Ironwood Pharmaceuticals, Inc. (IRWD) Q3 2013 Earnings Report, Transcript and Summary

Meredith Kaya - Director of Investor Relations Thomas A. McCourt - Chief Commercial Officer and Senior Vice President of Marketing & Sales Mark G. Currie - Chief Scientific Officer, President of Research & Development and Senior Vice President Michael J. Higgins - Chief Financial Officer, Chief Operating Officer, Principal Accounting Officer and Senior Vice President Peter M. Hecht - Co-Founder, Chief Executive Officer and Director

Rachel L. McMinn - BofA Merrill Lynch, Research Division Mario Vincent Corso - Mizuho Securities USA Inc., Research Division Marc Harold Goodman - UBS Investment Bank, Research Division Ravi Mehrotra - Crédit Suisse AG, Research Division Irina Rivkind - Cantor Fitzgerald & Co., Research Division Anupam Rama - JP Morgan Chase & Co, Research Division Gary Nachman - Goldman Sachs Group Inc., Research Division Juan F. Sanchez - Ladenburg Thalmann & Co. Inc., Research Division Yi Chen - Aegis Capital Corporation, Research Division Jason M. Gerberry - Leerink Swann LLC, Research Division

Good day, ladies and gentlemen. And welcome to the Ironwood Pharmaceuticals Q3 2013 Investor Update Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I would now like to do transfer your conference call, Ms. Meredith Kaya. You may begin, ma'am.

Good morning, and thank you for joining us for our third quarter 2013 investor update. By now you should have a copy of our press release, which crossed the wire earlier this morning. If you need a copy of the press release, you can go to our website, www.ironwoodpharma.com, to find an electronic copy. Some of the information discussed in today's call is based on information as of today Tuesday, October 22, 2013, and contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set forth in such statements. We do not undertake any obligation to update any forward-looking statements made during this call or contained in the accompanying slides as a result of new information, future events or otherwise. For a discussion of these risks and uncertainties, you should review the forward-looking statements disclosure on our press release and on the current slide with the heading Safe Harbor Statement, as well as the risks under the heading Risk Factors in our quarterly report on Form 10-Q for the quarter ended June 30, 2013, and any of our future SEC filings. Joining me for today's call are Tom McCourt, Chief Commercial Officer, who will provide an update on the commercialization of LINZESS; Mark Currie, Chief Scientific Officer, who will walk through the top line results from the LINZESS Phase IIIb clinical trials; Michael Higgins, Chief Operating Officer, who'll update you on our efforts to bring linaclotide to appropriate patients worldwide, as well as review our financial performance for the quarter; and Peter Hecht, Chief Executive Officer, who will wrap up and open the call to your questions. Our speakers will be referring to slides available via the webcast. For those of you dialing in, it may be helpful for you to go to the events section of our website to access the webcast slides, if you haven't done so already. I would now like to turn the call over to Tom.

Thanks, Meredith, and good morning, everyone. I'll begin the call this morning by providing you with an update on the commercialization of LINZESS. LINZESS continues to track well across key leading indicators including; the growth of our prescriber base, the progress we and Forest have made with the payer, our initial efforts in engaging appropriate patients and the update and growth of LINZESS prescriptions. We are pleased with the progress to date and believe that these data reinforce the clinical profile of LINZESS to prescribers and patients, as well as the substantial unmet need in this category. We believe our combined efforts with patients, physicians and payers are driving uptake in growth of LINZESS prescriptions. During the third quarter, approximately 178,000 total LINZESS prescriptions were filled, a growth in prescriptions of over 40% during the last quarter, resulting in over 539,000 have been filled since launch. New prescriptions continue to grow and the volume of refills looks very strong, indicating that many patients are not just trying LINZESS once but continuing to remain on therapy. There is still considerable work to be done to continue bringing LINZESS to appropriate patients and accelerating its growth in the marketplace. Beginning with our physician efforts on Slide 5. At the end of September, greater than 40,000 physicians have prescribed LINZESS, which includes over 80% of top gastroenterologists and over 50% of top gaestroen primary care physicians. We have built a strong prescriber base to-date and continue to see approximately 1,000 physicians choosing LINZESS for their adult patients for the first time each week. We're encouraged to see that the gastroenterologists who began prescribing LINZESS early are continuing to prescribe to more and more of their patients. As expected, educating affecting primary care prescribing behavior is a longer-term effort given the size, the diminishing access to offices and the complexity of this physician base. We're pleased with our progress and the continued growth we're achieving today. We believe that our continued efforts through our joint Ironwood and Forest sales force, combined with our broader patient education outreach, which I'll talk about shortly, will accelerate prescribing growth among these physicians. Approximately 65% of LINZESS growth is coming from either adult patients newly seeking care or adult patients actively managed by physicians with an OTC. We're seeing a significant shift in physician prescribing to choose LINZESS more frequently because they believe it provides an important benefit to their patients, first, OTC treatment choices. Turning to Slide 6. We continue to make important strides in gaining broad formulated coverage for LINZESS. As of September, we estimate about 80% of adult patients covered by commercial insurance plans have unrestricted access to LINZESS and greater than 60% of patients with commercial insurance have access to LINZESS at a co-pay of $30 a month or less through direct formulated coverage or our instant savings program. We also continue to make progress in the Medicare Part D plan, which cover approximately 15% to 20% of the target patient population. As of September, approximately 50% of adult patients on Medicare Part D plans are covered, which is substantial progress in the first year of launch. As you know, the payer environment has become more challenging over the past several years. We in Forest are continuing to work hard to both secure and maintain broad coverage within the commercial space, as well as across government plans, so that we can maximize the benefit to as many patients as possible. While we've made encouraging progress to date, gaining broad payer coverage will be important and an ongoing effort. By establishing a broad informed patient population, as well as a strong prescriber base, in maximizing access to LINZESS through broad formulated coverage, we in Forest have laid the groundwork to expand our efforts on the patient side and we intend to amplify the patient education efforts across multiple communication channels including direct-to-consumer education. Successful consumer programs tend to be for disorders that are highly symptomatic and chronic in nature where the patient can easily recognize and articulate their symptoms and the product is the first in the new class that can help address a well acknowledged unmet medical need. We believe LINZESS meets these characteristics. IBS and chronic constipation are both highly symptomatic and chronic disorders, ones where patients can easily recognize and articulate their symptoms and LINZESS is a first in a new class of drugs that can treat and provide multi-symptom relief for millions of adult IBS-C and chronic constipation patients. Our initial patient efforts have been through the digital channel and have resulted in encouraging engagement by the adult patient population. We expect to expand our patient efforts during the first half of 2014, encouraging a more productive dialogue between patients and physicians that focus on specific symptoms, treatment history and LINZESS as a treatment option. As we said before, we in Forest will evolve and refine our marketing mix and expect to continue to operate within a $250 million and $300 million sales and marketing budget for 2014. We are encouraged by our progress so far and track well to previous successful GI launches such as Prilosec and Zelnorm. In order to maintain and accelerate growth of LINZESS in this large, highly symptomatic patient population, we need to work with physicians, payers and patients to advance LINZESS into the current marketplace, enhance its clinical profile within its current indications and explore opportunities to expand into additional approved populations and indications, to help as many patients as possible to the long patent life of LINZESS. With that, I'll now to turn it over to Mark.

Thanks, Tom, and good morning. Our scientists are exploring exciting opportunities both with linaclotide, as well as with our broader pipeline. And we continue to make encouraging progress on all fronts. I'm excited to provide some of the top-level data from our recently completed Phase IIIb study. The joint Ironwood and Forest team set out to evaluate the effects of LINZESS on abdominal symptoms in adult patients with CIC. This study enrolled rapidly and focused on patients suffering from constipation and a high degree of abdominal bloating. We enrolled 487 patients in this study, all of whom suffered from multiple chronic constipation symptoms, including prominent abdominal bloating. The average bloating score reported by these patients at baseline was 7.1 on a 0 to 10 point scale. As you can see on Slide 10, I'm very pleased to report that we met our primary as well as all 27 prespecified secondary endpoints in this study with statistical significance. Importantly, linaclotide was shown to significantly increase bowel movement and significantly reduced abdominal bloating in the chronic constipation patients. Diarrhea was the most common adverse reaction reported and was observed in 5.9% of patients treated with 145-microgram dose, our currently approved dose for CIC patients, and 15.9% of patients treated with 290-microgram dose of linaclotide versus 2.3% in placebo-treated patients. 1.3% and 5.0% of linaclotide treated patients at the 145 and the 290-microgram doses, respectively, discontinued the trial due to diarrhea over the 12 weeks versus 0.6% in placebo-treated patients. These data are consistent with the results we achieved in our pivotal Phase III clinical program in CIC. The study also greatly extends our understanding of the level and time course of improvement in abdominal bloating, seen with linaclotide in this CIC patient population. An examination of the effects of linaclotide treatment over time on the weekly CSBM rates showed a marked improvement occurring in the first week. And the improvement was maintained throughout the treatment period. With respect to abdominal bloating, a statistically significantly reduction in bloating from placebo was observed with both doses of linaclotide occurring in the first week and continuing to improve over the next 5 weeks with the response maintained throughout the remaining treatment period. This effect was significantly different for both doses for each of the 12 weeks. At week 12, patients treated with linaclotide at the 145-microgram dose and the 290-microgram dose, experienced approximately 45% and 47% decrease in abdominal bloating, respectively, relative to baseline, compared with 31% decrease in bloating in the placebo patients. The data from this study reinforced the consistency we have seen with linaclotide data throughout its clinical development and enhance our understanding of the effects of linaclotide. These data also provide greater insights into a few areas: First, to better understand the expression and persistence of constipation in abdominal symptoms in adult CIC patients suffering from prominent bloating. Second, to better define the treatment effects of linaclotide in these patients. Third, to provide an early assessment of the possible effect of linaclotide on upper abdominal symptoms and insight for a potential future development of our GC-C agonist, including linaclotide in IW-9179 for upper GI disorders. And fourth, to provide the foundation for future publications in this area and scientific rational for discussions with regulatory authorities for a better understanding of abdominal symptoms. Beyond linaclotide, our scientists continue to pioneer the GC-C state and their innovative research have resulted in a robust scientific exchange through presentations at scientific conferences and publication of key data in peer review journals. New nonclinical data have recently been published in 3 journals, Gastroenterology, Pain, and the Journal of Neuroscience, increasing scientific understanding of the mechanism of how GC-C activation is thought to regulate cyclic GMP pathways, specifically, the role of extracellular cyclic GMP in decreasing GI pain. We have also had a significant presence at several biomedical conferences, furthering our scientific dialogue with the medical community. Most recently, we had presentations at ACG and continue to receive very positive feedback from physicians around the importance of having the first-in-class therapeutic agent available for their adult IBS-C and CIC patients. We also continue to study the molecular mechanism of the actions of cyclic GMP on intestinal pain and other visceral sensations. And we are actively seeking to extend that knowledge from nonclinical studies in this area to the relevance of symptoms described in patients suffering from these conditions. As we've stated previously, we at Forest continue to explore potential paths to bring linaclotide to other patient populations such as pediatrics, as agreed to in our post-marketing requirements with the FDA, and a digital indication such as opioid-induced constipation. We are currently working closely with the FDA to establish an appropriate plan to study LINZESS in the pediatric population. And with respect to OIC, we expect to initiate a Phase II dose ranging study in adult patients suffering from this condition in the first half of 2014. Again, we look forward to providing a more detailed pipeline update during our upcoming Investor Day in December. With that, I would like to turn this call over to Michael.

Thanks, Mark. Today, I'll be updating you all on 2 topics: our progress globally with linaclotide and an update on our financial performance. But let's turn first to our global partnerships. In Europe, our partner Almirall continues to commercialize Constella. Qualitative feedback from the Almirall salesforce and physicians has been encouraging. Adult IBS-C patients are interested in Constella and have had a positive initial experience. Almirall continues to work closely with the relevant regulatory authorities to establish appropriate pricing and reimbursement in approved countries. They have made important progress to date in this area, including positive reimbursement decisions in the U.K. and the Nordic countries. In Germany, the GBA issued a benefit assessment statement stating that insufficient evidence was submitted to prove the additional clinical benefit of Constella over comparative therapies. The GBA feels the data from our clinical program, which was a design to evaluate the safety and efficacy of linaclotide versus placebo for global regulatory standards, didn't generate sufficient evidence comparing Constella to various treatments used in Germany to address the individual symptoms of IBS-C. We and Almirall do not agree with GBA's position and continue to firmly believe that Constella can provide additional clinical benefits to adults with moderate to severe IBS-C because of its demonstrated effect on the hallmark symptoms of IBS-C, including abdominal pain, bloating and constipation as stated in the Constella label. Almirall will continue to work with GKB to secure as favorable a price as possible. Now moving out from Europe. In China, we and AstraZeneca have begun enrolling patients in a Phase III clinical trial for linaclotide in adult patients with IBS-C. The trial is expected to be completed in the first half of 2015. In Japan, our partner, Astellas, completed enrollment in a Phase II clinical trial with linaclotide in adult IBS-C patients. And we maintained full rights in our unpartnered territories, representing additional value-creating opportunities for linaclotide. Now turning to our financial performance, beginning with LINZESS. Forest reported $34.4 million in net sales of LINZESS for the third quarter of 2013 compared to $28.8 million in net sales reported in the second quarter of 2013. As of Q3, gross to net discounts were approximately 24%, and we expect them to be in this range going forward. Wholesale and inventory levels now approximate 3 to 4 weeks. The LINZESS collaboration produced a total net loss of $28.8 million that resulted in a payment of $6.2 million to Forest recorded as collaboration expense after backing out the $8.2 million that we incurred in LINZESS sales and marketing. Turning to a few Ironwood-specific financial highlights from Q3. GAAP revenues this quarter were approximately $4.9 million and are primarily made up with 2 components: $3.4 million for the sale of API to our ex U.S. partners and $1.5 million in amortization from our Astellas and AstraZeneca collaborations. Total operating expenses during the third quarter were $53.3 million, as compared with $55 million last quarter. Included in our total operating expenses for the quarter are our R&D expenses, which for the third quarter were approximately $23 million and comprised of the following: $3.7 million in LINZESS R&D; $6.4 million invested into our supply chain and to support our rest of world partners in their development; and lastly, $12.9 million invested into our non-linaclotide pipeline. Total operating expenses also included SG&A expense, which for the third quarter were approximately $30.3 million. Included in this were $8.2 million in LINZESS sales and marketing expense that is included in the collaboration expense shared with Forest; $7.7 million of additional sales and marketing as well as rest of world support. The additional sales and marketing cost is primarily made up of the unreimbursed portion of our sales force. And finally, G&A cost of approximately $14.4 million were also included in our SG&A line. We incurred approximately $6.2 million in collaboration expense during the third quarter, as I mentioned earlier. This expense represents the settlement of payments such that 50% of the net profits and loss of LINZESS sales are equally shared. We recorded approximately $5.3 million in interest expense in the third quarter of 2013, in connection with the $175 million debt deal that we completed in January. Total cash and cash equivalents as of September 30 were $242 million. And approximately $58 million in cash was used during the third quarter. Continued growth in LINZESS net sales will have a positive impact on our cash flows, shrinking the overall net collaboration expense and moving towards collaboration revenue over time. Finally, we previously guided that in 2013 we expect to spend between $60 million and $75 million in non-linaclotide R&D and that we and Forest expect to spend between $250 million and $300 million in sales and marketing for LINZESS. We now expect to end the year at the lower-end of both of those ranges. Thank you and that with that, I'll turn it over to Peter.

Thanks, Michael. We remain focused on our mission to bring important medicines to patients, maximize value for our fellow shareholders and build an outstanding team and culture. As you've heard from the team today, LINZESS continues to see a positive reception from physicians and patients and we are gaining critical information about LINZESS performance that will enable us to continue building this first in a new class of primary care medicines. We believe we have an important and long-lived asset with linaclotide, and our scientists continue to make advancements in its pharmacology, that will not only strengthen our understanding of its effects in adult IBS-C and CIC patients, but will also enable us to explore helping more patients over time with linaclotide and GC-C agents more broadly. Our partners have made important strides in bringing linaclotide to appropriate patients worldwide over the past few months. And lastly, we continue to maintain a strong balance sheet, striving to allocate shareholder capital prudently and efficiently across our key value drivers to help patients and build per share value. Thanks, and with that, I'll turn it back over to Kevin to begin the Q&A portion of the call.

[Operator Instructions] Our first question comes from Rachel McMinn with Bank of America.

I guess I just had a bigger picture question. I know you're not really giving revenue guidance for next year. But you have given operating expense guidance, and I'm wondering if you can just provide a little bit more color on timing of when you expect to start DTC? Is that still in the first half of the year? And if things go according to plan, can you give us a general sense of whether you expect the overall collaboration to be positive, cash flow positive into -- by the end of next year?

Thanks, Rachel. Tom, can you take the first part of the question about timing for DTC and I'll ask Michael to do a little bit on the financial side?

Thanks, Rachel. As I mentioned earlier, I think we wanted to make sure that we had an adequate and broad prescriber base, as well as felt we have done everything we can to secure broad access and reimbursement in the payer side. And certainly, that's progressing very well. I think currently, we think by the first quarter or second quarter of next year, we think we feel very good about where we are with the adoption base, as well as where we are with regard to our access through the payer. And we'll be expanding the efforts at that point. So I think all the lead indicators look positive. Physicians' willingness to honor patient requests looks very, very strong. So I think that the product is well poised for expanding patient education. With that, I'll turn it back over to Michael.

Yes, Rachel, so to answer the other part of your question. With regard to the possibility question, as we've stated and actually as Tom has reiterated today, we expect, even with the changes that Tom just described, that we're going to operate from a commercial perspective in the range of $250 million to $300 million in commercial investment. And as you know, we plan on doing some adjustments in the life-cycle management. So our expectation remains the same that we believe that the product will likely break through into the profitability range when we approach the $325 million to $350 million from a top line perspective. So no comments with regard to the exact timing of that. Obviously, we'll watch this closely over time. But that's the kind of a general range that we see.

So that's helpful, but maybe I can get at it in a slightly different way. I guess, Tom, when you -- after you start DTC, how many quarters or months should we be thinking about before we actually see the pull through in prescriptions to notice a change in the slope of the prescription uptake?

I think if this behaves anything similar to what we've seen in the past in this category, obviously, Zelnorm being the best predicate or analog here, we saw fairly rapid response in the marketplace. I think we're going to know over the first 3 or 4 months what kind of impact we're having on patients being our ability to activate patients and certainly, the TRx growth. So I think we're going to see fairly quick response and then the question is how hard do we push after that?

And so you'll start -- you would expect to see an acceleration basically within a quarter and is that really like kind of the new slope? Or you would just tailor your expenses to try the accelerate the slope beyond that?

I mean, obviously, we're going to let the data guide us here as much as possible. And again, if this drug responds like we think it's going to respond, we will invest appropriately to accelerate and heighten its growth as fast as possible.

Last question. I guess, depending on what that curve looks like, is there a possibility that you would modify your expense guidance for next year or investment level, or is it really like your committed to stick within that level and whatever you need to do to direct more resources there, you have a firm commitment to stay within your expense guidance?

So, Rachel, that's always a hard question to answer, but I'll give this specific one. We've done it -- before kind of make the comments that we did today, Tom and the team working with Forest have done a lot of work, so we feel that that's the right guidance. Certainly as things change over time, we'll keep you informed. But based upon our best information today, we feel like that's a solid number for you guys to use for next year.

Our next question comes from Mario Corso with Mizuho USA.

So as we think about the bigger picture on the launch so far, I'm wondering if you could comment on -- when you look at the different elements between payers, primary care, refills, new Rx's, consumers. I'm wondering, which of those pockets do you think have gone better than you expected or maybe a little bit more difficult than you expected? Just kind of breaking down those different elements and how it's gone relative to the way you thought it would go. And then secondarily, on the pipeline, as I hear you talked about the mechanisms in pain, I'm wondering if you're thinking about that in the context of IW-9179 and wondering if we'll see that Phase II data by the time you have your analyst meeting?

Tom, can you take the first part and Mark can follow-up on the 9179?

Sure, thanks Peter. So, Mario, let's kind of break these up into kind of 3 pieces. First, as far as field force execution and the impact on the prescriber base. Obviously, we're looking a lot at lead indicators. The first of which is can we convince docs to try the drug and then continue to use it in a broader population. And I think we're clearly seeing that happen over time. So I think the breadth of adoption looks good as we continue to implement our launch plan, and the increase in productivity over time looks really encouraging. I think the other 2 pieces that came out of our market research is that physicians clearly see an expansion of the utilization to a broader patient population. And one of the critical decision points to inform how early we go with the consumer effort is really willingness to honor patient requests, which is very, very strong. In fact, as strong as I've ever seen at across multiple launch brands. So I think, overall, we're doing very well with the physician prescribing behavior in that community. Second is the payer. I think we think we're tracking ahead of where we'd hope to be with regard to overall access and reimbursement. And the implementation of the LINZESS instant savings program has had a significant impact in reducing walkaways at the counter. Obviously, it's something that we're going to continue to expand over time. But we think we're in a very good place, particularly in the commercial space. And I think what's been a nice surprise is the progress we're making in Medicare Part D. Even though it's 15% to 20% of our target population, to be at 50% coverage at this point in time with Medicare Part D is also quite encouraging. And of course, then on the patient side, we've seen really strong engagement in the digital space and certainly the feedback from the patient's overall have been very positive with regard to their overall treatment satisfaction, as well as probably one of the best indicators as to how the patients are doing at the refill rates. And as you can see, the refills look very, very strong, certainly tracking well ahead of Zelnorm, which kind of gives us an indication of how satisfied the patients are. So I think net-net, I think we like where we are right now. Keep in mind, we're continuing to implement the launch plan. So we've done well with physicians. We're making good progress with payers. We've learned a lot about our patients, and now we're in a position to really help patients help themselves. With that...

Where have things been more challenging, is it primary care?

Yes. Mario, I think we knew primary care was going to challenging going in and that it was going to take more time. I think the good news is we're seeing, certainly the primary care docs come along. Those, again, like gastroenterologists, those PCPs have enrolled early, seem to increase in overall productivity. But we're adding new primary docs really every week. But yes, I mean primary care is a tougher place than it was 5 or 10 years ago. But I think we're really pleased with the progress we are making both with regard to the sales force execution and their ability to access physicians and affect their behavior.

I think the only thing I might add, Mario, is that the other area is the payer, where I wouldn't we're surprised. The payers space has gotten a lot harder in the last 5 years or 10 years than it was. We went in with our eyes open on that. I think, as Tom said, we're at or ahead of our own expectations. But there's no question that compared to launches in previous years, payers space is a much more challenging space.

Yes, Mario. I'll take the question on the pipeline in particular around the mechanism of action of pain and our studies there relative to linaclotide, GC-C and cyclic GMP and then relevant to 9179. So I think, first off, we're very excited about this because we're seeing what we think are really breakthrough findings on the basic science level and the regulation of the enteric nervous system with stimulation by GC-C and cyclic GMP. The first places we think obviously to exploit that or utilize that really evolve around linaclotide. We have, obviously, a number of different indications we can go after relative to other functional GI disorders that have pain in their component or are a major symptom as part of their symptomology. So we think there's more opportunity for a linaclotide user in the current formulation that it is in or in future formulations and we look forward to taking you through some of those ideas at the Investor Day. With respect to 9179, we, again, are very excited about this molecule. It extends our leadership in the GC-C space. It's a molecule that's very potent. We'll be revealing a number of data around the activity of the molecule, its activity in the upper GI animal model. We'll also be looking at data from some of our early clinical studies in normal volunteers. My expectation is we would not be at the stage to be able to talk about the data from the exploratory functional dyspepsia at that time, but we will take you through what our thoughts are and where we think 9179 can address pain, particularly for upper GI pain in patients, functional dyspepsia, gastroparesis, those type of disorders that we think this molecule really been tailored for.

Our next question comes from Marc Goodman with UBS.

First, outside of the payer issues, if there are any, can you just talk about what pushback your salespeople are telling you that for patients not staying on drug or what you're hearing from doctors? Just curious about that. And second, on the DTC, is the commercial completely done and sent off to FDA yet? Just help us give us the timing on when that will be done.

With regard to the pushback, I think, again, the gastros are doing very well, and their prescribing behavior is growing nicely. We're not really hearing anything out of gastros that is concerning to us. I think the pushback on the primary care side really becomes an ongoing educational effort to make sure that they understand the product, they identify the appropriate patients. And I think, out of the gate, they have a fairly narrow view of who the appropriate patient is. Obviously, they're going to use it in a more refractory patient. And once they get some positive experience, they seem to continue to progress. So again, I think we knew that the primary care environment was going to take some time. And I don't think we're seeing a lot of pushback other than really trying to get the doc, the primary care doc to get some experience with a broader patient population. So I think we're going to continue to push on that and expand that prescriber base over time. And I think, again, the lead indicator is those early adopters and to see what's going on with their overall productivity, which is encouraging. On the consumer side, we have a number of concepts that we've taken to market research. They're responding very, very well. We're making a final decision on a concept. And obviously, at that point, we will submit it to the FDA. We have not submitted it as of yet, which certainly still keeps us on track for a first half launch of the consumer campaign next year.

You think turnaround from FDA is 3, 4 months, how should we be thinking about that?

Yes, I think at this point it's hard to determine that. I think, right now, the rules with FDA is if you submit 1 add [ph], they will turn it around in somewhere between 45 and 60 days.

Our next question comes from Ravi Mehrotra with Crédit Suisse. Ravi Mehrotra - Crédit Suisse AG, Research Division: I'm going to remain on the big picture perspective. You talked a little bit about how the refills are correlating to chronic usage. Can you just take us through what you perceive are the best leading indicators to show that you're getting across this use it chronically message which you talked about for a long time?

Yes. Again, we are encouraged by the volume and growth of the refills, and certainly, we are tracking cohorts of patients over time to really understand what's the overall adherence and certainly, the real question -- and we got about 7 or 8 months of data that we've been tracking the initial cohort of patients. And the real question in my mind isn't, do they fill 4 or 5 times, it's do they fill it 8 or 10 times over the 12-month period? So I think we're very encouraged by the refill rates. We're very encouraged by the feedback we're hearing from patients. And obviously we're going to need to continue to track these cohorts to really understand what annual days of therapy look like.

I would add value, if it's okay, that one thing we've seen from our market research is, even early in the evolution of this category and the evolution of LINZESS, both physicians and patients are perceiving the disorder to be a chronic disorder and the therapy to be a chronic therapy and the primary driver on both sides is the abdominal symptoms of pain and other forms of abdominal discomfort. So I think we're very encouraged as well by the changing perception in both of those communities that this is not a laxative or a laxative problem. This is a chronic pain and visceral hypersensitivity problem, and that this is an agent that can be helpful there.

Next question comes from Irina Rivkind from Cantor Fitzgerald. Irina Rivkind - Cantor Fitzgerald & Co., Research Division: I just wanted to turn to Europe for a minute. So we're booking API sales to Almirall, but we haven't started seeing any royalties yet on those sales. Can you sort of help us understand when you expect to book sales royalties in Europe and also, whether or not, you expect to get the $17 million in milestones from Almirall associated with the country-by-country approvals?

It's Michael. Let me take the royalty question first than I'll touch on milestones. So we are booking royalties as we mentioned in the last call, we're booking them 1 quarter in arrears in order to just properly account for everything and allow for the timing. So you'll see -- we didn't call it out as an individual line item because it was less than $100,000 in royalties from Q2, which were booked in Q3. But we will be calling that out as we go forward, and those have already started. So that's the first question. Secondly, with regard to milestones, at this stage, we're not projecting any additional milestone payments this year. But we continue to work with Almirall, and they're working quite hard to get approvals and get the appropriate reimbursement in different countries. So hopefully, over time, we'll be able to see additional milestones from Europe. But right now, we're just working hard on the countries where we have approval. Irina Rivkind - Cantor Fitzgerald & Co., Research Division: And then I just have a follow-up on R&D spending for next year. I know you mentioned kind of a range for what you expect to spend on SG&A. Directionally should we expect a slightly smaller R&D expense next year? I think you said you expected the OIC trials, et cetera, to cost less than the bloating trials. So I'm just kind of wondering how you're thinking about the budget for next year.

Yes. You're right, we did explicitly call out on the commercial side because we wanted people to understand how the investments would work now we're talking in more detail about DTC. It is early to be talking about 2014, and we're not providing any specific guidance from R&D perspective at this time. We will over time give you more clarity as we get a little bit closer.

Our next question comes from Geoff Meacham with JPMorgan. Anupam Rama - JP Morgan Chase & Co, Research Division: This is Anupam Rama in for Geoff Meacham. Just a quick question on the positive CIC data you have today, I was just wondering about the strategy of how to sort of take advantage of this. Is it quickly putting it at a medical meeting publication or is just going straight to the FDA trying to get a label update?

Yes, I think, first of all, thanks for acknowledging the data. We're very excited about it, obviously, came in very clear. So relative to the use of it, we're still in the early stage of doing all the analysis. That was a top line data. There's a lot of data in this study that we really are interested in going through and taking investors through, particularly on Investor Day, particularly around other symptoms that are there, the upper GI symptoms. So this study actually involves a lot, so -- and a lot of interesting points for us to look at. So we'll be sharing some of that in the Investor Day coming up. Relative to where we will go, certainly, we intend to advance it forward into medical conferences first. We will be working -- as the data gets -- as we continue to mine the data, manuscripts should be an anticipated throughout 2014. We would be planning, I think, at least one maybe additional manuscript from this very extensive study. And then with respect to regulatory authorities, again, we think this information provides a strong foundation to go and talk about the other symptoms besides abdominal pain and constipation. We want to expand that into the symptoms such as bloating and the rest of the secondary. Now we think the study provides a strong scientific rationale to go and have that discussion with regulatory authorities, and we certainly plan to do that.

Hi, this is Tom. The other piece to keep in mind is really, as Mark mentioned, the bloating data is critical. One of the things that we're learning in the marketplace is when physicians can move beyond just straining and infrequent stools to other intestinal symptoms, it's a huge driver of choice for LINZESS. So I think as we advance that, certainly having the abdominal pain data is critical, but to help understand -- or physicians and patients to understand the fact that they can see benefits for these other symptoms is critical, but obviously, we'll be working closely with the FDA to make sure that we're doing that in the appropriate manner.

Our next question comes from Gary Nachman from Goldman Sachs.

First, on the $250 million to $300 million in DTC -- or commercial spend for 2014. If you increase DTC, then what will that come at the expense of since the spending will be flat from 2013? So should we assume that physician details will come down next year? And do you think that's a risk as you're trying to expand further in primary care?

I mean, it's a really good question. Our overall strategy from day one was to initially go out as broad as we can to get as broad of adoption as we possibly could in both the gastroenterology as well as primary care marketplace. Over time, the intention was always to tighten up our focus on the most productive prescribers to really maximize growth and efficiency for the sales force. And that's always been the strategy, and we're certainly following that initial strategy, which obviously is likely to bring down the number of first physician calls certainly. Which, obviously, we'll get to a point where we're driving growth in a more productive efficient way and also, we will make an appropriate investment in the consumer patient side as far as the media spend. So I think the numbers that we've given in the past will feel will encompass both of those efforts. Obviously, they're still very broad scale investments into the primary care. And we believe it's the right level of spend to maximize the growth of the brand.

Okay. And then in terms of the bloating data, from a commercial standpoint, if it's ultimately published or you get some of that data on the label, you said it's critical. Could you give us a little bit more of that? How important is that, specifically with primary care physicians to get over the hump, let's say, or payers, is it going to matter there? And then on inventories at 3 to 4 weeks, is that a steady state here or could it come down a little bit more in the next quarter?

I'll take the bloating question. I'll pass over the second question to Michael. I think what we've seen in market research, bloating is really important to patients and it's -- bloating spans both chronic constipation and IBS. And it's really a critical symptom for patients. They self-identify with it. It's burdensome and it's extremely problematic. And obviously, the fact that certainly LINZESS appears to reduce bloating significantly is valuable to patients. And it's also a key reason to choose the drug from the physician's side. I think from a payer perspective, it certainly strengthens the overall value proposition as to why this brand clearly is unique in the marketplace and certainly strengthens our ability to secure ongoing reimbursement because it is a clearly differentiated brand. So I think bloating is a significant contributor to the overall profile of the drug and certainly should help us grow the brand over time. With that, I'll turn it over to Michael.

Yes, on the other question. The quick answer is, yes, we're approaching steady state, there's always a chance for fluctuation but we think we're in the right zone now. And your question was specifically is there is room for that tightening up a little bit over time. There is room for that to be tightened up a little bit, but we're in a steady state, we would expect to be in that zone going forward.

Our next question comes from Juan Sanchez with Ladenburg. Juan F. Sanchez - Ladenburg Thalmann & Co. Inc., Research Division: Couple of questions. What will be the right timing for a potential price increase? I mean, it's still early but if we think forward, when do you think it's appropriate to raise prices here? And the second question is in the current participation trial, the 290-microgram dose, did that dose meet the primary endpoint or it didn't?

So let me take the pricing question first, because I have a quick response to that. In terms of the comments on any change with regard to pricing is we certainly don't comment on that in advance. So I don't have anything to add at the moment. I'll turn it over to Mark to talk a little bit more.

Yes, Juan, 290-microgram did hit the primary endpoint and all the secondary endpoints.

The reason we presented the data that way is because the 145 dose is the only approved dose for chronic constipation. And so the primary endpoint was in the chronic constipation population, the recapitulation of that primary endpoint with the approved dose. Juan F. Sanchez - Ladenburg Thalmann & Co. Inc., Research Division: But could you potentially use this data to include a 290-microgram dose in a future label or?

Yes, I think it's too early to say right now, Juan. Again, we still are reviewing all of this data.

Our next question comes from with Yi Chen with Aegis Capital.

Hi, my question has already been answered.

Our next question comes from Jason Gerberry from Leerink Swann.

Just a couple of clarification points. On the DTC, I know you haven't really decided on the concept fully yet. But given the timeline that you provided, is it fair to say that you might have a concept decided by Investor Day? Just kind of curious if you'd commit to potentially sharing more of the details on the DTC program at Investor Day. And then the follow-up question is just around Europe, not having Almirall launch milestones in the remainder of this year, if you can provide any color on what's going on with the launches in Italy, France, Spain?

Tom, can you take the first question on the DTC?

Sure, Peter. As far as the DTC, the primary purpose of our Investor Day is really to focus on kind of our progress, how we see the kind of the long-term with regard to our development process and certainly where we're going to go in the future as well as what we've learned so far. And it'll be really focused on the clinical profile and strength in the clinical profile. As far as the consumer campaign, as I mentioned, we're on track to launch in the first half of next year, and we're certainly excited with the progress we've made so far. And it's been a great collaboration with Forest.

And with regard to Europe, our partners at Almirall are working hard on a Pan-European strategy. The rollout of that on a country-by-country basis, we don't comment on the specifics of the exact timing of that. But for sure, we believe this product has potential to benefit patients throughout Europe. And they're working through it on the most effective way to kind of operate the business.

And I'm not showing any further questions at this time. I'd like to turn the conference back over to our host for closing remarks.

Thanks, Kevin, and thank you all for participating. We appreciate your input and interest. We'll be around the rest of the day, so please contact Meredith if you'd like to follow up with any additional questions. And most importantly, of course, go Red Sox.

Ladies and gentlemen, that concludes today's presentation. You may now disconnect, and have a wonderful day.