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Operator
and thank you for standing by. Welcome to the Ironwood Pharmaceuticals first quarter 2021 investor update call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Meredith Kaya, Vice President of Finance and Investor Relations.
Meredith Kaya
Please go ahead. Good morning, and thanks for joining us for our first quarter 2021 investor update. Our press release crossed the wire this morning and 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, 2020, 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 president and interim CEO, will review our strategic priorities, highlight today's announcement regarding our new share repurchase program, and summarize our commercial performance for Linzess. Then Gina Consulman, our CFO, will review our first quarter 2021 financial results and guidance. Mike Schatzlein, our CMO, will also be available for the Q&A portion of the call. We'll 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 Tom.
Tom McCourt
Thanks, Meredith. Good morning, everyone, and thanks for joining us today. We had a solid start to 2021, as demonstrated by strong Linzess performance, continuing its momentum from 2020, and another quarter of delivering profitability and positive cash flow. We are steadfast in our mission and importantly remain focused on our goals of driving value to our shareholders by bringing important medicines to patients and building a growing and successful business. Our strategy starts with maximizing Linzess. Linzess continued to demonstrate double-digit growth in demand in the first quarter, resulting in U.S. net sales of $215 million, or 12% growth year-over-year. And we believe there's substantial opportunity for continued growth moving forward. Second... We're seeking to build an innovative portfolio, both through the development of internal assets such as our own IW3300 for the potential treatment of visceral pain conditions and through bringing in external assets that target serious organic GI diseases. And finally, we're focused on generating sustainable profits and cash flow. We ended the first quarter with nearly $440 million in cash on our balance sheet, an increase of $75 million versus the fourth quarter in 2020. Our strong financial position and our performance today provides us with the ability to simultaneously invest thoughtfully in our strategic priorities, as we just highlighted, and be in a position to also return cash to shareholders. We announced this morning that our board has authorized the share repurchase program under which we may purchase up to $150 million in outstanding shares of Ironwood common stock through December 2022. We maintain a disciplined and thoughtful approach to capital allocation and are committed to strategically deploying capital where we believe it can drive the greatest value to our shareholders. The share repurchase program is aligned with that commitment and underscores the strength of our financial position. Now let's turn to the commercial performance. Linzess performed remarkably well in the first quarter. Prescription demand grew 12% year over year, with Linzess continuing to strengthen its position as the number one prescription treatment in the U.S. for adults with IBSC and chronic constipation, with approximately 40% market share in the category. New-to-brand prescriptions increased 24% year-over-year, significantly outpacing the IBSC and chronic constipation market. This is an all-time high for Linzess, reinforcing that patients and healthcare practitioners continue to choose Linzess. 90-day prescriptions also continue to represent a significant number of total Linzess prescriptions. In the first quarter, 90-day prescriptions made up nearly 20% of the business. This strong performance reaffirms our confidence that Linzess has the potential to exceed a billion dollars in U.S. net sales, with several additional opportunities to drive even further growth. The success of Linzess to date in the U.S. has come through consistent and strong execution of the commercial strategy that's grounded in three core fundamentals, increasing awareness of Linzess amongst physicians, motivating appropriate patients to seek care and request LINZ-S and securing broad payer access. We believe the growth that we've achieved in the first quarter is in part a reflection of the success of this strategy and the positive experience that physicians have had with LINZ-S. In addition, LINZ-S remains the class leader in formulary access, important for supporting both existing and new patients. We also believe that the brand continues to demonstrate strong promotional responsiveness. Since the beginning of the year, we've evolved the marketing mix to further support our consumer media strategies. This includes a fully refreshed consumer campaign that launched in early April, which now incorporates the IBSC overall abdominal symptom data. We expect this new campaign to have a meaningful impact on patients and the brand. Also, our skilled and experienced sales force have been gaining a high level of in-person meetings with physicians, achieving access comparable to pre-COVID levels. Additionally, there has been significant increase in online searches and clicks for constipation-related terms. And we are also seeing higher traffic to the LINSS website, suggesting that more patients are seeking treatment options for their IBSC and constipation-related symptoms. In the first quarter, we experienced a significant increase in the number of visitors to Linzess.com, with about 400,000 unique visitors a month. This represents a 70% increase year over year. Finally, recent survey data also suggests that there's been a significant increase in overall prevalence of IBSC in chronic constipation in adults in the U.S., New data on prevalence and the burden of illness will be presented at DDW in a few weeks. These data illustrate the growth potential for lenses for appropriate patients, particularly on the relief of overall abdominal symptoms associated with IBSC. We're looking forward to the upcoming DDW meeting where Ironwood and AbbVie will be presenting seven scientific posters. four of which have been developed in partnership with AbbVie, and four of the seven have been named Posters of Distinction. In addition to the demand catalysts I highlighted, we continue to believe that our investments in telemedicine may help advance access to physician care for GI patients in need, and our commitment to exploring lifecycle management initiatives present an opportunity to expand the clinical utility for Linacritide. We believe both these efforts will serve as key drivers for continued growth moving forward. Just a few final comments before I turn it over to Gina. As we look forward, we recognize that GI remains a therapeutic area with a significant unmet need, with millions of highly symptomatic and suffering patients and diseases that often have limited or no treatment options. We have a strong, experienced team with the knowledge and expertise to advance innovative science and build successful brands. I'd like to take a moment to thank all of our employees, patients, caregivers, and advocates in the GI community for their shared dedication to advancing and supporting our efforts in this underserved market. With that, I'll turn the call over to Gina.
Meredith
Thanks, Tom, and good morning, everyone. It's wonderful to be in a position to report such great financial performance. I have a few updates to provide today. First, I'll walk through the financial performance for Q1. Then I'll review our 2021 guidance. And finally, I'll touch on our capital allocation strategy and provide a few closing thoughts. Please refer to our press release for our detailed financial information. In the first quarter of 2021, Ironwood revenues were 89 million, up 11% year over year, driven primarily by U.S. Linzess collaboration revenues of 86 million. Our core business, U.S.-Linzess Collaboration Revenues, increased 21% compared to the first quarter of 2020. Moving to Linzess, as Tom mentioned, U.S. net sales grew 12% compared to the first quarter of 2020. Net sales growth was driven by robust prescription demand and favorable inventory channel fluctuations. partially offset by net price erosion. We continue to expect mid-single-digit net price erosion for the full year. And regarding the channel, we anticipate fewer channel fluctuations for the remainder of the year due to tighter inventory management. We are on track to achieve our U.S. LINZES net sales guidance of 3% to 5% growth year over year in 2021. While we exceeded these growth rates in the first quarter, it is still early in the year, and we will continue to monitor demand, price, and inventory moving forward. Turning to Linzess brand profitability, commercial margin in the first quarter was 73%. We continue to seek to expand margins over time for growing Linzess net sales and disciplined investment behind the brand. Now to Ironwood's profitability. Gap net income was $40 million, and adjusted EBITDA was $46 million in the first quarter. Now let's review our 2021 guidance. In addition to continuing to expect Linzess net sales growth in 2021, as I mentioned earlier, we continue to expect total Ironwood revenue of $370 to $385 million and adjusted EBITDA of greater than $190 million for the year. Moving to cash and capital allocation priorities. In the first quarter, we generated $74 million in cash flow from operations and ended the quarter with $438 million in cash and investments, up from $363 million in the fourth quarter of 2020. Being a profitable biotech company, delivering meaningful cash flow is a fortunate and unique position to be in and a long way from where we were just a few years ago. We are committed to strategically deploying capital where we believe we can drive the greatest value for our shareholders. I am thrilled as CFO that this strong financial position has given us the ability to simultaneously invest thoughtfully in our GI strategy and also return cash to our shareholders. As Tom highlighted, our board has authorized a share repurchase program in which we can buy back up to $150 million of Ironwood common stock through December 2022. To be clear, this program is aligned with our strategic priorities, and we do not expect it to constrain our efforts to maximize lens S, build an innovative GI pipeline, and deliver profits and cash flow. To wrap up, we had a solid start to the year. Our strong results are reflective of our investments, and we believe we are in a great position to develop innovative assets in the GI space. Looking ahead, we are focused on advancing our three strategic priorities. We have built a strong foundation, and we are excited about the opportunities ahead of us to improve the lives of GI patients and deliver shareholder value. Thanks again for joining us this morning. Operator, you may now open up the line for questions.
Operator
At this time, we would like to take any questions you may have. To ask a question, please press star 1 on your telephone keypad. Your first question is from Jacob Hughes with Wells Fargo. Your line is open.
Jacob Hughes
Hi. Thanks for taking my question. Gene, if I just look at the first quarter results for Linzess, 12% growth, and, you know, I know you called out rolling through the first quarter, but, you know, the full year guidance does assume or does imply a deceleration through the year. Could you just provide some additional color on that on both the RX demand side and pricing? I mean, is this conservative or do you think it's just realistic?
Meredith
Hi. Good morning. You know, it's a great question, and it's certainly one that, you know, we took a hard look at. You know, we always look at our performance for the quarter and then take a look at the guidance expectations for the year. And certainly your question is one we asked ourselves as well. So, one, you know, we're just, you know, thrilled with 12% demand growth year over year, especially where we are. I think it's the eighth year, you know, post-launch at this point. And just Fantastic to see the growth. But, you know, I go back to a couple things, two of which I guess I mentioned in the script. So one, you know, it's just early, right? It's the first quarter for the full year. And two, I talked about expectations for tighter inventory management this year. So what does that mean? That means, you know, if you think about prior years, we would see some seasonal changes in the inventory. We would typically see some burn, you know, and actually kind of significant burn in the first part of the year, and then we would see build in the second part of the year. And if you think, you know, if you compare that to what we're expecting this year, so if we expect a more stable inventory balance for the full year, less burn in the early part of the year, so where we are in Q1, for instance, contributes to higher Linzess net sales growth year over year. So the first part of the year you have higher growth rates, right? And then you think about the second part of the year where we'll have less build compared to the prior year, and that will contribute to lower Linzess net sales growth rates year over year. So think about that dynamic in combination with, obviously, the demand, which we're really pleased with, and then the pricing guidance that we continue to guide to, which is around mid-single-digit price erosion for the year.
Jacob Hughes
Okay. Got it. And then just on, you know, the buyback and, you know, just maybe provide some additional color on how you're thinking about the pipeline beyond 3300. You talked about bringing in some additional assets. Is Is the supervising color on the stage and timing of those assets in light of the buyback and the upcoming convertible debt next year?
Meredith
Sure. You know, maybe I'll start, if that's okay, on the financial part of the buyback, and I can turn it over to Mike and Tom if they want to jump in on more of the specifics that we're looking for for the assets. But, one, you know, I'm – It's just a great quarter. I'm thrilled to be able to announce this. If I think back, for the last couple of years, we have periodically received questions about when we would be able to return cash to our shareholders. Up until now, I really didn't think we were in that place. We started with probably a low point of $100 million post-spin and close to $500 million of debt. And all that debt, if you recall, was due at roughly the same time. And so, you know, fast forward now, it's just over two years post-separation. We have $440 million in cash on the balance sheet. We're guiding to greater than $190 million of EBITDA this year, right, which is a nice proxy for cash generation. And the debt's been nicely spaced between 22, 24, and 26. We remain committed to paying off the 22 convert in cash. We've also said that we have expectations for 24 and 26 to possibly pay that off in cash as well. So if you just think about all of that, I think we're in a great position to have this $150 million cash buyback or the stock buyback. And I think it does not impact our ability to continue to invest in our strategy. So, you know, our strategy is maximizing Linzess, building out our pipeline and growing profitability. We have full investment behind Linzess. You can see that in the numbers for the year and we're guiding to that for the year. And the pipeline, we're continuing to look at assets to bring in And I think as we're looking at these assets, you know, by the time we bring the asset in and, you know, I would love to see the asset brought in sooner rather than later, right? And we're all really excited to bring something in this year. But if you think about, you know, just the pace of bringing in the assets, I think we're very confident that we can fund these asset acquisitions and still remain profitable.
Jacob Hughes
Thanks very much.
Operator
Your next question is from Eric Joseph with JP Morgan. Your line is open.
Eric Joseph
Good morning. This is Hannah on for Eric. Thanks for taking the question. Just a few from us. So first on give Laurie your asset that you're developing or marketing in partnership with Alnylam. How much of a revenue generator do you think that asset could become for Ironwood? And does the exposure and hepatic disease in that treating community factor into your BD prioritization numbers? And I have a follow-up after that.
Tom McCourt
Yeah, maybe I can, this is Tom, maybe I'll take, you know, I'll take that question. Obviously, this was a, you know, a really, we think, a sound strategic move for us. One, you know, to be able to contribute to, you know, a real innovation in the marketplace, particularly, you know, among our customers in GI as well as hepatology. And, you know, our primary objective early on was working with the NILAM to identify additional patients, which we've successfully done. What's happening right now is we've identified a pretty sizable, excuse me, a sizable group pipeline of patients that now, you know, we're working with Anilam to get onto drugs. So these are patients that are highly symptomatic, have been diagnosed, have a positive test for AHP, and, you know, we're moving them through. So, I mean, it's still relatively early on. We've certainly exceeded our expectation with the number of patients that we have found, that the number of patients that they have put on drugs. But it's a little challenging to speculate overall how big that opportunity is going to be for us. I think we'll have a better line of sight towards the end of the year as we pull the patients through that we've identified and then, you know, how many more additional patients can we identify through a number of different means that we're deploying with our sales force. And again, I think the other piece of this is really understanding what it takes to succeed in the rare disease space, which is obviously an area, you know, that we may be interested in if it's a GI-related disease. And as far as the adjacency of hepatology, I mean, it is clearly an area that may be of interest to us because of the common call point because, as you know, the far majority of patients suffering from hepatic disease are actually managed by gastroenterologists due to the limited number of hepatologists out there. So I think overall, I think we're delighted with the progress we've made, and ILM's been a terrific partner, and we're really helping an awful lot of patients in a very, very debilitating disease.
Eric Joseph
Great. That's helpful. And for IW3300, You had mentioned that you are guiding towards an IMD filing within the first half of 2021. So in terms of gating items beginning that's submitted, what are the remaining items on the list? And then also, are you able to share what you're thinking of in terms of potential phase one trial design and endpoints of interest?
Tom McCourt
Yes. I apologize. You broke up a little bit, so I just want to make sure I understood it. So, you know, what I'll do is I'll ask Mike Schuetzlein, our chief medical officer, to kind of share kind of where we are with the IND and the progress as well as, you know, what is the next step on trial design. And then, you know, we can come back and talk a bit more about kind of how we're viewing the asset and how we might think about monetizing that asset. Okay.
Mike Schuetzlein
Thanks, Tom. It's a good question. We remain on track with IW3300 for the IND submission for the second half of 2021. And as you know, we're actually pursuing that for interstitial cystitis and bladder pain syndrome. And the key point there to recognize is that even though you may not think of that as a GI indication, you need to understand that mechanistically how IW3300 acts is actually in the colon. And it's actually based on the crosstalk hypothesis, which we think we're going to be able to demonstrate hopefully clinical data to support that when we get into the clinical program. And how that works is that we know that inflammation or underlying diseases of the gut can actually cause different sensitivity in other abdominal organs. like pelvic organs or the bladder. So we really look at targeting IW3300 to the colon as a real opportunity to help pain syndromes like bladder pain syndrome. So again, we're on track for IND at the end or the second half of 2021 and starting a clinical program soon thereafter.
Tom McCourt
And Mike, as far as the PAC. So what would that look like?
Mike Schuetzlein
Yeah, thanks. Thanks for your reminder. So the design is obviously we'll get safety and tolerability data first, but we're really trying to move rapidly to a POC proof of concept study. And the proof of concept study will be in bladder pain syndrome patients. So we're going to look at an endpoint of relevance to bladder pain syndrome patients. We're working with external experts to get granular on those endpoints. And we're going to have a design, you know, obviously sometime later in the year as well that we can present to health authorities to start the clinical program.
Tom McCourt
Yeah, I think as far as the asset itself, as the team thinks about this, obviously it's a wholly owned asset. We know the drug. Certainly we know how it acts. We know the drug is safe. We know we can manufacture it. We have confidence we can deliver it at the site of action. And certainly the preclinical data has been very, very positive with regard to this crosstalk mechanism that Mike spoke with. And, you know, with a modest investment, we can get to at least a proof of concept. And at that point, you know, we can make a decision as to, you know, where we go, you know, with the asset, whether we out-license it or, you know, do we develop ourselves. But obviously, this is a valuable asset, and we certainly want to make the most of the opportunity.
Eric Joseph
Okay, great. That's helpful. Thanks for taking the question. Sure.
Operator
Again, if you'd like to ask a question, please press star followed by the number one on your telephone keypad. Your next question is from David Lebowitz with Morgan Stanley. Your line is open. David, your line is open.
David Lebowitz
Sorry, I had it on mute. My question is on cadence of the sales for the quarters. Clearly volume growth was pretty good in the quarter. I know that the first quarter is typically a down quarter. Fourth quarter last year was quite strong. How can we expect the cadence to go as the year goes? I know that it tends to get stronger as the year progresses. Will we expect that trend to continue? Will it be quite as sharp as it was last year? Because last year, the first quarter versus the fourth quarter were quite substantially different. So how should we expect to look at it this year?
Tom McCourt
David, this is Tom. Maybe I'll take a whack at it. And, you know, this is a really – One, it's really remarkable what we're seeing. To your point, there traditionally has been clear seasonality in the drug where, due to the high deductible plans, we see a dip in January and February, usually March and April and May. It starts accelerating. It slows down over the summer and then accelerates in the back end of the year. And certainly, the pandemic, I think, has made a difference here. There's no question. I think we saw a very strong fourth quarter, but as you mentioned, we saw an extraordinarily strong first quarter. And the question is why, and where is that source of business coming from? And as I mentioned, you know, we're seeing a tremendous amount of traffic, you know, certainly on the internet, but also to our website. I mentioned, you know, we're seeing like 400,000 unique visitors a month. That's up 70% from where we were a year ago. In addition, you know, we collaborated with the University of Michigan and Cedars-Sinai to connect a rather large GI survey. which replicated a survey we did five years ago, you know, with them. And there's a clear increase in the prevalence of the disease. So it looks like, you know, this buoyancy of the overall prevalence looks encouraging. But, you know, as Gina mentioned, you know, we're excited at what we're seeing. We've clearly seen an inflection point in demand, particularly with new to brand. But, you know, we're certainly cautiously optimistic as we're looking forward.
Meredith
Yeah, David, if I could just quickly add, just keep in mind my inventory comments that I mentioned earlier, right? We won't, obviously, net sales is a combination of demand, price, and inventory movement, and we won't see the same, at least we're not anticipating, right, at this time, the same level of burn in the first part of the year and the same build in the second part of the year to contribute to, you know, where we have typically seen higher net sales in the fourth quarter due to some build.
David Lebowitz
Excellent. Thank you very much for taking my question. Thanks, David.
Operator
We have no further questions at this time. I turn the call back to presenters for closing remarks.
Tom McCourt
Well, I just want to close by, you know, certainly, you know, thanking all of you for joining us today. And, you know, it's been a terrific, you know, first quarter. I think I know I speak on behalf of the management team that, you know, we've stayed true to our promise that, you know, to shareholders. We've executed well on the core strategy that we outlined two years ago, you know, as Gina shared with you earlier. But I think we're extremely optimistic with regard to what we're seeing and what we're doing. And I think we're looking forward to, you know, following up with you at the end of next quarter to see kind of where we are. And I think we'll have a much better line of sight of what the year will look like. So thanks for your time.
David Lebowitz
This concludes today's meeting.
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