Good morning, everyone. My name is Balaji Prasad. I'm the senior analyst for the spec pharma coverage for Barclays. Kick-starting the day for the Barclays Annual Global Healthcare Conference, we have the pleasure of having the management team from Ironwood with us. Tom McCourt, CEO, and Greg Martini, Vice President, Strategic Finance and Administrations. Tom and Greg, thank you so much for joining us today. We have around 25 minutes. In terms of the organization, why don't we start with just a couple of recaps you reported a few weeks ago.
Yep.
Maybe a couple of recaps, and then we can go into Q&A.
As you know, Ironwood is a GI-focused healthcare company with a lead asset, excuse me, LINZESS, which is now considered a blockbuster in terms of U.S . Net sales. We have really three strategic imperatives. First of all, of course, maximize LINZESS. Second, you know, how do we continue to advance a GI portfolio? Three, generate, you know, cash and positive cash flows. We're delighted with the progress we've made so far. We reported earnings recently that we advanced our all three strategic imperatives. LINZESS continues to thrive both with regard to demand and generating very strong sales. Second, we are advancing the GI portfolio. First, expanding the clinical utility of LINZESS into the pediatric population.
We have an asset in development, CNP-104, targeted at primary biliary cholangitis, and then IW-3300, excuse me, for visceral pain conditions, particularly of the pelvic region. We finished, you know, with a very positive EBITDA of over $250 million for the year, and we're sitting on a fair bit of cash. Over $260 million in cash. We have a very.
Sorry, $650 million.
$650 million in cash. Thanks, Greg.
Yeah.
We have a very strong balance sheet. You know, we're looking at right now is, you know, what is the best way for us to deploy capital? Certainly we're looking at a number of external assets that are now, you know, certainly available to bring into the organization, but the bar is high. We wanna make sure it's the right fit and the right deal structure for Ironwood. We're very excited about where we are right now as a profitable healthcare company with a strong balance sheet and certainly a thriving product.
Great. That's a good recap, Tom, and definitely seen progress on all three of your strategic objectives in the recent call. As I was listening in, I mean, there's a question that you get fairly often, I'm sure. You continue to call out the large market opportunity with LINZESS, with an estimated 40 million potential patients still remaining. Help us understand how you'll continue to tap into this and expand into this opportunity.
I think to your point, or, you know, first, this is a large, highly symptomatic market. It's a very debilitating disease, and it's very uncomfortable for patients. As successful as we've been, we've treated 4 million patients, so there's still...
Yeah
You know, tens of millions of patients out there suffering. You know, they're struggling with OTC laxatives. They're not satisfied with therapy. This drug in this marketplace is very promotionally sensitive. This is really all about, you know, how do we, how do we expand physicians' view of who the appropriate patient is? How do we activate, you know, patients to raise their hand and say, "I need help"? We continue to see very strong linear growth, which, you know, we're talking about year 10 and 11 here, where you're still seeing linear growth. You know, I had the great good fortune of working on a drug called Prilosec many years ago.
I haven't seen a drug that's seen this kind of linear growth and demand in a long, long time, which I think speaks to, one, the unmet medical need, but also the high level of treatment satisfaction that we're seeing, you know, with the drug. In addition to that, as I mentioned, we filed an sNDA for pediatric-
Mm-hmm
... pediatric constipation, which is a, another very broad market, you know, with a significant unmet medical need. We're gonna continue to invest in the brand, as long as it's a growth brand, and we're certainly constantly refining the marketing mix so we can optimize the bottom line.
Got it. When you say the pediatric market is another very broad market, can you contextualize the size that you see, and what are the next milestones for us to watch out for as you continue to develop this program?
Sure. We estimate there's somewhere between 4 and 6 million kids from 6 - 17. That'll be the first pediatric indication we're seeking approval for. You know, the big difference is we've learned and as we've evaluated this market, the big difference between kids and adults is if you have a child that's suffering from chronic constipation, you're seeing the doctor.
Yeah.
Literally 80% of these patients are actively seeking care. They're not just once a year. It's multiple times a year. This is a very available patient population. In addition, there's no currently approved therapies for functional constipation. As crazy as that sounds, you know, the, these people have been suffering, these kids have been suffering for a long, long time. There's been several agents that have tried to demonstrate efficacy, but LINZESS thus far certainly has the most promising data.
Got it. You also called out the promotionals, promotionally sensitive nature of this disease. Can you help us understand the efforts for this through 2023? As you get closer to the pediatric opportunity, are there any variances in the promotional campaigns that you plan to run between the adult and the pediatric side?
Sure. Well, first of all, you know, we wanna make sure we take advantage of our current beachhead 'cause a lot of these kids are in primary care offices. You know, we're certainly going to educate, you know, the current prescriber base, both the GI community as well as primary care about the opportunity and the availability. Second, we've. As much as it's a very broad prescribing community, it's also very concentrated. There's probably 2,000 or 3,000 physicians that really drive the growth of this market. It's gonna be pediatric gastroenterologists and very, you know, high-prescribing pediatricians. You know, currently, we're calling on about 35,000 docs. We can largely fold these additional targets into our current call list. It won't require us to expand the sales force at this point.
We will re-engineer the call list to make sure we're optimizing the productivity of the sales rep. Then we're running a number of promotional models and studies to see how promotionally sensitive it is and how do we shift our call list. This is an opportunity for us to really let the data guide, you know, our decisions as far as our promotional mix.
Understood. As you also called out that this is the first and only therapy for the pediatric population, always can't help wondering what is there in development, what is the competitive landscape going to look like? What are the very specific challenges to this to this opportunity?
Yeah. The market opportunity is the OTC market.
Yeah.
It's as good as we have done, there's been four additional agents that have come into the market, eight out of ten patients are still walking out of the office with an OTC and are inadequately treated. This is still a very large market, we're gonna certainly take advantage of that, we're the market leader. We have, you know, over almost 45% market share.
Mm-hmm.
We continue to increase our market share even in the face of emerging competitors, which you rarely see, right? Which I think really, again, speaks to the health of the drug. I don't see an emerging competitor out there that is a real threat to the agent. I think this is really us about us staying focused on what we do really well and again, you know, invest in the brand appropriately to drive ongoing demand growth.
If I could just add, just specifically the pediatrics opportunity. Just like the adult population, the current treatment is typically over the counter.
Yeah.
It really is looking at really education of physicians, of these prescribers, and awareness of LINZESS, for these prescribers in this new age group, as we start really trying to enter that new demographic.
Yeah. Thanks, Greg. I think the other piece too, it's almost barbaric how these kids are managed. I mean, generally, they use MiraLAX, you know, which as you know is low dose bowel prep.
Yeah.
They push the dose until they see diarrhea. You know, if you're, if you're a small child, that's one thing. If you're, you know, a school-aged kid, it's really a problem for kids. You know, the good news here with the linaclotide data is not only is it highly effective as far as improving frequency of bowel movements and straining that the kids experience, we also had a very, very low diarrhea rate. I mean, it's less than 5%, which is really remarkable. You know, as we share those data and market research with prescribers, they're very encouraged, you know, by the profile of the drug.
Got it. Since we're also still in the Q1 phase of the year, where we'd have seen recent price increases across board or at least with some of your brands, can you take us through the pricing dynamics for the year and what is the gross and the net, pricing momentum that you'd get?
Yeah. As you know, last year, we, you know, we had very strong demand growth. We had to shore up a couple of big Part D plans, so we guided to high single-digit price erosion, which is what we saw.
Mm-hmm.
This year, that's moderated significantly. You know, we're really guiding to, you know, more single-digit price erosion. There's a couple of commercial plans and Part D plans that, you know, we invested in. 'Cause really, the game here is access.
Yeah.
In this category, you have to make it easy to prescribe your drug, and that's good coverage. We have very broad payer coverage, you know, with the brand, which makes it very easy and accessible to the prescriber.
Got it. Tom, one of the things we're also trying to scope across the board is the impact of IRA. IRA?
Yeah. Yeah. Sure.
Something that I've been discussing with management from the beginning of the year, and the word is still that there is multiple variations, and the impact is not clear. For us, speaking specifically from LINZESS perspective, what's the impact that you guys see?
I think we're studying it like everybody else. Of course, we have a very strong partner with AbbVie, who's obviously, you know, very focused on this because of the pricing sensitivity they have in their portfolio. I think we're up to speed, and we're fully informed kind of the process. I think there's still a lot of unknowns. You know, these tend to sometimes be rather blunt instruments that, you know, that do have an effect. That being said, I think it's important to know is that we've been negotiating with Medicare.
Mm-hmm
... for 10 years, We're already discounting quite heavily, you know, in negotiating with the payers. Hey, is there an impact out there? Could be. You know, I don't think this is the type of brand they're gonna be chasing.
Fair enough. Yeah. Maybe shifting next towards the pipeline side of things. We spoke of the pediatric obviously, but there are two other legs to this CNP-104. Let's start with your take on the market size gain in PBC. How much do you think the opportunity is really realizable for CNP-104?
Sure. Well, I think everybody knows, you know, primary biliary cholangitis is a really difficult disease. About 130,000 patients suffer from it. You know, there's treatment out there that can improve symptoms but doesn't solve the problem. The problem is really an, you know, an antigen, antibody problem, right? Virtually everybody that has PBC has the PDC-E2 Antigen, which then stimulates this production of these activated T-cells that then attack the bile ducts and destroy the bile ducts, which then reduces the ability to clear bile. Now, the current synthetic bile acids can increase flow, but it doesn't fix the problem.
Mm-hmm.
You know, the problem is these activated T-cells that continue to destroy bile ducts. What CNP-104 does is it actually takes the PDC-E2 Antigen, encapsulates with a nanoparticle, and then preferentially goes to the spleen and basically tolerizes the body.
Mm-hmm.
It actually reduces the production of these activated T-cells, which is a root cause of the problem. This is probably one of the best examples of precision medicine we've probably seen in recent years, and actually has the opportunity to cure the disease. We're very excited about it. It's certainly a very strong strategic fit for us 'cause most of these patients are managed by gastroenterologists. You know, we're already there, we're already very present, and it's a great fit into our portfolio.
Great. When I met you two months ago to discuss again, of course, business updates on these assets, I could see that, you guys were very excited about it. Also, can you just remind us the stage of development the asset is currently in, the next steps that we need to look out for? As you look at the benchmarks for success when, evaluating the early data that is seen on the T-cell response, how should we think about it?
Yeah. This is a very kind of a unique situation because you have such a strong surrogate marker in the T-cells, which tend to respond. I mean, based on other diseases that you utilize this technology, and basically reduce these activated T-cells, that can happen in a matter of weeks.
Mm-hmm.
We think, you know, that will be the lead indicator that we will be focusing on first to get a read on, you know, are we having a clear pharmaco-pharmacodynamic effect. We're in Phase II, but, you know, with that data, it's not just about is the drug safe and we're treating PBC patients. We'll also have efficacy data both with regard to T-cells as well as Alk Phos and certainly histology, liver histology data. The first set of data we'll be able to inspect will be these activated T-cells, which we hope to see, you know, later this year.
Okay. Got it. On the second, pipeline, IW -3300 , again, both IC and BPS. How have you validated this pathway till now? As you look at visceral pain, visceral pain management, what are the current, treatment modalities for this specific area?
Well, bladder pain syndrome and interstitial cystitis are, again, very highly symptomatic, very debilitating disease, there really isn't any really effective therapy. I mean, there's hormonal therapy, tends to be a little messy, and physicians don't like using it. Intravesical lidocaine, which is, you know...
Mm-hmm
...pretty invasive way to treat patients. There really isn't anything out there to treat the pain symptoms. Just to remind you, CNP-104 is another GCC agonist, similar to apraglutide, but it will be testing the hypothesis of crosstalk. Basically, what crosstalk is an intervention at the spine where the bladder and the pelvic region, as well as the colon, you know, innervate the spine at the same point. Cyclic GMP has an effect on pain signaling to the brain. We've seen in several animal models that when we create the visceral hypersensitive m-model-
Mm-hmm
...it actually reduces pain sensation, you know, in the animal models. We're gonna be testing this crosstalk hypothesis by delivering the drug into the colon, but we'll be measuring, you know, the effects on bladder pain and interstitial cystitis. I mean, this is a large population, 4 to, you know, 8 or 10 million patients are suffering. And this would be a very, very elegant solution for these patients that are, that are suffering. Not to mention, it's obviously very safe and well-tolerated.
Got it. As you continue to develop this, what are the expectations around the data that you want to see, to decide if you want to invest in the product or not?
Yeah, I mean, this is a straight-up pain model. This is an 11-point numerical scale.
Mm-hmm
...very similar to the model we use in IBS, pain relief. We'll be certainly be looking for, you know, separation from placebo with regard to the overall evaluation of worse daily pain. You know, that will really give us a very strong read in phase II with regard to its potential benefit to the drug.
Got it. Excuse me. Sorry.
Bless you.
Yeah. As we look at the BD and the $600 million of cash that you have on the balance sheet right now, you know, of course, you have called out multiple times that you're actively pursuing M&A opportunities. Take us through the thoughts around the BD, both for early stage and mid stage assets, and how do you look to add to complement assets into LINZESS?
Sure. As I mentioned, we're primarily a GI-focused company. There really isn't a GI company out there anymore, right? I mean, we've got companies that have drugs for inflammatory bowel disease or one-off, but there really isn't kind of a consolidated GI group, and that's what we really aspire to be. We're looking at, you know, both, you know, GI, emerging GI assets or commercially available GI products, in both GI and hepatology, you know, which as you know, is a very strong adjacency to GI. You know, and we're seeing a lot of activity there with regard to, you know, available assets.
You know, the challenge that we've seen over the last couple of years is a value, you know, valuation of the companies that even though their stock has traded down significantly, everybody was last year was trying to figure out.
Mm-hmm.
what is the real value of my company. I look at my 52-week high and I'm down 35%, 40%. Now there's been a run here of, you know, 9, 12 months where that is where the values of these companies are.
Okay.
Of course, I think as the market continues to get tight, you know, cash is gonna be tough to get. I think people are becoming a bit more realistic with regard to the value of the company. You know, we're trying to be poised to take advantage of that. That being said, the bar again is very high as far as, you know, the value of the asset. You know, we're looking for highly differentiated products in serious GI medical conditions. We also need to make sure that the deal makes sense for us. I would say at this point, we're generally evaluating three-five assets almost-
Okay.
continually. you know, we just wanna make sure we're making the right next move.
The more realistic we set on valuations, then is it more of a near-term event?
Well, you know, it's a very binary outcome.
Yeah.
We hope so. You know, we've been in active negotiations several times, but again, you know, we have to make sure it works for us.
Got it. Maybe just a quick comment on how do you expect OpEx to trend through the year, especially as you think about the spending incrementally on promotions?
Yeah. I think this is one that we continue to evolve the marketing mix. You'll, if you recall, you know, when we first launched LINZESS, this was, you know, we went after a very broad physician population. Most of the investment was in physician promotion. we went out to the consumer and we kinda reengineered the marketing mix, tightened up our focus. You know, went from roughly, you know, 90,000 targets to about 50,000 targets. Now we're at about 35,000 targets. but, you know, we haven't seen any kinda slowdown in demand growth. these are really the most productive, emotionally sensitive targets. we'll continue to hone that, particularly with the pediatric indication coming in, as well as the consumer effort, which as you know, with the evolving media changes, you know, we're adapting to that.
As far as the overall spend, we see that very stable 'cause we're, as you know, we have very good margins on the brand and we certainly want to nurture that. That being said, we are making some investments in the pipeline. We'll be certainly finishing up the pediatric program. We certainly will be investing in CNP-104 and IW-3300. We're still guiding to, you know, over $250 million in EBITDA, but, you know, we're gonna be increasing our investment in the pipeline.
Got it. Tom, I think spent last Friday calling a few of my companies asking them about their exposure to SVB. It probably is less critical now as it was versus Friday, but I'll still put that question out there.
Sure.
Any exposure to SVB?
Yeah. For us, I mean, we have relationship with multiple banks, right? early on, I mean, they were a very significant bank to Ironwood.
Mm-hmm.
Since Greg and our CFO came on board, you know, we've largely diversified into large banks. The far majority of our cash-.
Okay.
you know, with the larger banks as well as mainly in securities. We feel that it was very protective. Certainly we had, you know, some money there, 'cause, you know, we do operations with SVB. And but, you know, we've obviously moved all of our cash out of there. You know, we haven't skipped a beat with regard to operations.
Okay.
'cause we've had such available cash, you know, at the other bank. I think, hey, this was a tough one for the industry. I mean, created a lot of turmoil. You know, we monitored it very close with regard to, you know, how we would communicate. Fortunately it got resolved.
Yeah. I would just even finer point there. We had looked at exposure, from an SVB perspective. As Tom said, we are diversified across many large financial institutions.
Mm-hmm.
We're monitoring the progression of the banking sector actively. We continually look at the allocation of our capital across those institutions to make sure that we do have a risk mitigation.
Okay, great. No impact on operations at any stage. Yeah.
Exactly.
Okay. Maybe just lastly very quickly on the, on the macro side. I mean, again, last year we went through a multitude of issues, supply chain, inflation, labor, and we discussed that in last year's conference. How has things evolved since then and what's the journey now?
You know, this all started with the pandemic, right?
Yeah.
I mean, it changed our business model.
Yeah.
you know, we're, you know, most, you know, brands went through kind of, you know, a very dark period where they were losing market share and growth. LINZESS continued to thrive. It thrived because one, there's this large unmet medical need, but you know, how we continued to operate. That certainly has, you know, evolved into, you know, a hybrid workplace model which we've been able to adapt to.
Mm-hmm.
Which is working for us. We're constantly evaluating it, but our employees are actively engaged. We've had very limited turnover at the organization. You know, the company is thriving financially. I think, you know, we feel very good about where we are right now in terms of, you know, the quality of the people that we have, certainly the progress we're making across all of our strategic imperatives and a very strong balance sheet.
Fantastic. Well, Tom and Greg, thank you so much for your time here.
Great to be here.
It's great to have you all here and I wish you a very productive conference.
We're looking forward to it.
Thank you.
Thank you.
Appreciate it.
Thank you.
For the sake of, five minutes.