Ironwood Pharmaceuticals Provides Fourth Quarter 2010 Investor Update
Linaclotide
In November, Ironwood and its U.S. partner, Forest Laboratories, Inc., completed the clinical efficacy portion of the linaclotide development program to support upcoming regulatory submissions in both the U.S. and the E.U. Linaclotide met 66 out of 66 U.S. and E.U. primary and secondary endpoints in the four Phase 3 trials assessing its efficacy and safety in patients with irritable bowel syndrome with constipation (IBS-C) or chronic constipation (CC). Diarrhea was the most common adverse event in linaclotide‐treated patients in these trials.
In the 26-week Phase 3 IBS-C trial, improvements in both abdominal pain and complete spontaneous bowel movements were achieved for linaclotide-treated patients in the first week of treatment, and these improvements were sustained throughout the entire period. Of particular note, at the 26th week of treatment, linaclotide-treated patients had a mean reduction in abdominal pain of 50 percent compared to 27 percent for placebo-treated patients (p<0.0001).
Ironwood and Forest are on track to submit a New Drug Application (NDA) for linaclotide with the U.S. Food and Drug Administration for both the IBS-C and CC indications in the third quarter of 2011.
Ironwood’s European partner, Almirall, S.A., is on track to submit a Market Authorization Application (MAA) for linaclotide with the European Medicines Agency for the IBS‐C indication in the second half of 2011.
Ironwood and Forest were recently informed that all six linaclotide-related abstracts submitted for presentation at the 2011 Digestive Disease Week (DDW) annual meeting have been accepted. Four abstracts will be discussed in oral presentations and two will be made available through poster presentations. These presentations will be the first time that Ironwood and Forest discuss the full results of the two Phase 3 IBS-C clinical trials. These presentations will be made May 7–9, 2011 at the DDW annual meeting in Chicago.
Pipeline and Corporate
Ironwood continues to advance its pipeline, which includes product candidates and research efforts focused on gastrointestinal disease, pain and inflammation, respiratory and allergic disease, and cardiovascular disease. To augment its internal discovery capabilities, Ironwood recently initiated a collaboration with Protagonist Therapeutics, Inc. through which Protagonist will use its proprietary disulfide rich peptide technology platform to discover peptides against targets identified by Ironwood. Ironwood has the right to advance such peptides through preclinical and clinical development, and if such development is successful, commercialization.
Ironwood ended fiscal year 2010 with $248 million of cash, cash equivalents, and available-for-sale securities. Based on its current operating plan, Ironwood targets ending fiscal year 2011 with greater than $150 million of cash, cash equivalents, and available-for-sale securities.
Conference Call Information
Ironwood will host a conference call and webcast at 8:30 a.m. Eastern Time today to discuss its business activities. Individuals interested in participating in the call should dial (888) 206‐4836 (U.S. and Canada) or (913) 312‐0679 (international) using conference ID number 9353790. 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 today at approximately 11:30 a.m. Eastern Time, running through 11:59 p.m. Eastern Time on March 17, 2011. To listen to the replay, dial (888) 203‐1112 (U.S. and Canada) or (719) 457‐0820 (international) using conference ID number 9353790. The archived webcast will be available on Ironwood’s website for 14 days beginning approximately one hour after the call.
About Linaclotide
Linaclotide, an investigational drug, is an agonist of the guanylate cyclase type-C (GC-C) receptor located on the luminal surface of the intestine. In preclinical models, linaclotide has been shown to reduce visceral pain, increase fluid secretion, and accelerate intestinal transit. The effects on secretion and transit are mediated through cyclic guanosine monophosphate (cGMP), which is also believed to modulate the activity of local nerves to reduce pain. Linaclotide is an orally delivered peptide that acts locally in the gut with no measurable systemic exposure at therapeutic doses and is intended for once-daily administration. Linaclotide is in Phase 3 clinical development for the treatment of irritable bowel syndrome with constipation (IBS-C) and chronic constipation. The efficacy portion of linaclotide’s development program has been completed and will support the NDA submission for both indications, as well as the MAA submission for the IBS-C indication. An issued composition of matter patent for linaclotide provides protection to 2025. Ironwood and Forest are co-developing and, if it is approved, will co-promote linaclotide in the United States. Ironwood has out-licensed linaclotide to Almirall for European development and commercialization, and to Astellas Pharma Inc. for development and commercialization in Japan, Indonesia, Korea, the Philippines, Taiwan, and Thailand.
About Irritable Bowel Syndrome with Constipation (IBS-C)
IBS-C is a chronic functional gastrointestinal disorder characterized by abdominal pain, discomfort, and bloating associated with altered bowel habits, and as many as 11 million people in the U.S. suffer from it. There are currently few available therapies to treat this disorder and there is a high rate of dissatisfaction with available therapies. Patients suffering from IBS-C can be affected physically, psychologically, socially, and economically.
About Chronic Constipation (CC)
As many as 34 million Americans suffer from symptoms associated with CC and 8.5 million patients have sought treatment. Patients with CC often experience hard and lumpy stools, straining during defecation, a sensation of incomplete evacuation, and fewer than three bowel movements per week, as well as discomfort and bloating. This condition significantly affects patients’ quality of life by impairing their ability to work and participate in typical daily activities. There is a high rate of dissatisfaction with currently available treatments.
About Ironwood Pharmaceuticals
Ironwood Pharmaceuticals (NASDAQ: IRWD) is an entrepreneurial pharmaceutical company dedicated to the art and science of great drugmaking. Linaclotide, Ironwood’s GC-C agonist, is in Phase 3 clinical development for the treatment of irritable bowel syndrome with constipation (IBS-C) and chronic constipation. The efficacy portion of linaclotide’s development program has been completed and will support the NDA submission for both indications, as well as the MAA submission for the IBS-C indication. Ironwood also has a growing pipeline of additional drug candidates in earlier stages of development. Ironwood is located in Cambridge, Mass. To learn more, visit www.ironwoodpharma.com.
This press release contains forward looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements, including, but not limited to, the timing of the filing of a New Drug Application or a Marketing Authorization Application for linaclotide, linaclotide’s potential as a treatment for IBS-C or chronic constipation, our potential presentations at DDW, the potential size of linaclotide’s target patient population, and our targeted cash-on-hand for 2011. 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 the risks that our linaclotide development activities do not progress as expected, serious adverse events arise in patients that are deemed to be definitely or probably related to linaclotide treatment, the incidence or severity of diarrhea in patients treated with linaclotide is higher than expected, we are unable to produce an adequate commercial supply of linaclotide, as well as risks related to the difficulty of predicting regulatory approvals, the acceptance of and demand for new pharmaceutical products, the impact of competitive products and pricing, and whether linaclotide will ever be commercialized successfully. Applicable risks also include those that are listed in our Quarterly Report on Form 10-Q for the three months ended September 30, 2010, in addition to the risk factors that are listed from time to time in Ironwood Pharmaceuticals’ Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and any subsequent SEC filings. We undertake no obligation to update these forward-looking statements to reflect events or circumstances occurring after this press release. These forward-looking statements speak only as of the date of this press release.
Bitter pill when politicians swallow big pharma’s spin
Politicians always profess great sympathy for people struggling to keep up with the cost of living but often fail to put that sympathy into practice. Economists like to divide the economy into consumers on one side and producers on the other. They believe the economy should be run for the benefit of consumers, not producers. The consumer is supposed to be king.
Ostensibly, pollies think the same. But they’re always doing deals with producers that allow them to charge higher prices at their customers’ expense.
Why would politicians do such a thing? Because the producers are usually better organised. They have more to gain from a higher price – or lose from a lower price – than individual consumers have to lose or gain. Consumers are amateurs; producers are professionals and they put a lot of effort into lobbying governments.
But there’s another factor. Every voter with a job is a producer as well as a consumer. Politicians care about jobs. And when producers offer to create new jobs – or, more likely, threaten to sack workers if they don’t get what they want – the pollies usually play ball. They’re easily conned.
Consider the case of pharmaceuticals. When a drug company – usually a big American or European corporation – discovers and develops a new medicine, it is granted a patent that amounts to a 20-year monopoly on the production of the medicine. If the medicine is highly effective, the monopoly allows the company to charge a very high price.
The standard justification for patents is that, by holding off competitors, they allow the company a period of grace in which to recover its research and development costs and make a big profit, thus encouraging more invention, to the benefit of society.
This explains why pharmaceuticals are so expensive in the United States. But the companies are prevented from charging such high prices in Australia by the operation of our pharmaceutical benefits scheme.
Under the scheme most drugs are, in effect, bought by the federal government, then sold to patients at heavily subsidised prices. This makes the government a ”monopsonist” – a single buyer – and so gives it the ability to beat down the prices the drug companies are able to charge.
This explains why patented pharmaceuticals are so much cheaper in places such as Australia and Canada than they are in the US. The Aussie taxpayer benefits, as does the patient required to pay a smaller out-of-pocket contribution towards the cost of the drug.
Great stuff. But here’s where the story gets bad. When a drug’s patent expires, any drug company is allowed to start producing that drug in competition with the former patent holder. They can’t appropriate the drug’s trade name, of course, so they’re known as generics. Generics are tightly regulated to ensure they’re just as effective as the drug being copied.
So when a drug comes off patent and a lot of cheaper generics come onto the market, you’d expect the price of the trade-name drug to fall sharply. That’s what happens in the US and in many other countries, but not in Australia. Why not? Because our pharmaceutical benefits scheme goes easy on the former patent holders. It drops the price by a bit, not a lot.
And it leaves it up to the prescribing doctor – and sometimes the patient talking to the chemist – to say whether a generic may be substituted. Many doctors and patients have an irrational attachment to the brand name, even though it’s a lot dearer.
Last year the Rudd government proudly announced it had cut a new and tougher deal with the drug companies, represented by Medicines Australia, which would save the taxpayer $1.9 billion over five years.
The patents of a lot of expensive drugs will expire in the next few years. The deal involved cutting the prices of these drugs by 16 per cent and cutting the prices of generic drugs by 2 or 5 per cent from the start of this year.
But a health economist at the University of Sydney, associate professor Philip Clarke, and his colleague Edmund Fitzgerald, argue the deal still leaves our off-patent and generic drug prices much higher than they are in most developed countries. They quote the example of statins, the cholesterol-lowering drugs, where the patents of the various types have expired or soon will. Statins account for about 16 per cent of the total cost of the pharmaceutical benefits scheme.
They surveyed the wholesale price of Simvastatin 40mg in 10 developed countries and found our price was the highest: 50 per cent more than the next highest country and more than four times greater than the average price.
The lowest price was in New Zealand, which stages competitive tenders between the drug companies. Its price is just a fraction of our wholesale price of $1 a tablet. And even in the US, chains such as Kmart Pharmacy sell that statin for $15 for 90 tablets.
Clarke and Fitzgerald estimate that, compared with prices in England and Canada, the Rudd government’s deal with the industry lobby will cost taxpayers and consumers $1.7 billion more over its five-year term. And that’s just for the statin group of drugs.
The saving would be even greater, no doubt, if the government were game to take a firmer line on the prescribing habits of doctors.
Why would a government that professes to care so much about our cost of living cut such an expensive deal with the drug producers? Because, in practice, it gives a higher priority to maintaining an industry that makes the actual pills in Australia.
And the largely foreign-owned drug companies have conned it into believing that, unless it forces Australian consumers to paying much higher prices for off-patent drugs than people in other countries pay, the local industry will curl up and die.
Canada lacks oversight on online medical information, study finds
Canada may have a state-run health-care system, but the federal government is noticeably reticent when it comes to providing medical information online.
Wikipedia entries or pharmaceutical company websites are almost always the top hits when Canadians Google the name of a brand or generic drug, while in the United States, Web surfers are directed to a profile of the drug from the government-run National Library of Medicine’s website.
At a time when Internet searches are common for any type of medical problem – and when the medical credentials of Dr. Wikipedia are dubious at best – the lack of federal government oversight on drug searches raises concerns about the accuracy of information Canadians are receiving.
“There’s estimates that thousands of Canadians suffer adverse drug reactions every year, and providing people with accurate information is fundamentally important,” said Michael Law, an assistant professor at the Centre for Health Services and Policy Research at the University of British Columbia. “People are clearly using the Internet, so we should be interested in what type of information they’re finding.”
Prof. Law and his colleagues conducted searches of nearly 300 drugs, and their results, published online this week in the Annals of Pharmacotherapy, showed that Wikipedia turns up as the first search result about 85 per cent of the time when looking up the generic name of a drug. Industry websites crop up nearly 80 per cent of the time when searching the brand name.
Compare this to the U.S., where about three-quarters of the time Google searches yielded a drug synopsis from the NLM, which is a branch of the National Institutes of Health, the country’s medical research agency.
The main reason for this discrepancy is that the U.S. government struck a partnership with Google last year to display its results more prominently when residents are searching prescription drugs online.
In Canada, no such deal exists – and researchers are encouraging federal regulators to step forward.
Tim Vail, spokesman for Federal Health Minister Leona Aglukkaq, said the government is hoping to address the issue within the next year as it looks to strengthen its online presence. He said Ottawa is looking at all options, including working with search engines like Google to make sure accurate information from Health Canada is more prominent for Canadians doing Web searches on prescription drugs, the next pandemic or any other health issue.
“We’re continuing to modify our website and look at ways that will improve searches for Canadians so that we will be more prominent in search engines when Canadians are looking for it,” Mr. Vail said. “We do realize that we are a trusted name and a trusted brand among Canadians.”
Prof. Law described the online world for medical information as the “Wild West” in terms of what Canadians can find. He said Wikipedia often omits certain information on drugs, and pharmaceutical companies could potentially leave out adverse side effects.
One pharmaceutical company defended its online presence. Pfizer, which makes the cholesterol drug Lipitor, said it provides up-to-date scientific information on its website. A company spokeswoman, however, did encourage Web surfers to check the source of their information and to always seek an opinion from health professionals – a message echoed by Prof. Law.
“I would hope that our study would also make patients aware of the fact that the information they read online may be inaccurate or incomplete,” Prof. Law said. “Patients should be sure to talk to their health-care professionals about information they might find online.”
Pharmaceutical Industry Outlook – March 2011
The pharmaceutical industry continues to witness major challenges like sluggish prescription trends, EU pricing pressure, intensifying generic competition, pipeline failures and limited late-stage catalysts. The next five years are expected to reflect a significant imbalance between new product introductions and patent losses.
According to IMS Health, this is the main reason global pharmaceutical market growth will be restricted to the mid-single digits (5-8%) through 2014. Over the next five years, products that currently generate more than $142 billion in sales are expected to face generic competition, including Lipitor, Plavix and Zyprexa.
In fact, 2011 itself will see products worth more than $30 billion losing patent protection. This includes products like Lipitor, Plavix, Zyprexa and Levaquin. These products generated more than $15 billion in sales in 2010. The effect of the genericization of these products will be felt mostly in 2012, which will be a challenging year for several companies.
At the same time, new products are not expected to generate the same level of sales as products losing patent protection. With revenue growth stalling or slowing down, companies have been resorting to cost-cutting and share buybacks to drive bottom-line growth.
M&A Activity
The pharma sector continued to witness major merger and acquisition (M&A) deals in 2010. With most of the big pharma companies already facing or likely to face patent challenges for their blockbuster products, the companies have been looking towards M&As and in-licensing activities to make up for the loss of revenues that will arise with key products losing patent exclusivity.
We saw huge M&A activity over the last few quarters. Major deals include Johnson & Johnson’s (JNJ – Analyst Report) acquisition of medical devices maker Micrus Endovascular Corp. and Merck KGaA’s (MKGAF) acquisition of Millipore Corporation.
Johnson & Johnson is currently looking to buy out the rest of Dutch biopharmaceutical company Crucell NV. This acquisition should not only help strengthen Johnson & Johnson’s portfolio, it should also allow the company to build its presence in the vaccines market, given Crucell’s expertise in the manufacture, discovery and commercialization of vaccines.
Meanwhile, pharma giant Pfizer (PFE – Analyst Report) recently completed its acquisition of King Pharmaceuticals. With this deal, Pfizer is looking to strengthen its presence in the pain management market.
Oncology also remains a much sought-after therapeutic area with companies like Sanofi-Aventis (SNY – Analyst Report) and Celgene (CELG – Analyst Report) strengthening their presence in this market through acquisitions. Meanwhile, generic player Mylan’s (MYL – Analyst Report) purchase of Irish injectable drug maker Bioniche Pharma Holdings Ltd. provides Mylan with a direct entry into the North American injectable drugs market.
Elsewhere, companies have been looking towards biotech firms to build their product portfolios. Prime examples include Johnson & Johnson’s acquisition of Cougar Biotechnology, Roche’s (RHHBY) acquisition of Genentech, Bristol-Myers Squibbs’ (BMY – Analyst Report) acquisition of Medarex, Sanofi-Aventis’ acquisition of Fovea Pharmaceuticals SA, Astellas Pharma’s acquisition of OSI Pharmaceuticals and Abbott Labs’ (ABT – Analyst Report) acquisition of Facet.
Sanofi-Aventis has also been in the news with its agreement to acquire biotech company Genzyme Corp. (GENZ – Analyst Report).
Going forward, we expect this M&A trend to continue. We also expect a significant pickup in in-licensing activities and collaborations for the development of pipeline candidates. Instead of developing a product from scratch, which involves a lot of funds, pharma companies are shopping for mid-to-late stage pipeline candidates that look promising.
Small biotech companies are also game for in-licensing activities and collaborations. Most of these companies find it challenging to raise cash, thereby making it difficult for them to survive and continue with the development of promising pipeline candidates. Therefore, it makes sense for them to seek deals with pharma companies that are sitting on huge piles of cash.
We would recommend investors to put their money in biotech stocks that have attractive pipeline candidates or technology that can be used for the development of novel therapeutics. Therapeutic areas which could see a lot of in-licensing activity include oncology, central nervous system disorders, diabetes and immunology/inflammation.
Emerging Markets
Another recent trend seen in the pharmaceutical sector is a focus on emerging markets. Companies like Mylan, Pfizer, Eli Lilly (LLY – Analyst Report), GlaxoSmithKline (GSK – Analyst Report) and Sanofi-Aventis are all looking to expand their presence in India, China, Brazil and other emerging markets. Until recently, most of the commercialization efforts were focused on the US market — the largest pharmaceutical market — along with Europe and Japan.
However, emerging markets are slowly and steadily gaining more importance and several companies are now shifting their focus to these areas. Emerging markets should see strong sales thanks to higher demand for medicines. Several factors like government initiatives for healthcare, new patient population, and increasing use of generics should help drive demand. Growth in emerging markets could help stabilize the base business during the industry’s 2010-15 patent cliff.
IMS Health estimates that pharmerging markets will grow 14-17% through 2014, while major developed markets will grow only 3-6%. Although the US will retain its position as the single largest market (estimated growth: 3-6% annually in the next five years), China’s pharmaceutical market is expected to continue to grow more than 20% annually, and contribute 21% to overall global growth through 2013.
Growth Forecasts for 2011
According to IMS Health, the global pharmaceutical industry should record growth of 5-7% in 2011 representing sales of approximately $880 billion.
Pharmerging markets, consisting of 17 countries, are slated to grow in the range of 15-17% in 2011, representing sales of $170-$180 billion. China, which is now the third largest market in the world, is expected to grow 25-27% to more than $50 billion in 2011.
As far as developed markets are concerned, Japan is slated to grow 5-7% in 2011. Major European markets like the UK, Germany, France, Italy and Spain are expected to deliver combined growth of 1 3%. A similar growth rate is expected from Canada. The US market, which is expected to retain its position of the single largest pharma market, is slated to grow 3-5% to $320-$330 billion.
Source of Growth Forecast: IMS Health
OPPORTUNITIES
We currently have a neutral outlook on large-cap pharma stocks, supported by the Zacks #3 Rank. While the companies will continue to face challenges like pricing pressure and genericization, growth in emerging markets and product approvals could help reduce the impact.
Most of the companies have provided a disappointing outlook for 2011 with performance expected to be affected by factors like US healthcare reform, EU pricing austerity, and generic competition among others.
We currently have Neutral recommendations on companies like Abbott Labs (ABT – Analyst Report), Allergan Inc. (AGN – Analyst Report) and Pfizer (PFE – Analyst Report). We believe that Allergan’s presence across different segments and geographies will help maintain decent growth going forward. We believe the company will be back on its historical mid-to-high teens earnings growth trajectory from 2011.
In the biotech space, we are positive on Biogen Idec (BIIB – Analyst Report). Biogen delivered a strong fourth quarter with revenues being driven by Tysabri and Avonex. Earnings estimates for Biogen have gone up significantly for 2011 based on continued strong performance of the multiple sclerosis franchise and share repurchase.
WEAKNESSES
We currently have a negative outlook on European pharma companies like Sanofi-Aventis (SNY – Analyst Report) GlaxoSmithKline (GSK – Analyst Report) and Bayer (BAYRY – Analyst Report). All these companies have witnessed downward estimate revisions following the release of fourth quarter and full year results. US healthcare reform, EU pricing austerity and lower sales of pandemic flu products are likely to impact the performance of companies like Sanofi and Glaxo.
Moreover, Sanofi is facing generic competition for several products and this is expected to continue impacting the company’s performance going forward. For 2011, Sanofi expects earnings to decline 5-10% given the absence of A/H1N1 vaccine sales and the impact of generic competition.
Meanwhile, we have a Zacks #4 Rank (short-term Sell rating) on Johnson & Johnson (JNJ – Analyst Report). The company provided a disappointing outlook for 2011. We expect the poor performance of the company’s Consumer segment due to back-to-back OTC product recalls, EU pricing pressure as well as genericization of certain products to weigh on sales.
We recommend avoiding names that offer little growth or opportunity for a take-out. These include companies which are developing drugs that are likely to face regulatory hurdles. The US Food and Drug Administration (FDA) has been exercising more caution before granting approval to new products and several candidates have been facing delays in receiving final approval.
We currently have a Zacks #4 Rank (short-term Sell rating) on MannKind Corporation (MNKD – Analyst Report). The company suffered a major setback earlier this year when it received a second complete response letter from the US Food & Drug Administration (FDA) for its diabetes treatment, Afrezza.
We would also avoid companies like Eli Lilly & Co. (LLY – Analyst Report), which is facing patent expirations on key products and whose new products may not be enough to make up for the loss of revenues that will take place once generics enter the market. 2011 will be a challenging year for Eli Lilly with the company losing patent exclusivity on Zyprexa. Zyprexa sales should erode rapidly with the entry of generics. Moreover, we expect continued erosion of Gemzar sales due to genericization.