Ironwood Pharmaceuticals Reports Fourth Quarter and Full Year 2022 Results

– 2022 GAAP and non-GAAP net income of $175 million –

– 2022 adjusted EBITDA of $252 million; ended 2022 with $656 million in cash and cash equivalents –

– FDA granted priority review to the sNDA for LINZESS® (linaclotide) for the treatment of functional constipation in pediatric patients aged 6 to 17 with a PDUFA date in the second quarter of 2023 –

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

“We performed well and made important progress across our strategic priorities in 2022,” said Tom McCourt, chief executive officer of Ironwood. “While full year LINZESS U.S. net sales growth came in lower than our expectations for 2022 primarily due to inventory fluctuations in the retail channel, we are encouraged by continued robust prescription demand and focused expense management, which helped us deliver our adjusted EBITDA guidance of over $250 million. We ended the year with a strong balance sheet, positioning us well to continue to invest in LINZESS as a growth brand and actively pursue highly differentiated GI assets to add to our portfolio. Looking ahead in 2023, we remain committed to further advancing our strategic priorities, unlocking new opportunities for LINZESS, and strengthening and progressing our innovative GI portfolio. We anticipate a number of exciting milestones this year, and believe Ironwood is well positioned to deliver long term growth and value to patients and shareholders.”

Fourth Quarter and Full Year 2022 Corporate Highlights

U.S. LINZESS

• Prescription Demand: Total LINZESS prescription demand in the fourth quarter of 2022 was 45 million LINZESS capsules, a 9% increase compared to the fourth quarter of 2021, per IQVIA. Total prescription demand was 174 million LINZESS capsules for the full year 2022, a 9% increase compared to the full year 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 $260.3 million in the fourth quarter of 2022, a 7% decrease compared to $278.6 million in the fourth quarter of 2021, and $1,002.1 million for the full year 2022, a slight decrease compared to $1,005.9 million for the full year 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 74% in the fourth quarter of 2022, compared to 76% in the fourth quarter of 2021. LINZESS commercial margin was 73% for the full year 2022 compared to 74% for the full year 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 $183.8 million in the fourth quarter of 2022, compared to $200.0 million in the fourth quarter of 2021. Net profit for the LINZESS U.S. brand collaboration, net of commercial and R&D expenses, was $695.7 million for the full year 2022, compared to $701.3 million for the full year 2021. See U.S. LINZESS Full Brand Collaboration table below and at the end of this press release.

• Collaboration Revenue to Ironwood: Ironwood recorded $104.8 million in collaboration revenue in the fourth quarter of 2022 related to sales of LINZESS in the U.S., an 8% decrease compared to $113.7 million for the fourth quarter of 2021. Ironwood recorded $398.8 million in collaboration revenue for the full year 2022, a slight decrease compared to $400.4 million in 2021. See U.S. LINZESS Commercial Collaboration table at the end of the press release.

Pipeline Updates

Pediatric Program

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

– In September 2022, Ironwood reported positive topline data from the Phase III trial of LINZESS (linaclotide) 72 mcg in pediatric patients aged 6-17 with functional constipation. Ironwood, and its partner AbbVie, submitted a supplemental New Drug Application (sNDA) to the FDA in December 2022, which was granted priority review with a Prescription Drug User Fee Act (PDUFA) date of June 14, 2023. There are currently no FDA approved prescription therapies for the treatment of functional constipation in pediatric patients.

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 is continuing the Phase II proof of concept study in IC/BPS, with patient dosing expected to begin in early 2023.

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, with early data assessing T-cell response from patients enrolled in the clinical study expected in the second half of 2023, which Ironwood believes will inform timing of topline data.

Fourth Quarter and Full Year 2022 Financial Results

• Total Revenues. Total revenues in the fourth quarter of 2022 were $107.2 million, compared to $117.1 million in the fourth quarter of 2021. Total revenues for the full year 2022 were $410.6 million, compared to $413.8 million for the full year 2021.

– Total revenues in the fourth quarter of 2022 consisted of $104.8 million associated with Ironwood’s share of the net profits from the sales of LINZESS in the U.S. and $2.4 million in royalties and other revenue. Total revenues in the fourth quarter of 2021 consisted of $113.7 million associated with Ironwood’s share of the net profits from the sales of LINZESS in the U.S. and $3.4 million in royalties and other revenue.

– Total revenues for the full year 2022 consisted of $398.8 million associated with Ironwood’s share of the net profits from the sales of LINZESS in the U.S., and $11.8 million in royalties and other revenue. Total revenues for the full year 2021 consisted of $400.4 million associated with Ironwood’s share of the net profits from the sales of LINZESS in the U.S., and $13.4 million in royalties and other revenue.

• Operating Expenses. Operating expenses in the fourth quarter of 2022 were $38.8 million, compared to $60.5 million in the fourth quarter of 2021. Operating expenses for the full year 2022 were $160.3 million, compared to $181.5 million for the full year 2021.

– Operating expenses in the fourth quarter of 2022 consisted of $28.4 million in selling, general and administrative (“SG&A”) expenses, and $10.4 million in research and development (“R&D”) expenses. Operating expenses in the fourth quarter of 2021 consisted of $28.6 million in SG&A expenses and $31.9 million in R&D expenses.

– Operating expenses for the full year 2022 consisted primarily of $116.0 million in SG&A expenses, and $44.3 million in R&D expenses. Operating expenses for the full year 2021 consisted primarily of $111.1 million in SG&A expenses, and $70.4 million in R&D expenses.

• Interest Expense. Interest expense was $1.5 million in the fourth quarter of 2022 and $7.6 million for the full year 2022, in connection with Ironwood’s convertible senior notes. Interest expense recorded in the fourth quarter of 2022 included $1.1 million in cash expense and $0.4 million in non-cash expense. Interest expense recorded for the full year 2022 included $5.7 million in cash expense and $1.9 million in non-cash expense.

– Interest expense was $7.9 million in the fourth quarter of 2021 and $31.1 million for the full year 2021, in connection with Ironwood’s convertible senior notes. Interest expense recorded in the fourth quarter of 2021 included $1.8 million in cash expense and $6.2 million in non-cash expense. Interest expense recorded for the full year 2021 included $7.2 million in cash expense and $23.9 million in non-cash expense. The reduction in non-cash interest expense in the fourth quarter of 2022 and for the full year 2022 primarily 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, which impacts the accounting for Ironwood’s convertible senior notes.

• Interest and Investment Income. Interest and investment income was $5.4 million in the fourth quarter of 2022 and $9.5 million for the full year 2022.

– Interest and investment income was $0.2 million in the fourth quarter of 2021 and $0.7 million for the full year of 2021.

• Gain (Loss) on Derivatives. Ironwood recorded a loss on derivatives of an insignificant amount in the fourth quarter of 2022, as a result of the change in fair value of its note hedge warrants. For the full year 2022, Ironwood recorded a gain on derivatives of $0.2 million.

– Ironwood recorded a loss on derivatives of $2.6 million in the fourth quarter of 2021 as a result of the change in fair value of its convertible note hedges and note hedge warrants. For the full year 2021, Ironwood recorded a loss on derivatives of $1.2 million.

• Income Tax (Expense) Benefit. Ironwood recorded $23.4 million of income tax expense in the fourth quarter of 2022 and $77.4 million of income tax expense for the full year 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 $4.9 million of income tax expense in the fourth quarter of 2021 and $327.8 million of income tax benefit for the full year 2021, primarily related to the release of the valuation allowance against the majority of deferred tax assets during the second quarter of 2021.

• GAAP Net Income. GAAP net income was $48.9 million, or $0.32 per share (basic) and $0.27 per share (diluted), in the fourth quarter of 2022 compared to GAAP net income of $41.4 million, or $0.25 per share (basic and diluted) in the fourth quarter of 2021. GAAP net income for the full year 2022 was $175.1 million, or $1.13 per share (basic) and $0.96 per share (diluted), compared to GAAP net income of $528.4 million, or $3.26 per share (basic) and $3.21 per share (diluted), for the full year 2021.

• Non-GAAP Net Income. Non-GAAP net income was $48.9 million, or $0.32 per share (basic) and $0.27 per share (diluted), in the fourth quarter of 2022, compared to non-GAAP net income of $43.9 million, or $0.27 per share (basic and diluted) in the fourth quarter of 2021. Non-GAAP net income for the full year 2022 was $174.9 million, or $1.13 per share (basic) and $0.96 per share (diluted), compared to non-GAAP net income of $191.8 million, or $1.18 per share (basic) and $1.16 per share (diluted), for the full year 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 income tax benefit related to 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 $68.7 million in the fourth quarter of 2022, compared to $57.0 million in the fourth quarter of 2021. For the full year 2022, adjusted EBITDA was $251.8 million, compared to $233.7 million for the full year 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 2022 with $656.2 million of cash and cash equivalents, compared to $620.1 million of cash and cash equivalents at the end of 2021.

– Ironwood generated $79.2 million in cash from operations in the fourth quarter of 2022, compared to $64.6 million in cash from operations in the fourth quarter of 2021. Ironwood generated $273.8 million in cash from operations for the full year 2022, compared to $261.9 million for the full year 2021.

– In 2022, Ironwood used $126.4 million of cash to complete the board authorized share repurchase program and $120.7 million of cash for the repayment of the remaining aggregate principal on the 2022 Convertible Notes upon maturity in June 2022.

• Ironwood 2023 Financial Guidance. In 2023, Ironwood continues to expect:

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.

Conference Call Information

Ironwood will host a conference call and webcast at 8:30 a.m. Eastern Time on Thursday, February 16, 2023 to discuss its fourth quarter and full year 2022 results and recent business activities. Individuals interested in participating in the call should dial (888) 330-2384 (U.S. and Canada) or (240) 789-2701 (international) using conference ID number and event passcode 4671230. To access the webcast, please visit the Investors section of Ironwood’s website at www.ironwoodpharma.com at least 15 minutes prior to the start of the call to ensure adequate time for any software downloads that may be required. The call will be available for replay via telephone starting at approximately 11:30 a.m. Eastern Time on February 16, 2023, running through 11:59 p.m. Eastern Time on March 2, 2023. To listen to the replay, dial (800) 770-2030 (U.S. and Canada) or (647) 362-9199 (international) using conference ID number 4671230. The archived webcast will be available on Ironwood’s website for 14 days beginning approximately one hour after the call has completed.

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.

We routinely post information that may be important to investors on our website at www.ironwoodpharma.com. In addition, follow us on Twitter and on LinkedIn.

About LINZESS (linaclotide)

LINZESS® is the #1 prescribed brand in the U.S. for the treatment of adult patients with irritable bowel syndrome with constipation (“IBS-C”) or chronic idiopathic constipation (“CIC”), based on IQVIA data.

LINZESS is a once-daily capsule that helps relieve the abdominal pain, constipation, and overall abdominal symptoms of bloating, discomfort and pain associated with IBS-C, as well as the constipation, infrequent stools, hard stools, straining, and incomplete evacuation associated with CIC. The recommended dose is 290 mcg for IBS-C patients and 145 mcg for CIC patients, with a 72-mcg dose approved for use in CIC depending on individual patient presentation or tolerability. LINZESS should be taken at least 30 minutes before the first meal of the day.

LINZESS is contraindicated in pediatric patients less than 2 years of age. In neonatal mice, linaclotide increased fluid secretion as a consequence of age-dependent elevated GC-C agonism resulting in mortality within the first 24 hours due to dehydration. There was no age-dependent trend in GC-C intestinal expression in a clinical study of children 2 to less than 18 years of age; however, there are insufficient data available on GC-C intestinal expression in children less than 2 years of age to assess the risk of developing diarrhea and its potentially serious consequences in these patients. The safety and effectiveness of LINZESS in patients less than 18 years of age have not been established.

LINZESS is not a laxative; it is the first medicine approved by the FDA in a class called GC-C agonists. LINZESS contains a peptide called linaclotide that activates the GC-C receptor in the intestine. Activation of GC-C is thought to result in increased intestinal fluid secretion and accelerated transit and a decrease in the activity of pain-sensing nerves in the intestine. The clinical relevance of the effect on pain fibers, which is based on nonclinical studies, has not been established.

In the United States, Ironwood and AbbVie co-develop and co-commercialize LINZESS for the treatment of adults with IBS-C or CIC. In Europe, AbbVie markets linaclotide under the brand name CONSTELLA® for the treatment of adults with moderate to severe IBS-C. In Japan, Ironwood's partner, Astellas, markets linaclotide under the brand name LINZESS for the treatment of adults with IBS-C or CIC. Ironwood also has partnered with AstraZeneca for development and commercialization of LINZESS in China, and with AbbVie for development and commercialization of linaclotide in all other territories worldwide.

LINZESS Important Safety Information

INDICATIONS AND USAGE

LINZESS (linaclotide) is indicated in adults for the treatment of both irritable bowel syndrome with constipation (IBS-C) and chronic idiopathic constipation (CIC).

IMPORTANT SAFETY INFORMATION

Contraindications

• LINZESS is contraindicated in patients less than 2 years of age due to the risk of serious dehydration.
• LINZESS is contraindicated in patients with known or suspected mechanical gastrointestinal obstruction.

Warnings and Precautions

Pediatric Risk

• LINZESS is contraindicated in patients less than 2 years of age. In neonatal mice, linaclotide increased fluid secretion as a consequence of age-dependent elevated GC-C agonism resulting in mortality within the first 24 hours due to dehydration. There was no age-dependent trend in GC-C intestinal expression in a clinical study of children 2 to less than 18 years of age; however, there are insufficient data available on GC-C intestinal expression in children less than 2 years of age to assess the risk of developing diarrhea and its potentially serious consequences in these patients. The safety and effectiveness of LINZESS in patients less than 18 years of age have not been established.

Diarrhea

• Diarrhea was the most common adverse reaction in LINZESS-treated patients in the pooled IBS-C and CIC double-blind placebo-controlled trials. The incidence of diarrhea was similar in the IBS-C and CIC populations. Severe diarrhea was reported in 2% of 145 mcg and 290 mcg LINZESS-treated patients, and in