Ironwood Pharmaceuticals, Inc.

Good morning, everyone. My name is Ian, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ironwood Pharmaceuticals Q2 2026 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. Thank you. I would like to now turn the call over to Chris Stamm, VP, Investor Relations and Communications. Please go ahead.

Good morning, and thanks for joining our second quarter 2026 investor update. A press release issued this morning highlighting Q2 results can be found on our website. Today's call and accompanying slides include forward-looking statements within the meetings of the Private Securities Litigation Reform Act of 1995. 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 Form 10-K for the year ended December 31, 2025 and in our subsequent SEC filing. 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 Chief Executive Officer, will review second quarter business highlights and strategic priorities. After Tom, Chief Commercial Officer Tammi Gaskins will provide an overview of second quarter Linzess performance. Next, Jeff Silber, our newly appointed Chief Medical Officer and Head of Research and Drug Development, will give a brief update on Apributide. Then Ron Silver, our Interim Chief Financial Officer, will close our prepared remarks with a financial update before we open the call for questions. Jeff Ruberti, our Chief Strategy Officer, will also be available for the Q&A at the end of the call. Today's webcast includes accompanying slides. For those joining by phone, please visit the events section of our website to access the presentation. And with that, I'll turn the call over to Tom.

Thanks, Chris. Thanks, everyone, for joining us to review Ironwood's second quarter 2026 financial results and business update. Before I begin, in addition to welcoming Chris, who joined the team in June to lead our IR and communications efforts, I'd like to introduce two recent additions to the Ironwood leadership team. who you'll be hearing more from today and in the weeks and months ahead. But first, I want to sincerely thank former Chief Medical Officer and Head of R&D, Mike Shetzline, who retired after a distinguished career dedicated to advancing GI science and patient care. Most recently, he led the team through a major company milestone, the successful initiation of the confirmatory Phase III STARS II trial. Last month, we welcomed Dr. Jeff Silver, Mike's successor, who brings more than 30 years of experience in the industry and academia. Jeff is an accomplished leader in drug development from pre-clinical through submission, commercialization, and expanding value of brands through lifecycle management. Previously Chief Medical Officer at Vedanta Biosciences, he brings broad, late-stage development expertise to Ironwood. having supported multiple successful new drug applications and valuable brands in leadership roles at AbbVie, EMD Sirono, Merck, KGA, and Merck & Company. This leadership will be instrumental as we advance Afroglutides through Phase III and commercialization. I'd also like to introduce Ron Silver, our Senior Vice President, Corporate Controller, and Chief Accounting Officer who is serving as Interim Chief Financial Officer. Ron has been with Ironwood for eight years, serving in key financial leadership roles, providing him with deep knowledge of our business and strategy. His experience in leadership will be invaluable as we continue to execute against our priorities. Now, let's dive into the second quarter business updates. At the beginning of the year, we outlined three key priorities for 2026, maximizing the performance of Linzess, Advancing Apiglutide, and Delivering Sustained Profitability and Cash Flow. These priorities remain central to achieving our mission to redefine standard of care for patients living with gastrointestinal and rare disease while creating long-term shareholder value. During the second quarter, we made meaningful progress across each priority. Starting with Linzess, The brand continues to demonstrate exceptional strength in its 14th year on the market and remains the prescription leader in both irritable bowel syndrome with constipation and chronic idiopathic constipation. We're pleased to report a second consecutive quarter of strong Linzess performance, delivering $82.3 million in U.S. net sales fueled by improved net price and mid-single-digit prescription demand growth. This outstanding performance supported our decision to raise our full year 2026 financial guidance. Based on the updated outlook, Linzess is positioned to grow more than 30% year-over-year, return to blockbuster status, and deliver the highest annual U.S. net sales in the product's history. We also achieved an important regulatory milestone during the quarter. with the FDA approval of LINZUS for the treatment of functional constipation in pediatric patients two years of age and older. This is another important milestone, establishing LINZUS as the only prescription therapy approved for functional constipation in this age group, addressing yet another unmet patient need. Turning to afraglutide. In June, we initiated the STARS II confirmatory Phase III clinical trial, evaluating apraglutide in adults with short bowel syndrome with intestinal failure, or SBSIF. The trial is now actively recruiting patients, and we continue to activate additional sites to drive enrollment. STARS II will build on the positive data from the Phase III STARS trial, which we believe demonstrates that apraglutide has the potential to be a best-in-class therapy for patients with SPS who are dependent on parenteral support. Our goal is to ensure apraglutide will be the first long-acting GLP-2 analog to market. Finally, we delivered strong financial results during the quarter. generating $51.3 million in GAAP net income and $83 million in adjusted EBITDA. We also repaid our $200 million convertible notes at maturity with cash on hand. Looking ahead, we expect to leverage LINTSUS generating cash flow to further reduce our debt as well and we are well positioned to end 2026 with a gross leverage below 1x. while maintaining resources necessary to advance and prepare for the potential commercialization of apriclutide. With that, I'll turn the call over to Tammi to provide some additional context on Linzess. Tammi?

Thanks, Tom, and good morning, everyone. As Tom just stated, Linzess delivered another strong quarter with U.S. net sales of $282.3 million. That's a 14% year-over-year increase driven by both demand growth and improved net price. Now, through the first half, Linzess U.S. net sales reached $555 million, 44% year-over-year, underscoring the strength and momentum of the brand. Now, if I just double-click for a minute on demand, the slide you see shows year-on-year EUTRX volume growth of 4% for Q2 and 5% year-to-date June. We expect this demand momentum to persist and anticipate Mid-single-digit demand growth for the full year, giving us the confidence to raise our full-year financial guidance. Turning to price, the positive impact seen in Q1 from elimination of inflationary rebates across channels really continued to benefit net price as planned, in addition to favorable timing of growth to net rebate reserves as compared to the second quarter of 2025. Our full-year net sales guidance reflects the ongoing benefit of improved net price combined with anticipated reduced variability in sequential quarterly U.S. net sales as compared to 2025, really due to more consistent net price across channels. To that end, since demand volume is historically highest in the second half of the year, we expect quarterly performance to build with the fourth quarter projected to deliver the highest net sales for 2026. This performance also highlights the significant unmet needs that Linzess helps to address for millions of patients with IBSC and CIC across the U.S. And the recent FDA approval for functional constipation down to two years of age further expands the reach of Linzess and helps highlight its importance for any broader range of patients. Now, I'd like to hand the presentation over to Jeff Silber to highlight our progress advancing apraglutide.

Thanks, Tammi, and good morning, everyone. I'm excited to be joining the Ironwood team at such an important time. We work to bring apraglutide to patients suffering from SPSIF as quickly as possible. Today, I'd like to share my perspective on why the science behind apraglutide and what it could mean for patients is so compelling. There's a considerable unmet need for patients with SPS IM. On average, these patients require parenteral support, that is, IV fluids and nutrients, 10 hours per day, 6 days per week, creating a real burden to their quality of life. Although parenteral support meets the nutritional needs that enable them to survive, patients continue to face many significant daily challenges. As highlighted in the landmark HCP survey that Ironwood presented at DDW last May, central line infections, fatigue, central line pain, and abdominal pain are all common and highly distressing challenges associated with parenteral support. These findings underscore the need for therapies that reduce patients' IV dependence and the associated burden of parenteral support while improving their quality of life. One of the reasons I'm so excited to have joined Ironwood is the opportunity to help advance a therapy with the potential to address this significant unmet medical need. First, abraglutide is currently the only once-weekly GLP-2 analog with positive Phase III efficacy and safety data in adults with SPS-IF. Data from the STARS study, the largest Phase III clinical trial in SPS-IF conducted to date, demonstrated significant reductions and Parenteral Support requirements compared with placebo at week 24, with treatment effects observed as early as week 8. As you can see in the graph on the left, at week 24 in the overall population, the reduction in weekly parenteral support volume in the apraglutide group was more than double that of the placebo group. In addition, a significantly greater proportion of patients receiving apraglutide were able to reduce their dependence on parenteral support by at least one day per week. Importantly, apraglutide was well tolerated in the STARS study with an overall safety and GI tolerability profile that was similar to that of placebo. The graph on the right comes from our Phase III long-term extension study, STARS-EXTEND. About 90% of the patients enrolled in the STARS trial rolled over into STARS-EXTEND. and the majority remained on treatment at the time of the analysis shown here. These longer-term data show that patients achieved further reductions in their parenteral support requirements with continued exposure to apraglutide. This translates into more patients achieving additional days off of parenteral support, with some reaching internal autonomy, which is the ultimate goal for patients with SPS-IF. In fact, More than one in five patients enrolled in STARS-Extend had achieved enteral autonomy as of January 2025. We look forward to sharing additional STARS-Extend updates in the future. The clinical profile we have observed to date reflects apraglutide's best-in-class differentiated molecular design, differentiating it from both native GLP-2 and other GLP-2 analogs. Apraglutide is long-acting, enabling convenient once-weekly dosing, and it's demonstrated a favorable tolerability profile that may support better treatment adherence. This is an important point because maintaining patients on therapy is a key factor in achieving full treatment benefit, including meaningful and sustained reductions in parenteral support. When you put all this together, the clinical evidence, the favorable tolerability, and the convenience of once-weekly dosing, We believe that apraglutide has the potential to become the preferred GLP-2 treatment option for patients with SPSIF, which we expect to expand the number of patients who may benefit from GLP therapy. Looking into the future, a uniquely differentiated GLP-2 analog like apraglutide has the potential to restore intestinal function in patients with other types of GI compromise beyond SPSIF. Today, however, our top priority is advancing epiglutide to patients with SPS-IF as quickly as possible. And to that end, the confirmatory Phase III STARS II trial was initiated in June as planned and is now actively recruiting patients. STARS II is a 24-week, global, randomized, double-blind, placebo-controlled trial. The primary endpoint is relative change from baseline in actual weekly parenteral support volume at week 24. As we continue to add clinical trial sites, we'll be leveraging the infrastructure and the relationships that we developed during the conduct of the STARS study. As a reminder, the Phase III STARS study was the largest SPS-IF trial conducted to date with 68 global sites. We're building on that strong foundation leveraging those existing site relationships and adding new, high potential sites, including more sites in the U.S., and identifying opportunities to accelerate enrollment. Successful execution of STARS II remains one of our highest priorities for Ironwood. As site activation continues, we expect enrollment to build, and we're evaluating opportunities to accelerate the enrollment timeline. We look forward to updating you on our progress in the coming months. In summary, if approved, we believe apraglutide's differentiated clinical profile, once-weekly dosing, and long-term data position it to meaningfully improve the treatment landscape for patients with SPS-IF. With that, I'll pass the call to Ron.

Thanks, Jeff. Thanks, Tom, for the introduction. I'm pleased to have the opportunity to join the call today. and look forward to working closely with our investors and analysts as we continue to advance our strategic priorities with a focus on financial discipline and operational excellence. Turning to our financial results. During the second quarter, total revenue was $113 million, GapNet income was $51 million and adjusted EBITDA was $83 million. We ended the quarter with $79 million in cash and cash equivalents and $113 million in collaboration receivables. As Tom mentioned, we repaid our convertible notes at maturity in June. Looking ahead, we intend to continue using operating cash flows to further reduce our debt balance. Based on our current outlook, we expect to end the year with less than $300 million of gross debt outstanding, further strengthening our balance sheet and financial flexibility. Now turning to guidance. Given the continued strength of WINS-S and our very strong first half performance, I am pleased to share that we are increasing our full year of 2026 guidance. We now expect Linzess U.S. net sales of between $1.15 billion and $1.2 billion, representing a greater than 30% increase year over year. This increase is driven by significantly improved net price and mid-single-digit Linzess prescription demand growth. Our revenue guidance has increased to between $460 million and $485 million, and we expect adjusted EBITDA of greater than $310 million. This increase in our guidance reflects both the strength of our underlying business and our confidence in continued execution on our priorities throughout the remainder of the year. Now I'd like to turn the call back over to Tom for some closing remarks.

Thanks, Ron. In summary, the second quarter was marked by strong commercial execution of Linzess, continued advancement of Apraglutide with the initiation of SARS-2, and meaningful progress towards strengthening our balance sheet. Throughout the second half of the year, we will remain laser focused on executing on our strategic priorities and advancing our vision to redefine standard of care for patients living with GI and rare disease. Before I turn it over to Q&A, I would like to thank our employees, patients, caregivers, investigators and advocacy partners for their continued commitment and support. Operator, we're now ready to open up the line for questions.

Thank you. At this time, I would like to remind everybody that in order to ask a question, please press star followed by the number one on your telephone keypad. Once again, that is star followed by the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Our first question comes from the line of Jason Ballar from Ferguson's. Your line is opened.

Hi, guys. Can you hear me?

Yep. Yep.

Hey, it's Jason Butler from Citizens. Thanks for taking the questions. Just a couple for me. First, I know one question at the beginning of the year was would there be an impact on demand from the net price change? Seems like you have an increased comfort level that isn't going to happen now even on a delayed basis. Can you just walk us through those dynamics?

Hi, Jason. It's Tammi. Appreciate the question. So as I stated, through June, we are tracking to 5% year-to-date EUTRX volume demand growth, which is modestly ahead of what we had shown or indicated early in the year, which was low single-digit demand growth. And based on where we are in the year and the fact that historically our performance from a demand perspective even further increases in the second half of the year, that has have given us the confidence and the belief to raise the demand number to mid-single digits. We've done a lot. We did indicate previously that we thought there could be some demand softening due to the elimination of the inflationary rebates across channels, but we've done a lot working with our partner to really help ensure ongoing access for patients across channels. and we think we're in a very good spot now to deliver in that mid single digit range to the full year.

Great and then a second one for me just starts to understand you're still relatively early here in the trial but can you just walk us through how you know site onboarding is going and then just The comments you made about potentially impacting or improving enrollment timelines, can you give us a little more detail about what your strategies could be there? Thank you.

Absolutely, Jason. This is Jeff Ruberti. I'll open the response. But as you noted, it's early days. We initiated the trial in June, and we have our first sites activated and enrolling patients. Full weight of the company is really pressing behind, ramping up the trial, activating more sites, and we look forward to providing more operational details. As we noted, Jeff Silver just joined the team, and it is a top priority as well. And Jeff, do you want to comment on the Accelerate timeline? Sure.

It's week three, and so I am working with the team, and what's impressed me so far is the diligence with which the team is executing on the plan that had been laid out over the last several months. I am just now beginning to... look through this with a fine-tooth comb. We'll be looking for opportunities to accelerate and look forward to sharing in the coming months. But right now, the priority really is to execute optimally on the plan that had already been developed.

Yeah, I think the big thing here, Chase, is really the expansion of the number of sites. Particularly in the U.S., where we were with STARS, as you recall, there wasn't a lot of U.S. sites. It was largely ex-U.S. And we see a real opportunity here, and obviously that's building off real strong support from our steering committee, scientific steering committee, who are a lot of the key investigators around the country. and also our ability to identify high potential sites where there clearly is or we know there are patients that exist and I think with our trial design and combining that with the clinical profile of the drug we're pretty confident that we're going to be able to bring in a number of patients fairly quickly but obviously we'll be updating you and the rest of the investment community as we progress through that process.

Thanks, Tom. I appreciate it. Thanks for taking the questions.

Our next question comes from the wine of Mohit Bansal with Wells Fargo. Your wine is opened.

Great. Thank you very much for taking my questions, and congrats on all the progress. So just to, like, I have two questions, so one on Eprine and one on Lindsay's. So there was some, for Lindsay's, there was some concern around, like, Could there be some plans? They could have an issue given the price is higher now. Are you seeing anything like that in the Medicaid patient population? So far it doesn't seem like that, but would love for you to touch upon that. And then for APRA, so now that you are expanding to newer sites and all that, how do you make sure that, you know, trial conduct issues last time to other people did not dose properly. How do you ensure that a repeat of that doesn't happen as you go into more sites here? Thank you. Sure. Tammi, do you want to take the first question on this?

Yeah, sure. Hi, Mahit. It's Tammi, and I appreciate the question. So, you're absolutely correct in that before we had talked about, and part of the reason indicated low single-digit demand growth at the beginning of the year is through the elimination of the inflationary rebates across channels, including Medicaid. We thought there could be some demand softening. But based on where we are at the year, the 5%, and the fact that we have done, as I mentioned, a lot with our partner to work with the states individually to help ensure ongoing access to those patients, we are now very confident in that mid-single-digit and so forth. So, there's an expectation for that mid-single demand growth through the rest of the year, especially since, historically, our demand has a bit of a seasonality and increases towards the latter half of the year, especially in Q4.

Just to be clear on kind of this issue or concern that we had at DOES, as you recall, with the original trials, the STARS trial, the intent was to deliver a five milligram dose. Unfortunately, due to the kit and the instructions, what we actually saw was a delivery of three and a half milligrams. Now, clearly the drug worked and was extremely well tolerated, even at three and a half milligrams. So what we wanted to do was match that so we could leverage the great data of STARS with this smaller confirmatory trial. Now what we've done since then, based on the root cause analysis on the delivery, we've dramatically improved the kit to avoid any kind of errors in instruction or implementation of the new kit. And we've done several human factor studies around that. We've also done drug exposure and kinetic data. So we're absolutely confident that we're in complete control of the dose, and we're absolutely confident that this error will not happen in STARS 2. So I think moving forward, we see a very, very high probability of success to reconfirm the great data we saw in the original STARS trial.

Very helpful. Thank you. And then congrats, Jeff and Ron, and welcome to the group. Thank you.

Thank you.

Once again, a reminder, if you'd like to ask a question, please press star followed by the number one on your telephone keypad. Our next question comes from the line of Dominic Rose with Intron Health. Your line is opened.

Hi, this is Dominic from Intron Health. Thanks for taking my questions. I've got two. My first question is, both Q1 and Q2 saw favorable time phasing of gross to net rebate reserves. Do we expect this to unwind in H2, or would there be more favorable moves? Is there anything you can tell us about that? And my second question is, in May, you flagged that Medicaid would be most likely seeing reduced volume growth in H2. Is that still your expectation now, given the guidance upgrade? Thanks.

Thanks, Dominic. Tammi, do you want to take both of those?

Sure. Appreciate the question. This is Tammi. So to start with the favorability of paving of gross net reserves. So first, as I indicated in my comments, we do expect less variability in sequential quarterly net sales this year. We had quite a bit of variability last year because there was, for two key reasons. One, there was more difference in net price across channels. because of accruing rebates relative to actual demands dispensed in a quarter, that variability in price had more of a variability because of seasonality of certain sectors of the business. So this year, more consistent net price across channels, not be affected nearly to the extent of the Seasonality and actual units dispensed, but also we expect to see quarter-on-quarter increase in performance with Q4 actually being the strongest quarter that we'll have this year from a net sales perspective. In key takeaway, don't expect there to be an unwinding, if you will, due to changes in favorability quarter-on-quarter.

And you're the anticipated reduction for Medicaid volume?

Yes. So, as I said, we saw strong 5% demand growth through mid-year. We've worked very hard at a state level with our payer to help maintain access across channels, including Medicaid, and we are still projecting to have our growth across channels to be in line with expectations to drive that mid-single-digit demand growth through the full year.

So bottom line, Tammi, I think where we're at is we're not seeing the dramatic reduction in Medicaid that we thought we were at risk of. So I think we feel very good about the current trend we're on with regard to volume as well as net price.

And we expect more consistent sequential quarterly net sales growth, continue to improve performance each quarter throughout the end of the year with fourth quarter being our strongest performance.

Thank you. I appreciate the detail.

Thanks, Dominic. Our next question comes from the line of Chase Knickerbocker with Craig Pelham. Your line is open.

Good morning. Thanks for taking the questions. Maybe just on Linzess Net Sales guidance, the high end of the range went up by a higher magnitude than the bottom. Just trying to understand the edge caps. The increase in the guidance was actually consistent on each end of the range. It was up by 25 million. And I think the major driver of the confidence to raise that guidance was the single-digit demand, which we've seen now consistently two quarters in a row.

So it gives us confidence we'll be able to land and that range. But just to reiterate, the range was improved consistently across both ends.

Understood. And then just as we think about, you know, the EBITDA guidance on the year, any additional kind of color you can give us as far as kind of how we should be thinking about kind of R&D progressing in Q3 and Q4 on those step-ups, just as we think about kind of the bottom end of the P&L?

Absolutely. Ron, do you want to take that? Sure. Thanks, Chase. Appreciate the question. So for the remainder of 26, we do expect R&D expense to increase relative to the first half of the year, and that reflects the ramp-up of the SARS-2 trial we initiated in June. We also expect a modest increase in SG&A expense as well, I think, through OpEx.

And obviously, Chase, that's all going to be depending on how many sites we can get up and running and how fast we can do that. And obviously, that's a critical investment in our future. So, you know, while obviously this quarter the EBITDA was remarkably strong, I think, you know, we certainly see that, you know, continuing throughout the end of the year, but we clearly will see an increased expense, as Ron mentioned, but that's going to be largely dependent on how many sites we can get up and running and how fast we can do it.

Got it. Thanks, guys.

Thanks, Jason. and there are no further questions at this time. With that, that concludes today's conference call. Thank you all for joining us. You may now disconnect and have a good rest of your day.