us to push for efficacy so that we can get greater efficacy in those symptoms that are upper GI versus the lower GI. And again, they're working on the same receptors. The distribution of the receptor, very modest distribution in the lower stomach pyloric region, and then very high expression of the receptor in the duodenum all the way through the distal colon.

Got you. That is helpful. Thanks a lot, guys.

Rachel McMinn, Bank of America Merrill Lynch.

Thanks very much. I had a couple of financial questions. You gave a couple of expense numbers, but could you clarify what you think your operating expenses are going to be for 2012? I think you talked about $60 million to $70 million in non-linaclotide R&D, so how should we think about the overall R&D? And then, the $70 million to $100 million, excluding the actual cost for the sales force, is that all in? Is that split with Forest? I just want to better understand those numbers.

Rachel, it's Michael. I'll take that.

So let me clarify, the $60 million to $70 million on the pipeline spend is -- that's a direct expense, obviously to Ironwood. The other expenses that we've provided to you are specifically to the cost of the product, so they go to linaclotide. So our portion of that, as we've discussed in the past, that flows through, if you think about it as a linaclotide P&L, that would flow through the linaclotide P&L, and then we would be responsible for 50% of that.

You asked a broader question, though, and let me just comment and then you can follow-up. We haven't provided, other than the size of the sales force, which I think you can translate into a cost, again, for linaclotide, we have not provided specific guidance, for instance, on the lifecycle management yet, because there's lots of questions about exactly when that will kick off. It all relates to the timing of the process with FDA, and then a lot of those efforts will kick off. So without better clarity on when that is going to happen, it is hard to give you specific calendar guidance. What we are trying to do is give you guidance on how we are going to run the programs. It is hard to cut the calendar for you this year, simply because we are uncertain about the exact timing. So what we are trying to do is make sure you have all the data points, and then as we get more clarity, we can provide more clarity to you.

Okay. The $70 million to $100 million, that is an all-in number you are quoting, how much you and Forest would be spending, not just yours then?

That is right, specifically for the marketing-related expenses.

Okay. Is that a 2012 number or an annual number?

That's an annualized number; and again, depending on when things kick off, it's hard to answer your calendar number because we don't know exactly how things are going to play out this year. That's a 12-month number.

Okay. I am sorry for all these little small things, but then in terms of --

Rachel? Rachel, this is Tom. I just want to make sure we put a point on this. That $70 million to $100 million is a year from launch. So we are just thinking about, for a calendar year from launch, that is what typical spends look like in this category. So keep in mind, we're going to be approved mid-year, so we will launch it after that, and it will be a 12-month running calendar, and that is basically what we are looking at as far as a range of expenses. And of course, that will depend on how promotional responsive it is out of the gate.

Okay. And then, your comment about that you would provide drug 100 to 120 days-- not provide drug, you said launch. I don't want to put words in your mouth, I just want to understand, should we not be expecting any scripts until you actually get out there and promote, or will there be some initial prescriptions coming out before that time period?

I think we are trying to zero in on when we think you're going to start seeing our TRX's being reported. And I think the path between the OPDP feedback and preparation of the selling effort and certainly stocking, are running pretty much in parallel. So that is -- the number of range is somewhere between 100 and 120 days, and that is pretty typical of what we're seeing in primary care launches. And I think what we've learned from Forest and their recent launches, this is pretty much online with what we observe there.

Last question, and then I'll jump back. The acute versus chronic comments that you made in response to Geoff's question, should I take from that, that what you mean is that initially you will see shorter duration scripts being written and that the average duration of use would, over time, increase as physicians got more comfortable?

No, I think there is a comfort question with regard to safety, right? And I think the feedback that we are getting from the market research, when you look at the overall profile of the drug and how it works and how it is absorbed, the physicians seem to be pretty comfortable with the safety. But we have to make darn sure that they understand that and they feel comfortable with the safety profile as well as the efficacy of the drug.

I think what we are saying is, this market is currently acute treatment. I think what Linaclotide provides as the opportunity is move to chronic therapy. And I think the exciting part of the clinical profile here is one, we see really strong relief of all their symptoms, a high-level of satisfaction, and when patients stop taking the drug, the symptoms come right back, which was the biggest single driver for the chronicity of therapy with other symptomatic diseases, such as Prilosec. And I think we are going to see something similar to that occur, and it occurs pretty quickly. Because if the patients are happy on drug, they are going to stay on drug.

Okay. That's clear. Thank you so much. I appreciate it.

Juan Sanchez, Ladenburg.

Hello. Good afternoon. Do you want to talk about the formulary placement process, how quickly are you going to get on formulary, and what are your expectations for moving from tier to tier down the road? And the second question is, how many MSLs and regional managers are you hiring and whether or not they are going to the P&L with Forest?

So, let me take the first one, and maybe Mike will take the MSL question. With regard to the payor, I think as you know, Juan, it is probably going to be six months before we really see the decisions on the payors being made. I think between zero and six months, based on what we've seen with other analogs, we're going to be a tier three drug. Based on discussions, also the other market research we are observing, I don't think we're going to see a lot of prior authorization or stop edits, mainly because there's not a lot they can prior authorize or stop edit against. The reality is, these patients are suffering, they're really only taking OTC drugs, and now they have an effective therapy. So I think those decisions will start flipping at 6 months to 12 months, but I think in the meantime, I think we will see reasonable access to the payer.

Okay. Thank you.

And Michael, do you want to take the MSL question?

With regard to the regionals and the MSLs, let me start broadly. As Tom stated in his comments, we are expecting to bring on board a sales force specifically to deal with the regional structure first, a sales force between 150 and 200. You'd expect a regional structure there in the range of 15 or so regional folks. We are, as we stated in the past, we are not planning to bring the full sales force on board until approval. But your question is a great one, because we certainly want to be prepared to launch quickly and have that sales force ready. So we will bring on board the regional folks to make sure that happens on the sales side. And from an MSL perspective, again, we want to have that team ready to go and we'll start to bring folks on board there. Numbers are relatively small and that is really just part of our preparation, but we will bring those folks, a small number of folks onboard. But the important part is that we won't incur the significant sales force expense until after approval.

Okay. Thank you again.

David Friedman, Morgan Stanley.

Hello. Thanks for taking the question. It's on the - your second gen GCC program. In terms of the indications that you are looking at, did you see any degree of efficacy on those types of parameters, were they measured at all during the linaclotide phase 2 or phase 3 program? And also, had you ever run studies with linaclotide or any other molecule in those indications yet, or will this be a first shot at these new areas?

This is Mark. Relative to the specific symptoms, no, we haven't looked at those with linaclotide relative to what would be described as upper GI symptoms. But there are some very broad symptoms that these IBS-C patients and chronic constipation patients share with the functional dyspepsia patient. And by that I mean symptoms such as bloating, fullness, obviously abdominal pain. So in our discussions with the KOL, the thought leaders in this area, there certainly is understanding that most of the time they think patients can dissociate the two upper and lower GI symptoms, but not all the time. So there is an overlap, and we think again, because of linaclotide's effect on so many of the visceral sensations that we are seeing, that we are seeing this marked reduction in the visceral sensitivity that comes out and is translated for the patient we think as pain, bloating, fullness, cramping. So we think there is again, there is a likelihood that GCC has a real strong chance to potentially help with the upper GI pain. And that is really why we designed 9179, so that we can fully explore that and take it on in a way that allows us to push for the highest degree of efficacy possible for the upper GI. Does that help answer your question?

Yes. No, that's good. Thanks.

You're welcome.

Irina Rivkind, Caris and Company.

Actually, Cantor Fitzgerald.

Hello. Thanks for taking the questions. I wanted to explore the marketing a little bit more. You showed the two launches, Prilosec and Zelnorm. I was just wondering if you could comment on typically spending levels for those two launches, if you knew what those were, and whether or not this is in line with what you expect to spend on linaclotide?

Again, we look at analogues in this GI category and that is where we anchored to the $70 million to $100 million in the first year of expenses.

Okay. And then do you think you can improve linaclotide launch trajectory beyond Zelnorm, potentially by spending more?

That is a great question. I am not sure it is above spend. I think it is above the performance of the drug. I think the spending level is probably right. I think it is really going to depend on if linaclotide is as good as it looks like in clinical trials. When we think about Zelnorm and it's uptake, and we talked a little bit about the safety concerns, we talked a little bit about the restricted indications, and really, the inability to affect abdominal pain. Now we have a drug that actually does affect abdominal pain, we believe it will have a broader indication for IBS, chronic constipation, men and women of all ages, and we think that it is a well tolerated and has a strong safety profile that will be appealing to physicians. And I think what the physicians are telling us in market research is there is a very strong likelihood to prescribe the drug.

So I think we will certainly think about spending more if we really see a strong promotional response out of the gate. But I think we're going to see that within the first 6 to 12 months. But I think it is really going to come down to how well do the patients do on the drug.

Irina, this is Peter. The only other thing I would add, I think that Tom and the team have learned so much in the last couple of years about how to access patients and to educate and inform patients through digital media. And the Internet has evolved so much since Zelnorm was launched, first in 2002 and then more broadly in 2004. And these patients who are highly symptomatic and suffering pain are highly information seeking individuals, and we have learned a lot about how we can reach and communicate effectively with them. And that is, I think, a much more cost effective, but also more effective and efficient, communication channel than was available when Zelnorm launched.

That is really helpful. And I guess just one last one. Zelnorm didn't do so well in Europe. I was looking at 2006 sales, and it looks like they had about $488 million in the US and $73 million in Europe. Can you comment on why there was this disparity?

Sure. It was largely not approved in most of the countries in Europe. It was only approved in a small -- was never approved in really most of the EU. So it got approval in Switzerland and a couple of other small markets, but it never got into Germany or France or the UK.

Okay. Thanks very much.

Mario Corso, Caris and Company.

Yes, good evening. A couple things I wanted to ask about. In terms of DDW, are you able to say what the topic or the title is on the oral presentation? And then in terms of the $60 million to $70 million in R&D for this year, does that include a full phase 2 program for 9179? I am curious what the makeup there is. Also, there was a little bump in SG&A in 4Q, and I'm wondering what the reason there may have been. And then finally, just for clarification, you had talked about previously launch timing, a scientific launch, 60 to 90 days post-approval and then something with promotional material 30 to 60 days later. And that certainly fits with the 100 to 120 days, so there is no change there, right, that is just how you are characterizing the launch timing today versus the prior day? Thanks very much.

I will take the DDW one real quick, and then let Tom take over from there.

For DDW, we can't really comment on the specific titles or areas, but it covers our CC of the IBS-C program, and the phase 3 program in particular. The one thing I should mention and correct real quick, in the slide we have DDW listed as the 9 through the 12; the correction should be DDW occurs from the 19 through the 22. So, sorry for that miscommunication,

Tom, you want to take the commercial question?

There was a question actually about the investment in the pipeline and what that $60 million to $70 million captures. I don't know if you want to talk to that full phase 2 program and what else.

It includes a number of different things we have in early-stage development and also our discovery program. What we obviously in the past have tried not to do at this stage is go into depth on early-stage development programs until we get proof of concept. We brought forward 9179 early, because of its link to GCC and linaclotide, but the rest are early stage development in our discovery program.

As far as the launch sequences, to whether we go out with a PI or a scientific launch, a package insert launch and a scientific launch in addition to the commercial, full commercial launch. I think that is really going to be dependent on how things are going with the OPDP review. So if we have a quicker review, we would like to pull up the full commercial launch and get that out as fast as possible. So I think we are still thinking both options, but it is going to be completely dependent on how quickly we hear back from DD-MAC -- or excuse me, OPDP, and how that review is going. But I think the bottom line here is, certainly we want to get drug to patient as fast as we can.

Mario, the other question you had was with regard to SG&A. Just a quick comment,, as I stated earlier, we don't expect to incur the significant increase in expenses in SG&A until the second half of this year, but we are starting to invest in the preparation for launch. So Tom has built out his team, we are starting to make some of those investments to get ready.

Hello, Mario. This is Jim. I guess the only thing I would add is we also have a G&A infrastructure that we are starting to build and really, most of that is around four facilities. And what you saw in Q4 was us building out another portion of our facilities, and so some of that bump up is associated with non-cash items, like depreciation.

(Operator Instructions) Ram Selvaraju, Morgan Joseph.

Thanks very much for taking my questions. Just one quick financial query, if I may. Could you give us an idea as to what the current pro forma cash position is, taking into account the burn so far this year and the most recent financing? Would it be approximately in the $220 million to $230 million range, or am I off there?

I can comment on the numbers that are out there, and I will say you are in the general range, the ones to add up. We're not commenting on our performance during 2012 yet, but I can tell you we finished the year with $164 million, and you know the raise we just completed was approximately $85 million. So you can overlay a burn on that and get pretty close.

Okay. And then, just with respect to the pipeline, and in particular 9179, I was wondering if you could comment on the relative impact of the pathway that that drug is targeting versus, for example, attempts to modify the ghrelin hormonal pathway to exert a positive therapeutic impact in upper GI tract motility disorders, and whether you think the areas in which 9179 might be effective would be complementary or synergistic with or potentially competitive with efforts to modulate the ghrelin hormone receptor pathway in areas of upper GI tract motility disorders, like for example, gastro paresis.

Ram, this is Mark. Thanks for the question.

Certainly, very different approaches. Clearly, the ghrelin approaches are mostly around stimulating gastric infeeding and motility. What we think happened with 9179 is a couple of things. Again, we see in our pre clinical model that it decreases visceral pain in a manner very similar to linaclotide. So, again, through the GCC program efforts, stimulation, we see that type of effect. We also see very marked stimulation in upper intestinal transit that again we think is part of the issue for those patients. And finally, we see a very marked increase in bicarbonate secretion. And some of the work by some of the key thought leaders in this area have really indicated that a number of the symptoms related to functional dyspepsia can be markedly diminished by doing an infusion of bicarbonate over the duodenum mucousal surface.

So again, I'd say, I think we would not be looking really at directly competing against type ghrelin agonists. We think ghrelin mostly is more around trying to treat gastro paresis. A number of things have been utilized to treat motility for functional dyspepsia, and really hasn't helped those patients much. So we don't think that is a big bonus for them. But maybe, as you indicate, potentially some complementary actions if you one day put them together.

The final question was, does the firm believe that current stability data on linaclotide is sufficient to permit long-term use, or would additional stability data be needed at this juncture?

We believe it is sufficient for long-term use. We submitted with 12 months of data, as required by FDA, and we are feeling very good about the viability of the product at launch.

Thank you.

And at this time, there are no further questions in the queue. I'll turn the call back to Mr. Higgins for any closing or additional remarks.

Thank you all for taking the time and for your interest in Ironwood. We look forward to keeping you up-to-date. Have a great evening.

Ladies and gentlemen, that does conclude today's presentation. We thank you for your participation.