Ironwood Pharmaceuticals Reports Second Quarter 2022 Results

BOSTON–(BUSINESS WIRE)–Ironwood Pharmaceuticals, Inc. (Nasdaq: IRWD), a GI-focused healthcare company, today reported its second quarter 2022 results and recent business performance. 

“We made progress towards our goal of becoming the leading GI healthcare company in the U.S., as the positive momentum across our business continued in the second quarter,” said Tom McCourt, chief executive officer of Ironwood. “We are pleased by the year-over-year double-digit LINZESS prescription demand growth in the first half of 2022, and we believe there is still significant opportunity to reach appropriate new patients and drive additional growth for the brand. In addition to the commercial success of LINZESS, we continue to make progress with our ongoing clinical trials. We now expect our Phase 3 pediatric study of linaclotide in 6 to 17 year-olds with functional constipation to readout in the third quarter of this year and remain on track with the previously shared data readout timing for IW-3300 and CNP-104. We believe our capabilities in GI, strong balance sheet and disciplined capital allocation continue to position our company for growth moving forward.”

1. Refer to the Reconciliation of GAAP Results to Non-GAAP Financial Measures table and to the Reconciliation of GAAP Net Income to Adjusted EBITDA table at the end of this press release. Refer to Non-GAAP Financial Measures for additional information.

Second Quarter 2022 Corporate Highlights

U.S. LINZESS

• Prescription Demand: Total LINZESS prescription demand in the second quarter of 2022 was 43 million LINZESS capsules, a 9% increase compared to the second quarter of 2021, per IQVIA.
• U.S. Brand Collaboration: LINZESS U.S. net sales are provided to Ironwood by its U.S. partner, AbbVie Inc. (“AbbVie”). LINZESS U.S. net sales were $248.4 million in the second quarter of 2022, a 4% decrease compared to $259.3 million in the second quarter of 2021.
  • Ironwood and AbbVie share equally in U.S. brand collaboration profits. See the LINZESS U.S. Commercial Collaboration table at the end of the press release.

– LINZESS commercial margin was 69% in the second quarter of 2022, compared to 72% in the second quarter of 2021. See the U.S. LINZESS Full Brand Collaboration table below and at the end of this press release.

– Net profit for the LINZESS U.S. brand collaboration, net of commercial and research and development (“R&D”) expenses, was $163.8 million in the second quarter of 2022, compared to $176.6 million in the second quarter of 2021. See U.S. LINZESS Full Brand Collaboration table below and at the end of this press release.

• Collaboration Revenue to Ironwood: Ironwood recorded $94.5 million in collaboration revenue in the second quarter of 2022 related to sales of LINZESS in the U.S., a 6% decrease compared to $100.3 million for the second quarter of 2021. See U.S. LINZESS Commercial Collaboration table at the end of the press release.

• In June 2022, LINZESS received a strong recommendation and a high rating on certainty of evidence in the update to the American Gastroenterological Association practice guideline on the Pharmacological Management of Irritable Bowel Syndrome with Constipation (IBS-C).

Recent Business Highlights

• In May 2022, Ironwood completed its board authorized share repurchase program of up to $150 million. For the overall program, under which repurchases commenced in December 2021, Ironwood repurchased 13.1 million shares of Class A Common Stock at an average price per share of $11.47.
• In June 2022, Ironwood repaid the remaining $120.7 million aggregate principal amount of the 2022 Convertible Notes in full.

Pipeline Updates

Pediatric Program

• Ironwood and AbbVie are currently advancing the linaclotide clinical pediatric program to potentially expand the clinical profile of LINZESS (assuming positive data and FDA approval).

– The functional constipation study in 6- to 17-year-olds is expected to readout in the third quarter of 2022. There are currently no FDA approved prescription pediatric therapies for functional constipation.

IW-3300

• Ironwood is currently advancing IW-3300, a guanylate cyclase-C agonist being developed for the potential treatment of visceral pain conditions, such as interstitial cystitis / bladder pain syndrome (IC/BPS) and endometriosis.

– Ironwood has successfully completed Phase I studies to evaluate the safety and tolerability of IW-3300 in healthy volunteers and expects to initiate a Phase 2 proof of concept study in IC/BPS patients by the end of 2022.

CNP-104

• Ironwood has a collaboration and license option agreement with COUR Pharmaceuticals Development Company, Inc. (“COUR”). This agreement gives Ironwood an option to acquire an exclusive license to research, develop, manufacture and commercialize, in the U.S., products containing CNP-104 (“CNP-104”), a tolerizing immune modifying nanoparticle, for the treatment of primary biliary cholangitis (“PBC”), a rare autoimmune disease targeting the liver. If successful, CNP-104 has the potential to be the first approved PBC disease modifying therapy.

– COUR is currently conducting a clinical study for CNP-104 evaluating the safety, tolerability, pharmacodynamic effects and efficacy of CNP-104 in PBC patients, and remains on track with a data readout estimated in 2023.

Second Quarter Financial Results

• Total Revenues. Total revenues in the second quarter of 2022 were $97.2 million, compared to $104.0 million in the second quarter of 2021.

– Total revenues in the second quarter of 2022 consisted of $94.5 million associated with Ironwood’s share of the net profits from the sales of LINZESS in the U.S. and $2.7 million in royalties and other revenue. Total revenues in the second quarter of 2021 consisted of $100.3 million associated with Ironwood’s share of the net profits from the sales of LINZESS in the U.S., and $3.7 million in linaclotide royalties and other revenue.

• Operating Expenses. Operating expenses in the second quarter of 2022 were $41.6 million, compared to $38.9 million in the second quarter of 2021.

– Operating expenses in the second quarter of 2022 consisted of $30.1 million in selling, general and administrative (“SG&A”) expenses, and $11.5 million in research and development (“R&D”) expenses. Operating expenses in the second quarter of 2021 consisted of $27.0 million in SG&A expenses and $12.2 million in R&D expenses, partially offset by a $0.3 million adjustment to restructuring expenses.

• Interest Expense, net of Interest and Investment Income. Net interest expense was $2.2 million in the second quarter of 2022, primarily in connection with Ironwood’s convertible senior notes, partially offset by $1.0 million of investment income. Interest expense recorded in the second quarter of 2022 included $1.7 million in cash expense and $0.5 million in non-cash expense. Net interest expense was $7.6 million in the second quarter of 2021, primarily in connection with Ironwood’s convertible senior notes. Interest expense recorded in the second quarter of 2021 included $1.8 million in cash expense and $5.9 million in non-cash expense. The reduction in non-cash interest expense in the second quarter of 2022 relates to the adoption of ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”) on January 1, 2022, that impacts the accounting for Ironwood’s convertible senior notes.

• Loss on Derivatives. Ironwood recorded a loss on derivatives of $0.7 million in the second quarter of 2022, as a result of the change in fair value of its convertible note hedges and note hedge warrants. The convertible note hedges terminated unexercised upon expiration in June 2022. Ironwood recorded a loss on derivatives of $3.2 million in the second quarter of 2021, as a result of the change in fair value of its convertible note hedges and note hedge warrants.

• Income Tax Expense. Ironwood recorded $16.7 million of income tax expense in the second quarter of 2022, the majority of which was non-cash, as Ironwood continues to utilize net operating losses to offset taxable income for federal purposes and in many states. Ironwood recorded $336.9 million of income tax benefit in the second quarter of 2021, primarily related to the release of its valuation allowance against the majority of its deferred tax assets. Ironwood maintained a valuation allowance on the majority of its net deferred tax assets until the second quarter of 2021.

• GAAP Net Income. GAAP net income was $37.1 million, or $0.24 per share (basic) and $0.21 per share (diluted), in the second quarter of 2022 compared to GAAP net income of $391.3 million, or $2.42 per share (basic) and $2.39 per share (diluted) in the second quarter of 2021.

• Non-GAAP Net Income. Non-GAAP net income was $37.8 million, or $0.24 per share (basic) and $0.21 per share (diluted), in the second quarter of 2022, compared to non-GAAP net income of $56.4 million, or $0.35 per share (basic) and $0.34 per share (diluted), in the second quarter of 2021.

Non-GAAP net income excludes the impact of mark-to-market adjustments on the derivatives related to Ironwood’s 2022 Convertible Notes, restructuring expenses, and the release of the company’s valuation allowance against the majority of deferred tax assets in the second quarter of 2021. See Non-GAAP Financial Measures below.

• Adjusted EBITDA. Adjusted EBITDA was $56.0 million in the second quarter of 2022, compared to $65.2 million in the second quarter of 2021.

– Adjusted EBITDA is calculated by subtracting mark-to-market adjustments on derivatives related to Ironwood’s 2022 Convertible Notes, restructuring expenses, net interest expense, income taxes, depreciation and amortization from GAAP net income. See Non-GAAP Financial Measures below.

• Cash Flow Highlights. Ironwood ended the second quarter of 2022 with $504.4 million of cash and cash equivalents.

– Ironwood generated $61.4 million in cash from operations in the second quarter of 2022, compared to $48.6 million in cash from operations in the second quarter of 2021.

– Ironwood used $120.7 million of cash to repay the remaining aggregate principal amount of the 2022 Convertible Notes and $33.9 million of cash to repurchase shares of its Class A Common Stock in the second quarter of 2022.

• Ironwood 2022 Financial Guidance. In 2022, Ironwood continues to expect:

¹ Adjusted EBITDA is calculated by subtracting mark-to-market adjustments on derivatives related to Ironwood’s 2022 Convertible Notes, restructuring expenses, net interest expense, income taxes, depreciation and amortization from GAAP net income. For purposes of this guidance, Ironwood has assumed that it will not incur material expenses related to business development activities in 2022.

Non-GAAP Financial Measures

Ironwood presents non-GAAP net income and non-GAAP net income per share to exclude the impact of net gains and losses on derivatives related to Ironwood’s 2022 Convertible Notes that are required to be marked-to-market, restructuring expenses, and the release of the company’s valuation allowance

against the majority of deferred tax assets in the second quarter of 2021. Non-GAAP adjustments are further detailed below:

• The gains and losses on the derivatives related to Ironwood’s 2022 Convertible Notes were highly variable, difficult to predict and of a size that could have a substantial impact on the company’s reported results of operations in any given period.
• Restructuring expenses are considered to be a non-recurring event as they are associated with distinct operational decisions. Included in restructuring expenses are costs associated with exit and disposal activities.
• The income tax benefit associated with the valuation allowance release in the second quarter of 2021 was a non-cash, non-recurring accounting recognition event, and does not affect the company’s ability to utilize its historical net operating losses and tax credit carryforwards to offset future taxable income.

Ironwood also presents adjusted EBITDA, a non-GAAP measure, as well as guidance on adjusted EBITDA. Adjusted EBITDA is calculated by subtracting mark-to-market adjustments on derivatives related to Ironwood’s 2022 Convertible Notes, restructuring expenses, net interest expense, income taxes, depreciation and amortization from GAAP net income. The adjustments are made on a similar basis as described above related to non-GAAP net income, as applicable.

Management believes this non-GAAP information is useful for investors, taken in conjunction with Ironwood’s GAAP financial statements, because it provides greater transparency and period-over-period comparability with respect to Ironwood’s operating performance. These measures are also used by management to assess the performance of the business. Investors should consider these non-GAAP measures only as a supplement to, not as a substitute for or as superior to, measures of financial performance prepared in accordance with GAAP. In addition, these non-GAAP financial measures are unlikely to be comparable with non-GAAP information provided by other companies. For a reconciliation of non-GAAP net income and non-GAAP net income per share to GAAP net income and GAAP net income per share, respectively, and for a reconciliation of adjusted EBITDA to GAAP net income, please refer to the tables at the end of this press release.

Ironwood does not provide guidance on GAAP net income or a reconciliation of expected adjusted EBITDA to expected GAAP net income because, without unreasonable efforts, it is unable to predict with reasonable certainty the non-GAAP adjustments used to calculate adjusted EBITDA. These adjustments are uncertain, depend on various factors and could have a material impact on GAAP net income for the guidance period.

About Ironwood Pharmaceuticals

Ironwood Pharmaceuticals (Nasdaq: IRWD), an S&P SmallCap 600® company, is a leading gastrointestinal (GI) healthcare company on a mission to advance the treatment of GI diseases and redefine the standard of care for GI patients. We are pioneers in the development of LINZESS® (linaclotide), the U.S. branded prescription market leader for adults with irritable bowel syndrome with constipation (IBS-C) or chronic idiopathic constipation (CIC). Under the guidance of our seasoned industry leaders, we continue to build upon our history of GI innovation and challenge what has been done before to shape what the future holds. We keep patients at the heart of our R&D and commercialization efforts to reduce the burden of GI diseases and address significant unmet needs.

Founded in 1998, Ironwood Pharmaceuticals is headquartered in Boston, Massachusetts.

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