Ironwood Pharmaceuticals Inc (IRWD) 2024 Q2 法說會逐字稿

Thank you for standing by. My name is Celine, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ironwood Pharmaceuticals Q2 2024 earnings call for investor update conference call. (Operator Instructions)

I would now like to turn the call over to Matt Roache, Director of Investor Relations. Please go ahead.

Thank you, Celine.

Good morning and thanks for joining us for our second-quarter 2024 investor update. Our press release issued this morning can be found on our website.

Today's call and accompanying slides include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual results to differ materially. The 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 annual report on Form 10-K for the year ended December 31, 2023, and in our subsequent 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 the press release for reconciliations of these measures to the most directly comparable GAAP measures.

During today's call, Tom McCourt, our Chief Executive Officer, will begin with a brief overview; Mike Shetzline, our Chief Medical Officer, will discuss our pipeline; and Sravan Emany, our Chief Operating Officer and Chief Financial, Officer will provide a commercial update and review our financial results and guidance. Andrew Davis, our Chief Business Officer, is available for the question-and-answer session following our prepared remarks.

Today's webcast includes slides. So for those of you dialing in, please go to the Events section of our website to access the accompanying slides separately.

With that, I'll turn the call over to Tom

Thanks, Matt. Good morning, everyone. Thanks for joining us today.

We continue to make progress across our strategic priorities in the second quarter. Starting with LINZESS, prescription demand remains robust, increasing 11% in the second quarter with continued strength in new-to-brand prescriptions, which grew 15% versus the prior year. This marks the sixth consecutive quarter of double-digit new-to-brand volume growth, underscoring that patients and providers are consistently choosing LINZESS.

While demand is up, LINZESS has continued to experience pricing headwinds driven by a higher-than-expected Medicaid utilization, which is impacting our US net sales. As a result, we are revising our full-year 2024 guidance. Sravan will speak more to the specifics on the call later.

From a financial perspective, even with the continued LINZESS pricing pressure, we believe we are in a fortunate position with meaningful cash flows generated by LINZESS and a capital structure to support continued execution of our strategic priorities over the upcoming years.

Moving to our pipeline, in May, we presented our late-breaking STARS Phase 3 data at the Digestive Disease Week meeting, which was very well received. Since DDW. We've continued to receive positive feedback on apraglutide's clinical profile from physicians, key opinion leaders, and patient advocacy partners.

The positive feedback was reinforced through a recent advisory board meeting supporting our belief that if approved, apraglutide would be the drug of choice among physicians to treat adult patients with short bowel syndrome who are dependent on parenteral support based on its differentiated profile, included demonstrated efficacy, tolerability, and once-weekly dosing convenience.

We believe these three distinguishing factors will drive uptake, adherence, and improved quality of life for patients with short bowel syndrome who are dependent on parenteral support. We also continue to make strides in our commercial planning activities for apraglutide, and we are encouraged that patients identified by the recently implemented ICD-10 codes have supported our estimates of between 8,000 and 10,000 adult SBS patients who are dependent on support actually exist in the US today.

We believe a significant portion of these patients remain untreated by currently available therapies. The ability to identify these unique patients using ICD-10 codes is an important development to enable a more targeted and informed go-to-market strategy, and we continue to believe apraglutide is well positioned to address the ongoing unmet needs because of its strong clinical profile, including the convenience of once-weekly dosing, the low incidence of both injection site reactions and GI tolerability issues, and a demonstrated high rates of compliance as seen in the STARS Phase 3 study.

Moreover, we are developing a robust patient service program to help drive uptake and adherence to therapy. We are advancing our launch planning and are confident we are well equipped to commercialize apraglutide, if approved, with an established sales force with a very strong presence in offices of GI specialists across the United States.

Over the past few months, we've continued to progress towards the apraglutide NDA submission, a label focus on adult SBS and expected to complete the filing in the first quarter 2025. Mike will provide additional details on our submission strategy in a few minutes.

Next, CNP-104 for the potential treatment of primary biliary cholangitis. We are on track to share Phase 2 proof-of-concept top-line results this quarter, which will inform a decision on our option to acquire an exclusive license from COUR Pharma for CNP-104 in the US.

Moving to our third strategic priority of delivering sustained profits and cash flow. In the second quarter, we generated $33 million of operating cash flow. Also in June, we repaid the $20 million principal amount of our 2024 convertible notes upon maturity, using a combination of cash on hand and funds drawn from our revolving credit facility.

Looking ahead, we are intently focused on managing LINZESS pricing pressure to maximize profits and cash flow while simultaneously progressing our pipeline to extend Ironwood's growth horizon beyond LINZESS.

With that, I'll hand it over to Mike to discuss our pipeline in more detail. Mike?

Yeah. Thanks, Tom, and good morning, everyone.

I'll start with an update on the NDA submission for apraglutide for patients with short bowel syndrome who are dependent on parenteral support. As Tom mentioned, we've made steady progress in preparing the NDA submission. Our plan is to pursue a rolling NDA review. The rolling review allows us to submit completed sections of the application as they become available and continue to engage with the agency as we proceed with the submission process.

We expect the rolling review process to begin in the fourth quarter. The early modules will include the non-clinical and clinical components. As we progress to work on the regulatory filing in conjunction with our commercial planning activities, we decided to make enhancements to the presentation of the vial kit to optimize it for commercial use. As a result, we expect to fully complete the NDA submission in the first quarter of 2025.

Moving to slide 8. As Tom pointed out, we continue to receive positive feedback on paraglider's clinical profile and believe it has the potential to improve the standard of care for patients living with SBS who are dependent on parenteral support, based on the combination of demonstrated efficacy, tolerability, and once-weekly-dosing convenience.

In cell-based assays of receptor activation, apraglutide retained potency and selectivity at the GLP-2 receptor compared with native GLP-2 and teduglutide and is uniquely designed to accelerate intestinal growth for improved gut function and absorption. Apraglutide is the only GLP-2 analog to achieve a statistically significant reduction in weekly parenteral support volume with once-weekly dosing.

Patients achieved a clinically meaningful parenteral support reductions as early as week eight in the STARS Phase 3 study. In addition, we saw a powerful parenteral support volume reduction with apraglutide as some patients achieve two and three days off per week. Furthermore, seven patients were able to achieve enteral autonomy by week 24, including patients with the stoma versus none on placebo.

Importantly, apraglutide demonstrated high rates of compliance and similar rates of adverse events were observed between treatment and placebo groups with no malignancies and discontinuations due to GI tolerability issues. We look forward to continuing to evaluate the robust dataset from the largest ever GLP-2 study in short bowel syndrome with intestinal failure and plan to disclose further findings at additional medical meetings, including the American College of Gastroenterology meeting in October for our Phase 3 subgroup analysis was accepted for an oral presentation.

Before moving on, I'd like to take a moment to highlight that August is Short Bowel Syndrome Awareness Month. As part of our unwavering commitment to people suffering from SBS, I want to say a big thank you for this rare disease community of patients, advocates, caregivers, investigators, and health care professionals for their dedicated support and ongoing devotion to raising awareness around the serious and chronic malabsorptive disorder.

Moving to CNP-104 on slide 9, this is a tolerizing immune-modifying nanoparticle for the treatment of primary biliary cholangitis, which is a rare autoimmune disease that causes the liver's bile ducts to slow to deteriorate and can lead to irreversible damage and scarring of the liver, ultimately requiring liver transplant. As a reminder, the Phase 2 study is a 42-patient, placebo-controlled study evaluating the safety, tolerability, pharmacodynamics, and efficacy of CNP-104 in patients with PBC who are unresponsive to UDCA and/or Ocaliva.

Top-line results will be based on data through day 120 of treatment. A positive signal of liver function markers in addition to T cell response would further support the potential for CNP-104. Top-line data from the Phase 2 proof-of-concept study in patients with PBC remains on track, and we look forward to sharing top-line results with you later this quarter.

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

Thanks, Mike, and good morning, everyone.

I'll begin on slide 11. As Tom mentioned earlier, LINZESS continued to deliver impressive demand growth in the second quarter. LINZESS volume grew 11% year over year in the second quarter, while new-to-brand prescriptions increased 15% compared with the second quarter of 2023. On a year-to-date basis, LINZESS extended units and new-to-brand volume growth increased 10% and 16% year over year, respectively, reinforcing the patients and health care practitioners continue to choose LINZESS in a growing market.

Next, I'll discuss collaborative arrangements revenue on slide 12. LINZESS US net sales, as reported by AbbVie, were $211 million in the second quarter. In the second quarter, Ironwood recorded a $17 million adjustment to collaborative arrangements revenue. This $17 million adjustment is comprised of two components. Ironwood increased collaborative arrangement revenues by $30 million related to the 2023 LINZESS change in gross-to-net estimate that Ironwood previously reported in the first quarter as this change in estimate is now reflected in the second-quarter LINZESS net sales as reported by AbbVie.

In addition, Ironwood reported a $13 million reduction to collaborative arrangements revenue in the second quarter to reflect Ironwood's estimate of LINZESS gross to net reserves as of June 30, 2024. With this adjustment, Ironwood's view US collaboration revenue was $91 million in the second quarter.

Before moving on to our financial highlights, I'd like to take a moment to discuss what is happening with Medicaid in more detail. Over the past few quarters, we have seen growth in LINZESS Medicaid prescription volumes and an increase in Medicaid prescriptions as a percent of our overall LINZESS business. We now believe the higher-than-expected Medicaid utilization, which we saw in 2023, will also be higher than expected in 2024 based on a combination of legislative and market factors, which include Medicaid redeterminations having a lower-than-expected impact on LINZESS.

While fewer patients are enrolled in Medicaid across the country, we have not seen that correlate to lower LINZESS utilization to date. We have also seen state-by-state changes with some states actively expanding Medicaid enrollment eligibility and some making changes to Medicaid formulary position.

Additionally, as we had shared at the beginning of the year, in 2024, we faced uncapped rebates on LINZESS Medicaid volumes from the AMP cap repeal legislation, which has led to higher rebates on our Medicaid book of business than we had in 2023. While these rebates have played out as expected to date, higher Medicaid utilization trends have further magnified the pricing headwinds associated with the AMP cap appeal for 2024. We continue to monitor these trends closely and remain focused on maximizing LINZESS profits and cash flows and optimizing our investments as we seek to mitigate these increased pricing pressures.

Now turning to our financial highlights on slide 13. Ironwood revenue in the second quarter was $94 million, a decrease of 12% year over year. GAAP net loss was $1 million and adjusted EBITDA was $28 million.

In June, we repaid the $200 million principal of the 2024 convertible notes upon maturity, using $50 million of cash on hand and $150 million drawn on our revolving credit facility. The outstanding principal balance on the revolver was $424 million -- sorry, $ 425 million at the end of June.

We ended the second quarter with $106 million in cash and cash equivalents on the balance sheet. We continue to believe wins LINZESS cash flows will support our existing portfolio, including the potential apraglutide launch, further progress on our development programs, and repay our debt.

Moving to slide 14, we are revising our full-year 2024 guidance to reflect additional pricing risk, primarily associated with the higher than expected Medicaid utilization trends I just mentioned. As a result, we now expect a LINZESS US net sales between $900 million to $950 million, Ironwood revenue of between $350 million and $375 million, and adjusted EBITDA of greater than $75 million. In the second half of 2024, disciplined expense management remains a priority as we seek to offset top-line revenue headwinds to optimize profits and cash flows.

To wrap up, this prescription demand continues to be healthy but is currently being more than offset by pricing headwinds, primarily due to higher Medicated utilization. Moving forward, we remain focused on maximizing LINZESS profits and cash flows until generic entry in 2029.

In terms of our pipeline, I'm excited for the future of apraglutide where we see an attractive market opportunity and has significant lifecycle management initiatives ahead of us. Furthermore, we look forward to providing an update later this quarter on CNP-104 and the potential treatment of PBC.

I want to thank -- I want to close by thanking all of our employees, patients, caregivers, and advocates for their shared dedication to advancing and supporting therapies for GI diseases.

Operator, you may now open up the line for questions.

(Operator Instructions) David Amsellem, Piper Sandler.

Hey, thanks. So just a few, so as you think about 2025 and maximizing the net economics of LINZESS, how do you think about -- you and AbbVie think about contracting and may be backing off widespread preferred access as a means of driving a narrower gross to net maybe sacrificing some volumes, but also driving better net economics. So just help us understand the thought process as we move beyond this year. So that's number one.

And then number two on 104, help us level set expectations in terms of what you want to see in order to move forward? And then what next steps would look like to the extent that you see an adequate efficacy signal, particularly on markers of liver function? Thank you.

Sure. Good morning, David. Hope you are well.

Why don't we start with the second component on CNP-104, hand that over to Mike, and then Andrew will answer the second question -- sorry, your first question regarding the contracting strategy.

Yeah. Thanks, David. The primary thing we're looking at really is in the top line results for the T cell response. We certainly believe that the T cell response and T cell effects will be a leading indicator of the clinical benefit. And we'll also then evaluate several markers of liver function. And the linkage, obviously, between the T cell response and liver function is also equally important for us to look at.

As I said, we're on track to deliver that this quarter. What comes after that is a little bit premature at this stage, right? This is the first-in-human study, proof-of-concept study. We certainly look to learn a lot. But again, we did the deal primarily because we thought we'd have a good look at this T cell response and that this T cell response could be a leading indicator for clinical outcomes. So until we get that, I have to wait on what to determine to do after that.

Thanks, Mike. And then Andrew will respond regarding the contracting question.

Yeah. David, thanks for the question. I mean, I think the point of net economics definitely is key for us as we look across the book of business from here to LOE. So I think that's fine as we look at our contracting strategy, both for next year and the future. We'll really be looking at what the net economics that get driven over the life of the product.

Amy Li, Jefferies.

Hey, thanks so much for taking our question. On apraglutide, given the Q1 2025 submission completion timeline, do you still expect launch in 2025? And then also, can you give us some color on how you are optimizing the commercial use kit? I know you alluded to it earlier. Is there going to be any formulation changes, format changes? Any color would be super helpful.

Yeah, sure. Thanks, Amy. Good morning. I'll take those questions.

Look, I think our view on approval could occur in 2025 or early 2026 depending on whether it receive priority or standard review. I think that the standard review will be early '26 from our perspective.

With respect to the kit, look, I think it's industry -- it's common industry practice that what's used commercially is different than what's used in clinical trials. I think we take a very long view on apraglutide here as we have IP out into the 2040s, and we want to make sure the launch is as successful as possible.

And so we've -- as we conducted human factor trials, we've learned ways to make the commercial vial kit presentation easier for patient use and we are implementing those changes. And so not to get into a lot of detail, but I think the goal here is to make it easier for patient to administer themselves.

Mohit Bansal, Wells Fargo.

Great. Thank you very much for taking my question. And I have two different questions.

So one is it does seem like that the pricing pressure is more than you anticipated. In last quarter, you said that it seems like earlier than anticipated, and you did anticipate this pricing pressure starting '25. So that's why, I think, the last quarter, it was more like 25 and onwards. It should be similar to what you were previously expecting, but has anything changed in that thought process now that? Like how should we think about the revenue growth trajectory versus 24 from now at this point?

And then the second question is regarding CNP-104. Can you just remind us when you saw the healthy volunteer study with -- which COUR did, what kind of T cell responses they saw in those patients? And how could they -- how do you correlate that with a sickle patient trial.

So Mohit, could you repeat the second part that question? Did you -- was the question that the T cell response that COUR saw in their --?

I think that was the study. I don't know it was a healthy voluntary study or was it -- I think it was a PBC study as well, right?

I cannot recall. It was 40-patient study. right?

Yeah, I can just put in some pieces of information. I mean, this is the first-in-human study for CNP and PBC patients, this 42-patient study. There's no other clinical dataset. You may be referring to a study many years ago that was done with the COUR platform in celiac. That data was -- celiac is a different autoimmune disease. It's a poly kind of valent autoimmune disease, right, gliadin, the peptides of [insult], right, for celiac. Have a lot of different epitopes, and it's driven by a lot of different deamidated gliadin peptides. And you can also externally challenge those T cells with gluten differently than the T cells that are primarily in the liver for PBC.

So there are there are differences across those two diseases, but we certainly think our approach is a valid way to look at the potential benefit of this platform technology in the autoimmune disease like PBC. We're certainly using different techniques, given the T cell -- antigen-specific T cell responses, but that's sort of how it plays out on the different diseases.

Then respect -- and Mohit, with respect to the guidance, looking in Q1, I think as we mentioned, we did anticipate higher utilization for the full year 2024, and that was our best estimate at the time.

Since Q1, we've seen higher than -- an even higher than anticipated Medicaid utilization of LINZESS and felt that it was prudent to revise guidance. And therefore, you can see we've meaningfully modified our guidance to account for that even higher utilization. That's driven again by the three things we talked about, which is even though there are less patients on Medicaid, LINZESS use continues to increase in terms of our book of business in terms of share.

The AMP cap removal is pretty significant. And then there's also just changes that are occurring on the state level with respect to enhanced -- increased eligibility and then also just formulary changes. So all of that has just led to an even greater increase than we anticipate at the start of the year for the book of business.

(Operator Instructions) Jason Butler, Citizens JMP.

Hi. Thanks for taking the questions. Just a couple on apraglutide. Can you just talk about what the remaining gating items are to submitting the BLA and [1225]. And then just as you continue to get ready for launch, what is the work that you're doing? What is the feedback that you're getting from potential prescribers on the data?

Yeah, great. Mike, you want to tackle that one in terms of outstanding remaining items of trial.

Sure. Yeah, so for in terms of what's going on, we've obviously made steady progress in preparing the NDA. We've had a focus on, obviously, the quality of data package. The early models modules that we're working now will include the nonclinical and clinical components. We've continued to progress on the regulatory filing in conjunction with the commercial planning activities. Also have some additional information we've been getting as we talked about -- in terms of the best application of how to pursue the vial.

We decided to make those enhancements to the presentation of the vial to optimize it commercially and we're in the process of finalizing the commercial supply chain and the supporting documentation for the CMC components of the application. And as I said, we -- as Tom and I both said, we expect to complete that in the quarter -- first quarter of 2025.

And then with respect to the feedback, Mike, on clinical profile from physicians and other key opinion leaders.

Yeah. We've gotten great -- we continue to get great feedback from external, so whether they be prescribers, people, the KOLs, the key opinion leaders, thought leaders in the area. They really are quite impressed with the fact that we are the first and currently only once weekly to hit the primary endpoint. In SBSIF, that was a pretty significant achievement. They certainly -- I think, our tolerability profile is excellent as well.

As Tom mentioned, we had an ad board to review that with a lot of externals and prescribers and really was very well received. So there's quite a lot of enthusiasm out there, and we're looking to continue that engagement with the prescribers and the community push forward the submission to get to market as early as possible.

Jason, this is Tom, and I'll ask Andrew to jump in here as well. But as we think about next steps, this is really about preparing the market, preparing the organization for a successful launch. We've already initiated some disease awareness programs. This is really about identifying patients and making sure that we get patients into the program. These patient support programs. To get them on therapy as quickly as possible and retain them.

One of the really big pieces of data that we've -- nobody ever had access to is this implementation of the new ICD-10 codes, which are actually labeling a lot of these patients. And it's validated how many patients are really out there, but it also allows us to target and really guide our go-to market strategy, which is data that didn't exist before. So as the commercial team continues to evolve its go-to-market strategy, we're going to do our best to increase the overall awareness of the disease, proactively identify the patients, and their location, and then how do we align that with our commercial capabilities, including certainly the sales force that's already in these offices -- many of these offices , and these patients' hub services, which is really going to be critical to be able to pull the business through.

Andrew, if there's anything else you'd like to comment beyond that?

No, I think you nailed it. I think we're excited here, Jason. I think we're getting great feedback.

Tim Chiang, Capital One.

Hi, thanks. Mike, could you talk a little bit about how much interaction or discussion you've had with patient advocacy groups in the short bowel syndrome disease area with apraglutide? I mean, what sort of responses have you gotten so far? And then just, sort of, have you already started to talk with payers on apraglutide.

Yeah. Thanks, Tim. We have a -- go ahead, Sravan.

I apologize. Go ahead.

Yeah. So we certainly have a strong link with the patient advocacy groups. This is a disease that has a very vocal and actually long-standing advocacy among patients we have started with decades ago, five of them with the Olay Foundation. So there's a lot of good networking out there by patients. And the feedback we've gotten from patients is very enthusiastic.

Many have participated in our trial. The compliance in our trial has been very high. People have talked about how nice, if I could say it that way, the drug is from a utilization perspective. They don't suffer some of the adverse effects that they know other agents might be little more common at achieving.

So that overall has been very, very good. And obviously, the weekly administration is just a big bonus in terms of you don't -- if you're not on parenteral support seven days a week, you have to take something every day. That's one position.

But if you're really only on parenteral support four or five days a week, I'd have to take something more than that. can be a little bit more work than you might want to do. And so the opportunity for the patient population that just have a weekly administration really broadens the utility across the SBS-IF community. But in general, I could say it's been very, very positive.

Okay. Great.

And Sravan, I have one follow-up just On the LINZESS JV. Commercial margins, I think they were, what, 62% this quarter. Do you think that number can stay at around that figure in the back half of this year?

Yeah. So look, from a commercial margin perspective. I think since the spin -- and Tim, I think The Company has been very focused on maximizing the brand profit and improving it as much as possible. I think we had opened this year. I think based on our guidance, we thought we'd be close to 70%. And I think our goal is -- I think our guidance reflects our best estimate in terms of and our profit as of now and where we sit today.

Okay. And I know you did comment about the $17 million gross-to-net adjustment, but you're not going to get that in future quarters this year. Is that right?

Well, I think the point of that is that we've adjusted our guidance down to $900 million to $950 million of net sales for LINZESS accounting for increased Medicaid utilization throughout the back half of the year.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.