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Narrower-than-Expected Loss at Ironwood, Shares Up

Ironwood Pharmaceuticals, Inc. (IRWD) reported a loss of 43 cents per share in the fourth quarter of 2013 compared to the year-ago loss of 41 cents per share. Despite the company reporting lower costs in fourth quarter 2013, results were primarily hurt by lower revenues.

The Zacks Consensus Estimate was a loss of 50 cents per share. Investors reacted positively to the news with shares rising 16.51%.

Full year 2013 loss was $2.35 per share, wider than the year-ago loss of 68 cents per share. However, loss was narrower than the Zacks Consensus Estimate of a loss of $2.41 per share.

Revenues in 2013 fell 84.8% to $22.3 million. Revenues came in below the Zacks Consensus Estimate of $25 million. 2013 and 2012 revenues included collaborative revenues of approximately $2.9 million and $84.4 million, respectively.

Linzess Update

Ironwood’s sole marketed product is Linzess (EU trade name: Constella) indicated for irritable bowel syndrome with constipation (IBS-C) or chronic idiopathic constipation (:CIC). Ironwood co-markets the drug with Forest Laboratories Inc. (FRX). Net sales of the drug, as reported by Forest Labs, came in at $51 million in the fourth quarter of 2013, up 48% sequentially.

Number of prescriptions filled increased 25% to 220,000 driven by new patient addition and continued demand for Linzess. The company is focusing on promoting the product to gastroenterologists and primary care physicians. The company is also working on expanding managed care access to Linzess and lowering the out-of-pocket cost borne by patients.

Approximately 75% patients who are covered by commercial insurance plans and approximately 50% Medicare Part D patients have unrestricted access to Linzess, while approximately 80% have tier II ($30 co-pay) access as of Dec 2013. Ironwood is focusing on promoting the product by improving the marketing mix and will step up the direct-to-consumer campaign from late Mar 2014.

Ironwood is looking to broaden Linzess’ label by expanding the targeted patient population and gaining approval for additional indications including opioid-induced constipation, pediatrics and potentially for the prevention of colon cancer.

Meanwhile, EU partner Almirall has launched the product in nine European countries including the U.K. and Germany.

During the fourth quarter of 2013, selling, general and administrative (SG&A) expenses fell 13.7% to $28.7 million. Research and development (R&D) expenses amounted to $22.5 million, down 20.4%.

2014 Guidance

For 2014, Ironwood expects operating expenses in the range of $215 million to $245 million (R&D expenses of $105 million to $120 million and SG&A expenses of $110 million to $125 million). Linzess-development related expenses are expected to be approximately 55% of total R&D spend.

For 2014, Ironwood expects total investment (including Forest Labs’ share) in sales and marketing for Linzess in the $240 million to $270 million range (previous guidance: $250–$300 million). Ironwood is working on tightening costs. The company is looking to reduce its workforce by approximately 10% during the first quarter of 2014

Our Take

We are pleased with Linzess uptake rates and believe that it has the potential to be a blockbuster product in the long run. We are also positive on the company’s cost control efforts.

Ironwood carries a Zacks Rank #3 (Hold). Companies that currently look attractive in the healthcare space include Actelion Ltd. (ALIOF) and Actavis (ACT). Both carry a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on IRWD
Read the Full Research Report on ACT
Read the Full Research Report on FRX
Read the Full Research Report on ALIOF


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