Ironwood Pharmaceuticals Inc (IRWD) 2019 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Ironwood Pharmaceuticals Fourth Quarter and Full Year 2019 Investor Update Conference Call. (Operator Instructions)

I would now like to hand the conference over to your speaker, Meredith Kaya. Ma'am, please go ahead.

Good morning, and thanks for joining us for our fourth quarter and full year 2019 investor update. Our press release crossed the wire this morning 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 September 30, 2019, 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. Also included are non-GAAP financial measures, which should be considered only as a supplement to and not a substitute for or superior to GAAP measures. To the extent applicable, please refer to the tables at the end of our press release for reconciliations of these measures to the most directly comparable GAAP measures.

During today's call, Mark Mallon will begin with an overview of the year; Tom McCourt will highlight our progress across our GI portfolio; Mike Shetzline will provide additional detail around our upcoming Phase II data readout for MD-7246; and Gina Consylman will close by discussing our fourth quarter and full year 2019 financial results and 2020 financial guidance.

We will be referring to slides via the webcast. For those of you dialing in, please go to the Events section of our website to access the webcast slides.

With that, I'll turn the call over to Mark.

Thanks, Meredith, and thanks to everyone for joining today. 2019 was a transformative year for Ironwood, and we are excited to share our full results with you. In April 2019, Ironwood was launched as a newly focused company with a clear vision: to become the leader in U.S. GI health care. The GI landscape represents an area of large unmet need, one where we believe we could have a real impact for patients. There are 70 million Americans suffering from GI diseases. That's 1 in every 5 people. Grounded in innovation with the demonstrated knowledge, expertise and capabilities to build blockbuster GI brands, Ironwood is dedicated to advancing the treatment of GI diseases and redefining the standard of care for these patients.

In order to achieve our vision, we set out 3 strategic priorities: drive LINZESS growth, advance our late-stage pipeline and deliver sustainable profits. We're in the early stages of executing against each of these, with substantial progress in 2019, positioning us well for 2020 and beyond. I'd like to hit on a few of our 2019 highlights and then pass it on to the team to talk in more detail.

First, LINZESS. LINZESS is now the #1 prescribed product in the U.S. for adults with IBS-C or chronic idiopathic constipation, having crossed that important threshold in the latter half of 2019. These results were driven by acceleration in prescription demand growth, up 14% in 2019 compared to 13% growth in 2018. Importantly, just in these past 6 weeks, we've entered into settlement agreements that resolved the outstanding LINZESS patent litigation with the earliest license generic entry for the 145- and 290-microgram doses in March of 2029. We are looking forward to working with our partner to continue to grow LINZESS franchise for many years to come. And as a reminder, we also have U.S. patent applications pending, covering the commercial formulation of the 72-microgram dose, which if granted, will expire as late as '30, '31.

Now turning to our GI pipeline. Last May, we initiated a Phase II study with 7246 in abdominal pain associated with IBS-D, and we are on track for a data readout midyear. We are initially exploring 7246 in IBS-D, but we believe it has the potential to become a non-opioid abdominal pain-relieving agent for a number of GI diseases. Additionally, our 2 Phase III pivotal trials for 3718 in refractory GERD continue to enroll patients, with data targeted in the second half of 2020. If approved, 3718 would be the first new medical innovation for the treatment of reflux disease in 3 decades. This is since the launch of the PPIs, and could be the first prescription option approved to improve regurgitation.

Lastly, we've significantly strengthened our financial profile. For the first time in Ironwood's history, we reported full year profitability, both on GAAP and non-GAAP basis. Through a number of important actions taken post separation, we've improved our capital structure, strengthened our commercial capabilities and are running a more efficient business.

We expect 2020 to be another pivotal year with multiple catalysts that we believe will position us for long-term value creation. We will be unwavering in our efforts to drive LINZESS growth. We are more confident than ever that LINZESS is a durable asset that we expect to continue to grow for many years to come. We are thoughtfully and urgently advancing our late-stage pipeline towards 2 important data readouts this year, each of which will help define our path forward. And lastly, we're focused on profitability, positioning Ironwood to become a strong cash flow-generating business.

We are a very different company today than we were a year ago. We believe that much of our future growth will come from our existing GI portfolio, as shown on this slide. LINZESS is already on track to become a $1 billion-plus drug. If you add to that 3718 and 7246, which we believe could be 2 equally sized opportunities if approved, there's tremendous growth potential beyond 2020.

With that said, we continue to stay well informed on the broader GI landscape and are seeking GI opportunities that would fit well within our GI-focused approach and are aligned with our objectives to advance care for patients and create value for shareholders. We continue to have a high bar in terms of these types of opportunities -- or the types of opportunities we would pursue. We do not intend to move forward with assets that would compromise LINZESS growth, limit our ability to invest in our portfolio or deliver profits.

Before I turn it over to Tom, I'd like to close by saying that I am very proud of what the team has accomplished in such a short time. I'm also inspired by the millions of GI patients in need of new treatment options and more confident than ever in the opportunities we have in front of us at Ironwood.

With that, I'll turn it over to Tom.

Thanks, Mark. Our commercial performance in 2019 was headlined by the continued growth of LINZESS. LINZESS prescription demand increased 13% year-over-year during the first -- fourth quarter of 2019, and as Mark mentioned, 14% for the full year. The strong underlying demand resulted in net sales of $231 million and $803 million, respectively. For a brand in its eighth year on the market, we are very pleased with the growth we continue to see and the attributes -- and attribute this to a variety of factors, including: the impact of withdrawal prescription, MiraLAX, in the market; our positive Phase IIIb data demonstrating that LINZESS improves overall abdominal symptoms of bloating, pain and discomfort; the continued impact of our DTC campaigns; and the tens of millions of patients who continue to suffer.

In 2019, LINZESS achieved a significant milestone and became the #1 prescribed product for IBS-C and chronic constipation. As you can see on this slide, LINZESS, which generated approximately 300,000 prescriptions per month at the end of 2019, exceeding lactulose, the leading generic IBS-C and chronic constipation prescription treatment. The growth in net sales, combined with focused investment behind the brand, has generated substantial profits for Ironwood. In 2019, total LINZESS profitability, including both commercial and R&D expenses, was $514 million, translating to over $250 million to Ironwood.

We believe we will continue to realize growth from the withdrawal prescription, MiraLAX, as physicians continue to choose LINZESS for more and more of their IBS-C and chronic constipation patients. Additionally, our new DTC campaign is expected to launch this spring, leveraging the opportunity to communicate with consumers about the overall abdominal symptoms associated with IBS-C.

We have seen a demand inflection every time we launched a new campaign including 2019, which was our most successful campaign to date. We expect this trend to continue as our quantitative market research suggests that the 2020 campaign could be as strong, if not stronger. 2020 is positioned to be another strong year for LINZESS. We do expect to see the typical seasonality in the first quarter primarily due to the changing health plans, resets in annual deductibles and the increased number of Americans using high deductible health plans. We also tend to see a decrease in channel during the first quarter, both of which can impact net sales. The seasonality tends to stabilize in the second quarter, with volume accelerating later in the year.

Turning to our partnership with Alnylam. GIVLAARI was launched late in the fourth quarter, and we are encouraged by the initial feedback we're hearing from the field. Physicians are highly engaged, increasing the time that our field reps are getting with them, and physicians are already identifying potential patients.

Now our pipeline, beginning with 3718. There is an estimated 8 million to 10 million patients in the U.S. who are suffering from refractory GERD despite being on standard care PPIs. Many of these patients are taking multiple drugs to treat their symptoms each and every day, including doubling their PPI dose, adding H2s and supplementing with antacids and are still suffering from significant reflux and regurgitation 3 to 5 times a week on average. As evidence suggests, the reason many of these patients continue to suffer, because even though they're taking PPIs, which is eliminating the stomach acid, they may actually be refluxing bile into the esophagus.

3718 is a gastric retentive bile acid sequestering agent, which we believe represents an opportunity to redefine standard of care for these patients. Our pivotal Phase III program is designed to evaluate the safety and efficacy of 3718 plus a PPI on refractory GERD in 2 identical trials. The trials were more than halfway enrolled by the end of 2019, and we're seeing a nice uptake in screening in 2020 so far. We continue to target top line data from the program in the second half of 2020.

Now 7246. There's approximately 50 million Americans suffering from some form of lower GI pain. We and Allergan are evaluating abdominal pain associated with IBS-C through a Phase IIb -- through a Phase II study and expect top line data in mid-2020. With 16 million Americans suffering from IBS-D and current treatment options often failing to provide adequate relief of abdominal pain, there is a clear unmet medical need that we can fill.

With that, I'm going to ask Mike to talk in more detail about the upcoming results of the 7246 study.

Thanks, Tom. Our current data demonstrates that 7246 has a fundamentally different clinical profile from (inaudible), as we believe it can relieve abdominal pain associated with certain GI diseases without impacting bowel function. This is very important as prior to this, many in the clinical community believe any abdominal main benefit in IBS was solely related to improved bowel function.

7246 is designed to be released in the colon, further down the GI track than LINZESS, and where we believe abdominal pain originates. It also bypasses small intestine, where we believe the impact on fluid secretion occurs, thereby limiting the effect on bowel function. This hypothesis was originally demonstrated in our previous proof-of-concept Phase II IBS-C trial with 7246. In that study, we demonstrated that the effect of 7246 on abdominal pain relief was the same as LINZESS, but with no appreciable effect on bowel function. Remember that these were IBS-C patients, so even though they remained highly constipated, they still had a meaningful reduction in their pain relief.

In the current Phase II trial in IBS-D, we're seeking to answer 2 important questions. First, does 7246 show abdominal pain relief in this patient population? We're using a similar abdominal pain responder end point that we used in our previous LINZESS and 7246 trials, defined as at least a 30% reduction in abdominal pain from baseline. In this study, we hope to see an effect in a similar range of what we saw in the previous trial of LINZESS and 7246.

Second, does 7246 had an impact on bowel function? As I just mentioned in the Phase II IBS-C study with 7246, we saw a clinically insignificant effect on bowel function. We'll be looking to see if these data are replicated in the IBS-D population. We're exploring 3 doses of 7246 in this trial, 300, 600 and 1,200 micrograms versus placebo. The highest dose is 4x that of LINZESS and the 7246 dose used in the IBS-C study. We're studying the higher doses in particular to evaluate the degree of abdominal pain relief that can be achieved for these patients. We're finishing up dosing and look forward to reporting the top line results midyear.

I'll now turn it over to Gina to discuss our financial results.

Thanks, Mike. 2019 was an incredibly strong year, the strongest since I've been here, particularly as it relates to our financials. We delivered robust revenues and profitability in 2019, exceeding our external guidance.

After separating Cyclerion from Ironwood, we took several additional actions in 2019 that we believe better position us for future success and profitability. These actions included restructuring our debt, which lowers our cash interest expense over the next few years; moving our headquarters to Boston; restructuring our ex U.S. linaclotide agreements; and securing the new partnership with Alnylam. As a result, in the 3 quarters following the separation, and for the full year 2019, we were profitable on a GAAP and a non-GAAP basis. Over the next few minutes, I will highlight some of the progress we made in both the fourth quarter and full year and share our full 2020 financial guidance. Please refer to our press release for additional details.

Revenues in the fourth quarter were $126 million, driven by $106 million in collaboration revenue and $21 million in sales of linaclotide API. LINZESS commercial margin was 81% in the fourth quarter, contributing to our growth in collaboration revenue. The year-over-year expansion in commercial margin in the fourth quarter was primarily driven by the timing impact of the collaboration expenses and higher revenue.

Turning to the full year. Ironwood revenues were $428 million, which included $42 million in license and milestone revenue resulting from our amended ex U.S. linaclotide agreements recorded in the third quarter. With the amended ex U.S. agreements, we are no longer responsible for the supply of linaclotide API, and as a result, our revenue from API sales is expected to decline to approximately $5 million in 2020 as we ship final batches to our partners.

R&D expenses were $27 million and $115 million in the fourth quarter and full year. We plan to continue to invest significantly in R&D in 2020, as we continue to advance our ongoing clinical studies. SG&A expenses were $39 million and $172 million in the fourth quarter and full year. The decrease in SG&A compared to 2018 is primarily due to the termination of the lesinurad license agreement and the cost optimization actions implemented during the year. Interest expense was $7 million and $37 million in the fourth quarter and full year. In connection with the debt restructuring last August, we now expect our cash interest expense in 2020 to decrease by approximately $9 million year-over-year.

With that said, due to the equity component of our convertible debt, total cash and noncash interest expense are expected to be similar to total interest expense recorded in 2019.

Lastly, we delivered both GAAP and non-GAAP profitability for the fourth quarter and full year. GAAP net income from continuing operations was $48 million for the fourth quarter and $59 million for the full year. Adjusted EBITDA from continuing operations was $55 million in the fourth quarter. The fourth quarter is typically our strongest LINZESS collaboration revenue quarter. This, combined with the timing impact of the collaboration expenses and API sales, resulted in a strong finish to the year. We do not expect this to be a run rate for 2020 as quarterly profitability will fluctuate.

Adjusted EBITDA from continuing operations was $148 million for the full year. One important reminder is that even though we are now profitable, we have over $1 billion in NOLs as of year-end and expect them to offset tax liabilities for the next few years.

Turning to our 2020 financial guidance. In 2020, Ironwood expects U.S. LINZESS year-over-year net sales growth in the mid-single-digit percent range, driven by continued growth in volume demand and stable net price, which we consider to be plus or minus a few percent. We also expect total Ironwood revenue to be in the range of $360 million to $380 million. We anticipate continued year-over-year growth in collaborative arrangements revenue in 2020 due to the expected strong demand for LINZESS. Thirdly, we expect adjusted EBITDA to be greater than $105 million in 2020. As a reminder, 2019 total revenue and adjusted EBITDA from continuing operations included the $42 million in the ex U.S. license and milestone revenue and the sales of API.

As you can see, 2019 was a great year for Ironwood, and we are positioned for near- and long-term value creation. Our transition to profitability puts us in a strong position to invest thoughtfully into growing our business, and our capital allocation strategy is aligned with our strategic priorities. As Mark commented on earlier, we expect to continue to invest in the advancement of our GI portfolio. This is our highest priority and where we believe we can create the most value today.

We are also focused on delivering sustainable profits over time, which is a critical threshold for any investment decision we make. This enables us to continue to invest thoughtfully into our portfolio and pay down our existing debt. We expect to settle the remaining portion of our 2022 convertible notes in cash and given our current projections over the next several years, believe we will have the option to settle our 2024 and '26 notes in cash as well.

Lastly, we are balancing our investments into our business in a way that allows us the financial flexibility to pursue external opportunities when we find something that meets the disciplined criteria that we have done.

With that, I'll now turn it back over to Mark for some closing comments before Q&A.

Thanks, Gina. I want to take a moment to recognize the team members at Ironwood, who worked tirelessly and remain focused throughout the year to deliver these outstanding results. 2019 was a year full of favorable change for Ironwood. We delivered on LINZESS growth, completed the separation, relocated our headquarters and embarked on our vision to create a leading GI-focused company in the U.S.

We're off to a great start and have put the company on the right path for long-term value creation. With that said, we understand that there is more to do to achieve our goals. We must continue to focus on executing across all areas of the business, driving LINZESS growth, advancing our late-stage pipeline and delivering sustainable profits. We have an exciting year ahead, full of important catalysts to continue the momentum we gained through 2019.

And so I'll close by saying thanks for joining us this morning, and we look forward to your questions. Operator, we can open the line for questions.

(Operator Instructions) And your first question comes from Jacob Hughes with Wells Fargo.

My first question is, in your view, what are the upside factors to your sales guidance? I mean can pricing be better than the stable commentary you provided earlier this year? And then secondly, has there been any changes with AbbVie? And could LINZESS ultimately come back to Ireland -- or Ironwood without a partner?

So let me take the second question, Jacob, and I'll ask Tom to comment on the first one. So we've had limited interactions with AbbVie at this point, as we've talked about before. They're focused fully, as you would expect, on closing the transaction with Allergan. The Allergan team has stayed really strongly engaged and continue to work with us to drive LINZESS growth. We're looking forward to working with AbbVie in the future. They've got great commercial capabilities to build on the success that we've had with Allergan.

I've said in the past also that we remain open to options to really drive value to shareholders. So that hasn't changed, and we'll continue to be open to other -- sort of a full range of options that they really could make a big difference for the shareholders. So I think that's what we can say right now about AbbVie, like everyone else, to hear that the transaction closed so that we can start to engage with them fully.

I would say that in the limited interactions we've had with them, they've all been positive. I think they certainly see LINZESS as one of the important products as part of the Allergan portfolio. So we're excited to work with them. Tom, do you want to talk about opportunities for upside?

Yes. On the price specifically, first of all, I think it's important to recognize, the brand is in a very, very healthy spot right now. When you look at the momentum that we're coming out of in 2019 with, certainly, the volume of patients out there are still underserved. We continue to see very steady strong growth that's really founded on a high level of patient satisfaction as well as a need for more effective therapy.

That being said, obviously price plays a significant role and payer access is one of the core foundations for this near-term and long-term success. Certainly, as everybody else in the industry, there's certainly pricing pressure here. Last year was a somewhat atypical year where there was a number of factors that really affected some price erosion. As we look at this upcoming year, we see that, as we mentioned, stabilizing. So last year, we lost about 8%, 9% in price. We don't see that happening this year from what we can see so far.

So hey, we're optimistic. We think we have a very strong value proposition for the payer. But we have to make some decisions on some of the payer contracts, which we did, which obviously will maintain the stability in the price, but it may affect some of our volume. But I think overall, I think the brand is very healthy. I think we see nothing but upside growth as we move forward.

I would just say -- thanks, Tom. I think that's right. Just to come back to the question about upside opportunities. The large market of people suffering from IBS-C and chronic constipation are not satisfied. We've shown that as we continue to add to what we do, particularly with the consumer space, that we can really accelerate growth

And so that's where I would see really the biggest opportunity is continue to leverage and expand what we're doing with consumers. And of course, we're still very early into communication of the abdominal symptom data, which our market research has shown to be highly impactful to physicians and patients. So definitely, things to keep driving growth.

And our next question comes from Eric Joseph with JPMorgan.

Maybe just a further question on the mid-single-digit growth guidance for LINZESS. Just to clarify, does that anticipate added demand from the abdominal symptoms claims? And if not, how are you and Allergan assessing their impact to the brand? I guess are there certain growth targets that you've put in place to measure the impact of abdominal symptom claims? And then secondly on commercial margin, if I heard correctly, Gina, you said that we shouldn't use fourth quarter '19 as the run rate for 2020. How should we be thinking about commercial spend for the brand directionally relative to 2019, considering that it looks favorable to 2018 and also kind of heading into the revised DTC effort?

Sure. Eric, this is Gina. I'll take the second part of your question first, and then probably turn it over to Tom. So on the commercial margin, you're right, 81% for the fourth quarter. So it's really nice to see. It was just a combination of the fourth quarter is typically our strongest quarter for LINZESS revenue. So we, again, saw higher revenue in Q4. And then this time around, it was coupled with just lower level of expenses during the fourth quarter as well. So we saw some of our expenses related to a personal promotion earlier in the year rather than in Q4. So that's the timing comment.

So with that said, we do expect margins to continue to grow over time, but they will fluctuate quarter-to-quarter. And for instance, Q1, we typically see some seasonality impact where we'll see lower level of revenue. But we expect to continue to see a higher level of expense in Q1 versus Q4. So our overall level of expense behind the brand, we're fully committed to supporting the brand. We have locked in that plan with Allergan for 2020 and expect roughly the same amount of expense in 2020 versus 2019.

I mean as far as what we think the impact of the additional abdominal symptoms that will be as far as the upside, I think it's important to first note that we have been on a very strong linear growth curve since launch. And in order to maintain that, we constantly got to be able to identify and activate new sources of business, which is what we've done throughout the life cycle of the product, with regard to the expansion of our claims, the addition of the 72-microgram dose, et cetera.

I mean this, again, is a further extension of the overall strategy in that what we know about this marketplace is most patients do not identify with abdominal pain. They identify more with bloating and discomfort. So we believe that by educating through our DTC campaign, we can get more patients to raise their hand and ask for help. In addition, these claims also broaden the physician's view of who the appropriate patient is.

And we certainly see upside that we did build into the forecast. But obviously, we're optimistic as far as what we'll see and we'll continue to optimize our promotional mix to try to accelerate the ongoing growth of the brand.

Tom, would you expect to see their impact reside with an expanded uptake for one of the dose levels, perhaps expansion of the 72-microgram dose formulation?

Yes. I think this -- obviously, the focus of the label change was really in the IBS-like patients, which is the 290 and the 140 -- 290 particularly. But we also know that a lot of physicians will use lower doses for these patients. So I think we're going to -- we could very well see growth across all doses as we move forward. But again, I think until we get into the marketplace and really start pulling the levers, all the levers on communication to both patients and physicians, we're not going to see the full impact of what this additional claim will provide.

And your next question comes from Raghuram Selvaraju with H.C. Wainwright.

This is Edward Marks on for Ram. I noticed in the JPMorgan presentation, you had mentioned that there were multiple efforts to support enrollment for the 3718 Phase III trial. I was just wondering what those multiple efforts were and whether you could provide some guidance as to how confident you are that top line data can still be produced in the second half of this year.

Mike?

Yes. Yes, certainly. So the 3718 trial, as you know, is a fairly robust, large Phase III program with over 1,300 patients. And the patients to be enrolled have to go through a lot of steps, including invasive procedures like the [Bravo]. So we did recognize early that that enrollment in that trial would be challenging. We have kept abreast of that on a very regular basis and continue to, to your point and the point of your question, adapt and mitigate enrollment to make sure we achieve the desired goal, which is the top line data at the end of 2020.

Some of those efforts actually include enhanced central recruiting. We're looking at even newer opportunities, not just using a traditional method where we use the Internet, or ways to outreach to increase screening. We're actually taking a deeper dive into that using some newer technologies to actually try to target the phenotype of patients that will deliver the patient we need to be enrolled. And that's a step-up above traditional screening efforts that central recruiting metrics have traditionally done.

We've also just worked more closely with the site. We and then Mark's leadership team are actually visiting sites. We're very engaged with the principal investigators and trying to make sure we do everything we can to facilitate their activity in the clinical study, so we can make sure that they're able to deliver the patients that they have in screening because, as you know, some of these invasive procedures then require a little more time at the site to go through that. And so we're working very closely with the sites to improve that and facilitate that pass-through so that the screened patients become enrolled.

And Mike, just to be clear, I think we have great confidence that we can deliver the study by the end of the year. I mean everything looks like -- as we mentioned earlier, we've actually seen an uptick in the screening rates, which has been very encouraging with these rather innovative approaches that we've been leveraging.

Okay. Great. And then as much as you can provide guidance, I was wondering what the projected 2020 royalties might be from AZ's work in China and Astellas' work in Japan.

Yes. Gina, go ahead.

Yes. I'll try and take that from both sides. So I'm going to start with Astellas. If you recall, the Astellas royalties are -- they start in the mid-single digits and they escalate to the low double digits. Astellas recently reported their revenues for the 9 months ended 12/31/19, and it's approximately $40 million in sales. So I think you can do the calculation and then the math, hopefully.

On the AstraZeneca side in China, we haven't called out a specific amount of royalties within our guidance, but we would expect it to be rather modest in 2020, and that's just because they've only launched and they are seeking reimbursement in 2020. We don't expect that until later in 2020. So right now, we have very modest expectations for 2020.

And your next question comes from Patrick Trucchio with Berenberg Capital.

Just first question, just regarding 7246 and the top -- Phase II top line data expected midyear. The expectation is to see a similar improvement in pain as the prior Phase II trial. During this trial, the highest dose is 4x the dose evaluating the IBS-D trial. So I'm wondering what magnitude of pain relief from baseline should we anticipate and if there are any dose-limiting side effects we should be concerned about, particularly at the high dose in the Phase II trial that's expected midyear this year.

Go ahead, Mike.

Yes. Thanks for that. It's a very good opportunity to clarify some of those important points around 7246. So as you mentioned, the dose we're taking into the IBS-D trial now is at 3 to 4x the doses that we've used in the Phase II. We're actually very confident in the safety profile for 2 important reasons.

Number one, as we know from the Phase II in the IBS-C patient population that we really didn't see any dose-limiting side effects in that dose range. Now to your point, that was up to 300 micrograms. But we have tested up to 3 grams or 3,000 micrograms in other studies, including healthy volunteer studies, and we didn't see any dose-limiting side effects, including around diarrhea. In fact, no healthy volunteers actually reported diarrhea in healthy volunteer study.

So again, this is a new patient population of IBS-D. But based on the mechanisms of action and what we know about the distal and the more colonic delivery for 7246, we're fairly confident in the safety profile. Again, the IBS-D trial is ongoing, so the data is blinded. But I can tell you, in a blinded fashion, that we've seen no unexpected safety concerns, and it's been fairly well tolerated. So we're fairly confident in the safety profile to date. However, that will obviously become much clearer when we see the data mid of this year.

That's helpful. And then just secondly, regarding the commercial collaboration with Alnylam. Can you discuss more specifically Ironwood's contribution to the commercial launch of GIVLAARI in terms of what proportion of patients that you believe Ironwood could help Alnylam discover? And then secondly, can you tell us what data Ironwood has that could be helpful for other rare liver disease commercial launches? And should we expect GIVLAARI agreement to be the first of more to come?

So I'm going to have Tom answer that question, but just one last comment on 7246. So Mike, I think you covered it, of course, our view on the safety profile. Well, I just want to add that when you talk about seeing the pain effect in that Phase II study, obviously, that's something that -- there could be a possibility of getting even better results with the higher doses. We've not really been able to explore the dose response beyond 300 micrograms because of the risk of diarrhea. So this is why we're doing the study, is to learn what might be possible going beyond that. But we certainly see the starting point based on the data we have already is exciting in terms of pain relief.

Yes. As far as our role working with Alnylam, I mean our primary objective is to educate gastroenterologists and really key primary care docs about the disease, and it's certainly about GIVLAARI. This is -- it's a great fit for us because really, the cardinal symptom that these people suffer from is pretty severe lower abdominal pain. And one of the things we do know is many of these patients are confused with IBS patients.

So to have the opportunity to have a sales force as large as ours and as effective as ours within the GI community is, I think, going to be a very powerful tool. And what we do know about these patients, really, all of them, at some point, consult with a gastroenterologist. The early signals we're seeing so far is very encouraging. We've begun to identify a number of patients that could likely be candidates for GIVLAARI.

And then as the mechanics work, we -- now once we identify those patients, we hand them off to Alnylam who really kind of pull through all the mechanics with regard to reimbursement and getting drug to patient. So far, the mechanics have worked well. The collaboration and communication is very effective.

I think this is a great learning, as you mentioned, for us in this space to understand what does it take to be successful with an orphan disease in the GI hepatology arena. And I think it's something we're going to continue to explore. Mark mentioned that we have looked at a number of other GI-related diseases, including rare diseases in which there's clearly some opportunities with regard to an emerging science. So I think we're very encouraged by what we've seen so far with GIVLAARI. We're going to learn a lot. And I think there's a lot of possibilities coming out of this experience.

I mean I'll just quickly add, and I think that there are 2 core capabilities that we have that are going to be particularly helpful with this partnership as well as if there are future opportunities in rare diseases. So one is, of course, the ability to work with the physicians and office staff to identify patients on the ground. These are obviously difficult patients to necessarily find. There's a lot of testing involved. So having the relationships, really strong and deep relationships with the physicians and, in particular, their office staff is, I think, a critical success factor, and we really have that in place.

And then the second thing is being able to sort of use advanced analytics and databases to help practices use the data that they have to identify these patients. And we've been applying some of those techniques already, certainly in how we've been looking to accelerate the enrollment for the 3718, but also in identifying patients to -- within practices for LINZESS. So I think this will just further strengthen those core capabilities.

And your next question comes from Boris Peaker with Cowen.

Maybe just more on 7246. Can you comment on the time line that if you have a positive Phase II readout midyear this year, what's the time line to actually doing a pivotal study? What size of study would you need to do? And when can this ultimately be on the label if all the studies are successful?

Yes. So thanks. We're -- again, we're committed to top line data for 7246, the Phase II study mid this year, okay? We actually think that study is fairly robust as a Phase II trial. So we do recognize we'll need to consult with the agency for the formal design of the Phase III program, and we will institute a rapid end of Phase II meeting with the FDA during the latter half of this year, pending the results of 7246 trial to put that in place.

We're certainly hopeful to start that Phase III program as soon as possible and as early as the beginning of next year, hopefully. And if things go even better, maybe we could do it sooner, but we're pushing to at least do that by early 2021.

In terms of the time line you're asking and when it could be commercially available, that obviously will rest in the end of Phase II meeting, the sample size we need for the pivotal program, whether we need to do 1 or 2 IBS-D studies because we do think we have an opportunity just to do 1 IBS-D study given the breadth and size of the Phase II program and also our desire to do other sort of relevant indications, which we think could be supportive to an IBS-D submission. And so they are the details that make that sort of final determination a little premature right now. But I do think we're committed to starting that Phase II program as soon as possible.

Boris, I think that it's really important to understand, as I look at the potential of this brand, this is a pain drug. And we think we've -- as we've mentioned, we've isolated the pain effect from the effect [that bowel have], which has obviously allowed us to push the dose and optimize the dose. But we see this as a complete different brand. I think this is -- we do not see this as a line extension of LINZESS.

We want to be able to enter the market purely as a pain drug. IBS-D is likely to be the first indication that we'll have as far as its demonstration of pain, but then we see ourselves going well beyond that into all -- probably all forms of IBS as well as other GI diseases, where there's a significant lower abdominal pain symptom. So this -- the data that's coming out of here could really open up a real opportunity for us. But I think it is important to say it's going to be important for us to really rebrand this and position this in a unique spot in the marketplace.

Got you. I'm just curious, given the fact that you also saw this pain reduction, as you mentioned, the pain drug. Do you have any sense of any docs who are currently using this essentially to do exactly that to control lower GI pain?

Yes. I think the one challenge -- first of all, yes, but that's generally in disorders that include constipation. Because one of the limitations of the current immediate-release formulation, as we push the dose, you're going to increase the prosecretory effect of the drug and increase the risk of diarrhea. But we also see a very clear dose-ranging effect on the relief of pain. So yes, it's getting very broad application. Yes, most docs -- I think almost all docs see this as a pain drug that's differentiated from other treatments. But it also does affect bowel function.

(Operator Instructions) Our next question comes from David Lebowitz with Morgan Stanley.

To expand off the last question, when you look forward to potentially marketing a drug like 7246, how would you compare that? What would be needed to be done for that experience to how the evolution of the LINZESS launch went?

Sure. This is Tom. Thanks, Mark. We learned an awful lot. LINZESS was a tremendous success, and we're delighted. We've learned a lot about how to commercialize the product, what the marketing mix should look like and the marketing mix over time. I think what we've learned is, these are largely going to be the same prescribers as we saw with LINZESS in IBS-C. And that being said, it's a fair -- the early growth is from a fairly smaller group of physicians, somewhere between 20,000 to 25,000 docs drove about 70% to 80% of the early growth.

So I think there's certainly a path forward to more efficiently commercialize this product as we secure reimbursement over time. So I think we can leverage not only the things that we learned on LINZESS, but also some of the capabilities that we've built over time. To Mark's point, how do we proactively identify patients through electronic databases? How do we get patients to more efficiently raise their hand based on the symptoms? And of course, what's the alternative?

These patients -- other than opioids, these patients have no alternative to treat these lower abdominal pain symptoms. So I think we -- again, we've learned a lot. I think we -- we're well positioned to really increase the productivity of the overall commercial, particularly the selling effort as we move forward as an organization.

So are we talking about a patient population that right now is either getting treated with opioids or nothing? Or would they be typically using just over-the-counter analgesics?

They're using everything. A lot of it has to do with the severity of the pain, right? There has been certainly a number of studies that have been done in the past that have showed an increased use of opioids in this population. Obviously, we're trying -- everybody in the health care industry is trying to get that under control. But yes, I mean they're using NSAIDs, they're using aspirin, they're using all kinds of things to try to manage their lower abdominal symptoms. But unfortunately, most of these treatments are insufficient. I mean this is a very unique mechanism that could really affect the management of these lower abdominal pain symptoms.

And I would now like to turn the call back over to Mark Mallon.

So operator, just to confirm, we don't have any additional questions for people in the queue.

Correct.

Okay. Then I just thank everybody on the call. We appreciate your time and interest in Ironwood, and look forward to continue sharing the exciting development of Ironwood during the course of the year.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.