Ironwood Pharmaceuticals Earnings Call Insights: Expenses and Reimbursements

Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Expenses

Mario Corso – Mizuho Securities USA: Maybe just in terms of the launch, can you talk a little bit about the $250 million to $300 in expenses for 2013? So, is that kind of a combined number that we are going to see in a joint venture type P&L? I guess I am trying to figure out how we should best think about that number and how it relates to Ironwood’s P&L on the Company’s own SG&A line. Then secondarily, I’m wondering the best way to think about on a kind of European revenue contribution for this year as well?

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Michael J. Higgins – COO and CFO: It’s Michael. Let me take the $250 million and $300 million first. What we attempted to do there is to clarify for you guys say the broad investments, specifically in LINZESS for sales and marketing. So that’s the way we’ve discussed it with folks in the past is we’ve given you basically parameters for the sales investment, parameters for the non-sales commercial investment and we simply wanted to clarify for the folks. But you are right in your interpretation. That’s the combined investment, the total investment for LINZESS that will be made by Ironwood and Forest together. We are responsible for about half of that and it will show up in – depending on the utilization of our different assets, it will show up over the course of the year in different line items. So, for instance, our sales, it will be incorporated in our sales line, in our sales and marketing line and then there will be some collaboration expense components to that. But I think the most important thing to recognize is that we are accountable for half of that and we wanted to give you a range based upon other predicates in the space for this type on investment. We just want to people to understand that in a little more granularity. If that make sense; so let me pause there.

Peter M. Hecht, Ph.D. – CEO: Just if I editorialize just for a second Mario, I think partly what we’re trying to do here, over the past maybe five or six quarters we’ve taken the time to educate on the various components of primary care launches because some folks haven’t seen a primary care launch like this in a while. We thought it was…

useful during that period of time to breakout the various components, both to remind people about all the pieces that go into a primary care launch and to describe the individual investment elements that are required to execute on it. At this point, we’re really just aggregating those various components of the investment into a single number to simplify for folks. I think at this point folks who have been following our story understand all these pieces in pretty gory detail, so we thought it would be helpful to simplify, It’s more that than anything else.

Michael J. Higgins – COO and CFO: Mario, the second part of your question again if you could repeat it? Is there another element or are you good?

Mario Corso – Mizuho Securities USA Inc.: European contribution in 2013.

Michael J. Higgins – COO and CFO: Yeah, I think it’s premature. I think our expectations from Europe for this year are – we’re going to keep them on a conservative side. The launch – we do expect initial launches to happen for – I’m sorry Almirall is not, given the specific breakout and exact timing of those, but we do expect launches on a territory-by-territory basis to start happening this year, and obviously there are milestones associated with that, and most importantly from a long-term perspective, we’ll start to see some of our royalties coming in from there, but we would expect that that’s going to roll out over the course of the year and it will be a – we’re in it for the long-term in Europe, but we expect that to start this year, but no specific guidance on how exact timing and magnitude of impact this year.

Reimbursements

Anupam Rama – JPMorgan: Just a quick question on reimbursement; can you expand a little bit on what goes on in the negotiation process as you’re trying to move from Tier 3 to Tier 2, and how long, generally speaking, that takes to sort of make that move?

Peter M. Hecht, Ph.D. – CEO: Tom, can you take that one on?

Thomas McCourt – CCO and SVP, Marketing and Sales: Yeah, absolutely. I think it is obviously the core – is really laying out the value proposition the payor pays on the clinical profile and the price, and certainly we feel very good about the clinical profile of LINZESS based on what we got on the label and the overall performance of the drug. I think we priced the drug initially to really maximize the value proposition. Certainly, as we go forward in the evaluation process with the payor, obviously there will be ongoing discussions on kind of what the net price will look like, which we haven’t given any specific guidance on overall. But I think we – and we would expect, there’s going to be a group that will come out over the first three months, making a decision; there’ll be another wait, probably six months, and then the last groups will generally make a decision within the first 12 months, and certainly, it’s our goal to get the majority of patients into Tier 2 before the end of the year with either limited or no restriction. Does that help?

Anupam Rama – JPMorgan: Yes, great. Thanks for taking our question.

Thomas McCourt – CCO and SVP, Marketing and Sales: I think the other comment I’d make is, we’ve had some really positive initial conversation with a couple of the big payors, and I think we’re going to hear something here quite quickly. So, we’re extremely encouraged.