Ironwood Pharmaceuticals, Inc.

Great. Thank you very much for joining us today. My name is Mohit Bansal. I'm one of the biotech and pharma analysts back here at Saraswago and I'm joined by team Ironwood today. So we have Tom McCourt, the CEO of the company and we have Sharman Imani, the CFO of the company. Thank you very much for joining us. Great to be here. Great. So maybe start, let's just start with those who are new to the story. They are trying to learn the story. Talk a little bit about the company, just a brief overview of the company and what you're up

to. Sure. So Ironwood is a GI-focused healthcare company. Our primary focus is in GI medicines and about five years ago we reorganized the company to really strengthen our overall skills and capabilities around GI disease, both with regard to development and commercial. We have a lead asset in LinzS, which is the market leading brand for the treatment of IBS and chronic constipation. It continues to thrive in the market. It's really been a remarkable drug and story in that in year 12, based on a platform of about four and a half million prescriptions, it's still growing at about 10% a year, which is really remarkably steady and consistent, durable growth that we're very proud of. And it's obviously reached blockbuster potential, exceeding a billion dollar in sales. And we recently have continued to nurture that. We have faced some pricing pressures over the last year or so that we're working through, but it's still throwing off really healthy revenue. And so the primary objective of the organization is to maximize at this point the profitability of the brand through LOE, which is March of 2029. So we have a number of years of good growth and certainly opportunity to harvest the brand. In addition, three years ago or four years ago, we set out to expand the pipeline. And we looked at a number of different assets and we settled on purchasing or acquiring effective vial primarily because of the asset of apraglutide, which is a really, we believe, a best in class GLP2 for the treatment of short bowel syndrome for patients that are dependent on significant parental support. We finished the phase three trial in March, reported the data recently, which was positive. And we've continued to evaluate the data, present a lot of the secondary analysis at a number of GI forums. And we're getting very, very positive feedback from the experts in the space as well as the investigators. So we're rapidly moving that forward to submission that will come early next year. In addition, we license the opportunity to access an asset, it's called CMP104, which is for primary biliary cholangitis. This asset has a chance, we believe, to be a disease modifying agent in that it uniquely targets the root cause of PBC, which is the existence of a single antigen, a PDCE2 antigen that triggers the body to generate autoreactive T cells that destroy the bile ducts. And this would be the first potentially disease modifying agent. We'll be seeing data later this month and certainly we're very excited to see what those data look like. And then of course the third pillar in our strategic priorities is continuing to generate cash flow and profits in cash flow to be able to fund where we are. But I think we're really at a critical point in the history of Ironwood and the next year or two are going to be very exciting for us.

Awesome. So let's just, like this is very helpful, thank you for that. So maybe let's just start with lenses and then the pressures, pulls and pushes you saw in the last couple of quarters, just talk through that and there seems to be a little bit of trend break or if it is, please help us understand what exactly is going on this month.

Yeah, I'm going to have Shrevan handle that. I think the important thing to keep in perspective though is the real growth and health of the brand comes around the demand growth, which is continuing to be healthy. And at this point in time we have been seeing some fluctuations in the use of Medicaid and certainly some of the changes in the regulatory environment with regard to government pricing. But Shrevan, you know, has been spending a lot of time fully understanding this. Shrevan, maybe you can address that.

I think you answered it perfectly fine. We don't really think it's necessarily a trend break. I think it's a, I think we've, as we think of our overall business and our profile, demand is really strong, which is important. The brand is being, you know, continues to grow and thrive, which is great. We've just, from a government pay perspective, face some headwinds. I think our overall commercial book of business is relatively stable at this point in time and we feel pretty good about where that is between now and .O.E.

Was this a mixed change or something? So what, you talked a little bit about Medicaid and the cap removal as well. So can you elaborate this a little bit more so that we can get back

to it? So historically, yes, it is, to answer your question, it is a mixed change. So it's just an increase in, as we think about where and how we sell in our books of business, there's commercial, there's Medicare and there's Medicaid. And Medicare is part of the opposite. But the Medicaid percentage of our overall book of business, the amount of volume that we have has increased from a couple percentage points. And if you think about what the gross sales of overall invested, as you can imagine, it's a primary care drug that's been on the market since 2012. It's a heavily discounted drug. So the net sales we report is a fraction of what our overall gross sales are. And so if you think about that, the amount of net sales that we, I mean, that a couple point change in our book of business creates big shifts. Right. That's one. Two, Medicaid reimbursement historically had been capped at 100% of whatever our price was. And so essentially that volume, we'd get zero revenue for. And so if you think about an increase in that volume, in terms of a mix of our business, where we used to receive revenue, receive price for that product, we no longer do it because we're rebating it back to the States. So that's part one. So we saw an increase in utilization. Second component of that is last year due to the, to the ARA, America Recovery Act, there was a change in the legislation which removes the cap of reimbursement at 100%. So there was a formula that was constructed by the States that allowed them to receive a payment beyond 100% of the rebate price. So we can rebate more than what the actual price drug is back to the States. Right. And so the combination of the two created a headwind this year. And we've changed our guidance as a result. Right. Got it.

I think as we look, as we're looking forward, you know, the other piece too, is as we know, we're seeing some readjustment and really disenrollment of Medicaid. And we were really anticipating it to level off quicker than it did. You know, we are, to Trevor's point, even though there's fewer people on Medicaid, we're seeing greater utilization, which is really the kind of the ping we took this year. But as we look forward, you know, we certainly see that kind of baseline as we move forward. So we still see this as a very viable, very healthy brand

that's

going to continue to throw off, you know, a lot of cash.

Yeah. And I think that's a really important point, Tom, where it's in our 2024 over 2023 numbers in terms of the shock, but going forward, we won't have a year over year impact associated with.

In the past, you did talk about, I mean, probably the low single digit kind of growth for this particular brand, -O-E. Do you think it is, once you absorb the shock, you can probably get back to that?

I think we believe so. I mean, because really the key driver is the overall demand growth, which continues to be really, I mean, it dominates the market. We're almost at 50% market share. We're getting a disproportionate share of the patients, the new patients coming into the market, which is going to continue to fuel the I think the biggest thing we do need, I mean, I do think about payer access is a big part of our marketing mix, because if I lose payer access, it's really going to hinder our demand growth. So it is an investment in the brand, just like product promotion or our sales force.

And I think, again, relative to our commercial books, we're pretty stable. The thing that's always a wild card is changes in government policy, which we have, we don't have control and we're only reactive

to. Talking about government policy, so there's a Part B redesign coming as well. So how much impactful that is for your business?

So we'll come back and give guidance on that when we give guidance at the start of next year, anticipating some, I assume we'll come back and give you the level of what that might be. And I am hesitant to tell you what it's like. Got it. No better. Got it.

I

mean, like

there's one part that, you know, especially for, I mean, for lower priced product, like they are not high priced product, there is volume offset there as well. Do you think that is possibly the possibility there?

Potentially. I would say that again, it depends. This is the change in the redesign associated with catastrophic coverage associated with these brands. It just depends on how much that percentage is and the volume of in our Medicare book business. Medicare is a significant part of our business. And so we'll have to come back as to what that impact is in future days. There will be some impact. I just don't know what that is.

Got it. So one consequence of this top line shock we saw this year, obviously this year is the impact on EBITDA and then... Yeah, it's all price. It's a change in price. It's change in prices, right? So it has an impact on EBITDA and then obviously, so people are thinking about the profitability of the business going forward. How are you... What kind of comfort you can give the investors? How are you thinking about this? And is there room to, you know, right sides organization or think about situations where, you know, you can probably still throw off pretty good...

Yeah. So as Tom mentioned, you know, it is a pretty profitable brand to begin with. And so the demand obviously is a big driver of what feels like we feel pretty confident that we'll continue to optimize the spend that we have against the brand and look for opportunities to continue to, you know, as Tom mentioned, one of our pillars is increasing cash, free cash flow. And we'll continue to find opportunities to do that. And so sure way of saying, yes, there are options and possibilities to do that. We're evaluating this.

And I think as we look towards the future, Lindus is going to continue to throw off a good deal of cash. You know, we plan to have apric glutide into the market in 2026, and we still have another three years of revenue with Lindus and those two combined with really limited increase in overall GNA and expenses. So, you know, when you look at the longer term outlook for us, it looks very, very bright with regard to certainly, you know, our ability to return value to the shareholders.

Got it. I mean, again, not to talk about quantitatively, because you are not given guidance for the next few years, but given not thinking about CNP at this point, CNP would, whatever happens, but without that, do you think this is the high watermark, this year is high watermark for R&D probably,

given that you are... For R&D, yes. For development, true development we have advanced trials in short bowel syndrome, advanced trials in graft versus host disease, CNP 104, 3300, and that includes internal and external spend. So this is a big year from a development focus for the organization. As we turn the page, there is ramp up associated with regulatory filing, commercial launch that we'll face in 25. So from an effects perspective, we might be able to mix of where we have that off-ex will shift to essentially preparation of commercial launch. And then in 26, once we are able to post revenues and launch the drug after approval, if we get approved, which we should be so confident about, if the post approval, then we'll be able to, I think, have significant leverage over that existing operating base.

That makes sense. So let's just move on to our presentation. So we'd love to understand what the feedback you have received after the presentation at DDW, what physicians like, and what kind of questions did you get there?

Yeah, maybe we start with, you know, what does the market look like and kind of going into the market, you know, why we were attracted to this market and why we're attracted to the asset. And I think the reality is, you know, these are really debilitated patients. They're on, you know, daily or multiple days a week, the potential support to thrive or even survive. Certainly the first GLP2 that came to market was an advancement in care, but had some real gaps with regard to its value proposition to patients. And there's some questions around efficacy, you know, there's weekly injections, there's tolerability issues. And the reality is about 50% of patients that are initiated on this GLP2 discontinue within 12 months and almost two thirds in the first two years. So clearly there's a sizeful population out there, eight to 10,000 patients. The majority of those remain untreated and those that have been initiated, you know, often discontinue. So we saw an opportunity where, you know, there was clearly an advancement in care and certainly we saw that in Afroglutide, both with regard to, you know, its half-life and its exposure in the gut, you know, that would allow a more effective therapy and a more convenient therapy. And certainly the clinical data panned out. No question efficacy was demonstrated across both anatomies, those that have a stoma and those that have remnant colon. But I think the other that was remarkable is the tolerability profile, which was comparable to placebo. So if you look at the overall clinical profile of the drug, you know, clearly sound efficacy across both anatomies, you know, very well tolerated drug that's once a week as opposed to a daily injection. So, you know, the reaction from the investigators and KOLs have been very, very positive. And as we've continued to expand because this was such a large trial, I mean, the largest trial ever conducted, as we've kind of teased back a lot of the additional data and presented it, the case becomes more and more compelling. And certainly we're getting a lot of feedback, you know, from the KOLs that they're looking forward to getting the drug in their hands.

Got it. So, I mean, in terms of unmet need, can you talk a little bit about where is the opportunity there? And then I think you talked in the past that, I mean, this market is not like very, it's underplanted market. So where do you see the opportunity?

Well, I think multiple forms. One, you know, the minority of patients have been treated. And, you know, and part of that is the attractiveness of the initial treatment, which is a daily injection. And half this population, you know, aren't on daily parental nutrition. So if I'm on two, three, four days, do I want to take a daily injection as opposed to, you know, weekly injection? I think the other piece, as I mentioned, is the tolerability. There's a fair bit of abdominal distress in an injection site reaction associated, you know, with the currently available GLP-2, where we clearly saw an advantage. So I think the primary source of business will be the treatment naive patients that would be, you know, this would be a far more attractive asset, you know, treatment for them. I think second, you know, a lot of these patients that have discontinued GLP-2, either due to a lack of efficacy or tolerability, you know, are certainly available to us. And certainly we are also from physicians or prescribers, you're hearing, you know, their willingness to switch just because it looks like it's a better tolerated and a better alternative for their patients. So there is a sizable opportunity. The one thing that is new is the initiation of an ICD-10 code

for

Sharpe-Alzheimer, which never existed. So, you know, we were estimating the size of the population somewhere between 8,000 and 10,000 patients. And as we're seeing the data roll in, the ICD-10 code now has been available since late 2023. That certainly validated it. But the other piece that it gives us is where are the patients concentrated? So as we think about our -to-market strategy, it really allows us to focus on where are the pools of patients, where are the centers we want to cover. And that's data we never had before, which will be, I think, invaluable as we continue to get ready to go to market.

Got it. That's super helpful. So, I mean, I think in the past you did talk about there are patients who have tried Jatex before and they have discontinued. So can you talk a little bit about the size of the patient population and, like, what is the reason why people discontinued?

The primary reason was either a lack of efficacy, because what we do know from the clinical trials, when you look at the primary endpoint, it worked in stoma patients, but it really had no change over placebo in this other CIC population. So obviously you're probably not seeing efficacy in that group, where we clearly saw that in our primary endpoint. And certainly as we looked at the secondary analysis, there's clear benefit to those patients. So I think the clinical profile expands the clinical response to a larger population. And I think the other piece of that is this rolling off due to tolerability issues. And keep in mind, roughly, there's probably 14 to 1600 patients that are on the currently available GLP-2, which generates about $800 million a year, but they're cycling off. So again, about 50% of those patients discontinue within 12 months over the last several years. That's a sizeable population that have tried it and it stopped it, which we think is a very accessible population to us as we go to market.

Got it. And then given that you are in some of the clinics already with the clinches, what kind of crap you can do and then you have done so far?

I think we're really well situated right now with regard to our commercial model. We have a very effective, very tenured sales force that have been in gastrointestinal, gastroenterologist's office for the last 10 or 12 years. Over half of our sales force that we currently have launched the drug 10 years ago and are still in there. So the access that they have to those offices is very strong, particularly the large GI practices, these I call them GI supergroups where you've seen this consolidation in practices. There's a group down in Dallas that's over a thousand gastroenterologists and we have ready access to that. So we have the sales force necessary to certainly cover the large GI centers as well as the academic centers where these patients tend to be cared for. The previous GLP-1 or GLP-2 of sales force was actually smaller than the one we have.

So

I think we're not talking about a need to expand the sales force. I think we may want to refocus it on certain centers. I think the one outstanding piece that we do need to put in place is a hub service to really support patients to kind of hold their hand through the treatment process which we think could be invaluable for that patient population.

And then Tom, we're also started just in addition to the data we've had at individual conferences, the GI conferences over the course of the year, we've also begun disease awareness programs as well which also will prime us for a launch in 2026.

I mean that's really an important point and because right now as far as the number one opportunity is identifying patients. Right. And so we felt strongly that we want to jump start our disease awareness program to really expose who is the patient in need. So certainly it exposes the shortcomings currently in treatment. Well, obviously certainly we're not promoting, you know, a pre-clinic at this point, but I think really laying that foundation for who is the patient in need and really figure out who is the first patient that that prescriber is going to give us.

Right. That really makes sense. So I mean I think one question we get a lot and I'm sure you have got received a lot is that people recognize that it is better than catech, but there is a glapa glutide as well in between. So how do you see when you anything which is not on the market right now, but you see about overall competitors, competitiveness of the drug versus the market in which glapa would be there as well. How do you think about that? Maybe.

Right. So, you know, the reality is we don't know a lot about glapa. They haven't disclosed all the data. I think I go back to the clinical profile of APRA, you know, which clearly has efficacy across both patient population, both anatomies. The tolerability, you know, is outstanding. There's some question about that with glapa. Glapa, I don't want to comment on that, but also, you know, the once a week injection. Right. That's very well tolerated. I think we're still in a very, very strong position. And keep in mind, there's still a lot of patients out there that need to be treated.

Right.

So I think there's plenty of room for a couple of players that may advance care. I think we clearly advance care. So I think there's room, but it's really uncertain, you know, what their go to market strategy is going to be. I mean, we're going at it now.

Right.

Right. And, you know, we are, we feel an urgency, you know, to get our feet on the ground and really start developing the market where I'm not sure that that's happened over.

Yeah. And I think as we think about our product in terms of positioning, where we get confident in terms of our feedback from KOLs is it's a once weekly, which doctors have been seeking for a long time in terms of therapy. We had a large responders in terms of like high responders to our trial, which the data released in May in terms of patients receiving two or three days off therapy, which is like a quarter or third of our patients, depending on two or three days. And if you think about the doctors here when they're trying to work with their patients, giving them significant relief from parental nutrition and the potential that that might exist for patient is great. Couple that with fast responder, early response in terms of feeling and seeing benefits in the first couple of weeks. And then couple that with the safety and tolerability profile that's almost equivalent to placebo. I think it's the overall profile of our drug, right. As a package that makes us feel confident that in a competitive environment that we will get more than our share of patients because as a whole, I think the opportunity to give patients benefit and the opportunity to give significant benefit exists with our product. And the burden in terms of the hurdle for that patient to take on the therapy is very low. And so that combination, I think is a winner.

This is very helpful. Thank you for that. So when people look at the market opportunity, look at Gattax, which is selling what, $750 million, give or take some, but you have seen oftentimes with less frequent doses, compliance improves as well as durability, duration of the treatment improves. So do you think those sectors could also come into play here? And where do you see where do you see duration on Gattax right now versus how do you think about it?

Yeah, I think it comes down to again, the available patient population, right, which is sizable. I think to Shravan's point earlier, the clinical profile of drug is far more attractive. So I think we're going to attract patients that just weren't accessible to Gattax. I think we talked about those clinicians that have made the choice to try a GLP-2 and they stopped, those are available to us. And clearly, I think we'll see some switching as well because it is a far more attractive clinical profile. So I think about our confidence in our projection of a billion dollars in sales is very accessible. So we're talking about 2000 patients with current drug pricing to get to a billion dollars. And I think that is very achievable in this market with this clinical profile.

And just a reminder, that's our peak sales guidance. That is not year one guidance.

Our

hope with this product and we acquired it and we guided to, we still feel confident in this, that we'll replace LinsSess revenues by the end of the decade. It does go soft patent. Apple will be there at a significant, similar revenue level. We still feel confident in that ability. And just as a reminder for everybody, LinsSess produces about 400 something million dollars of revenue for us. So it's, I think, just to put in context, the number of patients to get to that level is not thousands and thousands.

Got it. That's super helpful. Maybe touching on CNP 104, I mean, at a high level, I mean, like, so what are you looking to see from this study? And this is a novel mechanism of action. So what is your thought I think

this is really exciting science. This is a real true innovation. And the first treatment ever to really, as I mentioned, target the root cause of the problem, which is, you know, this, this autoimmune response to the PDCE2 antigen that destroys these bile ducts. You know, this is a first in human study. The first signal that we would want to see is a reduction in these activated T cells that are destroying it. We did have some, a preliminary look in blinded data, you know, about halfway through the study. And we saw some, some clearly favorable trends that we like to see with the T cells. But, you know, by the end of the month, we'll be at, we'll be see the whole data set at 120 days. And so the first thing we really need to see is a proof of mechanism, you know, which is this reduction in these, you know, these activated T cells. The other thing that we are, we're evaluating is liver function. And we're looking at multiple markers as far as liver function beyond just alkali and phosphatates, which primarily just focus on bio flow, not actually the health of the liver. So hopefully if we see this significant reduction in T cells, that reads through to, you know, an improvement in liver function. Now keep in mind, it's important also to recognize that when you look at the currently available treatments, you know, for PBC, it generally takes a year to see an improvement in LFAS. So, you know, is 120 days soon enough or I'm sorry, long enough, excuse me, long enough too soon, you know, to see those data. So I think, you know, to give us confidence, I'm actually really need to see a reduction in T cell. And I think, you know, any lead indicators for liver function will take a hard look. But at this point, when I look at our business priorities as an organization of maximizing the profitability lends us getting an effort to market as fast as we can, you know, the bar is going to be high for this, you know, for us to take on another binary risk, you know, to go forward with a phase three trial, I think we want, we have to be absolutely convinced that, you know, this is going to advance care.

Got it. So basically you will exercise the option if you're absolutely certain about it. Absolutely. Got it. Very helpful. One last question to both of you. So fast for one year. We are sitting here again. I hope you come here. So if I ask you, like, what would make you look back at the year and that this was a great year for us?

Well, I think certainly as we continue to figure out how we can harvest lends us and generate even higher profits based on the that's certainly one. I think certainly getting in a timely submission. You know, we have, as you know, we already have fast track designation from the FDA. So, you know, we have all they've agreed to a rolling submission. So we'll be rolling out, certainly the submission later this year. And we hope to have it completed, certainly by early next year or early 2025. So I think looking back, having a timely and a very solid NDA submission is number one. I think continuing the strong trends of lends us is number two. And certainly, are we continuing to grow the EBITDA to a healthier place that we have great confidence in?

I think I'm sure of it. I think that's spot on. Great. On that high note, thank you very much. Thank you.