Good morning. My name is Stephanie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ironwood Pharmaceuticals Second Quarter 2022 Investor Update conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. Matt Roache, Director of Investor Relations, you may begin your conference.
Thank you, Stephanie. Good morning, and thanks for joining us for our second quarter 2022 investor update. Our press release issued this morning can be found on our website. 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 Annual Report on Form 10-K for the year ended December 31, 2021, 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, Tom McCourt, our CEO, will review our strategic priorities and provide an update on the commercial performance of Linzess. Mike Shetzline, our Chief Medical Officer, will discuss our pipeline, and Sravan Emany, our Chief Financial Officer, will review our financial results and guidance. 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, and thanks for joining us today as we share our second quarter results. The positive momentum across our business continued in second quarter as demonstrated by robust Linzess prescription demand growth, advancement of our clinical programs, completion of our share repurchase program, and repayment of our 2022 convertible notes. The progress we made in the second quarter is a direct result of hard work and strong execution from the team, along with our shared commitment to advancing treatment in GI diseases, redefining standard of care in GI, and bringing important medicines to our patients. Our mission is to become the leading GI healthcare company in the U.S. Now, I'll start with a brief overview of our strategic priorities on slide six. Our strategy starts with maximizing Linzess.
Since launch nearly 10 years ago, Linzess continues to experience remarkable prescription demand growth and widespread acceptance among healthcare practitioners as a leading prescription treatment for adults with IBS-C and chronic idiopathic constipation. We are proud to report the brand recently surpassed four million unique patients treated since launch in 2012. In the second quarter, Linzess prescription demand increased 9% versus the prior year quarter, and Linzess achieved an all-time high in new-to-brand prescription volume as patients and prescribers turned to Linzess to treat their IBS-C or chronic idiopathic constipation symptoms. Through the first half of 2022, Linzess prescription demand has performed in line with expectations with double-digit prescription demand growth year- over -year. We believe there's still significant opportunity to reach appropriate new patients and drive additional prescription growth for the brand.
In addition to the commercial success of Linzess, we continue to make progress with our ongoing clinical trials. We now expect our phase 3 pediatric study in six- 17-year-olds with functional constipation to read out in the third quarter this year, and we remain on track with previously shared data readout timing for IW-3300 and CNP-104. We continue to focus on strengthening our pipeline through in-license or acquisition of innovative GI assets, as we believe it'll position our company for continued growth. Mike will provide an update of our pipeline in a few minutes. Finally, we continue to deliver sustained profits and cash flow. We ended Q2 with over $500 million in cash and cash equivalents on the balance sheet after repaying our 2022 convertible notes in cash and completing our share repurchase program during the quarter.
We're pleased with the progress across our three strategic priorities and believe we will continue to position ourselves for growth moving forward. Now, let's turn to some additional details on the commercial performance of Linzess on slide seven. Linzess continues to perform exceptionally well, powered by both new patient and refill volume, further reinforcing its position as the number one prescribed branded medicine in the U.S. for the treatment of adults with IBS-C and chronic idiopathic constipation. As I mentioned earlier, Linzess prescription demand in the second quarter grew 9% year-over-year. We believe high single-digit demand growth is impressive, particularly relative to the 14% demand growth achieved during the second quarter in 2021 as the market recovered from the COVID-19 pandemic.
Overall, the strong double-digit year-over-year Linzess demand growth for the first half of 2022 is in line with our expectations for the full year. In addition, 90-day prescriptions have grown as a percentage of total retail prescriptions, now making up 21% of total prescriptions. This has led to an all-time high in the average size of prescription. Turning to slide eight. The impressive growth in Linzess prescription demand is a reflection of the strong clinical profile, focused investment in both consumer and professional promotion, and class-leading payer access. As a result of our efforts to maximize Linzess, total prescription share at the end of the second quarter was 44%, an all-time high for the brand. Over the past year, Linzess has grown share approximately two points within the branded and generic IBS-C and chronic idiopathic constipation market.
New prescription share has also increased, further strengthening the market leadership position of Linzess. Now slide nine. In addition to being the branded prescription market leader in IBS-C and chronic idiopathic constipation, the clinical importance of Linzess was further acknowledged in the quarter in updated treatment guidelines. On June 20th, Linzess received a strong recommendation from the American Gastroenterological Association for the treatment of IBS-C, supported by a high level of evidence. Linzess was the only treatment to receive a strong recommendation for the treatment of adults with IBS-C in the updated AGA treatment guidelines. A powerful reinforcement that Linzess can help millions of adults living with the highly frustrated symptoms of IBS-C. These guidelines are a critical tool to help physicians provide evidence-based care for their patients, and we will work to communicate this update during our ongoing interaction with our customers.
Finally, we're committed to advancing the lifecycle management program for Linzess to broaden the clinical utility for the brand and help even more patients in need of treatment. We are excited about the strong position we're in today and the opportunities ahead of us as we seek to continue to maximize Linzess, advance clinical programs, strengthen our financial position, and grow Ironwood's leadership within GI. We strive to lead the way in GI, both through innovative GI therapeutics and also in our contributions to the broader GI community. Over the next few days, Ironwood will be sponsoring the Young Investigator Forum at the 2022 American Neurogastroenterology and Motility Society Annual Meeting, or ANMS. We also have the honor of sponsoring the ANMS Ironwood Diversity Award, and we hope to see some of you there. Thanks as always to the employees, patients, and shareholders for all your support.
I will now like to hand it over to Mike to discuss our pipeline programs. Mike?
Thanks, Tom, and good morning, everyone. We continue to make good progress across our three pipeline programs. I'll start with the linaclotide pediatric program on slide 11. The clinical study in six-17-year-olds with functional constipation was well-executed, completed enrollment on time, and we now expect top-line data in the third quarter. This is an exciting opportunity to potentially expand the clinical utility of Linzess, and assuming positive data and FDA approval, bring a new treatment option to this patient population, as there are currently no FDA-approved prescription pediatric therapies for functional constipation. Next, we're advancing IW-3300, a guanylate cyclase-C agonist and a wholly owned Ironwood asset for the potential treatment of visceral pain conditions such as interstitial cystitis, bladder pain syndrome, and endometriosis.
We have completed the studies in healthy volunteers, which will enable us to begin the phase 2 proof-of-concept study, focusing on the potential pain benefits of IW-3300 for patients suffering from interstitial cystitis and bladder pain syndrome. We're currently working to finalize the study design for the proof-of-concept study, which we are targeting to start the end of this year. Finally, CNP-104. COUR Pharmaceuticals is currently conducting a clinical trial for CNP-104, and the top-line data is on track to read out in 2023. We're happy with the progress to date, working in partnership with COUR to get the study sites activated and begin enrolling patients.
When we speak to investigators, they're excited about COUR's novel approach, which combines the PDC-E2 antigen with state-of-the-art pharmaceutical nanoparticles to tolerize the immune system and potentially eliminate the bile duct destruction that is at the core of primary biliary cholangitis. We believe CNP-104 has the potential to significantly shift the treatment paradigm in PBC, target the root cause of PBC, and if successful, be the first truly disease-modifying therapy for patients. With that, I'll now turn it over to Sravan to review our financial performance.
Thanks, Mike. Hello, everyone, and a pleasant Thursday morning to you, wherever you may be. I will begin by re-iterating Tom's earlier commentary. We are delighted with our strong first half performance, driven by continued impressive Linzess demand growth. Based on our performance to date, we remain on track to achieve the guidance we put forth at the beginning of this year. Please refer to our press release for our detailed financial information. Now to slide 13. Linzess U.S. net sales were $248 million in the second quarter of 2022, a 4% decrease compared to the second quarter of 2021. Strong Linzess prescription demand growth was more than offset by net price decline and inventory fluctuations versus prior year. Net price was anticipated per our previously provided guidance.
Inventory channel fluctuations are not expected to have a material impact on net sales for the full year. In the first half of 2022, prescription demand is up 10% year- over- year, and net sales growth is up 1% year- over- year. For the full year, we continue to expect Linzess U.S. net sales growth in the low single digits, driven by double-digit prescription demand growth. Turning to Linzess brand profitability. Commercial margin in the second quarter of 2022 was 69%, compared to 72% in the second quarter of 2021. Moving to Ironwood revenues. In the second quarter of 2022, Ironwood revenues were $97 million, driven primarily by U.S. Linzess collaboration revenues of $94 million. Turning to income tax expense. During the second quarter of 2022, Ironwood recorded $17 million of income tax expense.
Ironwood will continue to report tax expense on our P&L at our effective tax rate throughout 2022. As a reminder, Ironwood has significant net operating loss carryforwards from prior years, and therefore the majority of our income taxes will be a non-cash expense as we use our net operating losses. Moving to Ironwood's profitability. As a reminder, second quarter 2021 GAAP net income included $338 million non-recurring income tax benefit related to the release of the valuation allowance. GAAP net income was $37 million and adjusted EBITDA was $56 million in the second quarter of 2022. Next, our cash and capital allocation priorities on slide 14. In the second quarter, we generated $61 million in cash flow from operations and ended the quarter with $504 million in cash and cash equivalents.
In May, we completed our $150 million share repurchase program. For the overall program, under which repurchases commenced in December 2021, Ironwood repurchased 13.1 million shares at an average price per share of $11.47, approximately 8% of our Class A common stock. In addition, in June, we repaid the remaining $121 million aggregate principal amount of the 2022 convertible notes in full. As of June 30, 2022, we now have $400 million in convertible notes outstanding. Over the past 12 months, Ironwood has deployed roughly $270 million in capital to strengthen our financial position. Our capital allocation priorities include investing to maximize Linzess and actively pursuing innovative, highly differentiated GI assets to add to our portfolio.
We are focused on identifying and investing in opportunities that create the most value for our patients and shareholders over the long term. We are fortunate to have a growing market-leading and profitable brand in Linzess, a strong balance sheet, and continue to take a disciplined approach to capital allocation, which we believe positions us well for continued growth. Before moving on to our financial guidance, I would like to highlight that Ironwood was added to the S&P SmallCap 600 index in June. We are excited to be added to this reputable index as it is a recognition of Ironwood's momentum and financial strength as we continue to make a difference for people living with gastrointestinal diseases. Turning to our 2022 guidance on slide 17.
We are reiterating our full year 2022 financial guidance as we remain confident in the continued strength of Linzess, with expectations of double-digit prescription demand growth. We continue to expect U.S. Linzess net sales growth in the low single digits, Ironwood revenue of $420 million-$430 million, which includes approximately $10 million in royalty and other revenues, and adjusted EBITDA of greater than $250 million. We believe the progress we are making positions our company well for continued growth. We remain focused on advancing our three strategic priorities, and we are excited about the opportunities ahead of us to improve the lives of GI patients and deliver shareholder value. 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 disorders.
Operator, you may now open up the line for questions.
At this time, I would like to remind everyone in order to ask a question, please press star then the number one on your telephone keypad. Your first question comes from David Amsellem with Piper Sandler. Your line is open.
Hey, thanks. Just a couple. First, wanted to ask about the functional constipation study in peds. To the extent that you do get favorable data, how does that advance the potential discussion surrounding an over-the-counter version of linaclotide? What kind of conversation or dialogue would you have with the FDA subsequent to that data? Again, assuming it's positive. Secondly, you know, on the commercial margins, I wanted to ask sort of a forward-looking question is, you know, as the franchise gets later in its life cycle and its commercial life, how do you see commercial margins evolving? Do you think that commercial margins, you know, might increase as there potentially could be less in the way of intensive promotion?
What's the right way to think about that over the long term? Thank you.
Morning, David. This is Sravan. I'll first have Mike respond to your first point about the PBC question, and then I'll handle the question on commercial margin thereafter.
Yeah, sure. The current study that you're alluding to, the six- 17-year-old functional constipation, certainly adds additional support to the overall safety and tolerability of the use of Linzess in patients certainly under the age of 18. You recall, and I think the basis of your question, was at launch, we had a boxed warning that encompassed all the pediatric patients from those 18 and below. Over the years, we've done a number of studies in pediatric patients, including patients seven- 17-year-olds with IBS, six- 17-year-olds with functional constipation, a prior study, a phase 2 study, in addition to the one we're talking about now, and also a study in two-five -year-olds. That actually got us a revision of the boxed warning, which now only includes kids less than two years of age.
This study, which specifically addresses the six- 17-year-old population. We've actually had that change in relation to a submission we did with the agency last year with the aggregate data I just mentioned. But certainly, additional data in that patient population is always helpful. As we move forward with the clinical program in pediatric, we have additional studies we're doing. We're kicking off another study, now in two-five -year-olds in the near term with our partner, AbbVie. All that data will be pulled together with the ultimate goal to have an engagement with the agency in the future for further discussions about the box and the appropriate language for pediatric patients.
We remain confident in the safety and tolerability in this patient population because all studies to date have demonstrated Linzess to be safe and well-tolerated in the pediatric patients we studied. Just one final note, please note we're currently not labeled in pediatrics, so this is all about addressing the label language that we had, which, to your real question, helps support us to further progress on discussions on how to move to an OTC product.
David, it's Tom McCourt. The other piece of this is certainly there looks like a clear path forward from a regulatory front, but Mike can maybe comment on that. You know, certainly there, you know, it's very clear about what a trial design would look like to get an indication for occasional constipation. We're very, very confident that obviously the drug, you know, will meet those requirements. But I think that the most important thing here with the whole pediatric program is really eliminating the safety concern that FDA originally had that was hypothetical. We're very pleased with the progress we're making and the ongoing collaboration and dialogue with both our partner as well as the FDA.
Yeah, we clearly have regulatory precedent in terms of OTC approaches for occasional constipation with products like MiraLAX. We've had some, you know, preliminary discussions, including with our partners. I think we are in a good position to carry that forward as a continued program that we have.
David, I'll start with your second question. First of all, we're really pleased about our progress on commercial margins overall and how we're managing expenses. I'll start by answering your question about where we are today with respect to commercial margin, and then talk a little bit about where we're going and where we think we'll head with the company. You know, first point is, year to date, commercial margins are 71%, through June 2022, compared to 72%, through June 2021 the prior year. Our commercial margin, you know, can fluctuate quarter to quarter based on timing of expenses throughout the year.
As a reminder, for everyone out there, the second quarter tends to be the largest commercial investment of the year due to the timing of the DTC launches, and where we have our commercial spend in the year. Second quarter commercial margins for 2022 were also impacted by lower net sales in the quarter, which was primarily driven by unfavorable inventory fluctuations. We don't expect those inventory fluctuations to have material impact on the full year, as we said earlier, but those fluctuations had an impact in this quarter. Where we stand, you know, we feel like we're on track to hit our guidance for profitability for the year.
With respect to long term and where we expect, you know, where we are from a brand perspective and where we wanna go, yeah, we're constantly evaluating. We're always looking with our partner where and how we can fine-tune and improve those margins. We do think there is still room to grow on the commercial margin front, and we'll continue to try and drive those efficiencies. Tom, I don't know if you have anything else to add.
Yeah. Thanks, Sravan. I think the other thing to remember, you know, year-over-year was, you know, the second quarter in 2021 was an interesting quarter. One, you know, we had this surge of demand as we were coming out of the pandemic. In addition, because of the pandemic, you know, we were short on calls that were getting billed to the P&L, so the margins were more favorable, you know, with those two combined things. You know, we're seeing now, or as Sravan mentioned, you know, we're delighted, you know, with the progress we're making. Keep in mind, we've continued to refine the marketing mix with regard to the level of investment, both with regard to professional promotion, DTC.
Certainly, you know, one of the real key investments is payer access, which really drive, you know, near term and long-term growth for the brand.
Hopefully, that answers your question, David.
Okay. Thank you.
All right. Great.
Again, if you would like to ask a question, please press star, then the number one on your telephone keypad. Your next question comes from Boris Peaker with Cowen. Your line is open.
Great. Thanks. This is Nick on for Boris Peaker. I have two questions. First is on IW3300. I was wondering if we should expect to see some data from this phase one trial, whether it be safety data or whatnot, before the initiation of the phase two trial. My second question is, what is your guys' strategy right now on, like, potentially expanding the pipeline further beyond COUR and, beyond CNP-104 and beyond IW3300? Thanks.
Sure. Thanks. Look, Mike, why don't you handle the first question again on IW-3300 and our plans there, and then I'll address the second piece.
Yeah, sure. The phase one program for IW3300 was in healthy volunteers. It was a single ascending dose study as well as a multiple ascending dose studies. Both of those studies were completed on time. Both of those studies did not demonstrate any concerns that may get any issues for us to complicate proceeding to starting the POC study at the end of this year. We're going through that data now, and we certainly are having discussions on how to disseminate that data, but we clearly will put it in the public domain. You may know those trials are registered in ClinicalTrials.gov. Even though they're healthy volunteer studies, we're not obligated to put that data out just 'cause they're phase one in healthy volunteers, but we are committed to disseminating the data publicly.
We certainly will take that opportunity.
Great. On the piece on strategy. Look, I'll start by saying that I think we're gonna continue to take a balanced approach to capital deployment. We believe we're in a position in the company for future success, which includes maximizing Linzess growth commercial innovation, lifecycle management, and actively pursuing these highly differentiated GI assets to bolster our portfolio. We're focusing on identifying and investing in opportunities that create the most value for our patients and shareholders over the long term, including licensing such as CNP-104 and other acquisitions. For us, at this point in time, our team continues to engage with third parties and evaluate opportunities.
You know, this market, while it's been better for us this year as a buyer, potentially, you know, finding assets, I think we're gonna continue to be disciplined. If we find opportunities that make sense and can create long-term shareholder value, we'll pursue them. We're not gonna comment on any other specific efforts beyond that. You know, we have set a high bar for ourselves in evaluating potential transactions and any asset that we acquire is gonna meet our internal criteria. I don't know, Tom or-
I think that's spot on, Sravan. I think the exciting thing is there's a lot of activity right now with regard to emerging technologies and treatments. You know, there's other dynamics in the market that, you know, look, may turn into something that may be very attractive. Again, to Sravan's point, you know, the bar is high. You know, we like where we are and, you know, how we're growing as far as our overall financial health. We just really wanna be disciplined with regard to how we think about allocation of our capital.
Great. Thank you very much.
Again, if you would like to ask a question, please press star, then the number one on your telephone keypad. There are no further questions at this time. Thanks, everyone, for joining today. This concludes today's conference call. You may now disconnect.