Ironwood Pharmaceuticals, Inc. (Nasdaq: IRWD), a GI-focused healthcare company, today provided an update on its second quarter 2020 results and recent business performance, as well as an update related to the impact of the COVID-19 pandemic on its business.
“Strong execution resulted in another solid quarter, highlighting the fundamental strength and resiliency of our business as we continue to advance our mission of advancing GI diseases and redefining the standard of care for millions of GI patients, despite the challenges posed by the COVID-19 pandemic,” said Mark Mallon, chief executive officer of Ironwood. “We are disappointed by the Phase II results for MD-7246; however, our strategy remains clear and we believe we are well-positioned for long-term growth, evidenced by continued LINZESS performance, the updates we made designed to strengthen our IW-3718 Phase III program, and our fifth consecutive profitable quarter.”
COVID-19 Business Impact
The impact of the COVID-19 pandemic continues to be far-reaching and unpredictable in the U.S. and around the world. Ironwood is taking important actions designed to help mitigate the impacts of the COVID-19 pandemic on its business and is following applicable federal, state and local health authority guidance.
Second Quarter 2020 Financial Highlights1
(in thousands, except for per share amounts)
|
|
2Q 2020 |
2Q 2019 |
||
Total revenues |
$ 89,432 |
$ 102,215 |
|||
Total costs and expenses |
56,719 |
80,638 |
|||
GAAP net income from continuing operations |
25,204 |
12,283 |
|||
GAAP net income |
25,204 |
12,283 |
|||
GAAP net income per share – basic and diluted |
0.16 |
0.08 |
|||
Adjusted EBITDA |
33,353 |
25,645 |
|||
Non-GAAP net income |
25,671 |
16,032 |
|||
Non-GAAP net income per share |
0.16 |
0.10 |
|||
Second Quarter 2020 Corporate Highlights
U.S. LINZESS
U.S. LINZESS Full Brand Collaboration1 (in thousands, except for percentages) |
Three Months Ended
|
|
|
2020 |
2019 |
LINZESS U.S. net sales as reported by AbbVie |
$218,945 |
$207,716 |
AbbVie & Ironwood commercial costs, expenses and
|
53,812 |
76,987 |
Commercial margin |
75% |
63% |
AbbVie & Ironwood R&D Expenses |
13,417 |
14,474 |
Total net profit on sales of LINZESS |
$151,716 |
$116,255 |
Full brand margin |
69% |
56% |
GI Pipeline
Global Collaborations and U.S. Promotional Partnerships
Second Quarter Financial Results
|
2020 Guidance |
LINZESS net sales growth |
Mid-single digit % increase |
Total Revenue |
$360 – $380 million |
Adjusted EBITDA1 |
>$105 million |
Non-GAAP Financial Measures
Ironwood presents non-GAAP net income (loss) and non-GAAP net income (loss) per share to exclude the impact of net gains and losses on derivatives related to our 2022 Convertible Notes that are required to be marked-to-market. Ironwood also excludes restructuring, and separation-related expenses from non-GAAP net income (loss), if any. These adjustments, as applicable, are reflected in the non-GAAP net income (loss) in the second quarter 2020 presented in this press release. Non-GAAP adjustments are further detailed below:
Ironwood also presents adjusted EBITDA, a non-GAAP measure, as well as guidance on adjusted EBITDA. Adjusted EBITDA is calculated by subtracting net interest expense, taxes, depreciation, amortization, mark-to-market adjustments on derivatives related to Ironwood’s 2022 Convertible Notes, restructuring expenses, and separation expenses from GAAP net income (loss) from continuing operations. The adjustments are made on a similar basis as described above related to non-GAAP net income (loss), 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 (loss) and non-GAAP net income (loss) per share to GAAP net income (loss) and GAAP net income (loss) per share, respectively, and for a reconciliation of adjusted EBITDA to net income (loss) from continuing operations on a GAAP basis, please refer to the tables at the end of this press release.
Ironwood does not provide guidance on GAAP net income (loss) from continuing operations or a reconciliation of expected adjusted EBITDA to expected GAAP net income (loss) from continuing operations because, without unreasonable efforts, it is unable to predict with reasonable certainty the non-GAAP adjustments used to calculate adjusted EBITDA including, without limitation, the mark-to-market adjustments on the derivatives related to its 2022 Convertible Notes. These adjustments are uncertain, depend on various factors and could have a material impact on GAAP net income (loss) from continuing operations for the guidance period.
Conference Call Information
Ironwood will host a conference call and webcast at 8:30 a.m. Eastern Time on Thursday, August 6, 2020 to discuss its second quarter 2020 results and recent business activities. Individuals interested in participating in the call should dial (866) 324- 3683 (U.S. and Canada) or (509) 844-0959 (international) using conference ID number 6183913. 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 August 6, 2020 running through 11:59 p.m. Eastern Time on August 20, 2020. To listen to the replay, dial (855) 859-2056 (U.S. and Canada) or (404) 537-4306 (international) using conference ID number 6183913. 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) is a GI-focused healthcare company dedicated to creating medicines that make a difference for patients living with GI diseases. We discovered, developed and are commercializing linaclotide, the U.S. branded prescription market leader for adults with irritable bowel syndrome with constipation (IBS-C) or chronic idiopathic constipation (CIC). We are also advancing IW-3718, a gastric retentive formulation of a bile acid sequestrant being developed for the potential treatment of refractory gastroesophageal reflux disease. IW-3718 is first-in-category product candidate currently in Phase III clinical trials.
Ironwood was founded in 1998 and is headquartered in Boston, Mass. For more information, please visit our website at www.ironwoodpharma.com or www.twitter.com/ironwoodpharma; information that may be important to investors will be routinely posted in both these locations.
About LINZESS (linaclotide)
LINZESS® is the #1 prescribed brand for the treatment of adult patients with irritable bowel syndrome with constipation (IBS-C) and chronic idiopathic constipation (CIC), based on IQVIA data.
LINZESS is a once-daily capsule that helps relieve the abdominal pain and constipation 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 6 years of age. The safety and effectiveness of LINZESS in pediatric patients less than 18 years of age have not been established. In neonatal mice, linaclotide increased fluid secretion as a consequence of GC-C agonism resulting in mortality within the first 24 hours due to dehydration. Due to increased intestinal expression of GC-C, patients less than 6 years of age may be more likely than patients 6 years of age and older to develop severe diarrhea and its potentially serious consequences. In adults with IBS-C or CIC treated with LINZESS, the most commonly reported adverse event was diarrhea.
LINZESS is not a laxative; it is the first medicine approved by the FDA in a class called guanylate cyclase-C (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
WARNING: RISK OF SERIOUS DEHYDRATION IN PEDIATRIC PATIENTS LINZESS is contraindicated in patients less than 6 years of age. In nonclinical studies in neonatal mice, administration of a single, clinically relevant adult oral dose of linaclotide caused deaths due to dehydration. Use of LINZESS should be avoided in patients 6 years to less than 18 years of age. The safety and effectiveness of LINZESS have not been established in patients less than 18 years of age. |
Contraindications
Warnings and Precautions
Pediatric Risk
Diarrhea
Common Adverse Reactions (incidence ≥2% and greater than placebo)
Please see full Prescribing Information including Boxed Warning: http://www.allergan.com/assets/pdf/linzess_pi
LINZESS® and CONSTELLA® are registered trademarks of Ironwood Pharmaceuticals, Inc. Any other trademarks referred to in this press release are the property of their respective owners. All rights reserved.
Forward-Looking Statements
This press release contains forward-looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements, including statements about our strategy, business and operations; the sufficiency of supply of LINZESS to meet U.S. commercial needs; the development, commercial availability and commercial potential of linaclotide and our other product candidates and the drivers, timing, impact and results thereof; the potential indications for, and benefits of, linaclotide and other product candidates; expectations that we will continue to record collaborative arrangements revenue based on actual settlement payments received from AbbVie; our plans with respect to the Phase III program for IW-3718, including statements about our plans to conduct an early assessment of efficacy in our IW-3718-302 and the IDMC assessment of the trial data, the timing of receipt of outcomes of such assessment, and the nature of the recommendation, next steps for the IW-3718 trial following receipt of the IDMC’s non-binding recommendation ,the anticipated timing of clinical developments and the timing and top-line results of the IW-3718 Phase III trials, and our ability to continue enrolling patients in IW-3718-301; our plans to discontinue development of MD-7246; expectations regarding our global collaborations, including partners’ responsibility, beginning in 2020, for API, finished drug product and finished goods manufacturing in their respective territories; and our financial performance and results, and guidance and expectations related thereto, including expectations related to LINZESS net sales growth, total revenue and adjusted EBITDA. These forward-looking statements speak only as of the date of this press release, and Ironwood undertakes no obligation to update these forward-looking statements. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such statement. Applicable risks and uncertainties include those related to the effectiveness and timing of development and commercialization efforts by us and our partners; preclinical and clinical development, manufacturing and formulation development; the risk that our clinical programs and studies may not progress or develop as anticipated, including that studies are delayed or discontinued, or that regulatory submissions are delayed, for any reason, such as safety, tolerability, enrollment, manufacturing, economic or other reasons, including due to the impacts of the COVID-19 pandemic; the risk that findings from our completed studies may not be replicated in later studies, our interpretation of the results of those studies are not shared by the U.S. FDA or the results of those studies are not consistent; the risk that we or our partners are unable to obtain, maintain or manufacture sufficient LINZESS or our product candidates, or otherwise experience difficulties with respect to supply or manufacturing; the efficacy, safety and tolerability of linaclotide and other product candidates; the decisions by regulatory and judicial authorities, including the potential impact of the COVID-19 pandemic on governmental authorities; the risk that we may never get additional patent protection for linaclotide; the risk that we may never get sufficient patent protection for linaclotide and other product candidates, that patents for linaclotide or other products may not provide adequate protection from competition, or that we are not able to successfully protect such patents; the outcomes in legal proceedings to protect or enforce the patents relating to our products and product candidates, including abbreviated new drug application litigation; the possibility that we may not achieve some or all of the anticipated benefits of the separation of Cyclerion; the risk that financial and operating results may differ from our projections; developments in the intellectual property landscape; challenges from and rights of competitors or potential competitors; the risk that our planned investments do not have the anticipated effect on our company revenues; developments in accounting guidance or practice; Ironwood’s or AbbVie’s accounting practices, including reporting and settlement practices as between Ironwood and AbbVie; the risk that we are unable to manage our expenses or cash use, or are unable to commercialize our products as expected; and the risks listed under the heading “Risk Factors” and elsewhere in Ironwood’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and in our subsequent SEC filings. In particular, the COVID-19 pandemic and the associated containment efforts have had a serious adverse impact on the economy, the severity and duration of which are uncertain. Government stabilization efforts will only partially mitigate the consequences. The extent and duration of the impact on our business and operations is highly uncertain. Factors that will influence the impact on our business, operations and financial results include the duration and extent of the pandemic, the extent of imposed or recommended containment and mitigation measures, and the general economic consequences of the pandemic. The pandemic could have a material adverse impact on our business, operations and financial results for an extended period of time.
Ironwood uses non-GAAP financial measures in this press release, which should be considered only a supplement to, and not a substitute for or superior to, GAAP measures. Refer to the Reconciliation of GAAP Results to Non-GAAP Financial Measures table and to the Reconciliation of GAAP Net Income (Loss) from Continuing Operations to Adjusted EBITDA table and related footnotes accompany this press release. Further, Ironwood considers the net profit for the U.S. LINZESS brand collaboration with AbbVie in assessing the product’s performance and calculates it based on inputs from both Ironwood and AbbVie. This figure should not be considered a substitute for Ironwood’s GAAP financial results. An explanation of our calculation of this figure is provided in the U.S. LINZESS Brand Collaboration table and related footnotes accompanying this press release.
LINZESS® is a registered trademark of Ironwood Pharmaceuticals, Inc. Any other trademarks referred to in this presentation are the property of their respective owners. All rights reserved.
Condensed Consolidated Balance Sheets (In thousands) (unaudited) |
|||||||
|
|
June 30,
|
December
|
|
|||
Assets |
|
|
|
|
|||
Cash and cash equivalents |
|
$ |
253,252 |
$ |
177,023 |
|
|
Accounts receivable, net |
|
105,379 |
11,279 |
|
|||
Related party account receivable, net |
|
- |
105,967 |
|
|||
Inventory, net |
|
- |
648 |
|
|||
Prepaid expenses and other current assets |
|
14,394 |
10,685 |
|
|||
Restricted cash, short-term |
|
1,250 |
1,250 |
|
|||
Total current assets |
|
374,275 |
306,852 |
|
|||
Restricted cash, net of current portion |
|
971 |
971 |
|
|||
Accounts receivable, net of current portion |
|
22,995 |
32,597 |
|
|||
Property and equipment, net |
|
11,190 |
12,429 |
|
|||
Operating lease right-of-use assets |
|
17,156 |
17,743 |
|
|||
Convertible note hedges |
|
16,131 |
31,366 |
|
|||
Other assets |
|
820 |
790 |
|
|||
Total assets |
|
$ 443,538 |
$ 402,748 |
|
|||
Liabilities and Stockholders’ Deficit |
|
|
|
|
|||
Accounts payable |
|
$ |
2,104 |
$ |
3,978 |
|
|
Related party accounts payable, net |
|
751 |
1,509 |
|
|||
Accrued research and development costs |
|
2,400 |
2,956 |
|
|||
Accrued expenses and other current liabilities |
|
17,955 |
30,465 |
|
|||
Current portion of operating lease liabilities |
|
2,610 |
1,146 |
|
|||
Deferred revenue |
|
875 |
875 |
|
|||
Total current liabilities |
|
26,695 |
40,929 |
|
|||
Note hedge warrants |
|
12,958 |
24,260 |
|
|||
Convertible senior notes |
|
418,924 |
407,994 |
|
|||
Operating lease liabilities, net of current portion |
|
21,211 |
22,082 |
|
|||
Other liabilities |
|
602 |
734 |
|
|||
Total stockholders’ deficit |
|
(36,852) |
(93,251) |
|
|||
Total liabilities and stockholders’ deficit |
$ 443,538 |
$ 402,748 |
Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (unaudited) |
|||||||
|
Three Months Ended
|
Six Months Ended
|
|||||
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenues |
|
|
|
|
|||
Collaborative arrangements revenue |
$ 89,423 |
$ 77,322 |
$ 163,868 |
$ 143,474 |
|||
Sale of active pharmaceutical ingredient |
9 |
24,893 |
5,507 |
27,471 |
|||
Total Revenues |
89,432 |
102,215 |
169,375 |
170,945 |
|||
Costs and expenses: |
|
|
|
|
|||
Cost of revenues |
- |
11,313 |
2,239 |
12,356 |
|||
Research and development |
22,076 |
28,758 |
50,103 |
60,956 |
|||
Selling, general and administrative |
34,643 |
43,246 |
71,093 |
92,341 |
|||
Gain on lease modification |
- |
(3,169) |
- |
(3,169) |
|||
Restructuring expenses |
- |
490 |
- |
3,818 |
|||
Total cost and expenses |
56,719 |
80,638 |
123,435 |
166,302 |
|||
Income from operations |
32,713 |
21,577 |
45,940 |
4,643 |
|||
Other (expense) income: |
|
|
|
|
|||
Interest expense |
( 7,318) |
(9,430) |
( 14,538) |
(19,022) |
|||
Interest and investment income |
276 |
668 |
1,053 |
1,404 |
|||
(Loss) gain on derivatives |
( 467) |
(672) |
( 3,933) |
3,272 |
|||
Other income |
- |
140 |
27 |
140 |
|||
Other expense, net |
( 7,509) |
(9,294) |
( 17,391) |
(14,206) |
|||
Income (loss) from continuing operations |
25,204 |
12,283 |
28,549 |
(9,563) |
|||
Loss from discontinued operations |
- |
- |
- |
(37,438) |
|||
GAAP net income (loss) |
$ 25,204 |
$ 12,283 |
$ 28,549 |
$ (47,001) |
|||
|
|
|
|
|
|||
Income (loss) from continuing operations per share — basic and diluted |
$ 0.16 |
$ 0.08 |
$ 0.18 |
$ (0.06) |
|||
Loss from discontinued operations per share — basic and diluted |
- |
- |
- |
$ (0.24) |
|||
GAAP net income (loss) per share—basic and diluted |
$ 0.16 |
$ 0.08 |
$ 0.18 |
$ (0.30) |
|||
|
|
|
|
|
Reconciliation of GAAP Results to Non-GAAP Financial Measures
(In thousands, except per share amounts)
(unaudited)
A reconciliation between GAAP net income (loss) on a GAAP basis and on a non-GAAP basis is as follows:
|
Three Months Ended
|
Six Months Ended
|
|||||
|
2020 |
2019 |
2020 |
2019 |
|||
GAAP net income (loss) |
$ 25,204 |
$ 12,283 |
$ 28,549 |
$ (47,001) |
|||
Adjustments: |
|
|
|
|
|||
Mark-to-market adjustments on the derivatives related
|
467 |
672 |
3,933 |
(3,272) |
|||
Restructuring expenses |
- |
490 |
- |
3,818 |
|||
Separation expenses |
- |
2,587 |
- |
21,941 |
|||
Non-GAAP net income (loss) |
$ 25,671 |
$ 16,032 |
$ 32,482 |
$ (24,514) |
A reconciliation between GAAP net income (loss) per share on a GAAP basis and on a non-GAAP basis is as follows:
|
Three Months Ended
|
Six Months Ended
|
|||||
|
2020 |
2019 |
2020 |
2019 |
|||
GAAP net income (loss) per share –basic and diluted |
$ 0.16 |
$ 0.08 |
$ 0.18 |
$ (0.30) |
|||
Adjustments to GAAP net income (loss) per share
|
- |
0.02 |
0.02 |
0.14 |
|||
Non-GAAP net income (loss) per share –basic and diluted1 |
$ 0.16 |
$ 0.10 |
$ 0.20 |
$ (0.16) |
Weighted average number of common shares used in net
|
159,407 |
155,849 |
158,890 |
155,405 |
||||
Weighted average number of common shares used in net
|
159,920 |
155,849 |
160,032 |
155,405 |
_________________________________
1 Numbers may not add due to rounding.
Reconciliation of GAAP Net Income (Loss) from Continuing Operations to
Adjusted EBITDA
(In thousands, except per share amounts)
(unaudited)
A reconciliation between net income (loss) from continuing operations on a GAAP basis and adjusted EBITDA:
|
Three Months Ended
|
Six Months Ended
|
|||||
|
2020 |
|
2019 |
|
2020 |
|
2019 |
GAAP net income (loss) from continuing operations |
$ 25,204 |
$ 12,283 |
$ 28,549 |
$ (9,563) |
|||
Adjustments: |
|
|
|
|
|||
Mark-to-market adjustments on the derivatives related
|
467 |
672 |
3,933 |
(3,272) |
|||
Restructuring expenses1 |
- |
490 |
- |
3,818 |
|||
Separation expenses1 |
- |
2,587 |
- |
7,477 |
|||
Interest expense |
7,318 |
9,430 |
14,538 |
19,022 |
|||
Interest income |
(276) |
(668) |
(1,053) |
(1,404) |
|||
Depreciation1 |
640 |
851 |
1,322 |
1,539 |
|||
Adjusted EBITDA2 |
$ 33,353 |
$ 25,645 |
$ 47,289 |
$ 17,617 |
_____________________________
1 These adjustments relate to the portion of costs included in continuing operations and not the amounts that have been recast to discontinued operations.
2 There were no discontinued operations for the three or six months ended June 30, 2020.
U.S. LINZESS Commercial Collaboration1
Revenue/Expense Calculation (In thousands) (unaudited) |
|||||||
|
Three Months Ended
|
Six Months Ended
|
|||||
|
2020 |
|
2019 |
|
2020 |
|
2019 |
LINZESS U.S. net sales as reported by AbbVie2 |
$ 218,945 |
$ 207,716 |
$ 411,767 |
$ 385,074 |
|||
AbbVie & Ironwood commercial costs, expenses and
|
53,812 |
76,987 |
109,894 |
138,692 |
|||
Commercial profit on sales of LINZESS |
$ 165,133 |
$ 130,729 |
$ 301,873 |
$ 246,382 |
|||
Commercial Margin4 |
75% |
63% |
73% |
64% |
|||
|
|
|
|
|
|||
|
|
|
|
|
|||
Ironwood’s share of net profit5 |
82,567 |
65,365 |
150,937 |
123,191 |
|||
Reimbursement for Ironwood’s selling, general and
|
3,936 |
10,359 |
12,610 |
20,636 |
|||
Adjustments to reconcile Ironwood’s previously reported
|
- |
(751) |
(5,902) |
(4,560) |
|||
Ironwood’s collaborative arrangement revenue |
$ 86,503 |
$ 74,973 |
$ 157,645 |
$ 139,267 |
__________________________________
1 Ironwood collaborates with AbbVie on the development and commercialization of linaclotide in North America. Under the terms of the collaboration agreement, Ironwood receives 50% of the net profits and bears 50% of the net losses from the commercial sale of LINZESS in the U.S. The purpose of this table is to present calculations of Ironwood’s share of net profit (loss) generated from the sales of LINZESS in the U.S. and Ironwood’s collaboration revenue/expense; however, the table does not present the research and development expenses related to LINZESS in the U.S. that are shared equally between the parties under the collaboration agreement. Please refer to the table at the end of this press release for net profit for the U.S. LINZESS brand collaboration with AbbVie.
2 In connection with its acquisition of Allergan, AbbVie recast historically reported LINZESS U.S. net sales (previously reported by Allergan) for periods beginning on January 1, 2019, to conform to AbbVie’s revenue recognition accounting policies and reporting conventions. As a result, certain of the rebates and discounts that were previously classified within LINZESS U.S. net sales have been reclassified as LINZESS U.S. commercial costs, expenses and other discounts within Ironwood’s calculation of collaborative arrangements revenue.
3 Includes certain discounts recognized and cost of goods sold incurred by AbbVie, as well as selling, general and administrative expenses incurred by AbbVie and Ironwood that are attributable to the cost-sharing arrangement between the parties.
4 Commercial margin is defined as commercial profit on sales of LINZESS as a percent of total LINZESS U.S. net sales. Ironwood has recalculated commercial margin in connection with AbbVie’s recast of historically reported LINZESS U.S. net sales (previously reported by Allergan).
5 Ironwood has recalculated its share of net profit on sales of LINZESS in the U.S. to conform with AbbVie’s recast of historically reported LINZESS U.S. net sales (previously reported by Allergan).
6 Includes Ironwood’s selling, general and administrative expenses attributable to the cost-sharing arrangement with AbbVie. Excludes an insignificant amount and approximately $0.4 million for the three and six months ended June 30, 2020, respectively, and excludes approximately $0.8 million and approximately $1.3 million for the three and six months ended June 30, 2019, respectively, related to patent prosecution and patent litigation costs recognized in connection with the collaboration agreement with AbbVie.
7 In connection with its acquisition of Allergan, AbbVie recast LINZESS U.S. net sales (previously reported by Allergan) for periods beginning on January 1, 2019 to conform with its revenue recognition accounting policies and reporting conventions for certain rebates and discounts. This recast did not result in any change to Ironwood’s historically reported collaborative arrangements revenue or collaborative arrangements revenue policy. Ironwood continues to record collaborative arrangements revenue based on actual settlement payments received from AbbVie.
U.S. LINZESS Full Brand Collaboration1 Revenue/Expense Calculation (In thousands) (unaudited) |
|||||||
|
Three Months Ended
|
Six Months Ended
|
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2020 |
|
2019 |
|
2020 |
|
2019 |
LINZESS U.S. net sales as reported by AbbVie2 |
$ 218,945 |
$ 207,716 |
$ 411,767 |
$ 385,074 |
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AbbVie & Ironwood commercial costs, expenses
|
53,812 |
76,987 |
109,894 |
138,692 |
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AbbVie & Ironwood R&D Expenses4 |
13,417 |
14,474 |
28,199 |
28,090 |
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Total net profit on sales of LINZESS5 |
$ 151,716 |
$ 116,255 |
$ 273,674 |
$ 218,292 |
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1 Ironwood collaborates with AbbVie on the development and commercialization of linaclotide in North America. Under the terms of the collaboration agreement, Ironwood receives 50% of the net profits and bears 50% of the net losses from the commercial sale of LINZESS in the U.S. The purpose of this table is to present calculations of the total net profit (loss) generated from the sales of LINZESS in the U.S., including the commercial costs and expenses and the research and development expenses related to LINZESS in the U.S. that are shared equally between the parties under the collaboration agreement.
2 In connection with its acquisition of Allergan, AbbVie recast historically reported LINZESS U.S. net sales (previously reported by Allergan) for periods beginning on January 1, 2019, to conform to AbbVie’s revenue recognition accounting policies and reporting conventions. As a result, certain of the rebates and discounts that were previously classified within LINZESS U.S. net sales have been reclassified as LINZESS U.S. commercial costs, expenses and other discounts within Ironwood’s calculation of collaborative arrangements revenue.
3 Includes certain discounts recognized and cost of goods sold incurred by AbbVie, as well as selling, general and administrative expenses incurred by AbbVie and Ironwood that are attributable to the cost-sharing arrangement between the parties.
4 R&D expenses related to LINZESS in the U.S. are shared equally between Ironwood and AbbVie under the collaboration agreement.
5 Ironwood has recalculated its share of net profit on sales of LINZESS in the U.S. to conform with AbbVie’s recast of historically reported LINZESS U.S. net sales (previously reported by Allergan).
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