Ironwood Pharmaceuticals, Inc. (IRWD) Q2 2019 Earnings Report, Transcript and Summary

Good afternoon. My name is David, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ironwood Pharmaceuticals Second Quarter 2019 Investor Update Conference Call. [Operator Instructions] Meredith Kaya you may begin your conference.

Good afternoon, and thanks for joining us for our Second Quarter 2019 Investor Update. Our press release crossed the wire 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 March 31, 2019, 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. Also included are non-GAAP financial measures, which should be considered only a supplement to and not a substitute for or superior to GAAP measures. To the extent applicable, please refer to the table at the end of our press release for reconciliations of these measures to the most directly comparable GAAP measures. During this today's call, Mark Mallon will begin with an overview of the second quarter, Gina Consylman will discuss our second quarter financial results and Tom McCourt, will close by highlighting our commercial and pipeline progress, Mike Shetzline will also be available during the Q&A portion of the call. We'll 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 slides. With that, I will turn the call over to Mark.

Thanks, Meredith. Good afternoon, everyone, and thanks for joining us today. The second quarter marked the beginning of an exciting new chapter for Ironwood. As we began executing our vision to develop and commercialize medicines that make a difference for patients living with GI diseases. Following the completion of the separation of Cyclerion on April 1, we launched new Ironwood with three near term priorities; accelerate LINZESS growth, advance our late-stage GI pipeline and begin to deliver profits. We are off to a strong start in to achieving each of these priorities. LINZESS showed another quarter of double-digit prescription demand growth with near-term opportunities that we believe have the potential to continue driving growth going forward. Our pipeline assets 3718 and 7246 progress further into Phase 3 and Phase 2 clinical trials respectively and importantly we generated GAAP net income and positive adjusted EBITDA from continuing operations in the second quarter, our first quarter post-separation. I will touch on each of these briefly and then turn it over to the team to provide a bit more detail. LINZESS prescription demand grew 13% year-over-year resulting in a second quarter net sales of $196 million. This impressive growth was fueled by our ongoing branded prescription market leadership in this category. We and Allergan also recently reported positive top line data from our Phase 3b abdominal symptoms study with linaclotide in adult IBS-C patients. We believe these data will help to enable better communication between physicians and patients about the multiple symptoms associated with IBS-C and the symptom relief LINZESS can provide. We also further advanced both 7246 and 3718 in mid and late stage trials respectively during the second quarter. I'm impressed by the amount of innovation driving both of these products. 3718 is designed to sequester bile in the stomach by utilizing an innovative gastric retentive formulation, providing an opportunity to treat the symptoms exacerbated by bile and reflux disease. And 7246 through it’s innovative delayed release formulation is designed to provide significant abdominal pain relief delivered by linaclotide to more patients suffering from abdominal pain associated with certain GI diseases and is initially being explored in adults with IBS-D. Lastly and importantly, we are pleased to report that we delivered profitability in the second quarter, which we believe reflects the benefit of our focus strategy priorities and capital allocation. As I've said before, we are focused on identifying the best ways to deliver maximum value to our shareholders and we are exploring all potential options. I'm very proud of the progress we've made thus far, but we have a lot more to do. This includes continuing to find new opportunities to accelerate LINZESS growth, staying focused on advancing our pipeline as quickly as possible and importantly doing all of this while advancing our goal of delivering profits over time. With that, I will turn the call over to Gina to detail our strong financial results for the quarter. Gina?

Thanks Mark. I will spend the next few minutes highlighting our financial results. Specifically, I will touch on our financials post separation from Cyclerion, our transition to profitability this quarter and our full-year 2019 financial guidance. Please refer to our press release for the detailed financial information. First beginning in the second quarter and as we detailed in the press release, we have recorded historical Cyclerion related expenses and certain one-time separation related expenses as discontinued operations for periods prior to the separation. Note that discontinued operations exclude any allocation of corporate overhead expenses such as the cost of employees in G&A who went to Cyclerion and one-time separation costs that our Ironwood employee are infrastructure related as they are not directly attributable to Cyclerion, we did not recast any expenses related to the second quarter 2019 to discontinued operations as the separation was completed on April 1. Turning to our financial results, we recorded ironwood revenue of $102 million driven primarily by our share of LINZESS net profits and sales of API to our partner Astellas. LINZESS net sales were $196 million in the second quarter, with a commercial margin of 66% resulting in total collaboration revenue of $77 million. LINZESS prescription demand growth was partially offset by lower net price during the quarter. As a reminder when looking at the second quarter numbers, recall that Allergan is now truing up LINZESS growth in it estimates more frequently with actual payments made. The lower net price in the second quarter, was partially due to Allergan’s true-up this quarter. While we expect net price to fluctuate, we continue to expect total net price to decrease in the mid-to-high single-digit percent range for the full year 2019. Linaclotide API sales were $25 million in the second quarter. API sales are expected to fluctuate throughout the year, but we continue to anticipate API sale to be flat to down in 2019 compared to the $70 million we recorded in 2018. Looking ahead, we expect revenue from Astellas to be much lower in future years, particularly because Astellas has been purchasing significant levels of API from us in it's build-up to launch LINZESS in Japan. We are not providing any formal guidance at this time but expect revenues to come down significantly after 2019. Total operating expenses were $81 million for the quarter consisting of $43 million in SG&A expenses, $29 million in R&D expenses, $11 million in costs of goods sold, which is directly related to the purchase of API and $0.5 million in restructuring expenses. Also in connection with the lease amendment executed upon the separation from Cyclerion, Ironwood recorded a gain on lease modification of $3 million during the second quarter. As Mark highlighted earlier on the call, we are very proud to record profitability in our first quarter post-separation. GAAP net income in the second quarter was $12 million or $0.08 per share and non-GAAP net income was $16 million or $0.10 per share. To put this into context, during the second quarter of 2018, we recorded GAAP net loss of $49 million, a more than $50 million year-over-year difference. Additionally, in the second quarter of 2019, we recorded GAAP net income from continuing operations of $12 million and $26 million in adjusted EBITDA from continuing operations. We are on track to hit all of our previously announced 2019 guidance, including greater than $65 million in adjusted EBITDA from continuing operations expected for the full year 2019. Beginning to generate profits is an important milestone for Ironwood. One of the most important elements of our recent separation is the ability for Ironwood to become a profitable cash generating growth company. We are continuing to take steps to maintain and grow profits, generate positive cash flow and streamline our business. For example, these are all our recent decision to relocate our headquarters from Kendall Square to Downtown Boston, which we expect to be completed in the fourth quarter of this year. We believe our new headquarters will provide an inspiring work environment for our employees and help build an innovative and collaborative culture. Not only do we believe that this new space will be better sized to fit our current employee base. We also expect it to result in savings of more than $25 million in cash payments to our landlord over the following five years. We also intend to explore ways to strengthen our balance sheet such as the potential restructuring of some of our debt. With that, I will turn the call over to Tom, who will highlight some of the key commercial and clinical development updates.

Thanks Gina. Beginning with LINZESS, the second quarter saw another period of strong growth with total prescription demand up 13% year-over-year. This impressive growth was headlined by an all-time high in new-to-brand volume, up 11% in the second quarter compared to last year. We continue to see good growth in prescription demand aided by the withdrawal of generic-prescription MiraLAX late last year. As a result, patients are now seeking different prescription options and physicians are choosing LINZESS for more of their adult IBS-C and chronic constipation patients. Additionally, we launched our refresh, Yes LINZESS DTC campaign this spring, which is proving to be our most successful campaign today since the launch of the original campaign. LINZESS continues to demonstrate impressive growth supported by key commercial fundamentals including high patient and physician satisfaction, a strong clinical profile, broad payer access and a large population of patients who are highly symptomatic and dissatisfied with current treatment. Touching on payer access briefly, our investments in the payer access has always been core to our strategy for LINZESS and have enabled us to grow demand at double-digit rates every year since launch. We expect to continue to invest in payer access in the future and we are working closely with our partner to explore options to reduce price erosion beyond 2019. Another important milestone last quarter was our positive Phase 3b data on LINZESS. We and Allergan, were excited to report positive top line data from this trial, demonstrating that 290 microgram dose of LINZESS improved overall abdominal symptoms of bloating, pain and discomfort in adult IBS-C patients. We believe these results of the trial are important because IBS-C patients often describe these symptoms using constipation as a catchall for these symptoms that encompass abdominal pain, bloating and discomfort, which patients often report as their most problematic symptoms of the disease. All of this can lead to incomplete conversations between patients and physicians resulting in under treatment. We believe by educating patients and physicians on these data, it will enable a more effective communication between patients and physicians about IBS-C and further differentiates LINZESS and the role of LINZESS that it can play in treating patients that are suffering from the multiple symptoms of IBS-C. And within four weeks of reporting top line data, the Ironwood and Allergan sales specialists were trained on these new data and are now sharing the results of the trial with physicians. Lastly, before turning to the rest of the GI pipeline, a quick update related to LINZESS IP. As many of you know, the ANDA trial with Teva and Sandoz was originally scheduled to begin on June 17 last year. However, the trial was postponed due to one of the expert witnesses for Teva and Sandoz, no longer being available to testify in person because of a serious health issue. The trial for the ANDA lawsuit is now expected to begin on January 7, 2020 pending the court's approval. As you know, we have settled with three of the ANDA filers to-date. These settlements allow a generic version of LINZESS to be marketed in the U.S. beginning in 2030. We and our partner are confident in the strength of our IP and our extensive patent portfolio for linaclotide and continue to vigorously [ph] defend this franchise. Turning now to the pipeline. Our GI focus is having an immediate impact on our development efforts and evidenced by the pace of the enrollment of the Phase 2b clinical trial of 7246 for the treatment of pain related to IBS-C. And the increased interest in the potential of 3718 and the need for new treatments for persistent GERD. We expect to reach two critical data milestones next year for both 7246 and 3718. Starting with 7246, our recently initiated Phase 2b study is expected to enroll 368 patients who will be randomized across three doses or match placebo. The trial is enrolling well so far underscoring the high unmet medical need for effective pain relief in IBS-C and we continue to expect data in the second half of 2020. On 3718, our gastro-retentive of bile acid sequestrant for the potential treatment of persistent GERD. Our Phase 3 program continues to enroll and we also expect data of these trials in the second half of next year. The two Phase 3 trials are evaluating the safety and efficacy of 3718 on two of the most bothersome symptoms, regurgitation and heartburn. There has been a lot of excitement around the persistent GERD and 3718 over the past several months including high visibility at the recent Digestive Disease Week meeting, with physicians increasingly recognizing the potential benefit that we believe 3718 can bring to patients with persistent GERD. In summary, our GI pipeline candidates represent a significant opportunity to advance care for millions of patients living with highly bothersome GI disorders in areas of high unmet medical need. With that, I'll turn the call back over to Mark for some closing comments before we open the line for Q&A.

Thanks Tom. And as I said, Ironwood is at an exciting turning point in the company's history. And we are more committed than ever to deliver on our vision of becoming a leading GI focused business, bringing new medicines to patients in need. The second quarter was a significant first step in executing as new Ironwood has demonstrated by a strong LINZESS performance, continued progression of our pipeline and our transition to profitability. We believe we are well positioned to continue executing on our strategy and look forward to sharing our continued progress with you. With that, I'll turn the call over to the operator to begin Q&A.

Certainly. [Operator Instructions] Your first question comes from the Line of David Lebowitz with Morgan Stanley. Your line is open.

Thank you very much for taking my question. Given that the withdrawal of prescription MiraLAX is contributed to prescriptions. How long do you think it might take until this, I guess, bolus ultimately gets worked down and it gets to more, I guess, standard demand?

Thanks for your question, David. I'm going to ask Tom to take that on.

Thanks, David. This has been interesting. So just the majority of the volume is now out of the market but the striking thing we're seeing is this elimination of generic-prescription MiraLAX as an option for treatment. And what we've seen is in the areas where it eroded fastest, we're seeing our most rapid growth. So I don't think this is just the disruption and the lack of availability that these patients are up for grab. This is a significant change in the overall market dynamic where you're eliminating a prescription option. And what we're seeing is in those markets where we've seen more rapid erosion, we're seeing greater growth. So we've seen these been sustained for an extended period of time. And at this point, obviously our primary objective is certainly to drive demand and conversion of the OTC market.

Thank you for that. And on the true-ups with Allergan, you talked about mid to upper single-digit, I believe it was a price impact. Could you just run us through the, I guess, the frequency and the mechanics of how the true-up process, I guess, works going forward?

I'm going to ask Gina to take that, David. Thanks.

Sure. Thank you, David. Sure. So we did note that we had slightly more price erosion during the current quarter, but also continue to reiterate our guidance for the full year, which is the mid to high single-digit price erosion for 2019. As you recall, back in late 2018 we had a pretty sizable true-up related to brand reconciliation for several years at that time. We are also willing – we’re able to work with Allergan at the time for more frequent true-ups. Allergan started that in 2019, we saw true-up – actually small true-ups in Q1 and again in Q2. And the good news is that, they're committed to looking at the brand on a regular basis and everything that's known compared to their payments and their estimates has already been recorded for the year.

Thanks for taking my questions.

Thanks David. And I guess we can move on to the next person in the queue, Boris from Cowen.

Your next question comes from the line of Boris Peaker with Cowen. Your line is open.

Great. So a couple of questions. So maybe on the competitive landscape, are you seeing any competition at all from Bausch’s TRULANCE?

Okay. Tom, why don't you take that as well?

Thanks Boris. We're really not seeing much of a difference thus far. As you know, our position in the market is very strong and obviously we need to continue to stay focus on growing the market and capturing as many OTC patients as possible. But besides just the TRULANCE, which really hasn't made much of a move, even the addition of the new entrance of Motegrity, prucalopride, as well as Zelnorm. I mean, there's really not much movement. And I think it's largely because these are largely undifferentiated brands. And there's a lot – a much broader awareness of LINZESS. Patients are requesting it by name more frequently. And of course, the payer coverage and our ability to pull through the business, puts us at a huge advantage. So I think, for us, as we look at the current and emerging competitors, we need to continue to stay on the basics and continue to behave as a market leader.

Great. And my second question is on the ANDA lawsuits. I understand, obviously, you have three settlements that allow generic entrance in about a decade from now. I'm just curious what are the possible outcomes from these lawsuits? And yes, I'll just leave it there.

We don't – as you know, we don't comment on sort of ongoing litigation. I think as Tom highlighted, that we remain confident in our IP. We – I think we successful negotiation or conclusions with the three previous cases, and we will continue to defend as our IPs as we go forward. So I can't really say anything about the case.

Okay, great. Thank you for taking my questions.

Thanks.

Your next question comes from the line of Eric Joseph with JPMorgan. Your line is open.

Hey, guys. Thanks for taking the questions. First, I'm just kind of curious to know what some of the initial feedback has been like from docs on the Phase 3b abdominal symptoms claims data, sort of how are these data being communicated and whether we should ultimately anticipate a label update going forward that reflects the results? And secondly, I'm just curious to get your thoughts on whether there are any fundamental changes to the LINZESS collaboration agreement with Allergan as the consequence of the proposed acquisition? And whether there are any contingencies that would later prevent any restructuring of that relationship to occur? Thanks for taking the question.

So I think I'll ask Tom to take your first question regarding initial feedback on the abdominal symptom data. And maybe Mike, I think you had a question about plan submission – or label change, if you could take that. And then I'll finish up with the question – the agreement with Allergan and how does that change or not going to AbbVie deal.

So as far as abdominal symptom, yes, this is something, as you recall, we have been working on since we got the initial label. Because these symptoms are so identifiable to patients and actually more identifiable to the majority of the patients than even abdominal pain is. And what we saw in overall – over a number of market research studies, physicians willingness to prescribe to a broader set of patients. But I think the bigger drive is really getting the patient self-identify with their own symptoms and our ability to relief those symptom or LINZESS ability to relief those symptoms, that really we believe will activate more patients to raise their hand and specifically request LINZESS. As far as the plan forward with regard to promotion, we have – as I mentioned, we have trained the sales force, they are out educating the medical community. It's only been a couple of weeks, but the feedback we're getting from the field is very, very positive and it just strengthens the overall brand, it further differentiates the brand and it gives something – the sales force in something new and exciting on par with clinicians. Our plan forward with the consumer is to launch a updated consumer campaign that would encompass these symptoms later last year – later this year, and we do believe that it'll have a significant impact on patients self-identifying with the disease and taking action. And as far as our plans for the sNDA, I'll turn it over to Mike.

Okay, thanks Tom. As you may recall, the design of the Phase 3b study was actually done in collaboration with the FDA with the intent on having the ability to promote those claims. And the multicomponent primary endpoint was the key deliverable from that design. So we believe that the phase – the strong Phase 3b data does support the statistical significance as well as clinically meaningfulness of that data, and we are currently in plans for sNDA submission and we're working that out with our collaborators, Allergan.

Thanks Mike. And regarding the agreement with our partnership with Allergan and potentially in the future with AbbVie, if that transaction is closed. So first, I wanted to say that the team in Allergan continues to be a great partner and they're fully focused on making sure we're driving LINZESS together and launching the abdominal symptom claim data. And both of our teams have been through this before and so they've got quite a bit of experience of people focused during this period. The agreement itself does not change in the case of a change in holder, the agreement is in place and as it is. There is provisions if the partner was not able to provide the correct amount of commercial support and effort behind the brand and with company like AbbVie that's not a very likely scenario. But basically, the agreement and the way of working hopefully will continue going forward, it's been a very positive partnership.

Great, thanks for taking the question.

Your next question comes from the line of Irina Koffler with Mizuho. Your line is open.

Hi, thank you for taking my questions. Can you revisit your comments on the API sales and the fact that you expect them to significantly decline. Why wouldn't they eventually rebound as the company sells through the material that they stocked? And maybe just help us understand what you mean by significantly decline?

So thanks for your question, Irina. I'll let Gina make a couple of comments and then I'll add a couple of comments.

Sure. Thank you, Irina. Well, firstly, I just want to point out we are quite encouraged by the launch in Japan. Astellas has recently stated that the prescriptions of the number of physicians prescribing LINZESS has been increasing steadily. Especially since the launch of their second indication, which was the chronic constipation launch. Now with that said, it was a launch and as typical with many companies they build out their inventory in anticipation of that launch. But then once they become more familiar or longer in that launch history they can manage their inventory to a bit tighter level. So as a result, we do expect that beginning in 2020, that the inventory or the API sales to Astellas in Japan will be reduced significantly compared to the 2020 level. And just to reiterate, we are still considering or expecting API sales to be flat to down in 2019 compared to the $70 million we recorded in 2018.

Sorry, go ahead.

Yes, we haven't quantified it, Irina. We typically give our guidance for the calendar year, as you know, usually in our year-end investor update, which is typically held in February. But given that the significant reduction in the preliminary indication of where we are right now, we thought we would give the heads-up now, a bit earlier.

Okay. And then I just have one follow-up. Was there any LINZESS stocking in the quarter?

It was very minimal. It's so minimal, it wasn't worth mentioning year-over-year.

Okay, great. Thank you.

If I could just add additional point. So of course, we'll working with Astellas to continue the momentum, particularly with the addition of the second indication behind the brand and working to drive that sales as much as possible and for them to use up the API that's been purchased going forward. So they've been – it's been a good launch. But the reality is that the purchases they made we've got the inventories that leaves us to provide this guidance. So and we will – as we get more information, we'll keep you posted.

Your next question comes from the line of Ram Selvaraju with H.C. Wainwright. Your line is open.

Thanks very much for taking my questions. Firstly, I was wondering, if you could comment on the net price trends that you've been seeing and when you expect that to stabilize, if at all, in the foreseeable future?

Thanks for your question, Ram. I’m going to ask Gina to take that.

Sure. Thanks for the question. Well, just as a reminder, we have guided to mid to high single-digit price erosion in 2019. And over the past couple of calls, we have guided to that amount of price erosion really due to a few different things, including consolidation of the industry in prior years, some competition impacts and really a combination of the coverage gap change this year in addition to the mix of our patients where we've continued to see a lower mix of commercial that had a higher net price. And we have felt that those were really like a perfect storm for 2019, and that we are optimistic that we will be able to reduce the impact on net price erosion in 2020 and beyond. Now having said that, we are not providing formal guidance for 2020 and beyond, just the overall uncertainty in the market and typically, we provide our guidance later in the year. So with that, I did note that Q2 was a little bit lower than it has been in prior quarters and that was really only related to just some true-ups related to the brand.

Tom, you want to add?

Yes. I think the other thing to keep in mind is job number one for us was to establish broad payer access and reimbursement and a lot of the initial contracts that really fueled the early growth of the brand were exclusive arrangements, either one of one or one of two. And obviously, you're paying a premium for that position on the formulary. At this point in time, where we have such a strong market leadership position and a dominant place in the market, we'll be revisiting those contracts to see do we need to maintain that levels of exclusivity really plan by plan. In addition, we've initiated some pilots in value based contracting, both of which we think will ease some of the burden on the discounts and the pressure on price. So, I think, we're really, we have a number of levers here, we can pull moving forward, based on our current position and the momentum in the marketplace.

Okay. Thank you. That's very helpful. And also with respect to the MD-7246 clinical trial and IBS-D, can you comment on where enrollment currently stands at this juncture and when you expect to reach full enrollment?

Yes. Mike, why didn't you take that?

Yes, sure. So 7246 is being developed in a study with an IBS-D patients. And the design of that study is to really highlight the real clinical benefit we think patients will get from 7246 on the relief of abdominal pain. And that's distinct from what patients experience with LINZESS, where they get a secretory effect as well as a pain effect. So this novel formulation really gives us the opportunity to study pain in a broad spectrum of GI patients. The trial is currently enrolling, it's actually enrolling fairly well. We are still guiding to data in the second half of 2020 but we're committed to doing everything we can to bring this trial in earlier and we actually believe we can do that.

Okay. And then with respect to the commercialization effort slated to be undertaken in China, do you have any color right now on what the sales infrastructure might like that AstraZeneca is likely to use to support that product as and when it is commercialized in that territory?

So, I'll take that question on China. So AstraZeneca has a large GI sales team, currently actively promoting for GI products, as we speak, and hundreds of sales representatives, I don't think we'll comment on the specifics of how they allocate those resources, but, we're very confident that, the share of voice and effort behind the brand will be enough to make sure that it's very successful. One thing that the AstraZeneca does very well is that they first focus on getting the reimbursement. So, we, because of the timing of the approval, we missed the 2019 cycle. We're hopeful that we can get that, reimbursement, national reimbursement in 2020. And then you go through a process of getting each of the provinces to add the product into their reimbursement list. And typically what we do is then as those, as those provinces come on, you scale up the sales force effort. One of the great things of having a partner like AZ with such a large footprint is that they have the flexibility to bring on the resources at the right time to really maximize the growth of the brand, but also be efficient in using the resources. So, I think we're well positioned to have a great launch there, we’re still expecting to have that launch in the second half of this year, but also do it in a smart and efficient way.

Okay and then just one very quick philosophical question as it were for Gina perhaps. Wanted to know how you think about and prioritize the potential refinancing of the existing debt versus the possibility at some point down the road of entertaining the payment of a dividend.

Great question. So, I'm sure, one of our prior, key priorities that we have noted is that refinancing our debt and strengthening our balance sheet is one of those top priorities that we're focused on. I can tell you that I'm more focused on that right now than a dividend. And one of the reasons that we're focused on that is that, one we've noted it as a key priority and two with such a strong quarter with the adjusted EBITDA at $25 million, we’re quite optimistic in working with our financial advisors that we will be able to restructure that debt soon. Now regarding a dividend, a dividend versus a buyback, we are certainly expected to take a look at that. I can tell you that first we really want to make sure that we get to a place where we're generating sustainable cash flows in a meaningful way over a period of time. And once we get there, we will certainly take a look at and communicate our plans.

Thank you very much.

Your next question comes from the line of Tim Chiang with BTIG, your line is open.

Hi thanks. Mark, I just wanted to congratulate you on getting Ironwood to it’s first quarter of profitability. I know you guys had set this as a target and it’s great to see you guys execute on that target. So, my first question really is LINZESS and obviously you've now shown to, double-digit year-over-year growth. Now, how do you sort of look at LINZESS volume growth in the back half of 2019 and heading into 2020 sort of what are the polls and the pushes, over the next six to 12 months?

Thanks, Tim. So let me say it really that, thank you for your congratulations and that's really, that goes to the team that has done a really great job in the first half of this year. I think Tom can answer your question about the growth in – or how we see growth continuing to progress.

Thanks, actually delighted to share our thoughts. As you mentioned, the brand is really on a very, very strong momentum track. We've actually seen some acceleration in growth obviously part and due to the removal of a generic MiraLAX. But I guess the whole market dynamic is looking very favorable for the brand. I think, one of the things as we push forward, we're going to be looking very, very hard as we construct the brand plan for next year is we're also looking at what are the levers that are more sensitive to investment particularly around the consumer side, we think there's an opportunity to push possibly harder on the consumer side because we have such broad, broad awareness, broad access and certainly the willingness to honor our patient requests. So, we're actually running a series of actually heavy-up tests in the – with the launch of the new campaign here with abdominal symptoms. So really understand how we can not only maximize growth but optimize the overall brand performance. So, I think we're very bullish and very encouraged by what we're seeing. And obviously we're expecting good things to come.

Okay, great. And, I had a follow-up for Gina. Obviously you're benefiting from the spin-out of Cyclerion off the books, it's spinning to lower operating expenses, the numbers that you guys reported for R&D and SG&A are those sort of the run rates that you would expect going forward over the next several quarters.

Well, that's a good question. We haven't given quarterly guidance. But I do think that this is the first quarter that, you could use as an indication of our future run rate. It's a nice clean quarter with no discontinued operations for Cyclerion. And then I would just reiterate our full year guidance that we are committed to achieving the greater than $65 million in EBITDA guidance from continuing operations this year.

Maybe I can just add a couple of thoughts on that. From a sales and marketing standpoint, we strongly believe and I think are aligned with our partner Allergan that, this brand can continue to grow. And so I think we've got the right size sales effort behind it. We've got to continue to sustain a good promotional push. We've got a strong DTC presence and we expect to continue that and we'll look for opportunities. If they see opportunities to even do more, we will do that. But I think this, as I've said before, probably right at the right order of magnitude. In terms of R&D, you see we've got the full Phase 3 up and running now on 3718, and now the Phase 2 with 7246. So that's up and running. And those trials are going to continue certainly through the rest of this year and through, into 2019. So, I think you can kind of keep those factors in mind if you're trying to think about Ironwood going forward in the next couple of quarters but we're not providing additional guidance at this time.

Maybe just one last question. Obviously the commercial margin was pretty good. I mean I think it was comparable to what you guys report in the first quarter, with 66% to 67% is that sort of the range that you guys expect commercial margin to fall into, for the rest of the year as well.

I'll take that one. You're right. We provided approximately 66% this quarter and 66% for the year-to-date numbers as well. We had previously guided, that we could – thought we could achieve the 70% market margin. And we are still expecting that at some point, we would expect the 66% to continue to increase over time.

Okay, great. Thanks.

[Operator Instructions] Your next question comes from the line of David Maris with Wells Fargo, your line is open.

Hi. A few questions. Hi. Good afternoon. A few questions. First, just a follow-up on the restructuring of the debt, just to be clear at the current price, you wouldn't, you would not anticipate that this would entail equity or replacing debt with equity. The second is, I missed something in the prepared remarks early, you mentioned something about continuing to explore all strategic options. I just didn't know what that was referring to, if you could just restate that and are there any current suggestions from Sarissa that you're currently contemplating? And that's it. Thanks.

I’ll let Gina clarify and follow-up on the question around the debt restructuring and I'll take the other couple of questions.

Sure. Great. There are no, we have no plans to issue any equity at this time. And just to reiterate, we do expect that the cash that we expect to generate in future periods would be enough to fund our current operations. So, there the debt is focused solely on debt and no equity issuance.

So, in terms of the first question of what a little bit more and looking at all options at first I want to reiterate, our priorities are about driving LINZESS growth both for the organization and also for our use of capital, for maximizing, trying to accelerate the pipeline. And then taking steps, as we did with, for example, with moving the headquarters, to improve the profitability of the company. And also we are looking at what we can do to restructuring our debt. What I mean by saying all options is that, we continue to, think about the business, what's the right structure as an organization. We, get calls and ideas from a variety of sources as many companies do, which we consider, and we are also doing an active review about when we look longer term in the future ahead what's the right size for the company, what do we need to make sure that we're sustaining long-term growth? And are there any sort of structural changes that we need to make, haven’t commented more on specifically on that but I think, wanted to signal that, we don't take, we don't, we're not taking anything off the table in terms of actions that could maximize value for shareholders. And then your question about Sarissa, one of our shareholders, we don't, we have discussions with all of our shareholders on a regular basis, but we don't discuss those discussions. We listen and, certainly try to act on ideas that, make sense to build on in the work that we're doing that. But we do that for all of our shareholders and we don’t comment further on that.

Your next question comes from the line of Patrick Trucchio with Berenberg Capital, your line is open.

Thanks. Good afternoon. I've got a follow up on the AbbVie transaction. Assuming the deal closes in early 2020, are there any capabilities that you would gain from a transition to the collaboration with AbbVie that you don't have currently with Allergan? And do you anticipate the team that you've worked with historically at Allergan to remain consistent at AbbVie?

Okay. So, as I said earlier, I mean, so first of all our focus is continuing to work closely with the team at Allergan, great partnership we've had there and staying focused on seeing no disruption from a LINZESS perspective. Allergan has brought some really great capabilities and has worked well. But AbbVie, and AbbVie is a great company and I think they'll continue that. They do have strong capabilities in many areas certainly they've done a lot in consumer, inpatient support efforts and medical programs. So, I think they're going to continue the support for LINZESS, or we will assume, it's very early in the process, at this point to be talking about any of these points. So stay tuned. Right now, the focus is continuing to grow the brand with Allergan.

Just a quick one for Gina on the, move to the new headquarters. Can you quantify how much of the savings will result in, will be part of 2019 and is this included in your guidance for 2019?

The amount of the $25 million in cash savings over the next five years actually, will really begin in 2020 and that's because we're expecting to move in Q4 of this year.

Okay. Thanks very much.

There are no further questions at this time. I will turn the call back over to the presenters.

Okay. Thank you very much. Appreciate the help there from our operator. And I want to say everybody on the call thank you very much for joining the call today. The team here is available to answer any follow-up questions as always. So, please feel free to reach out to Meredith, to coordinate. And again, thanks for your time and interest. We're excited to keep driving forward and delivering value to our shareholders and patients. Have a great day everyone.

This concludes today's conference call, you may now disconnect.