Ironwood Pharmaceuticals Inc (IRWD) 2014 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Ironwood Pharmaceuticals first-quarter 2014 investor update conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time.

(Operator Instructions)

As a reminder, this conference call is being recorded. I would now like to turn the call over to Miss Mary Conway of Investor Relations. Miss Conway, you may begin.

Thank you, Bridget, and good morning. Thank you all of you for joining our first-quarter 2014 investor update. By now you should have a copy of our press release, which crossed the wire earlier this morning. If you need a copy of the press release you can go to our website, www.ironwoodpharma.com, to find an electronic copy.

Some of the information discussed in today's call is based on information as of today, Tuesday, April 29, 2014, and contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set forth in these 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 and on the current slide under the heading Safe Harbor statement, as well as the risks under the heading Risk Factors in our annual report on Form 10-K for the year ended December 31, 2013, and any of our future SEC filings.

Joining me for today's call are Peter Hecht, Chief Executive Officer, who will provide introductory remarks; Tom McCourt, Chief Commercial Officer, who will give an update on the commercialization of LINZESS; Mark Currie, Chief Scientific Officer, who will summarize our pipeline efforts; and Michael Higgins, Chief Operating Officer, who will review our financial performance, guidance, and then open the call to your questions. Our speakers will be referring to slides available via the webcast.

For those of you dialing in, it may be helpful for you to go to the events section of our website to access the webcast slides if you haven't done so already. I would now like to turn the call over to Peter.

Thanks, Mary. Good morning, everyone. Ironwood is off to a strong start in 2014, as we made substantial progress in the past quarter across all aspects of our strategy to build a leading GI therapeutics Company.

As you'll recall the tenants of our strategy are first, maximizing LINZESS; second, leveraging our strong commercial capabilities; third, advancing our robust GI pipeline; and fourth, prioritizing investments on our key value drivers. We've made important progress in each of these areas in the past quarter, and I believe we are primed for further advances as this year unfolds.

Before I turn the baton over to Tom, I want to share a few highlights of the quarter. LINZESS continues to demonstrate healthy growth, with net sales reported by Forest of $60.8 million, up 19% quarter over quarter, with nearly 240,000 prescriptions, up 11% quarter over quarter. We believe our recently launched multi-channel, direct-to-consumer patient awareness campaign, which Tom will talk about in a moment, will help us reach more of our target patient population and further accelerate prescription growth.

On the IP front, we and Forest received notices of allowance for two separate patent applications covering the commercial formulation of LINZESS, and methods of using it to treat patients with IBS-C or CIC. Both of these patent applications are expected to issue in mid-2014 and extend LINZESS patent protection for another five years, from 2026 into 2031.

In addition, we continue to make advances across our robust GI pipeline. For example, in the first quarter we initiated dosing of IW-3718 in a Phase IIa clinical trial for patients with GERD symptoms who have not responded adequately to treatment with a proton pump inhibitor.

Turning to the rest of the world, our partners are making progress in our shared effort to help millions of adult patients suffering from chronic abdominal pain and constipation associated with IBS-C. In Europe, our partner Almirall has launched linaclotide, marketed there as Constella, in 10 countries, most recently in Italy, and they plan further launches in additional European countries this year.

Almirall and Forest recently received marketing approval for linaclotide in Mexico and in Canada as well, with both launches expected in mid-year. Unfortunately, in Germany, Almirall has not reached an agreement with the German pricing authority on a reimbursement price that reflects the innovation and value of Constella. As a result, they expect to suspend commercialization in Germany in May pending completion of that process.

We continue to focus on efficiently running our business, while making disciplined and appropriate investments to deliver on our strategy. We're also very appreciative of the strong investor interest that contributed to the successful completion of a common stock offering in February that raised net proceeds of $190 million. With that, I'll hand it over to Tom for a commercial update.

Thanks Peter, and good morning, everyone. I'm delighted to be here this morning to share our commercial progress with LINZESS. We're pleased with the solid growth we're seeing, and this growth has been driven by the physicians' ability and willingness to choose LINZESS for appropriate patients, the continued improvement in payer coverage, and demand from patients, that we believe will increase as we expand our patient awareness campaign, designed to improve patient-physician communication and increase requests for LINZESS.

Since we launched LINZESS with Forest in 2012, we've established strong commercial fundamentals across a number of leading indicators, in line with some of the most successful recent primary care launches. We remain focused on key metrics that we think are the most relevant performance indicators for LINZESS that include physician adoption and productivity, payer coverage, and patient persistency.

From launch through the first quarter this year, more than 260,000 unique patients have been prescribed LINZESS, and more than 800,000 total LINZESS prescriptions have been filled, including more than 240,000 in the first quarter this year, representing 11% growth quarter over quarter. This growth was driven by both new patient starts and a strong refill rate. And based on relevant primary care analogs with DTC campaigns, we're anticipating strong growth across all these metrics over the next three to six months, as we build overall awareness and provide support to improve patient-physician communication.

We believe we are still early in the growth period for LINZESS, and we've built a solid foundation of physician awareness and payer coverage. We are now broadening our strategy to fuel acceleration in the marketplace over the upcoming months and years.

Beginning with physicians, the combined Forest and Ironwood salesforce has established a broad and growing prescriber base of more than 63,000 healthcare practitioners. This includes approximately 90% of high-prescribing gastroenterologists and approximately 70% of high-prescribing primary care physicians. We're very encouraged by the breadth of the prescriber base and the expansion of use for appropriate patients as these practitioners gain more experience with LINZESS.

We believe this behavior is a result of physician satisfaction with LINZESS, and the observed clinical improvement in abdominal pain associated with IBS-C and the constipation symptoms of IBS-C and chronic constipation. In addition, 88% of physicians report a willingness to honor a patient request for LINZESS. As we mentioned last quarter, we will continue to concentrate our education efforts on the highest potential prescribing physicians to further accelerate the growth of LINZESS.

We continued to make progress in the first quarter with payers, as we work to maximize access for appropriate patients at a reasonable co-pay. As of March, over 70% of people covered by commercial insurance and Medicare Part D plans have unrestricted access to LINZESS.

Medicare Part D access is up from about 50% last quarter, largely fueled by a positive coverage decision by United Healthcare. Additionally, through our efforts of payers and our co-pay solutions, over 70% of people with commercial insurance have access to LINZESS at a co-pay of $30 or less.

Now turning to patients. Based on the past year, we are very encouraged by the patient adherence to treatment, and the high interest in new information concerning a treatment option that can relieve IBS-C and chronic constipation symptoms.

We believe patient persistency to treatment is a strong indicator for treatment satisfaction. This graph summarizes an analysis of four cohorts of patients tracked since launch. It compares patients' persistency of LINZESS to Zelnorm and Amitiza, based on a consistent strict definition.

As you can see, LINZESS persistence continues to run from 38% to 65% higher than these launch-aligned analogs, raising awareness of IBS-C and chronic constipation and enabling appropriate patients to more effectively communicate their symptoms, ask for help, and request Zelnorm -- and request LINZESS, is a critical growth driver for LINZESS. We have consistently identified poor patient communication as a key barrier to effective treatment, and underscore the importance for the patient to play a more active role in their own care.

We believe LINZESS is a very attractive candidate for a successful consumer advertising campaign, because it's well aligned with industry proven growth drivers that include the ability to target a highly symptomatic patient population with a clear unmet medical need, a patient population who can easily self-identify with an advertising message, and who have previously demonstrated a willingness to act. We are very pleased with our patient awareness campaign based on the breakthrough creative that you see here, the clear message, and the strong call to action designed to inspire patients to talk to their physicians.

Prior to making the final decision on our advertising concept, we extensively tested this in a simulated market analysis, and with this ad, it exceeded industry benchmarks by over threefold, so we're very optimistic about the potential impact on the growth of LINZESS. The campaign was initiated early April, and appeared on TV for the first time April 9 during the primetime airing of Modern Family. This is a multi-facetted campaign with a robust media plan, encompassing TV, print, online, and in-office programs.

It's early, but we immediately observed an increase in online traffic, and after the first full week, there was a 5% increase in total prescriptions and more than a 6% increase in new prescription volume. We continue to make good progress on all key commercial fronts, as we continue to advance our efforts to bring LINZESS to the over 30 million dissatisfied adult patients suffering from IBS and chronic constipation.

There is a significant opportunity in front of us, and we believe we've only scratched the surface, as we strive to help patients through our ongoing efforts to educate physicians, improve payer coverage, and informed appropriate patients about LINZESS as potential treatment option.

We believe LINZESS today is well on its way to become a very important GI medicine, creating a new category and establishing the foundation for our GI franchise to help millions of suffering patients. With that, I'll turn it over to Mark. Mark?

Thanks, Tom. We continue to make important progress in advancing a robust platform of GI therapeutic candidates with multiple opportunities for proof of concept data through the end of 2015. Before I share a few highlights with you, I want to say how encouraged I am to see the recent increase in clinical progress and interest in the GI space. This area encompasses many different disorders, affects millions of patients, and until recently had seen too little activity in the development of new treatments.

Ironwood is incredibly proud to have brought the first in a new class of GI treatments to market. Our flagship product, LINZESS, is the first GC-C agonist to be approved the FDA and the EMA. It is gratifying to see this product in the market helping patients. Building on our success with LINZESS, our research team is applying our vast body of GI and GC-C expertise to our pipeline of programs in areas including functional dyspepsia, gastroparesis, GERD, opioid induced constipation, and other GI conditions.

As you can see, we've made some important progress during the first quarter in advancing our robust pipeline. I want to highlight just a few items now.

First, as Peter mentioned, we initiated dosing in a Phase IIa clinical study of IW-3718. The study is to evaluate the drug in patients with refractory GERD, or GERD symptoms whose have not responded adequately to treatment with proton pump inhibitor therapy.

Refractory GERD is a significant unmet need affecting an estimated 7 million Americans. IW-3718 is a bile acid sequestrant that is designed to intercept bile acids in the stomach before they reflux back into the esophagus, with the intention of blocking the reflux and nerve fiber hyperactivity thought to play a role in refractory GERD. You can read more about this program in the press release we issued in March; we expect data in first half of 2015.

A second area that I want to highlight is our exploratory Phase II study of IW-9179 in functional dyspepsia. Let me remind you this is our second GC-C agonist, and early development studies have shown it is a highly potent agent with minimally systemic exposure.

We stopped the Phase II functional dyspepsia trial prior to completing enrollment, due to challenges with the rigorous enrollment criteria in the trial. Yet our initial analysis are encouraging, and consistent with the FD symptom improvement we saw in FD sub-groups analysis from our Phase IIIb CIC trial with linaclotide.

A digital analysis is ongoing, but our initial assessment is that the data supports further development of the program, and we're continuing to work with regulatory authorities and key opinion leaders to try to define a broad inclusion and exclusion criteria which would help define a path forward for IW-9179 in functional dyspepsia patients. It is a process, but establishing trial design standards and patient reported outcomes for symptomatic diseases is familiar territory for us, as we have successfully navigated these processes in our linaclotide approval for IBS-C and CIC. At the same time, we plan to initiate a Phase IIa clinical trial of IW-9179 in patients with gastroparesis in the first half of 2015.

There's one more highlight I'd like to share; at our Investor Day in December, we told you about our soluble guanylate cyclase program, that's our sGC program. This is a discovery program derived from our expertise with guanylate cyclase C and other guanylate cyclases.

We're very excited about this program because soluble guanylate cyclase is a proven mechanism with the potential for broad therapeutic opportunity. I'm pleased to report our research team identified a development candidate in this program and advanced it into preclinical studies.

We also continue to make progress with our other R&D programs, including our linaclotide colonic delivery formulation efforts. On the whole, we believe our pipeline demonstrates clearly that we are targeting precisely what Tom just said, building out a full GI franchise and transforming Ironwood into a leading GI therapeutic company.

Turning to Japan, our partner, Astellas Pharmaceuticals, completed a Phase II trial of linaclotide in adult patients with IBS-C. Preliminary data from the study that enrolled 559 patients indicate that all linaclotide dose group showed numerically higher responder rates in the primary end point than placebo; however, the responder rate for not statistically significant compared to placebo, and the primary endpoint was not met.

Linaclotide was well tolerated in all dose groups, and the preliminary safety and efficacy data are consistent with prior clinical studies of linaclotide. Both we and our partner, Astellas, believe that the results support proceeding to a Phase III study in Japan.

All in all, it's an exciting time for the GI field, and Ironwood is delighted to be a leader of innovation in this space. We look forward to seeing many of you next week and sharing some of our latest findings and insights with you at Digestive Disease Week in Chicago, where we will have a substantial presence and will present our Phase IIIb data on bloating and CIC, as well as several other posters. With that, I'll turn it over to Michael.

Thanks Mark. We continue to work diligently to efficiently allocate our shareholders capital, carefully investing across the key value drivers of the business, and we are very pleased with our progress during the first quarter.

Let's begin with a review of the financial performance of LINZESS, where we continue to see solid growth. Forest reported $60.8 million in net sales in LINZESS for the first quarter of 2014, compared with the $51 million in net sales reported in the fourth quarter of 2013, a 19% increase quarter over quarter. And as Tom mentioned, total Rxs for the quarter grew to nearly 240,000, an increase of approximately 11% from last quarter. We expect this favorable growth trajectory to accelerate as we head into the second half of 2014, with the support of the recently launched DTC campaign.

Wholesaler inventory levels increased to the four to five week range during the first quarter, a one week increase from the three to four weeks we reported in the fourth quarter, as wholesalers prepare for the anticipated increase in demand from the DTC campaign. Gross to net discounts for the quarter were approximately 22%, as compared to approximately 20% in the fourth quarter. We continue to expect gross to net discounts to settle into the mid-20% range over time.

Quarterly fluctuations will continue as we work to advance payer coverage for LINZESS, both in the commercial and Medicare Part D space. As a reminder, we and Forest also increased the price of LINZESS in early December by approximately 8.5% from a WAC price of $7.10 per day to its current $7.70 per day.

The Ironwood/Forest LINZESS partnership produced collaboration revenue to Ironwood of $8.4 million on our P&L in the first quarter. This is the second quarter in which we are reporting collaboration revenue from our partnership with Forest; in all preceding quarters we reported collaboration expense, as the 50/50 profit share resulted in a payment from Ironwood to Forest in each of those quarters.

Now let's turn to Ironwood's specific financial highlights for the quarter. Beginning with our balance sheet, total cash and investments as of March 31 were $332 million, up from $198 million at year end 2013. Our cash position was bolstered by the successful common stock offering that we completed in February, raising $190 million.

$58 million in cash was used for operations during the quarter; while this was an increase from the $42 million in cash we used during the fourth quarter, this quarter included non-recurring payments related to the reduction in force, the annual payment of year-end bonuses, and two API payments. As we stated, we're deploying our resources with financial discipline and we remain confident that we will see a decrease in the use of cash as the year progresses, due to revenue growth and continued expense management.

GAAP revenues for the first quarter were $14.6 million, including $8.4 million in collaborative arrangements revenue associated with our share of LINZESS in the US as previously described. Also included in revenue is $6.2 million for the sale of linaclotide API to our ex-US partners, amortization from our existing collaborations, and royalty and milestone payments from Constella in Europe. Ironwood's GAAP revenues increased threefold from Q4 2013, when they were approximately $5 million.

Total operating expenses excluding cost of goods during the first quarter were $57.1 million, compared with the $51.2 million in the fourth quarter of 2013. Included in operating expenses in the first quarter of 2014 were costs totalling $4.3 million associated with the reduction in force that I just described.

Our R&D expenses for the first quarter were $27.1 million, compared with the $22.5 million last quarter, and SG&A expense for the first quarter was $30 million, compared with $28.7 million from last quarter. Finally, our net loss for the first quarter was $49.6 million or $0.38 per share, versus a net loss of $52 million or $0.43 per share in the fourth quarter of 2013.

With respect to guidance for 2014, we are reiterating that we expect our total operating expenses to be in the range of $215 million to $245 million. This consists of $105 million to $120 million of R&D expenses, of which approximately 45% is for non-linaclotide R&D investments, and $110 million to $125 million of SG&A expense. In addition, we continue to expect that the 2014 LINZESS sales and marketing shared 50/50 with Forest will be in the range of $240 million to $270 million.

Thank you, all. And with that, I'll turn the call back over to Bridget to begin the Q&A portion of the call.

Thank you.

(Operator Instructions)

Our first question is from Geoff Meacham with JPMorgan.

Good morning, guys. Congrats on the quarter and thanks for the question. Got a couple questions, one on the DTC campaign and one on the physician adoption. So, what are some of the benchmarks that we can measure the success of the DTC campaign with? Is it primarily an Rx growth or are you guys also expecting an impact on new prescribers?

And the second question is, from one of your slides, for the physicians that are not willing to honor a patient request, what are the primary reasons why, and what can you do to address it? Thanks a lot.

Thanks, Geoff. Tom, can you take this?

Sure, thanks, Geoff. As far as the DTC benchmarks, obviously there's a number of analogs we can look to. Obviously, the most relevant one that we look to is the impact that we saw with Zelnorm, which, as you know, responded very, very well to a consumer message, which we certainly -- as we understood this population better, once patients believe that there is hope or an opportunity to feel better, they will act. And I think it's really making them aware that there is a better treatment available -- or a good treatment available, and providing them the language to speak to their docs, that provides them the confidence to really take action. And we think that's probably the most relevant analog in the marketplace.

As far as the physician's concerned, we have a very broad prescriber base -- well out in front of even our own objective. And it's continuing to grow. And it's continuing to grow as they see the patient and they have a positive experience with the product.

For those patients -- and keep in mind, physicians -- as I mentioned, 88% of physicians suggest that they will honor a patient request. I think the other 12% are probably physicians who, one, are unaware of LINZESS or haven't observed or have experience with the product thus far. But certainly the DTC not only will have an impact on new patients, but also remind patients that are currently on LINZESS to refill their prescriptions and certainly drive demand across the medical community.

Thanks.

Does that help, Geoff?

Yes, it does.

Our next question is from David Maris with BMO Capital Market.

Good morning, great quarter. I have a question that's a little bit odd, even for me. But, given the environment that we're in, I think we should ask it -- given also where the stock is. Can you talk a little bit about takeover defenses and, because you have the relationship with Forest I would think that those companies would think that, that's your natural partner. But maybe if you could talk a little bit about what defenses you might have and what your thoughts are on the current consolidating industry, thank you.

Thanks, David. It's Peter. I'll take the question. I think, first of all, the best defense is a good offense, is creating value for our shareholders. And our goal is to deliver on our strategy -- build a leading GI company; deliver on the promise of LINZESS; build on the pipeline strength that we believe we're creating value in here, in the Company; leverage the strength of our commercial business and our development capabilities that we built along the course of developing and commercializing LINZESS.

I think we feel pretty strongly that we're very early days in building a very exciting company and delivering great value for our shareholders. We do have some structural defenses in place. As I think you know, we have a very limited dual-class voting structure that only kicks in on change of control situations. We also have standstill agreements with all of our existing linaclotide partners. I think, as important as those, we have a very dedicated shareholder base who share our belief in the promise and the potential we can create for our shareholders.

With respect to what's going on more broadly in the current climate, I think it's pretty clear that consolidation is one way to create a lot of value for shareholders. It's also, I think, clear that the market pays for real innovation. And we believe we have a very innovative product with LINZESS and an opportunity to, as Tom said, help millions of patients where we think we're just scratching the surface today. And that we have a very focused and promising effort in our pipeline to create value for shareholders there as well, with a lot of innovation.

Great, thank you very much.

Thank you.

Thank you. Our next question is from Jason Gerberry from Leerink Partners.

Hi, good morning. Thanks for taking the question. First question for Tom, just quickly, looking at the LINZESS sales number you put up for the quarter. It looks like the implied average selling cost is around $250 million, but if I apply your gross to net assumption that comes to around $185 million. So, just kind of curious, was the discrepancy really all stocking in the quarter as you go into the DTC campaign?

And then, my second question, just more broadly, just kind of curious maybe, Pete, if you can answer this one. Your discussion so far to date with Actavis, regarding their commitment around LINZESS, and how you think that the Furiex deal will impact LINZESS positioning if that product gets to market. Just curious what makes you comfortable that LINZESS will be sort of positioned first with the Forest threat, thanks.

Thanks for the questions. Michael, can you take first question on the financials?

Yes. So, I think, broadly, you've got the math right. I think, directionally, I'll just comment on a few things -- there's one element missing in your question. You were trying to reconcile the TRxs to the overall revenue. As you know, we generated more than 240,000 TRxs. If you use the gross price of $7.70 and take the gross to net adjustment, I think you get close to the number that you articulated per script.

The one piece that you're missing in your calculation is that the average prescription is now north of 30 days --it's actually about 34 days -- so when you do your math there, that's how you kind of total out the numbers. So, the combination of those things, plus in the anticipation of the growing demand, the wholesalers taking that additional week of inventory makes up the full amount of the revenue for the quarter.

On the questions about Actavis and around Furiex, maybe I'll take a first whack at that. I would say we have a very strong partnership with our partners at Forest across every function. We have since the partnership initiated in more than five years ago now. That continues to be a very tight collaboration every day and we work to strengthen that in all of our areas across the business on a daily basis.

I think it was quite clear in the course of the discussions and the rationale for the Actavis-Forest merger that LINZESS was a very key element of the value that Actavis perceived in the Forest acquisition. And you can see from yesterday's news about Furiex that Forest, with the agreement of Actavis, is very committed, long term, to the GI space. As Forest said yesterday, and we agree, the Furiex product is a nice complementary product for them.

We agree that it improves -- when the product comes to market in a year or two, will improve Forest representative relevance with healthcare providers and support LINZESS, which they are very clear is their anchor GI product. And I think, for us, anything that helps Forest with LINZESS is good for us.

I think the deal also really reemphasizes Forest's and Actavis' commitment to the GI space, which is another great sign for us -- and their long-term commitment. The Furiex asset, as you guys know, has a very long IP life, as does linaclotide and the linaclotide IP franchise. So, being very close with our partners for a very long-term commitment and building a big space in GI is great for us.

Okay, thank you.

Our next question is from Gary Nachman with Goldman Sachs.

Hi, thanks, good morning.

Good morning, Gary.

Tom, first on the DTC campaign, could you comment on general expectations of where most of the incremental LINZESS volume will come from? Will it all need to be shifts from OTC, could some of it come from Amitiza, and was that a similar dynamic that Zelnorm faced? And then, Mark, on 9179, what was it about the criteria that were too strict for enrollment, if you could just elaborate on that?

Thanks. I'll take the first question. I think you're spot on with regard to where the growth will come from. Keep in mind that about 80% of patients that are actively seeking care are actually managed with OTC treatment. So, we see most of the growth coming from a switch from OTC directly to LINZESS, and it's pretty consistent with what we've seen all along. Will we see switches from other prescription therapies? Absolutely. So, I think the growth, as far as new patients, will likely come from OTCs.

I think the other piece that I mentioned just briefly earlier is -- one of the strengths of the DTC message is also reminding these 260,000 patients who have already been treated to go fill their prescription as symptoms return. So I think it certainly grows the product from a number of different directions.

Gary, this is Mark. Relative to the criteria, the real, I think, difficulty around trying to enroll the study was to get, quote, a pure FD population. But FD patients have a lot of co-morbid symptoms -- they have IBS, chronic constipation, GERD. And so, trying to narrow them down into just where they have functional dyspepsia has proved, in that study, quite challenging, and previously quite challenging for other companies that have taken it on.

Obviously, we learned a lot. We learned a lot about what the kind of newer understanding of patient reported outcomes and collecting of the data. So we think we'll be able to take that data back and utilize it to help broaden this definition that these patients aren't -- there aren't really, quote, pure -- or at least very many pure FD patients out there.

Okay. And, actually, just one quick follow-up for Mike, just to make sure we're all clear -- that one week of additional inventory. Could you just quantify that for us as we're trying to do the math to get into the price -- the right price prescription? Thanks.

Yes, so that additional week is actually as reported by the wholesalers. We take those in, that's on that basis. We don't disclose the specific number associated with that. But it's an as-reported number, so that one is a clean number that we get from wholesalers in terms of their inventory levels that they're holding.

Okay. And then, when you're up at four to five weeks, what's normal for this product? Should it come back down into the two to three week range at some point?

Yes, our expectation is that we'll be in the -- we've been in the three to four week range, our expectation is that we should level out in that range, probably about three weeks. The way the contracts are written, that's the zone that the wholesalers are guided to, and that's where we expect them to be.

This is a -- very much like an initial launch where they're getting ready for additional demand. They built in a little bit in front of the DTC. But the three-week range is what we expect over time. And I do say it's over time because it won't happen overnight, though they do a great job of managing that. So, it'll happen over a period of quarters, probably.

Okay, thank you.

Our next question is from Mario Corso with Mizuho.

Yes, thanks for taking my questions, good morning. A couple things I wanted to ask about. On LINZESS, how do you think about penetration or market share at this point and kind of longer term? Obviously I know there's millions of patients, but in terms of what's realizable. And also within the context there, maybe a little bit more renewed investor interest in Synergy Pharmaceutical drug with some clinical trial activity there, just wondering how you frame that whole situation.

And, on 9179, so should we consider gastroparesis now as a lead indication? And I'm wondering if you're able to tell from the dyspepsia study, if you were -- I assume you were able to limit the drug from going where you don't want it, and therefore getting any kind of GI side effects. Thanks very much.

If we got them all, Mario. I think we do. Tom, can you first take the --?

Penetration question?

-- penetration question?

Yes. I just want to be clear, Mario, on the question you're asking. So, as far penetration, as far as market share growth, and what we expect or what we think we'll observe? Is that what you're specifically asking for?

Yes, just trying to think about what the realizable market is and, again, outside of just pure patient numbers. And, as a corollary to that, room for other entrants, potentially longer term.

Yes, it's a great question. I think the tricky part here, again, is when the majority of the market is outside the prescription market, right? So, like you said, 80% of the patients that we're chasing, or we're expecting to get, is OTC patients.

We're continuing to grow our market share over time. In fact, over the last week as we turned on DTC, we almost jumped an entire share point. So, we're clearly capturing a significant market share, but the majority of the business is going to come in from OTCs, which is going to grow the entire market. And so, that's how we've kind of looked at patients and how much therapy they're actually consuming.

So, again, we pay attention to both -- obviously, the new Rxs and total Rxs, as well as market share -- but recognizing the majority of the growth is going to come from OTCs. Does that make sense?

Mark, can you take the second question?

Sure. So, I think, first off, we ground ourselves where we are with LINZESS. LINZESS is already helping hundreds of thousands of patients. We think by the time any competition comes along, we will be out helping millions of patients. We have a very strong track record relative to publications and characterization, and also the label.

So, we've demonstrated quite clearly the safety and efficacy of this drug, quite strong effects on abdominal pain in these patient populations, and we continue to innovate. So, as I think we described, we're advancing new linaclotide-related product opportunities, the colonic delivery is one example that we think is very high priority, and it gives us a chance to continue to broaden out and help more of the patients as we move forward.

Relative to the competition with plecanatide itself, I think we see still plecanatide is -- there's still some areas that we want to understand more, there's very little data that's out there specifically around plecanatide. There's still a long way to go, they're just starting their second Phase III CIC study is what they announced, lots of regulatory interactions, lots of data to collect. So I think it's still several years away. And, as we said, we will be moving along pretty fast during that time with other product opportunities.

So, I think for us right now is still we'll wait and see what the data looks like relative to IBS -- is there an effect on pain? How clear is that effect on pain? Obviously, that's one of the key drivers. So, we'll stay tuned, just like you, and watch the data.

Mario, you know that question about 9179 and gastroparesis -- can you repeat it? I think we lost track of it.

Right. Should we consider gastroparesis now the lead indication? And in the dyspepsia study, I assume you're able to limit any GI tolerability, which is part of the goal of formulation, right?

Yes, Mario, I'll take that one. So, as we indicate, we certainly are moving the project in a kind of dual fashion, somewhat like the way we did with CIC and IBS-C when we brought linaclotide forward. Both -- there are challenges that we have to address for both gastroparesis and functional dyspepsia. The learnings that we have from functional dyspepsia, we're going to go back and take that to regulatory authorities and the KOLs. And, again, we're going to focus on finding a path, because we think there's such a large number of patients out there that are suffering.

With gastroparesis, the path is better defined, but there's still work to do. And, like we said, we're going to initiate both. So I wouldn't say it's an either/or right now. We think there's opportunities still, but we're going to -- obviously, have to do more work on the clinical and regulatory path for functional dyspepsia at this point.

Relative to the side effects profile, at this point, we're still using obviously very -- in proof-of-concept studies, but still using very high doses. So, we haven't done a dose-ranging study to really define that at this point. Obviously, we believe we've made a molecule that will have less tolerability as we define the dose, but with proof of concept we go in pretty high dose.

Our next question is from David Friedman with Morgan Stanley.

Hi, this is Brienne Kugler calling in for Dave. Congrats on the quarter.

Thank you.

I just had a quick question about your agreement with Forest on LINZESS. Is there anything in the agreement that would stipulate what position LINZESS needs to be in for a certain percentage of sales calls?

Yes, this is Tom. Why don't I take that question. Yes there is, but the joint commercial team actually sets the commercial plan on an annual basis. So, Bill Meury, who heads up marketing, and myself chair that committee. And we build a full-year commercial plan which defines the specific call plan that both organizations will execute. And the both organizations are compensated or reimbursed for that call based on the execution to the call plan. So, there is very, very clear direction with regard to the order of the call and the position of the call in the bank.

We are very pleased with what we've seen in terms of execution to date, where LINZESS has been in the primary position -- in the first position for the far, far majority of the calls, and that will continue to be the case.

Thank you.

Our next question is from Greg Wade with Wedbush.

Good morning, and thanks for taking my questions. Tom, I was wondering if you might share with us some of your analysis of the prescriber-level data that you have, maybe let us know what percentage of prescriptions are coming from detailed versus non-detailed doctors, and how you expect those numbers to change over time. And then, how will you be determining the effectiveness of the direct-to-consumer expenditures, both with the detail and undetailed physicians? Thanks.

Thanks, Greg. Great question. As far as physicians, as I mentioned, we have about 63,000 physicians that have prescribed LINZESS. The majority of them are within our call deck, as far as our targeted physicians.

What I can tell you is gastroenterologists make up roughly about 40% of the volume, and about -- the remaining 60% is coming out of high-decile primary care physicians. And, as far as the amount of business, it's probably over 80% -- of the business is coming from targeted physicians currently.

Now, keep in mind, as we turn on to DTC, it's going to push patients to a variety of physicians, which we believe will broaden the prescriber base. But the majority of the physicians that are continuing to generate the volume will still reside within the target population of physicians we're calling on.

As far as the DTC -- and we have agreed on a very specific framework of data that we're going to evaluate and will inform where we go forward as far as an investment. We -- I think we were very -- we have a very robust, but extremely precise media plan in which we are running a number of studies within that to really understand what is the right level of media we should be at to inform where we go in the future.

So I think we're going to learn an awful lot in the upcoming months that are going to inform where we go in the future, but certainly the early signs look very encouraging.

Thanks.

Our last question is from Yi Chen with Aegis Capital.

Hi, thank you for taking my questions. My first question is, depending on what you just said about DTC plan, is it -- so the future spending on DTC advertising will depend on your media study, is that correct?

Correct.

Okay. Second question is, what are doctors' most significant concerns about LINZESS at this stage?

Great question. I think it's really the experience with the drug. I think, overall, as I mentioned, the satisfaction with LINZESS is quite high and it's very, very encouraging. I think, as they move forward, the opportunity for us is to broaden their view of who the appropriate patient is.

So, right now, early on, a lot of the physicians reserve LINZESS for the more severe IBS population. And as we see physicians get greater and greater experience and more comfortable and see the patient response, they're clearly broadening their view of who the appropriate patient is and which results obviously in broader prescribing.

And when we look at those physicians that prescribe earlier, clearly their overall productivity, as far as the number of patients they treat and prescriptions they're generating, is growing over time. So, I think all the lead indicators are heading in the right direction. Right now, we are completely focused on how we can, one, expand the patient walking into the office and more effectively communicating their unmet medical need, but also helping physicians to identify those patients and select appropriate patients for LINZESS.

Thank you. My last question is, what are the near-term catalysts from the pipeline?

So, we have shown you in the Investor Day the quite detailed outline of what the next things are. I think, without going through the list over this question, I think the keys are watch for 3718, watch for OIC moving forward, and also when we start the functional -- the gastroparesis study for IW-9179 next year.

Thank you.

Thank you. And I'm not showing any further remarks at this time. Mr. Hecht, please proceed with any further remarks.

Thank you, Bridget, and thanks for helping us this morning. Thanks to all of you for your time and attention. As you've heard, I think, you should be hearing from us that we're very pleased with LINZESS progress to date. We're very excited about the potential for DTC to raise awareness among sufferers.

It's very early days for this brand. We're really just scratching the surface of the potential we can bring to the category and helping physicians and patients with this very large unmet need. We intend to leverage the development and commercial capabilities we've built on LINZESS over time, and we're in a very strong cash position. As we close in on LINZESS breakeven for the brand and with tight financial management, we feel confident that we have the dollars to invest appropriately in LINZESS and the pipeline as we build our Company.

So, we'll be around the rest of the day. If you have questions, you should contact Mary, and feel free to follow-up. And we hope to see many of you at DDW, which is next Monday in Chicago. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a wonderful day.