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Why Is Ironwood (IRWD) Up 6.9% Since Last Earnings Report?

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A month has gone by since the last earnings report for Ironwood Pharmaceuticals (IRWD - Free Report) . Shares have added about 6.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ironwood due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Ironwood Q1 Earnings & Revenues Miss

Ironwood  incurred first-quarter 2019 adjusted loss of 26 cents per share, wider than the Zacks Consensus Estimate of a loss of 16 cents as well as the year-ago loss of 25 cents.

Total revenues in the first quarter were $68.7 million, almost flat year over year as higher Linzess collaboration revenues were partially offset by lower (active pharmaceutical ingredient) API sales to Japan-based Astellas. The top line also missed the Zacks Consensus Estimate of $83.14 million.

On Apr 1, 2019, Ironwood completed its previously announced separation into two public entities. From second quarter onward, Ironwood will report assets and business operations related to sGC pipeline as discontinued operations.

The Quarter in Detail

As reported by partner Allergan, Ironwood’s key marketed product — Linzess — generated net sales of $161.3 million in the United States, up 1.3% year over year.

Ironwood's share of net profits from sales of Linzess in the United States (included in collaborative revenues) was $64.3 million in the first quarter, up approximately 5.7% year over year. Total commercial profit in the reported quarter was $94.4 million.

Sales of linaclotide API added $2.6 million to revenues including sales to the company’s Japanese partner Astellas Pharma. The company also earned $1.8 million from linaclotide royalties, co-promotion and other revenues.

Per data provided by IQVIA, volume of prescribed Linzess capsules in the first quarter increased about 14% year over year. However, lower realization of net prices unfavorably impacted sales of the drug.

During the reported quarter, selling and administrative (SG&A) expenses increased 8.8% to $64.7 million mainly due to separation costs, partially offset by lower sales and marketing programs and employee-related expenses.

Research and development (R&D) expenses were $54 million, up 47.9% from the year-earlier period, primarily due to increase in costs related to early-stage pipeline candidates.

2019 Guidance

Ironwood maintained its guidance for total revenues in the range of $370-$390 million for 2019. Net interest expenses are anticipated to be approximately $35 million. The company provided its earnings outlook for 2019 including the impact of the business separation. The company expects adjusted EBITDA to be more than $65 million. It also expects net sales of Linzess to grow by low-to-mid single digit percentage point.

The company expects to turn profitable in 2019 for the first time since its inception.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted 31.78% due to these changes.

VGM Scores

Currently, Ironwood has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision looks promising. Notably, Ironwood has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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