Ironwood Pharmaceuticals Inc (IRWD) 2015 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Ironwood Pharmaceuticals second-quarter 2015 investor update conference call.

(Operator Instructions)

As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, Meredith Kaya, Investor Relations. Please go ahead.

Good afternoon and thanks for joining us for our second-quarter 2015 investor update. Our press release crossed the wire earlier this afternoon and can be found on our website, www.Ironwoodpharma.com.

Today's call and accompanying slides include forward-looking statements. Such statements involve risks and uncertainties that may cause actual results to differ materially. A discussion of these statements and risk factors is available on the current Safe Harbor statement slide, as well as under the heading risk Factors in our quarterly report on Form 10-Q for the quarter ended March 31, 2015 and in our future SEC filings. All forward-looking statements speak as of the date of this presentation, and we undertake no obligation to update such statements.

Joining me for today's call are Peter Hecht, Chief Executive Officer; Tom McCourt, Chief Commercial Officer; Mark Currie, Chief Scientific Officer; and Tom Graney, Chief Financial Officer who will open it up to the question-and-answer portion of the call. Our speakers will be referring to slides available via the webcast. For those of you dialing in, please go to the Events section of our website to access the webcast slides.

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

Thanks, Meredith. Good afternoon, everyone. We made important progress during the second quarter, executing across the key value drivers of our business, growing LINZESS, advancing our exciting pipeline, and strengthening our commercial business.

First, LINZESS, which is the branded market leader in its category, reported 56% year-over-year prescription growth, and approximately $112 million in net sales in its tenth full quarter since launch. This drove another solid quarter of profitability for the US brand.

Second, we made great progress in advancing our innovative pipeline. Mark will update you on a few key R&D successes, including the positive top-line data that we recently reported from IW-1973, the first candidate advancing from our sGC stimulators platform.

And, third, we continue to leverage our strong commercial capabilities. The latest addition is today's co-promotion agreement for Viberzi, Allergan's recently approved IBS-C drug, which Tom McCourt will talk about shortly.

As we head into the latter half of the year, we are well-positioned to achieve our 2015 objectives and to execute on our mission to build a great pharmaceutical company grounded in innovation and making drugs that can change patients lives. We believe that by continuing to execute on this mission we will create significant value for our patients and our shareholders alike.

With that, I'll turn it over to Tom McCourt to provide an update on LINZESS and our commercial business.

Thanks, Peter. And good afternoon, everyone. The second quarter proved to be another period of strong growth for LINZESS. More than 510,000 LINZESS prescriptions were filled in the second quarter. And, as Peter mentioned, this resulted in year-over-year growth of approximately 56%.

The fundamentals of the business are strong, with over 760,000 patients having filled nearly 3 million total LINZESS prescriptions since launch. We continue to see strong patient persistency, tracking approximately 40% to 60% above the industry analogs of Zelnorm and AMITIZA. Approximately 140,000 healthcare practitioners have prescribed LINZESS and they continue to prescribe more and more for their patients. And, finally, the payer team continues to provide broad payer access and reimbursement for LINZESS.

Our combined commercial efforts have grown the entire category and we've captured significant market share. The graph on the left illustrates quarterly total prescription volume growth for the IBS-C and chronic constipation category over the past five years. It's important to note that prior to the launch of LINZESS, there was minimal growth in the prescription category. Since the launch of LINZESS, the market has grown by over 30%.

At the same time, there's been approximately an 80% increase in LINZESS market share alone, since the initiation of LINZESS DTC campaign in April 2014. We believe the growth in this category, as well as the increased number of prescribers and the rate of prescribing has been driven by physician satisfaction with LINZESS. In a recent market research study that we conducted with approximately 200 physicians, over 60% of surveyed physicians reported to be highly to very highly satisfied with LINZESS overall, and specifically identified effective abdominal pain relief, improvement of constipation, and the low incidence of diarrhea as the key attributes driving their choice of LINZESS for their patients. These scores are similar to other highly successful first-in-class market-leading brands in symptomatic conditions such as GERD, overactive bladder, arthritis and asthma.

Overall, we feel great about the response we're seeing and the opportunity in front of us as the branded market leader. More than 40 million adult IBS-C and chronic constipation patients are suffering, with the majority of these patients currently taking OTC laxatives for their chronic constipation and abdominal symptoms, and are not satisfied.

LINZESS has a small percentage of the combined prescription and OTC market, which continues to grow. And while there's been a fourfold increase in the overall awareness of LINZESS since we launched the DTC campaign, there is still a large majority of the patients who are unaware that LINZESS is available and how it may relieve their symptoms. This represents a significant opportunity to further drive awareness and subsequent patient demand.

We believe the OTC market represents the greatest potential in terms of further growth for LINZESS. It's important to note that over 65% of patients treated with LINZESS were previously treated with an OTC laxative and are now taking LINZESS, which demonstrates the willingness of physicians to choose LINZESS as their first-line prescription therapy.

We anticipate the entire category will grow with new treatments entering the IBS market, like Viberzi and Xifaxan, further increasing the awareness of the need for effective relief of abdominal pain and bowel dysfunction. As a branded market leader in IBS-C and chronic constipation, we believe LINZESS will benefit from the additional promotion and education in the space. And as an innovator in the category, we have the unique opportunity to work to improve the clinical performance of LINZESS and expand the utility of LINZESS to help a broader spectrum of appropriate patients.

Turning to our commercial capabilities, over the past few years we've built very strong capabilities within our commercial organization to support and establish a brand leadership position for LINZESS, which we will further leverage to promote two additional products. Cologuard, which we are currently copromoting with Exact Sciences, and Viberzi, which we will begin to co-promote with Allergan as soon as it is commercially available. Both of these innovative products should strengthen the effectiveness of our LINZESS selling efforts and further establish Ironwood as an emerging leader in the GI and primary care space.

We believe these products will drive incremental value to Ironwood with essentially no additional investment required. And, importantly, our sales force and the commercial team continue to have further capacity to market additional products, both externally acquired and internally developed, and that we believe will create and generate meaningful cash flow to the organization.

With that I will now turn it over to Mark to discuss the exciting progress we've made within our pipeline. Mark?

Thanks, Tom. We're generating a lot of momentum within our pipeline, leveraging our core expertise in GI and our vast experience in the area of guanylate cyclases that builds all our success in bringing LINZESS to the market. We achieved several important milestones during the second quarter.

I will spend the next few minutes highlighting four specific programs -- IW-1973, linaclotide 72 micrograms, linaclotide colonic relief, and IW-3718. I'll begin with sGC, as we just recently announced exciting new data from our first SEC clinical candidate, IW-1973. Now, I'd like to provide additional context.

The nitric oxide soluble guanylate cyclase cyclic GMP pathway is a fundamental regulator of blood flow, inflammation and fibrosis in human tissues throughout the body. It also plays a critical role in modulating pathophysiology across multiple diseases such as cardiovascular, fibrosis and muscular dystrophy, among others.

This area is rich in pharmacology. Nitroglycerin has been used as a vasodilator for over 130 years. And many other nitro donors have been used to stimulate soluble guanylate cyclase in a nonselective manner.

With the discovery of the class of molecules called soluble guanylate cyclase stimulators come additional opportunities to effectively regulate this pathway and to increase soluble guanylate cyclase activity by enhancing the endogenous effect of nitric oxide. We believe we have the opportunity with our broad library of sGC stimulators to develop multiple blockbuster drugs targeting severe cardiovascular and fibrotic diseases with large unmet needs. We are one of two innovators evaluating a broad range of potential indications for the sGC stimulator class, which has already been validated by an approved product for pulmonary hypertension.

As Peter mentioned, we recently announced exciting top-line data from our Phase I clinical study evaluating IW-1973. This is an important value-creating step forward for us. The distinct properties of IW-1973 that we have seen so far, both preclinically and now clinically, give us great confidence in our ability to expand the potential of the sGC stimulator class in cardiovascular and other serious diseases.

We expect to initiate a Phase Ib multiple ascending dose study of IW-1973 in the fourth quarter of 2015, and also expect to initiate a Phase I study with our second sGC stimulator, IW-1701, in the fourth quarter of 2015. As we continue to advance this robust platform we will prioritize our resources and capital to focus on therapeutic areas with the highest unmet need and speed to market.

Slide 13 highlights some encouraging preclinical data we have with our two leading compounds. These data demonstrated a high degree of tissue penetration of IW-1973 and IW-1701 across multiple organs, including the heart, lung, liver, and kidney compared to blood levels of these compounds. These data also show higher relative levels of our compounds in some tissues compared to what has been observed in this animal study with both riociguat and vericiguat, the other sGC stimulator compounds.

While early, these preclinical data are important because they demonstrate that our compounds can leave the vasculature and enter tissue, offering the potential to more directly affect tissue fibrosis and information, and potentially providing the opportunity for new products with distinct pharmacologic profiles in a range of serious life-threatening disorders.

Turning to our GI franchise, we and Allergan are collaborating on a comprehensive lifecycle management effort with linaclotide, seeking to develop a wide range of innovative potential treatment options that cover the full spectrum of patient needs within these large and heterogeneous populations. We completed enrollment ahead of schedule in the Phase III trial, assessing the efficacy and safety of a once-daily 72-microgram dose of linaclotide in adult patients with CIC.

Data from this trial are expected in the fourth quarter and an sNDA is expected to be submitted to the FDA in the first half of 2016. If approved, we believe the 72-microgram dose will accelerate the expansion of LINZESS use within adult CIC patients by providing physicians with an additional dose option for this diverse population.

We have also made great progress on our colonic release formulation and are ready to proceed with the Phase IIb clinical study in the fourth quarter of 2015. This study will be a dose ranging study that includes two formulations. The first formulation is designed to enhance the abdominal pain relief in IBS-C patients. And the second formulation is designed to enhance the abdominal pain relief associated with other GI disorders such as ulcerative colitis, diverticulitis and other forms of IBS. Data are expected in the second half of 2016.

And, finally, turning to IW-3718, we have completed development of a commercial-ready formulation for IW-3718 and are finalizing the design of the Phase IIb trial in refractory GERD. We expect to initiate the Phase IIb trial in early 2016. Additionally, our abstract detailing the full results for the Phase IIa study was accepted at the American College of Gastroenterology 2015 annual meeting being held in October.

With that, I'll now hand it over to Tom Graney to discuss our financial results for the quarter.

Thanks, Mark. I will be spending the last few minutes detailing some of the key financial highlights for the quarter. Please refer to our press release for the detailed financials.

Demand for LINZESS continues to be strong, resulting in approximately $112 million in net sales for the second quarter, growth of approximately 79% compared to the second quarter of 2014. The LINZESS brand collaboration in the US recorded $15 million in total net profit for the second quarter. As expected, commercial expenses were higher in the second quarter due to investments in the new DTC campaign.

In the second half, we expect continued prescription growth and lower commercial investments. This is expected to result in an increase in total net profit for the LINZESS brand compared to the first half of 2015. In the second quarter of 2015 we recorded approximately $24.3 million in collaboration revenue from Allergan compared to $1.8 million in the second quarter of 2014.

Now, turning to Ironwood's financial highlights for the quarter, revenue for the second quarter was approximately $27.7 million, made up of revenue from our collaboration with Allergan as well as additional collaboration, royalty and amortization revenue from our global partnerships. Cost of revenue in the second quarter was approximately $8.2 million.

The China Food and Drug Administration recently made regulatory changes to the approval process in China, which resulted in an extended timeline to commercialization for linaclotide. Additionally, Almirall lowered its inventory demand forecast in Europe. As a result of these two items, we wrote down approximately $5 million of existing linaclotide API, as well as approximately $3.2 million for excess future purchase commitments.

Moving to the balance sheet, in June we raised approximately $336 million in a convertible debt offering. This offering enables us to improve our capital structure, pursue strategic initiatives and support continued investment in (inaudible).

Including the convertible debt offering, we ended the second quarter with approximately $493 million in total cash and investments. We used approximately $26 million of cash for operations during the second quarter of 2015 as compared to approximately $36 million in the second quarter of 2014.

Before I turn it over to Q&A, I want to highlight some of the key points from today's call. First, LINZESS continues to generate strong profitable growth with significant opportunity to create meaningful value through at least 2031. Second, we are generating great momentum within our pipeline with multiple product candidates advancing an important catalyst expected in the coming months.

And, third, our commercial capabilities are proving to be invaluable for growing an important brand, LINZESS, and we are leveraging these capabilities to generate increased cash flows by promoting additional marketed products such as Viberzi and Cologuard. Together these three points underscore why we're confident in our growth prospects and ability to deliver enhanced value to our shareholders.

Thank you. And with that I'll hand it back to Jonathan to begin the Q&A portion of the call.

(Operator Instructions)

Catherine Hu, Bank of America.

Just two for me, one on LINZESS. Can you give any commentary about any notable changes in gross to net this quarter versus prior quarters, and more longer term how you're thinking about pricing strategy, especially with maybe competition coming in on the market over the next year or two. And then on the Allergan agreement, can you give us any additional details on that, any financial terms or performance metrics? And how long should we expect the agreement to last? Thanks.

Thanks, Catherine. This is Tom Graney. I'll take the first question on gross to net. As we've said in the past, we continue to measure ourselves and our operational performance on TRX growth in the brand. And as you heard, we had pretty significant growth compared to the prior year with 56% TRX growth year over year, which we're very pleased with.

We will continue, as we have in the past, to see fluctuations quarter to quarter, both in gross to net as well as wholesaler inventory levels. What I can say is the wholesaler inventory levels were remaining within the two- to three-week range that we expected. And in terms of future price strategy, I'll turn that over to Tom McCourt.

Catherine, on the price side, as you know, previously we've taken three price increases from 9% to 10%. It's something we constantly evaluate as far as the value proposition to the payer, as we go into ongoing negotiation with the payer. But we are in a really strong position in that we're still significantly underneath AMITIZA. And we have a fair bit of flexibility with regard to how we will evolve our pricing strategy over time to create additional value.

As far as the Allergan question, this is a two-year arrangement. We will be compensated through basically our calls as well as performance milestones. We're extremely excited about the opportunity to put these two products together in the bag.

It's a wonderful opportunity to have an innovative product like this. We think this is a very efficient call. It's going to be a high-impact call. And we think it's going to greatly benefit LINZESS as well as drive certainly incremental value for Viberzi.

Great. Thank you, guys.

Boris Peaker, Cowen.

I just want a question on DTC. I'm just curious, how do you measure the success of your DTC campaign? And how does the current campaign on that basis compare to the initial marketing campaign?

As you know, the initiation of the campaign, the first-generation campaign, was a highly effective campaign. We saw a strong inflection point off pre-DTC trends, somewhere between 20% and 25%. And as you know, DTC campaigns tend to tire over time. So, the real objective is how do we identify, connect and motivate more additional new patients to raise their hand to maintain the growth that we reset the slope of the curve? And we're definitely seeing that with the new campaign.

When we look at the overall performance, certainly the control is the pre-DTC trend and how we can maintain the new trajectory of the line. We've learned a lot from the previous campaign that we applied. We're clearly accessing and motivating a lot of additional new patients. And we're in the process right now of continuing to evolve that campaign to try to engage and motivate even a broader audience of patients.

Got you. And also I have a question in terms of breakdown of sales between IBS-C versus CIC. Could you give us at least a ballpark or how that's approximately broken out?

This is a really fuzzy line. As you know, this is a continuum of patients. There's no real clear line between chronic constipation and IBS. So when does chronic constipation end and IBS begin?

What we do know is physicians tend to focus on symptoms. And what they treat is patients that tend to have more constipation or more abdominal discomfort. So, it's really hard to draw the line.

Based on what we've seen in market research, the majority of the patients that we're currently getting are patients that are suffering from both abdominal and constipation symptoms, which is really the space we own in the marketplace. So, you really can't just look at the sales of 145 versus 290. That's roughly a 45 to 55 split -- 55% going to 145, about 45% of it going to the 290.

But I think the most important thing is physicians are choosing to treat a broader and broader population of patients, which we feel good about. We're growing certainly into the IBS market but we're also penetrating the chronic constipation market very nicely.

Great. My last question, I'm just curious -- similar to a prior question -- do you have a sense of what fraction of patients take the drug just episodically or just for a few days versus take it more consistently on a chronic basis?

Based on the market research we've done so far, the patients that respond well to therapy take it pretty religiously. We go back and look at the cohort of patients that we continue to follow, comparing those patients to Zelnorm and AMITIZA. And LINZESS-treated patients basically are running about 40% to 60% higher with regard to overall adherence compared to Zelnorm. So, it is chronic management of a chronic disease and patients continue to be quite persistent and quite satisfied with the treatment.

But do you have a specific breakdown in terms of at least percentage that are chronic versus maybe just episodic, at least ballpark?

That's really hard to measure. I think what we're seeing is primarily chronic disease, chronic management. I can't give you a specific number breakdown, but certainly that's what patients and physicians are reporting.

Great. Thank you very much for taking my questions.

Matthew Harrison, Morgan Stanley.

This is Cyrus calling in for Matthew. For this co-promote deal that you guys have, can you provide any indication of any offset that you're going to see to your sales force costs and how these could be handled?

This is actually a structured deal. We're clearly being compensated for what's equivalent to a second position call plus some performance milestones on top of that over two years. We feel that this is a very strong deal for us. I think it's a very strong deal for Allergan.

These products are going to fit together so well. And, really, the clear benefit of this whole thing is amplifying the need to treat abdominal pain, which is really the core differentiator for LINZESS, and really is going to allow us to strengthen our position in the marketplace.

Great. Thank you.

Derek Archila, Leerink Partners.

I just have two. First, when we think about the Viberzi and Cologuard deal, how much additional capacity do you have for additional products that reps could also detail? And then, second, could you characterize the China opportunity a little bit more? Is Astra going to have to run large-scale DTC to create awareness? And any peak sales projections would be helpful. Thanks.

I'll take the first one and then Peter will take the China question. With regard to Viberzi, the call that we're working on with Allergan right now is almost a galvanized call around basically abdominal pain and bowel habit improvement. And it's essentially one call. It's a very efficient, clear message that is quite efficient.

So, we think we have plenty of room in the bag to deliver that combined call in addition to Cologuard. Certainly as we look at other opportunities, we'll be able to move products around. And we still believe that we have significant capacity in the bag for additional products. And certainly we would, depending on the opportunity, certainly take a look at how would we evolve the selling resource itself?

And with respect to China, Derek -- this is Peter -- we have a very good collaboration on going with AstraZeneca. Astra is a very strong participant in the pharmaceutical markets in China. They are really one of the leaders there.

The collaboration just reported out very good Phase III data in the last quarter, hitting again all of the primary and secondary endpoints as we've seen now. That's our fifth Phase III trial where we've hit all the primaries and secondaries. And with a very good tolerability, our data, as well, as we've always seen with the drug. And in this case I think low single-digit diarrhea rates, as well.

So we're very pleased about that. The teams are working hard to get the application into the Chinese FDA and we'll wait eagerly for its review and approval.

With respect to the market opportunity there, there hasn't been any drugs yet indicated or approved for IBS. So, it will be an effort to grow awareness and to build awareness both on the physician side and the patient side in China.

Having said that, over the longer term we feel very good about the opportunity there. As you know, there are now over 700 million Chinese accessing the medical system, and with capacity to pay for medicines that can help benefit their lives. And that's continuing to grow. And the medical markets, the pharmaceutical markets are growing nicely in China.

And certainly the demographics suggest that the level of suffering and the amount of IBS and chronic constipation in China is quite similar to what we see here in the US. So, substantial opportunity, lots of opportunity to build a new category and grow awareness.

Great. Thanks, guys.

Gary Nachman, Goldman Sachs.

This is Divya Harikesh on behalf of Gary Nachman. I had a couple of questions. Number one, was there any stocking in the quarter at all? And, secondly, we touched on DTC previously but just curious to know, as we get into the second half, is it going to be a staggered kind of a campaign for DTC or is it going to be more [trudiya], as we think about the various inflection points in terms of prescription growth?

And, lastly, we recently saw Phase III CIC data from Synergy Pharma on plecanatide. Just your thoughts on it and potential impact to market dynamics. Thank you.

Hi, this is Tom Graney. I'll take the first question and Tom McCourt will take the second and third questions. In terms of stocking levels, we've seen pretty consistently over the last few quarters that wholesale inventory levels have remained in our target range of two to three weeks. And beyond that, we don't really have much else to say. Tom?

As far as DTC is concerned, we really study this as far as when to best invest. And we tend to follow what generally happens as far as market growth. We've mentioned in the past that there is some seasonality here in that the spring tends to accelerate, the summer tends to slow and then the fall accelerates again.

We wanted to be in the market strong, certainly in April and May and June, and we saw really good growth there. We pulled back the investment a bit over the summer. But we still continued to capture market share over the summer. As the market accelerates in the fall, we will push harder as far as our media in the back half to take advantage of that. I think we really like where we're lining up as far as how the year will end with regard to our current growth.

The second piece, the second question concerning plecanatide and Synergy and the data. I don't think we saw any surprises. As you know, they reported data on basically the increased number of bowel movements.

I think it's important to note that it's difficult to compare the data without any direct head-to-head trial, as well as it's a little hard to interpret because they really didn't report any of the secondary endpoints. But if you are going to compare, it's really important that you placebo address the data, adjust the data, so you're really, at least in part, comparing apples and apples as opposed to looking at absolute numbers.

That being said, we're in a very strong position in the marketplace as the market leader. We have very high satisfaction with physicians and patients, as well as a strong position in the payer. We also have an indication for both IBS as well as chronic constipation with two doses.

And we're continuing to raise the bar. Mark had mentioned earlier that we'll be launching a 72-microgram, so we'll have three separate doses for doctors to tailor therapy to patients. And also how do we continue to strengthen the performance of the drug with the colonic release that we believe will further improve our ability to relieve pain and improve the overall tolerability and clinical profile. So I think we're in a very good spot.

I think the one comment that I will make is with additional share of voice in the marketplace, it's going to grow the entire market. And as the market leader, the market leader generally benefits as long as you continue to raise the bar. And that's our intention.

Thank you very much.

David Maris, BMO Capital Markets.

This is Katie Brennan in for David Maris. Thank you for taking my question. I'm just curious, if you guys find success in the colonic release, do you see any possibility of cannibalizing some of the LINZESS population? And if not, why not? Thank you.

I think of course you will cannibalize some of that population. But the primary objective is how do you improve the overall clinical performance of the drug. The reason why patients seek care is because they have significant pain and we believe we can improve the actual pain relief that patients will experience, which obviously will penetrate the market deeper, but it's likely to increase adherence and compliance to therapy which obviously is going to accelerate the growth of the drug.

The other piece of the equation here is can we actually broaden the clinical utility of the drug into other indications in broader patient populations. For instance, other forms of IBS, chronic pain related to inflammatory bowel disease or diverticulitis could be areas that we could grow into if we can target the drug appropriately, improve the pain effect, and actually minimize any effect on bowel function. So, we're extremely excited about the opportunity that we see with the colonic release formulation.

Katie, it's Peter. If I can add just a couple of comments on the colonic release and the cannibalization question. I think this is a market that's so large and with so many patients suffering symptoms heterogeneously across the spectrum that there's plenty of room for multiple entrants with differentiated attributes in the category, and for them all to grow. We see that in really big categories.

You think back to the cholesterol category or the PPI category, multiple differentiated entrants grew, and grew the market, and took share. So, we feel good about that. And I would remind you that the colonic release would have intellectual property coverage at least an additional five years beyond the current LINZESS coverage that goes out to 2031. And because it's a minimally exposed compound with unique pharmacodynamics, it may be very challenging for a generic to come in behind it at any point.

Thank you.

(Operator Instructions)

Geoff Meacham, Barclays.

Congrats on the quarter. I also have a DTC question and a pipeline one. On DTC, clearly the focus is on new starts but I wanted to see if you guys would expect any impact on persistence rates either from what you have so far for the current DTC campaign or last year/ Or any trends you can give us for script demand coming from low to mid decile [trevor]?

I'll take the first question. Geoff, as far as what we're seeing with patient persistency, we're continuing to track. That's still a little early to interpret what we're seeing. But I think we would anticipate some growth over time with regard to the adherence of therapy. And certainly the early signs are clearly reminding people to fill their prescription.

So, there's certainly some positive impact with regard to the portion of the market that we're getting from refills, which continues to grow nicely -- actually faster than we are seeing with new Rx's, which is very encouraging. And I'm trying to remember the second question.

Question about expanding use to lower deciles.

Oh, lower decile positions. As you know, we are now at 140,000 physicians that have written a prescription. We have a fairly sizable population of very high prescribers.

And there appears to be a tipping point with some of the lower prescribers that seem to be accelerating nicely. And part of that, I think, is with ongoing experience and satisfaction with the therapy. But I think the other piece is clearly the patients coming in and asking for the drug, which is really pushing the lower decile docs to try or expand their use.

Geoff, you had a pipeline question, as well?

On the (technical difficulty) proof-of-concept studies in larger indications like cardiovascular. How do you all think about the development path and balancing spend with commercial opportunities?

Hi, Geoff, this is Mark. First, we're really excited about this opportunity. We think, as we indicated, the soluble guanylate cyclase stimulator and particularly our molecules 1973 and 1701 have very unique opportunities for relative to where we are. We've seen already proof of mechanism and pharmacodynamic activity, and starting to understand the doses that we would potentially move forward with. So, all quite positive data from the Phase 1 single dose.

Relative to the indications, as we indicated, we'll prioritize both strength of what we think the rationale, the clinical rationale and the preclinical data supporting that rationale, in the unmet need and then speed to market. We haven't provided yet where we intend to go yet on our first proof of concept. Obviously with a very large competitor with Bayer and Merck and their collaboration, we're using the time right now to really determine where we can best compete and also keep that kind of information at this particular time confidential.

Okay. Thanks.

Anupam Rama, JPMorgan.

This is Eric Joseph in for Anupam. Just a first question on LINZESS. We saw recently that AMITIZA was excluded from the CVS Caremark formulary list for 2016. Just wondering what you're expecting in terms of any incremental impact to the LINZESS business, whether you're expecting any shifts in replacement coverage.

And just a pipeline question on 3718 in the Phase IIb there starting next year, wondering if you can give any color on how you're thinking about the size of that trial, the target population and potential endpoints in the study. Thanks.

First of all, thanks for acknowledging our recent win with CVS. It's a big one, a real big one, that we're very encouraged by. It's something the team has been working on for quite some time. The team came to terms with CVS. To be one of one on the formulary puts us in a very good position in a big market.

We're bullish on what that can do for us. It was in markets where we were struggling a bit because of the restriction limitations we had with CVS. But it's a big win.

We've also had several other Blue Cross Blue Shield wins across the upper Midwest as well as Texas and Oklahoma, which, again, are very sizable, somewhat underperforming markets because of our payer access which now will open up. So, I think we're excited about the opportunity and we're certainly going to take full advantage of it. Mark, do you want to take the 3718?

Yes. What we saw with our IIa data that we released earlier this year that we were quite excited about really has guided us into the refractory GERD population. Certainly we've been looking at where we think the drug performed best relative to the patient population that we looked at across the patient that had bile acid reflux and also overall reflux. So, it will be, we think, targeted to very active refluxing refractory GERD patients, would be the first part of that.

Relative to the size of the trial, again, I think it's a little early for us to give out that kind of indication, but it's normal. There's nothing, I don't think, will be too surprising. It's a IIb dose-ranging study and, again, using endpoints that have been previously validated. So, I think it's a normal range of a IIb for symptomatic study.

And the endpoints, these are the GERD endpoints, we think, that we will utilize based on our positive data from the IIa -- heartburn-free days, heartburn symptoms. Those are the types of things that we saw very positive effects on and we expect to utilize in our IIb.

Great. Thanks.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Peter Hecht for any further remarks.

Thank you, Jonathan. Thank you for your help on the call. Thanks to the Ironwood team for your hard work and excellent performance in the quarter. And thanks to all of you for your time and attention on the call. We'll be around this evening and tomorrow. If you have any further questions or suggestions for us please reach out to Meredith and we'll set something up. Thanks again and have a great evening.

Thank you. And thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.