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Ironwood (IRWD) Q2 Earnings & Revenues Miss, Shares Down
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Ironwood Pharmaceuticals, Inc. (IRWD - Free Report) reported second-quarter 2018 adjusted loss of 28 cents per share, wider than the Zacks Consensus Estimate of a loss of 19 cents and in line with the year-ago period.
Total revenues (collaborative revenue) in the quarter increased 24.6% from the year-ago period to $81.1 million but missed the Zacks Consensus Estimate of $89.75 million.
Quarter in Detail
As reported by partner Allergan plc , Ironwood’s key marketed product – Linzess (linaclotide) – generated U.S. net sales of $192 million, up 14% year over year.
Please note that Ironwood and Allergan have an equal share in brand collaboration profits or losses. Ironwood's share of net profits from the sales of Linzess in the United States (included in collaborative revenues) was $69.3 million in the second quarter, up 23% year over year. Sales of linaclotide active pharmaceutical ingredient to the company’s Japanese partner, Astellas Pharma added $8.8 million to revenues.
According to data provided by IMS Health, Linzess prescriptions filled during the quarter were more than 800,000, up 7% from the year-ago period.
In May, Ironwood and Allergan settled a patent litigation related to an abbreviated new drug application filed by Aurobindo Pharma, seeking approval for a generic version of Linzess. Per the settlement agreement, Aurobindo Pharma will be allowed to market an authorized generic version from Aug 5, 2030. A similar settlement with Sun Pharmaceuticals in January has allowed the company to sell authorized generic version from Feb 1, 2031.
Zurampic and Duzallo, approved for uncontrolled gout, generated sales of $1.1 million in the quarter. Duzallo was launched in October 2017 as an oral treatment for hyperuricemia associated with gout.
During the reported quarter, selling and administrative (SG&A) expenses increased 18.3% to $68.4 million. Research and development (R&D) expenses were $38.9 million, up 4.3% from the year-ago period
Restructuring Updates
The company remains on track to complete its separation into two publicly trading entities in the first half 2019. In May, the company had announced its intention to split to achieve increased operational performance and strategic flexibility.
One entity, which will continue with the current name, will focus on the three commercial drugs and gastrointestinal (“GI”) pipeline development. The other entity will focus on the development of the Soluble Guanylate Cyclase pipeline for the treatment of serious and orphan diseases.
Meanwhile, Ironwood sent a notice of termination to AstraZeneca (AZN - Free Report) for a license agreement related to lesinurad franchise. In January, the company commenced an initiative to explore a path for value creation of lesinurad-based products by increasing investments and/or optimizing marketing mix to drive promotional response. However, analysis of the data from the study did not generate any favorable response to support further investment. Ironwood decided to terminate the agreement for allocation of funds in opportunities that provided better returns.
The company announced a reduction in its workforce by approximately 125 employees, following the termination notice. It had reduced its workforce in January 2018 by approximately 60 related to lesinurad franchise. The company expects to save approximately $75 million to $100 million in full year 2019 in operating expenses.
Furthermore, Ironwood has reduced its projected revenue and net cash flow assumptions from Zurampic and Duzallo.
2018 Guidance
Ironwood provided its guidance for 2018 operating expenses. Selling, general and administrative expense is expected to be in the range of $230 million to $250 million while R&D expense is expected in the range of $160 million to $180 million.
The company expects total restructuring costs including workforce reductions expenses to be in the range of $18 million to $21 million for 2018. The company does not expect to be cash flow positive in the fourth quarter of 2018 due to restructuring costs.
Pipeline Updates
Linzess is approved in the United States for the treatment of adults with irritable bowel syndrome with constipation (IBS-C) and chronic idiopathic constipation (“CIC”). Ironwood and Allergan are looking to broaden Linzess’ label into additional symptoms and develop the drug as a non-opioid, pain-relieving agent in IBS patients.
In July, Ironwood and Allergan initiated a phase IIIb to evaluate a dose of 290 mcg of Linzess in multiple abdominal symptoms in addition to pain, including bloating and discomfort, in adult patients with irritable bowel syndrome with constipation (IBS-C).
The companies are also on track to start a phase IIb study to evaluate a delayed release formulation of Linzess for treating all subtypes of IBS, including IBS-mixed and IBS with diarrhea.
A label expansion of Linzess in the chronic constipation indication is under review in Japan. In China, Hong Kong and Macau, Ironwood has a marketing agreement with AstraZeneca for Linzess. The regulatory filing in China for IBS-C is under review. The company expects the review to be completed by the end of 2018.
The company is also developing three candidates – IW-3718, Praliciguat and Olinciguat – for gastroesophageal reflux disease, diabetic nephropathy, and sickle cell disease and achalasia, respectively. Ironwood is currently enrolling patients in separate phase III studies evaluating IW-3718 and Olinciguat in gastroesophageal reflux disease, and sickle cell disease and achalasia, respectively. Two phase II studies to evaluate Praliciguat in diabetic nephropathy and heart failure are currently enrolling patients.
Our Take
The company’s second-quarter loss was wider than estimated and sales also missed expectations. The stock was down 4.3% on Aug 6. Although the prospect of a new Ironwood looks attractive, the restructuring will have an unfavorable impact on cash flow in the near term.
However, a look at the company’s share price movement shows that the stock has outperformed the industry this year so far. Ironwood’s shares have gained 22.6% during this period, while the industry rose a mere 0.6%.
Ironwood is focused on expanding Linzess’ label and approval in new countries. Linzess’ sales growth is expected to continue in 2018, which will boost the top line. A potential approval in China will further boost sales of the drug.
Meanwhile, we expect Ironwood’s operating expenses to rise through the year
Ironwood Pharmaceuticals, Inc. Price, Consensus and EPS Surprise
Vertex’s earnings per share estimates moved up from $3.16 to $3.79 for 2018 and from $4.33 to $4.58 for 2019 in the last 30 days. The company delivered a positive surprise in three of the trailing four quarters with an average beat of 27.5%. Share price of the company has increased 16.7% in a year.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Ironwood (IRWD) Q2 Earnings & Revenues Miss, Shares Down
Ironwood Pharmaceuticals, Inc. (IRWD - Free Report) reported second-quarter 2018 adjusted loss of 28 cents per share, wider than the Zacks Consensus Estimate of a loss of 19 cents and in line with the year-ago period.
Total revenues (collaborative revenue) in the quarter increased 24.6% from the year-ago period to $81.1 million but missed the Zacks Consensus Estimate of $89.75 million.
Quarter in Detail
As reported by partner Allergan plc , Ironwood’s key marketed product – Linzess (linaclotide) – generated U.S. net sales of $192 million, up 14% year over year.
Please note that Ironwood and Allergan have an equal share in brand collaboration profits or losses. Ironwood's share of net profits from the sales of Linzess in the United States (included in collaborative revenues) was $69.3 million in the second quarter, up 23% year over year. Sales of linaclotide active pharmaceutical ingredient to the company’s Japanese partner, Astellas Pharma added $8.8 million to revenues.
According to data provided by IMS Health, Linzess prescriptions filled during the quarter were more than 800,000, up 7% from the year-ago period.
In May, Ironwood and Allergan settled a patent litigation related to an abbreviated new drug application filed by Aurobindo Pharma, seeking approval for a generic version of Linzess. Per the settlement agreement, Aurobindo Pharma will be allowed to market an authorized generic version from Aug 5, 2030. A similar settlement with Sun Pharmaceuticals in January has allowed the company to sell authorized generic version from Feb 1, 2031.
Zurampic and Duzallo, approved for uncontrolled gout, generated sales of $1.1 million in the quarter. Duzallo was launched in October 2017 as an oral treatment for hyperuricemia associated with gout.
During the reported quarter, selling and administrative (SG&A) expenses increased 18.3% to $68.4 million. Research and development (R&D) expenses were $38.9 million, up 4.3% from the year-ago period
Restructuring Updates
The company remains on track to complete its separation into two publicly trading entities in the first half 2019. In May, the company had announced its intention to split to achieve increased operational performance and strategic flexibility.
One entity, which will continue with the current name, will focus on the three commercial drugs and gastrointestinal (“GI”) pipeline development. The other entity will focus on the development of the Soluble Guanylate Cyclase pipeline for the treatment of serious and orphan diseases.
Meanwhile, Ironwood sent a notice of termination to AstraZeneca (AZN - Free Report) for a license agreement related to lesinurad franchise. In January, the company commenced an initiative to explore a path for value creation of lesinurad-based products by increasing investments and/or optimizing marketing mix to drive promotional response. However, analysis of the data from the study did not generate any favorable response to support further investment. Ironwood decided to terminate the agreement for allocation of funds in opportunities that provided better returns.
The company announced a reduction in its workforce by approximately 125 employees, following the termination notice. It had reduced its workforce in January 2018 by approximately 60 related to lesinurad franchise. The company expects to save approximately $75 million to $100 million in full year 2019 in operating expenses.
Furthermore, Ironwood has reduced its projected revenue and net cash flow assumptions from Zurampic and Duzallo.
2018 Guidance
Ironwood provided its guidance for 2018 operating expenses. Selling, general and administrative expense is expected to be in the range of $230 million to $250 million while R&D expense is expected in the range of $160 million to $180 million.
The company expects total restructuring costs including workforce reductions expenses to be in the range of $18 million to $21 million for 2018. The company does not expect to be cash flow positive in the fourth quarter of 2018 due to restructuring costs.
Pipeline Updates
Linzess is approved in the United States for the treatment of adults with irritable bowel syndrome with constipation (IBS-C) and chronic idiopathic constipation (“CIC”). Ironwood and Allergan are looking to broaden Linzess’ label into additional symptoms and develop the drug as a non-opioid, pain-relieving agent in IBS patients.
In July, Ironwood and Allergan initiated a phase IIIb to evaluate a dose of 290 mcg of Linzess in multiple abdominal symptoms in addition to pain, including bloating and discomfort, in adult patients with irritable bowel syndrome with constipation (IBS-C).
The companies are also on track to start a phase IIb study to evaluate a delayed release formulation of Linzess for treating all subtypes of IBS, including IBS-mixed and IBS with diarrhea.
A label expansion of Linzess in the chronic constipation indication is under review in Japan. In China, Hong Kong and Macau, Ironwood has a marketing agreement with AstraZeneca for Linzess. The regulatory filing in China for IBS-C is under review. The company expects the review to be completed by the end of 2018.
The company is also developing three candidates – IW-3718, Praliciguat and Olinciguat – for gastroesophageal reflux disease, diabetic nephropathy, and sickle cell disease and achalasia, respectively. Ironwood is currently enrolling patients in separate phase III studies evaluating IW-3718 and Olinciguat in gastroesophageal reflux disease, and sickle cell disease and achalasia, respectively. Two phase II studies to evaluate Praliciguat in diabetic nephropathy and heart failure are currently enrolling patients.
Our Take
The company’s second-quarter loss was wider than estimated and sales also missed expectations. The stock was down 4.3% on Aug 6. Although the prospect of a new Ironwood looks attractive, the restructuring will have an unfavorable impact on cash flow in the near term.
However, a look at the company’s share price movement shows that the stock has outperformed the industry this year so far. Ironwood’s shares have gained 22.6% during this period, while the industry rose a mere 0.6%.
Ironwood is focused on expanding Linzess’ label and approval in new countries. Linzess’ sales growth is expected to continue in 2018, which will boost the top line. A potential approval in China will further boost sales of the drug.
Meanwhile, we expect Ironwood’s operating expenses to rise through the year
Ironwood Pharmaceuticals, Inc. Price, Consensus and EPS Surprise
Ironwood Pharmaceuticals, Inc. Price, Consensus and EPS Surprise | Ironwood Pharmaceuticals, Inc. Quote
Zacks Rank & Stock to Consider
Ironwood currently carries a Zacks Rank #3 (Hold). Vertex Pharmaceuticals Incorporated (VRTX - Free Report) is a better-ranked stock in the health care sector, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Vertex’s earnings per share estimates moved up from $3.16 to $3.79 for 2018 and from $4.33 to $4.58 for 2019 in the last 30 days. The company delivered a positive surprise in three of the trailing four quarters with an average beat of 27.5%. Share price of the company has increased 16.7% in a year.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>