Ironwood Pharmaceuticals, Inc. (IRWD) Q3 2015 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Ironwood Pharmaceuticals Q3 2015 Investor Update Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your first speaker for today, Director of Investor Relations Mr. Meredith Kaya. You may begin.

Good afternoon and thanks for joining us for our third quarter 2015 investor update. Our press release crossed the wire earlier this afternoon and can be found on our website, www.ironwoodpharma.com. Today’s call and accompanying slides include forward-looking statements. Such statements involve risks and uncertainties that may cause actual results to differ materially. A discussion of these statements and risk factors is available on the current Safe Harbor statement slide, as well as under the heading Risk Factors in our quarterly report on Form 10-Q for the quarter ended June 30, 2015 and in our future SEC filings. All forward-looking statements speak as of the date of this presentation and we undertake no obligation to update such statements. Joining me for today’s call are Peter Hecht, Chief Executive Officer; Tom McCourt, Chief Commercial Officer; Mark Currie, Chief Scientific Officer; and Tom Graney, Chief Financial Officer, who will open it up to the question-and-answer portion of the call. Our speakers will be referring to slides available via the webcast. For those of you dialing in, please go to the Events section of our website to access the webcast live. I would now like to turn the call over to Peter.

Thanks, Meredith and good afternoon, everyone. We had another very strong quarter at Ironwood, successfully executing across each of our key value drivers. You will hear more details from Tom, Mark and Tom in a few minutes. Importantly we believe that the growing contribution from our commercial business and cash on hand enables us to fully fund our current business without the need to raise additional capital. It’s through the incredible commitment from our employees, partners and our fellow shareholders that we have reached this point, and I look forward to sharing our continued progress with you going forward. With that, I will turn it over to Tom McCourt to provide an update on LINZESS and our commercial business.

Thanks, Peter and good afternoon everyone. LINZESS showed strong in the third quarter with over 550,000 prescriptions, and nearly 40% year-over-year growth. LINZESS is a branded leader in the prescription IBS-D in chronic consultation market. It is driving total market growth, while capturing market share. As you can see from the chart in the left, the market has grown by greater than 30% since we launched LINZESS. The chart on the right shows a more than 80% increase in market share since initiating our direct to consumer campaign in 2014. We are emerging from launch mode, having successfully positioned LINZESS in the marketplace. Specifically, more than 150,000 healthcare practitioners that prescribe LINZESS and data show that prescribing continues to expand with experience. Further, recent data suggests that over 95% of healthcare practitioners are prescribing LINZESS if requested by a patient. This is an industry leading metric that we believe underscores the level of physician satisfaction and confidence in LINZESS. We continue to gain broad pair in reimbursement access for LINZESS. As I mentioned last quarter, we had a big win when LINZESS was added to the CVS Caremark formulary in an exclusive preferred position, beginning January 1, 2016, and we’ve demonstrated an ability to educate and activate patients through a direct consumer effort, which continues to increase patient awareness and demand for LINZESS. Our focus going forward is maintaining and accelerating the growth of LINZESS through three key efforts; leveraging the favorable market dynamics, tapping new sources of the business and expanding the clinical utility of LINZESS within its approved indication. Over the past year, the market dynamics have become quite favorable for LINZESS growth. This slide shows how the key forces in the market have improved for LINZESS over the past year. Our joint commercial leverage has increased patient awareness, expanded physicians for appropriate patient, increased physician’s willingness to honor a patient request the LINZESS and reduce payer rejections and patient walk away at the pharmacy due to high co-pays] As we move forward, our commercial efforts will focus on further increasing awareness and activating patients who specifically demand LINZESS while creating greater urgency for physicians to effectively treat appropriate patients for LINZESS and finally increase our favorable position with payers. There are tens of millions adults who continue to suffer from highly bothersome abdominal constipation symptoms. These indicate the far majority of these patients are kicking OTC Laxatives and not satisfied. We see tremendous growth potential for LINZESS, with less than 4% of the IBS-C and chronic constipation patients currently being treated with LINZESS. And two-thirds of those patients, were previously taking OTC Laxatives, which is the primary source of business that will fuel continued growth. As part of our efforts to accelerated growth of LINZESS, we strive to raise the bar in terms of what we can deliver to patients. We believe the addition of ongoing development opportunities will strengthen the clinical profile LINZESS and then if approved expand its clinical utility into additional indications and formulations. This includes a 72 microgram dose of linaclotide, for which we were delighted to report positive topline results from our phase III trial last month. We believe that if approved, the 72 microgram dose could enhance the clinical utility for physicians to use across a large and heterogynous chronic constipation population and dry further brand growth. We expect to report topline data from the phase II Opioid induced constipation trial later this quarter. And following those data, we will determine next steps in this program. We are also excited to have initiated the phase III with two colonic release formulations that we believe will strengthen the clinical performance and expand the clinical utility of LINZESS, which Mark will discuss in greater detail shortly. Lastly, our global commercial efforts for linaclotide continue to advance. We recently announced that Allergan acquired the licensing rights from Almirall for the development and commercialization of CONSTELLA in Europe among other ex-U.S. territories. While Europe continues to be a challenging market, we believe CONSTELLA will benefit from Allergan’s strong commercial expertise and broad footprint across Europe. In addition, linaclotide development in China with AstraZeneca and in Japan with Astellas continue to progress nicely. Turning to our commercial capabilities, we have built a strong organization that has successfully LINZESS to market and serves as a foundation to drive further growth and our ability to support multiple products overtime. This includes an experienced top performing sales team with both specialty as well as primary care experience. These sales professionals are calling on roughly 23,000 of the business physicians in the market and it’s these physicians who are generating 60% and 70% of the total LINZESS prescriptions. We are focused on brining multiple products in over time to maximize the product to view the entire commercial organization. In addition to LINZESS and Cologuard, the innovative colorectal cancer screening test that we are co-promoting with Exact Sciences, we are preparing to begin co-promoting VIBERZI, a first in category treatment for IBS with diarrhea with Allergan. Cologuard and VIBERZI are nearly 100% efficient with our current capabilities and we believe it will strengthen the effectiveness of our LINZESS selling efforts, while further establishing Ironwood as an emerging leader in GI and primary care. We have the capacity to bring in additional products to generate meaningful cash flows for the Company and we continue to look for value creating assets to add to our product portfolio. With that, I’ll now turn it over to Mark to discuss the pipeline updates.

Thanks Tom. We continue to make great progress with our innovative R&D effort with exciting advances across key areas of our pipeline. Over the next 15 months, we and our partners intend to file up to three linaclotide regulatory submission, expect four Phase 2b read out and one Phase 2a proof-of-concept read out from our GI franchise, which would inform pivotal trial and expect important data from our SEC platform. As Tom mentioned, starting with linaclotide development program with Allergan, we were pleased with the top-line data from our linaclotide 72 microgram Phase 3 trial. We and Allergan expect to submit a sNDA in the first half of 2016, and if approved by the FDA plan to bring that dose to market in the first half of 2017. We also initiated a Phase 2b clinical trial for linaclotide colonic release in adult IBS-C patient. We are evaluating two formulations in this those ranging study. The first formulation is to design to enhance abdominal pain release in IBS-C patients. The second formulation has been evaluated on rather can enhance abdominal pain release, while having little to no impact on bowel function. Data expected in the second half of 2016. Lastly we and Allergan initiated two Phase 2 studies linaclotide in the pediatric population as part of our post marketing requirement with the FDA. Turning to our ex-U.S. opportunities, we and AstraZeneca expect to file the input drug license or IDL, seeking marketing approval of linaclotide in China in the first quarter of 2016. Given some of the recent changes in the IDL review process, we and AstraZeneca are working with the China food and drug administration to determine the expected review timeline and we’ll update you accordingly. Additionally, Astellas has completed enrollment in their Phase 3 study of linaclotide and IBS-C adult patient for Japan and expect to report top-line data from this study later in 2015 and file for the regulatory approval in 2016. Now moving to our GI platform, we are looking to forward to initiating our Phase 2b trial with IW-3718 for refractory GERD in early 2016. Additional analysis of the Phase 2a data further reinforce our excitement about the potential for 3718 to be an important treatment option for these patients. For example, exploratory analysis suggests that in patients with ongoing GERD evidenced by root for [ph] and/or ongoing acid reflux there was an even more pronounced effect in heart burn relief compared with placebo than we had initially observed in other sub-populations. This supports our Phase 2b study design in refractory GERD and suggest that IW-3718 may have an effect on these patients. We have also made important progress with our 3718 formulation. It is ready to be evaluated in a Phase 2b trial and we’ve had predictive discussion with the FDA on the clinical path forward. We continue to expect data from our Phase 2a exploratory study with IW-9179 in diabetic gastroparesis in the first half of 2016. Diabetic gastroparesis is a challenging disorder, affecting millions of patients with few to no treatment option currently available. A new agent that offered substantial symptom related for these patient could be transformative. And finally our sGC platform is continuing into advance rapidly. As a leader in cyclic GMP in guanylate cyclase research, we are working to harness the burgeoning potential of soluble guanylate cyclase simulators and seek to deliver multiple blockbuster drugs, targeting severe diseases associated with vascular disfunction and fibrotic disorder. It is a very exciting time with important scientific advancements being made in this field by us and our peers. Just this morning we announced the initiation of a Phase Ib study, evaluating IW-1973 in a phase Ia study evaluating IW-1701, and we equally anticipated initiating group of concept studies later in 2016. For those of you, who are will attending the American Heart Association scientific sections at weekend, we will be hosting an event on Monday November 9th, with a key scientific expert to talk more about our sGC platform and it’s potential to provide multiple blockbuster treatment. Please let Meredith know if you are interested in attending or need more information. With that I’ll now hand it to Tom Graney to discuss our financial results for the quarter.

Thanks Mark and thank you everyone for joining us. I will be spending the last few minutes detailing some of the key financial highlights for the quarter. Please refer to our press release for the detailed financials. Demand for LINZESS resulted in $117 million in net sales for the third quarter, growth of 47% compared to the third quarter of 2014. The LINZESS brand collaboration in the U.S. recorded $35.8 million in total net profit for the third quarter. We recorded $34.8 million on our P&L as collaboration revenue from Allergan, compared to $13.5 million in the third quarter of 2014. Additionally, on October 1st, we and Allergan increased the price of LINZESS from a wack price of $9.24 per pill to its current price of $10.14 per pill. This price increase did not have a meaningful impact on LINZESS sales for the third quarter. Now turning to Ironwood’s financial highlights for the quarter. We ended third quarter with $462 million in total cash and investments. We used $26 million of cash for operations during the request of 2015, compared to $39 million in the third quarter of 2014. Revenue for the third quarter was $39.6 million, an increase of nearly 134% compared to the third quarter of 2014. The strong year-over-year growth in Ironwood revenue is attributed to the high degree of operating leverage, we are still gaining with LINZESS as the brand continues to grow. Revenue in the quarter was made up of revenue from our collaboration with Allergan as well as additional collaboration, royalty and amortization revenue from our global partnerships. As Tom mentioned, we were pleased to announce last week that Allergan has acquired the development and commercialization rights from Almirall for linaclotide in Europe, Turkey and the common wealth of independent states. Under the terms of the arrangement, Ironwood is eligible for launch and sales based milestones Allergan as well as royalty on sales volume of linaclotide in Europe. Of note, royalty payments will no longer be reduce by the price of linaclotide API and our revised royalty structure reflects this adjustment. Allergan has taken responsibility for manufacturing of API in Europe as well as associated costs. We accrued $9.4 million in the third quarter for excess inventory purchase commitments primarily related to our historical supply agreements in Europe. This charge is recorded in our P&L as a loss on non-cancellable purchase commitments. We have no remaining inventory or end reserve purchase commitments associated with Europe. Lastly, as a result of our $336 million convertible debt financing completed this past June, we will be recording on our P&L the non-cash unrealized gain or loss on derivatives each quarter. This is related to the change in fair value as we mark-to-market the convertible note hedges and warrants, which comprise the cost spread overlay. In the third quarter of 2015, this was a non-cash loss of $11.3 million. In order to provide investors transparency into the economics of our operations, and to supplement our GAAP financial statements, we are providing non-GAAP financial measure that describes our performance by excluding the impact of the mark-to-market adjustments related to the hedges and warrants. When our calculating our non-GAAP results, we excluded the non-cash mark-to-market adjustment on the derivative related to the convertible notes and this adjustment is primarily driven by market fluctuations. GAAP net loss for the third quarter was $47.4 million. As a result of this exclusion, our non-GAAP net loss was 36.1 million. GAAP net loss per share is $0.33 and as a result of this exclusion non-GAAP net loss per share was $0.25. We recently added a few slides for the Investor section of our website detailing the accounting treatment of the convertible debt transaction on our financial payments, including the non-GAAP measures. I encourage you all to take a look. Finally turning to our 2015 financial guidance, we remain on track to end the year within our previously guided ranges. Before I turn it over to Q&A, I want to briefly reiterate Peter’s earlier comment. We are having important transition point in our evolution of the business. The past several years have been focused on building and developing our core capabilities and launching an important primary care brand, and we’ve made great progress. Profitability of the U.S. LINZESS brand continues to grow. This combined with our current cash position should enable us to fully fund our current business going forward. We will continue to seek ways to optimize our capital structure, which may include paying down and/or restructuring our debt to achieve a lower cost of capital or using equity over the coming years for strategic business development opportunities. However, we no longer need to raise additional capital to fund our current business. We’ll be laying out more detail around our future financial expectations early near year. Thank you and with that I’ll hand it back to Andrew to begin the Q&A portion of the call.

Thank you. [Operator Instructions] And our first question or comment comes from the line of Boris Peaker with Cowen. Your line is now open.

Great. So my first question is on the 72 mcg dose. I’m just curious; if approved, how do you plan to market it; and based on what you know right now, what fraction of patient discontinue treatment for diarrhea?

Thanks Boris, this is Tom. As far as our approach to the marketplace. This has always been part of the overall strategy what we’ve had for the brand. Initially obviously we have launched a 290 for IBS-C and 145 for chronic constipation. Anticipating that the far majority of these patients initially treated would be on more severe end of the spectrum and it’s indeed what we saw in position with the patients certainly report that they’re very satisfied with the drug. That being said, there was a play through 72 microgram dose for patients that may have been a bit more sensitive to the drug and we do believe that based on what we’re hearing from physicians, they would expand the utilization of linaclotide with the 72 microgram dose. As far as the discontinuation rates, what we saw at a high level, as we mentioned in our press release is first of all compared to the 145, overall we saw lower rate of diarrhea. First of all, the efficacy primary endpoint was met, and we’re very pleased with those data. As far as this tolerability profile we saw a lower rate of diarrhea, but more important, even the diarrhea that was reported tended to be a lot more mild than the 145 and we saw significant reduction in the discontinuation rate.

Okay. And when we will see the detail data report for 72 mcg?

With the emerging competition in the market, we’ve made a strategic decision not to unveil that until we’re ready to come to market.

Okay. So we’re not going to see any from a medical meeting in the near future, just wanted to confirm that.

No.

Got you. And so my last question on the competitive front. I Synergy launches their drug at some reasonable discount to LINZESS; I’m just curious what your thought process on the competitive dynamic? Do you think you’ll maintain your price, would your price to 72 mcg cheaper just to address the diarrhea market? If you have any thoughts on that topic?

First of all, let’s go back to the top-line and that is overall linaclotide is performing extremely well in the marketplace. Physicians again report that they’re very satisfied with the clinical performance of the drug. There are a portion of patients who do encounter some diarrhea, but we’ve seeing the drug performed very similar to what we saw in the clinical trials in which there is a relatively low discontinuation rate due to diarrhea. So as we think about 2017 and emerging competitors, we’re going to be in a situation we’re clearly the market leader. We’ll be indicated for both IBS and chronic competition with what we believe will have three doses which will enable the doc to titrate for almost any kind of patient. So we like that position in the marketplace. In addition, we’ve established a very strong foothold in the payer, and we are continuing to strengthen that over time. And obviously we will continue to focus on broad access to patients, based on a very strong value proposition to the payer. So I think we like where we are, we like where we are going, we think we’ll be well positioned as the emerging competitors that to the market.

And our next question or comment comes from the line of Catherine Hu with Bank of America. Your line is now open.

The first one is that the colonic release formulation. I just starting to it, how are you looking at these versus the approved 290 microgram dose in terms of -- are you looking for [indiscernible], superiority, and then what is the rationale behind the 30 microgram doses at significantly lower? Do you have any preclinical data just show that will be sufficient? And another topic. I’m not sure how much you could comment on this, but can you broadly talk about impact on your Allergan partnership with potential further Pfizer-Allergan deals? Thank you.

Mark can you take the first question on colonic release?

Sure. So the study is really setup to really teach us about how the drug can potentially work when it is delivered into the colon. We’re very focused on trying to have a drug that had even greater pain relief so the comparison will be with the 290 microgram, with the various doses of the related release that you cite would go down the 30 and we move up to 290. And the purpose again is to try to tease out where do we have maximum pain relief and whether it's an affect that we’re having on bowel movement. So for IBS-C patients, of course they still want to relief and have the bowel movement relief and so that's why we think DR01 [ph], it would will be the preferred for those patient, but our goal is to have a superior pain relief versus the current treatment. And then second DR02, that really to drive -- just see if we can achieve a lowering of pain and a clear pain relief in patients that don't have constipation, so that we can broaden our potential product offering into IBS-M patients and patients with ulcerative colitis that suffer pain. Now we think there is two very exciting opportunities there. And again we’re going down the 30 microgram, because it really -- because you don't get circulating levels of the drug. It’s minimally absorbed. We really need to tease out exactly what amount we’re getting into the colon and there is no way do that without -- in the current dose. If taken acutely, it’s released in the stomach and then slowly breaks down. So we don't know the exact amount that gets into the colon. But we’re going from a dose that we think could be very low, the 30 microgram all the way up to 290, and then diving into how much pain relief can we maximize.

And Catherine, this is Peter. I can take the second question on Pfizer and Allergan. Obviously, we can’t speculate beyond what’s been in the press in the last couple of weeks. But I would say a couple of things. First, we have a very strong collaboration across all functions with Allergan and we are involved everywhere. We need to be in terms of the development, manufacture, regulatory, commercialization of the drug, and I would say the partnership execution really is the best it’s ever been. Since we established the partnership back in 2007. Obviously there continue to be a lot of changes in the industry over time, and you have seen with our partner over the last three or four years. For us LINZESS is our flagship product, and it’s going to be a big source of value for our Ironwood shareholders until at least 2031 and we expect beyond that, and that's really a key reason we structured the deal the way we did back in 2007, as a 50-50 partnership of equals where we knew we’d be involved and could help shepherd the drug through any time of turbulence like this. I would say also, certainly in the near term LINZESS and the GI franchise more broadly are obviously very key growth drivers for Allergan, and that's only strengthening with VIBERZI launching at the end of November, which we’re involved with as a co-promote partner. As you know we have the 72 microgram sNDA going in shortly and launching in early ‘17 and the colonic release Phase IIb program ongoing and launch to come in the not too distant future. So I think we’re very likely boats ourselves and Allergan or if it ends up being a different corporate name to be very focused on growing out the LINZESS franchise and staying focused on the GI business for many years to come. I think we feel quite good about it.

And our next question comes from the line of Jason Gerberry with Leerink Partners. Your line is now open.

First one Mark, I wasn’t sure if I understood you correctly, but as you think about IW-3718 for refractory GERD, did you specify the trial design, will it be all comers or will you focus on the subset that showed the better result, the patients with higher bile acids levels that you prescreened as a subset in the Phase 2a? And then my second question just thinking about emerging competitors in the marketplace, I was just kind of curious, if you guys were to have launch LINZESS on your own with the 150 reps or so you guys have how much of the market could reach, just sort of wondering how smaller player if they don’t have a large commercial partner with primary care presence. How much in reach issue would they face?

So thanks David, I’ll take the first question. So Tom will take the second question. So relative to moving forward now into the 2b. What we really now focus on because of all the analysis we’ve done is enrolling patients that have either [indiscernible] or clearly demonstrated acids reflux. So we’re not focusing only on the bile acid reflux and we think that’s an important differentiation and that we certainly we’ll continue to characterize those patients, but it’s really a broader representation of the refractory GERD market based on what our interpretation of the data in the analysis that we’ve done.

Well bile acids reflux be a perspective subset though in that study?

They will

Okay.

And I’ll take the second half of the question. I think about coming to market there are three key forces that are driving the growth for their brand. First of all, it certainly position adoption. As I mentioned we’ve had, we’re over a 150,000 docs that have chosen LINZESS for their patients. And the overall plan out of the gate was to make sure that we had a broad footprint out there to make sure positions were comfortable to profile and to receive these patients and choose LINZESS. So we initially focused on about 89,000 docs together with our partner Allergan. And it was absolutely critical that these physicians are well inform and confident so right the drug. Second piece is certainly the direct-to-consumer effort. So once we felt solid about the overall awareness of the product and they comfort with the prescriber. Then we really started more aggressively or more comprehensively communicating with patients to encourage them to go talk to the doctors about her disease and about LINZESS, which obviously had a significant inflection with regard to the [indiscernible] grow. And the third piece is really around the payer and we have a partner that absolutely has a terrific account management team, who has been able to establish a payer access level that is among the best in the industry. So when you think about a small player like we would have done on our own. It would have been really challenging to be able to have the success that we’re experiencing right now in the marketplace. And as we look for the future, we’re only going to feel that at a higher level. So we like what we’re add, we’re like what Mark and the team are doing as far as raise the bar and expand in the clinical utility and this isn’t just about one product, this is about a platform that we think we’re going to build off and grow off for years to come.

Great. Thank you.

And our next question or comment comes from the line of Gary Nachman with Goldman Sachs. Your line is now open.

Okay. Tom, have you now again started planning for the LINZESS promotional spend in 2016. Do you think the budget will be similar to 2015 and would you expect to continue to same level of the DTC? And then how are you be structuring VIBERZI into the sales call, what level of detailing for your reps will it have compared to LINZESS and Cologuard?

Thanks a lot. We are accessing the final pro is a finalizing the commercial plan for next year with Allergan. I think as I mentioned before, we have been able to establish a very favorable market dynamic in which we have physicians, broadening their view of the appropriate patient and willing this on our patient request. And we’ve continued to expand our payer access and eliminate that as a barrier. I think the most encouraging piece is our ability to connect and educate and motivate the patient to go and talk to the doc, which is what’s going to drive ongoing growth. And we’re just getting right into evolve our consumer campaign to a really exciting level with a new concept with a very strong message specifically targeting and encouraging patient that specifically asked for the drug, knowing that we can pull through the drug. And I think the level investment will be roughly comparable to what we saw in the past year as well as overall spend, I think the marketing mix will evolve overtime. So I think we like where we’re at, again we like what we’re going and we have a perfectly aligned partner which results in a very good place. As far as VIBERZI, I mean we are extremely excited about VIBERZI for a couple of reasons. One you’re talking about basically doubling the investment in the marketplace as far as increasing awareness of the need for effective therapy for abdominal pain and bowel dysfunction and these are perfectly synergistic products, covering a broad spectrum of patients and we’ve [indiscernible] or referring to as a galvanized call, which really is focusing on treating a broader population of IBS, targeting the underlying pathology and fitting these two products side-by-side in the bay and whether we lead with VIBERZI and finish with LINZESS or lead with LINZESS and finish with VIBERZI is one cohesive call and we just left the managers meeting last week and we’re getting ready for the launch meeting and the managers absolutely got it. So we really are excited about the execution in the field level, what we’re going to be doing around medical education an overall disease as well as product awareness across the brand. I think this is going to be a very, very exciting time for both organizations.

And Gary I just want to make sure there is no ambiguity on one point, when Tom talk about doubling the investment, he is talking about Allergan doubling their investment that's -- VIBERZI is a 100% efficient to us with no additional investment on our part, on any of that marketing or selling expense. So you should expect to see a LINZESS marketing and selling expense, in the same rough ballpark as this year and last year and no additional colors on our books for VIBERZI.

Okay. That's helpful and then one quick follow-up for Mark. What’s the timeline for opioid-induced constipation, if the Phase II data are positive, we’re going to see those soon, and what are the criteria to determine if you would actually move into phase III, when do you think we would know that?

Yes, so as you indicate, we are coming in towards the end of the year, and we expect data before the end of the year, we certainly think that we’ll do a full analysis, I think our OIC, we really need to understand competitive position based on the data, how it fits with the competition and that we’re again, I think Tom might want to comment of before we would move on and it got to fit with what we’ve think the real competitive situation would be.

Yes I think about it, in kind of three pieces here, one of which is how big is this market real and I think the recent entrance into the market are going to help and form, how promotional response of the market and how big is the market or how big could the market get. So I think we want to really understand the market opportunity. Second piece really is, how differentiated and how strong is a profile and it is a differentiated products, or comparable product or can we identified a differentiator with this platform and I think certainly the third piece is as we think about how we could position the product in the market, what kind of investment will be quite to really get this up and running, I mean the great news is we could easily folded in to our current commercial strategy and drive growth, but I think it’s really going to come down to the first two, which is, is this market real, is it going grow and two, do we think we have a competitive product.

And our next question are comes from the line of Mark Goodman with UBS. Your line is now open.

Hi this is Ami Fadia on behalf of Mark. Just following up on the linaclotide question on OIC, when the data comes out, what are we looking for and just going in, what do you see as the potential differentiating factor of this product relative to competition? Then I have another question.

Sure. So I think the first step is just to look at how much of a change from baseline do you see in the bowel movement number, so that’s kind of the early bar, what is that to look at, I think some of the things we know about the differentiating factors relative for a linaclotide in chronic constipation in IBS-C, so far we’ve seen great efficacy and we’ve seen really safety with the molecule. So that’s kind of where we always start from and when linaclotide been so consistent with those aspect in the --.

Yes, I think the other piece, we want to make sure, we have a very competitive profile. The other piece is we really want to understand, is the impact of patients that has preexisting constipation which is a large portion of these patients who are all excluded from other studies in patient that were treated for opioid-induced constipation, which could be a significant differentiator for linaclotide in its overall population that we would manage. But I think we want to make darn sure we have a competitive profile on its own and OIC and I think we will work with Mark and his team to really understand what impact does the preexisting constipation they have on clinical outcomes.

Could you remind us what was the composition of patients in the study, was it all in between pre-existing versus opioid-induced constipation?

Yes, no they are all opioid-induced constipation.

Yes all opioid-induced constipation okay.

Yes.

All right the second question was on the marketing and sales spending for LINZESS. It looks like you might be running towards the low end of the guidance range, is there any sort of wearability we’re expecting going into the fourth quarter or is there any step-up and expense that we expect in the fourth quarter?

No I think, you’ve got your figure on very closely. I think we are probably running on the lower end of the guidance that we give previously and we don’t see any dramatic change in the fourth quarter.

Got it. And may be one another question if I can squeeze it in. What did you get quarter from exact sign?

Hi Ami, this is Tom Graney. We got approximately $2 million in collaboration revenue from exact.

Got it. Okay. Thank you.

Our next question or comment comes from the line of Matthew Harrison with Morgan Stanley. Your line is now open.

Yes, thanks. This is Vikram [ph] on Matthew. So we had a couple of questions. First one picking up on the 3718 program. I know you mentioned that trials set to initiate in early 2016. Would you have any expectations around when data might be available?

No we haven’t actually detail that yet, obviously we’ll need to get in and start to get some experience on the rate of enrollment before we will do that.

Understood. And then as a follow-up to the Allergan discussion. Do you have any expectations or any thoughts you could share about how the recent Allergan repurchase of assets, excuse me might change your sales ramp going forward?

I guess, I’m not sure, I understand the question.

Could you ask that again, we’re all confused.

So the question is given the recent Allergan repurchased from Almirall. How do you think that’s going to impact sales going forward, if you have any thoughts around that?

Yes. So I think we’ve all recognize that this is a very challenging marketplace right now. However as we look to the future and having such a strong partner with Allergan both with regards to their commercial expertise, but also their footprint across Europe. I think in the longer term we’re very encourage by what we think the upside opportunity to be. But we’re going to work side-by-side with them and figure it out. There is no question, there is millions of patients that are suffering and in need of more effective therapy and we’re going to do our best to get it to them.

Okay. And then one last question if I could. So I know you mentioned that the Phase 1 studies announced this morning. [Indiscernible] there is to inform the Phase 2 program obviously. But could you share any more detail about what we’re looking for or what you might be looking for specifically in terms of the data readouts in the first and second half of 2016?

Yes. So obviously a very exciting area, we seen a lot of movement obviously, we’re moving on a molecule forward, we’ll get data from some of the competitor study coming up. So a key time for as -- we’re very focused on moving group a1 in both the 1a and 1b with 1973 and getting through to 1a and 1701 as quickly as possible. So that we can start to think and move forward into proof-of-concept studies and patients in 2016. If you look at the thing we’re hoping to get from the 1a and 1b studies, it’s around the biomarker demonstrating that we’re having proof of mechanisms with our compound. We’ve already shown that for 1973, in the single dose study we’ll certainly look to reproduce that in 1b study. And also looking at key pharma go dynamic markers around really demonstrating the drug working on the cardiovascular system. And then the third would be looking at the distribution in the molecule for the volume of distribution. We think that’s one of our key differentiator for this class to molecule that get out to the tissues and actually you can get to the side pass the vasculature to control thing such as the fibroblast proliferation and also protect the tissue in [indiscernible]. So exciting time with sGC. Mark mentioned it’s a very exciting area. One of the opportunities we have is to learned not only from our own molecular but from what’s going on in this space more broadly, there will be some interesting data next week on sGC compound in reduced inject infection heart failure from there. And there will be data over the next six or eight months in a number of different indications both with sGC stimulators and with PDE-5 inhibitors which work in a different place in the pathway, but are relevant. And a range of indications for a muscular dystrophy to cystic fibrosis and other indication. So we’re very excited to see the performance of our own molecules and to learn from what else is going on in the field.

Okay, thank you. And I’m not sure if there is time, but if there was time for one last question. Last one we had was around your expectations on China shifting gears a little bit. So I see that in your pipeline, you’ve mentioned that you’re looking at a file for the FDA approval and first quarter 2016. Do you have any preliminary thoughts on when market launch maybe achieved and beyond that what type of or what kind of market size do you expect for China broadly speaking if you have any thoughts on that?

Yes. So on the market launch in the approval. Again we just don’t know, we’re going to submit, we’re in discussion as we indicated there have been changes in the process that announced through those China, FDA. So we’ll again once we know more we certainly will share that information, but at this point, we really can’t give any guidance on when the approval would be.

I think all of us, I think across the industry are very, very optimistic with regard to what’s going to happen in China overtime as far as market potential which is the reason why everybody real wants to understand the market and be a part of the market and we’re fortunate enough to have with AstraZeneca probably the strongest partner in that arena, particularly when it comes to GI and how we’ve been able to successfully commercialize, certainly their PPIs across China. So again I think -- the opportunity is going to evolve overtime, I think we’re extremely well position with probably the best partner we could possibly choose to commercialize the product and I think depending on the past way based on the IDL and the review process. Obviously, we’re going to be looking to push that as fast as we possibly can because clearly the data was as you know very positive from the Phase III program in China.

Okay. Great thanks a lot.

[Operator Instructions] And our next question are coming comes from the line of Geoff Meacham with Barclays. Your line is now open.

Hi guys this is Carter on for Geoff. Thanks for taking the question. First is a follow-up on the sort of a lower pace of commercial spend in 3Q, is this -- speaking strictly on this, is this related to I think on the last call you mentioned potentially slower cadence of the DTC spend in the quarter and then ramping that up sort of as you got to the fall, is that still, I mean to that hold is that still the case, and have you sort of ramped with those activities?

Yes, this is Tom. You’re spot on, we did similar to what we’ve followed the strategy from last year, as the market slowdown, it just didn’t seem like a solid investment to invest a lot when the market is kind of slowing with the summer, so we pulled back on the investment over summer and we started increasing our investment in media for the fall and right now we’re seeing really nice activity both in regards the lead indicators as far as web traffic but also the lift that we are starting to see in new prescriptions and total prescriptions.

Great and then just a quick follow-up now. On the -- to just understand phase gates to filing the 72 microgram dose? Thank you.

I’m not quite sure I understand the phase gating?

Sure, what’s beyond, now that you have the data in hand sort of are there any other steps beyond sort of putting that into the filing?

Great, yes, I think it really now just bringing all the data together, a lot of work obviously to do that, we had the topline and now it’s much more detailed in bringing all that data together, so as we indicated we’ll be planning to get that submission in the first quarter.

And there is a big push on here.

Thank you.

And our next question are comes from the line of Anupam Rama with JP Morgan. Your line is now open.

Hey guys its Eric in for Anupam. Thanks for taking the question. Just quick pipeline question on 9179, just hoping if you could help understand how you are defining success in the Phase II first half in next year, what level of sincere improvement would you need to see to move forward that program and assuming you achieve that, how should we be thinking about next steps in development into a larger phase II, or advance to Phase III? Thanks.

Yes, thanks, so obviously this is a first attempt to look at our GCC active molecule in 9179 for gastroparesis, so the first study is an exploratory study we are looking broadly at the gastroparesis symptoms, the key symptoms of nausea, vomiting, bloating upper abdominal pain and early [indiscernible], So really it’s more at the stage let’s find out what the drug does to these symptoms, similar to this approach we took with IW-3718 when we did the refractory GERD. Advancing forward we really comes down to what impact we have on those symptom measure, they are very key for these patients and from really going across the symptom analysis without knowing exactly which symptom we might, or whether we work on potential all or none, we’ll wait until we see that data to decide whether we advance on into a Phase IIb study.

At this time, I’m showing no further questions. So with that said, I’ll turn the conference back over to CEO, Peter Hecht for closing remarks.

Thank you, Andrew and thank again to all of you for your time and attention. We’ll be around this evening and tomorrow, so reach out to Meredith if you like to follow-up after the call with any additional questions. Have a good evening.