Ladies and gentlemen, thank you for standing by and welcome to the Ironwood Pharmaceuticals Fourth Quarter and Full Year 2020 Investor Update Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. . I would now like to hand the conference over to your speaker today, Meredith Kaya. Thank you, please go ahead.

Good morning and thanks for joining us for our fourth quarter and full year 2020 investor update. Our press release crossed the wire this afternoon and can be found on our website. 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 September 30, 2020 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 as a supplement to and not a substitute for or superior to GAAP measures. To the extent applicable, please refer to the tables at the end of our press release for reconciliations of these measures to the most directly comparable GAAP measures.

Thanks Meredith. Good morning everyone and thanks for joining us today. Let me begin by saying how proud I am of the entire Ironwood team who truly show their passion and commitment throughout 2020 to advance treatments for GI diseases and redefine the standard of care for GI patients. Their passion and mission driven approach is one of the things that has most inspired me during my time with Ironwood. As I shared last week, deciding to leave Ironwood wasn’t easy but the chance to pursue certain passions of mine is really the right decision for me personally and for my family. I am confident Ironwood will be in great hands with Tom as Interim CEO while the Board conducts its search. Tom has been an incredible colleague of mine for many years and a key member of the leadership team since joining Ironwood in 2009. In addition to his many accomplishments over the years, he led the successful launch and commercialization of LINZESS. Despite the challenges of COVID-19 pandemic over the last year, Ironwood’s business fundamentals and financials were strong. We believe the resilience and strength of LINZESS combined with the continued profit and cash generation of 2020 provides a solid foundation for the future. I'm confident Ironwood is well positioned to deliver value for patients and shareholders. Turning to our 2020 performance, we began 2020 focused on our three core priorities to drive LINZESS growth, advance our GI portfolio, and deliver sustainable profits. LINZESS continues to be this prescription market leader within its category, demonstrating exceptional growth in the brand's eighth year since launch. Additionally, Ironwood has now delivered its second consecutive year of profits and ended 2020 with over $360 million in cash, more than doubling our cash position from the end of 2019. Turning to our pipeline, the results from the 3718 and 7246 clinical programs were disappointing. These are two distinct programs that were being developed to treat high unmet medical needs and represented an opportunity to potentially have millions of patients. While these types of outcomes are not uncommon in drug development, they are certainly never easy, especially when they affect our own teammates, as these did with the recent workforce reduction. We're pleased -- we were pleased to receive the approval of linclotide sNDA for overall abdominal symptoms data in adults with IBS-C, as well as the progress of our ongoing pediatric studies. With several GI diseases in desperate need of new therapies, continued scientific progress within this category and our unique expertise and capabilities, the team is focused on finding and advancing innovative treatments for GI diseases. I'm proud of the strong foundation we've built together. All of you in Ironwood are true champions in the GI community and I'm privileged to have worked alongside you. I look forward to calling Ironwood as it seeks to drive continued success. With that, I'll turn it over to Tom. Tom.

Thanks, Mark and good morning everyone. I look forward to serving as the Interim CEO following Mark's transition as we build on the strong foundation we have in place. Our path forward strategy begins with maximizing LINZESS. We believe there's substantial opportunity for continued growth and are working closely with our partners to deploy innovative commercial strategies and enhancing the clinical profile through lifecycle management. Second, we're focused on building an innovative GI development portfolio by pursuing assets that target serious organic GI diseases. We maintain a disciplined approach to exploring and assessing potential new assets, including applying a focused set of criteria and a high bar for any potential deal that we may consider. We believe our new refreshed approach has the potential to drive our business further and faster and with the potential for providing great benefit to patients we can serve. And third, we seek to continue to take a thoughtful and disciplined approach to capital allocation in an effort to continue generating sustainable profits and cash flow. We're steadfast in our mission and importantly remain focused on our goals of driving value to shareholders by bringing important medicines to patients and building a growing and successful business. Now, let me turn to the commercial performance. In 2020 LINZESS showed incredible strength and resilience in the face of the pandemic, further strengthening its position as the number one prescribed medicine in the U.S. for the treatment of adults with IBS-C and chronic constipation. LINZESS prescription demand grew 8% in the fourth quarter and 9% for the full year 2020 year-over-year. This strong performance translated into full year U.S. net sales of 931 million, a remarkable achievement and we are seeing strong LINZESS demand growth continuing into the first quarter and while it's still early, we're very encouraged by the performance thus far. We believe LINZESS remains on track to exceed $1 billion in U.S. net sales with several additional opportunities to drive further growth. The brand hit all-time highs in New-to-Brand prescriptions in the second half of 2020, reinforcing that patients and healthcare practitioners continue choosing LINZESS for appropriate patients despite the pandemic related limitations. We also saw an increase in 90-Day prescriptions as a percent of our total business. In the fourth quarter, 90-Day prescription demand was 20% of our business versus 17% during the same time in 2019, meaning on average more total pills per prescription. The brand success to date in the U.S. has come through consistent and strong execution of the commercial strategy that's grounded in three core fundamentals, increasing awareness of LINZESS among physicians, motivating appropriate patients to seek care and request LINZESS, and securing broad peer access. Moving forward, we intend to continue to focus on these core fundamentals, but to execute in new ways.

Thanks, Tom and good morning everyone. I am pleased to be able to highlight our strong financial performance for 2020 and provide our 2021 financial guidance. Please refer to our press release for our detailed financial information. First, touching on our 2020 financial performance, Ironwood total revenues in the fourth quarter of 2020 were 117 million driven primarily by a 9% increase in U.S. collaboration revenue from LINZESS year-over-year and 390 million for the full year exceeding our 2020 revenue guidance. A reminder that 2019 revenues included 42 million in license and milestone payments and 49 million in sales of linaclotide API recorded in 2019. Beginning in 2020, we are no longer responsible for the supply of linaclotide API to our ex-U.S. partners. AbbVie sales during this past year reflected the remaining API shipments to Astellas and AstraZeneca for our amended agreements. Regarding LINZESS, U.S. net sales were up 16% in the fourth quarter and 10% for the full year 2020 year-over-year. I'd like to briefly comment on commercial margin in the fourth quarter as it was lower than we have seen in previous quarters. This decrease is due primarily to an adjustment to selling expenses recorded during the period. During the first three quarters of 2020, only costs associated with in-person details were included as part of the LINZESS U.S. brand collaboration. Since we weren't able to execute as many in-person details due to COVID-19 restrictions, we saw a significant improvement in commercial contribution during those periods. Further we and AbbVie determined to adjust the selling expenses COVID-19 pandemic. As such, full year 2020 expenses are similar to our investments in 2019 and the adjustment simply reflects timing across the quarters. Looking ahead to 2021 we expect the commercial investment behind LINZESS to be in line with our investment in 2020, and we continue to seek to expand margins through growing LINZESS net sales and disciplined investment behind the brand.

Thanks Gina. I will spend the last few minutes touching on the opportunities within the GI space and our own Ironwood 3300 program. We've been steadfast in our efforts to advance treatments for GI diseases and over the past two years, I am sorry, the over the past two years and the learnings we gained give us confidence in our fresh strategy to also explore earlier stage development opportunities in serious organic diseases. Through our recent assessment of the GI landscape we identified over 100 GI assets across more than 25 disease areas to fit our new focus strategy. Through these efforts we prioritized eight disease areas with high unmet need and where we believe we can have the most impact. These areas we're seeing a lot of progress in the understanding of the disease, the pathophysiology and the potential targets. For example, two of the disease areas we're looking at are pancreatitis and celiac disease. Pancreatitis is a significant medical need since unfortunately today patients are still treated with I.V. fluids and pain management with no approved therapies targeting the underlying pathology of their disease. Celiac disease, where the pathophysiology is very well defined and the mechanism is well understood and there are lots of opportunities to target new medications for patients suffering from this disease still has no medical therapies. While these are just two examples, clearly, there remains tremendous unmet need within GI. In conjunction with this strategy we're also advancing 3300, a GC-C Agonist being developed for the potential treatment of visceral pain conditions such as bladder pain syndrome and endometriosis. 3300 is a stable and potent GC-C. Agonist that provides a true opportunity to test the cross-talk hypothesis in humans. Cross-talk is a well-known biologic phenomenon where sensations or injury originating in one organ can cause altered sensation in a nearby organ because of overlapping nerve pathways. We believe this can result in enhanced pain perception affecting the bladder and reproductive organs in the pelvic area. We have strong preclinical data in a number of visceral pain models, including vaginal and bladder pain that suggests the potential for GC-C stimulation with 3300 to alleviate the visceral pain. We expect a similar IND application with the SFDA in the second half of 2021, putting us on track, if approved to initiate a Phase 1 clinical trial with 3300 in early 2022. We expect this trial will help us determine the asset’s potential for further clinical development. I will now turn it over to Mark for some closing comments before Q&A. Mark.

Sorry, I was on mute, apologies everyone. So thanks, Mike for catching that and thanks for the update on 3300. It's certainly an exciting opportunity for Ironwood. As you've heard from the team this morning, Ironwood has significant opportunity ahead to advance our vision of becoming the leading GI focused healthcare company in the U.S. and I want to thank the entire Ironwood team, for a tremendous effort in putting patients at the forefront of everything we do. Thanks again for joining us this morning. Operator, Megan, we can now open the line for Q&A.

. Our first question is from Martin Auster with Credit Suisse. Your line is open.

Hi Martin.

Hi everyone, this is Mark on for Martin. But thanks for taking my question. I guess two for me, I was wondering if you might be able to provide a little more clarity on your 2021 guidance and it looks like revenue guidance was roughly flat year-over-year, while you expect LINZESS net sales to grow 3% to 5%. Is that discrepancy due to higher at the Ironwood commercial cost or is there something else we need to consider and I guess are there any additional details you can provide on how we should think about these costs moving forward? And then the second question I have relates to, I believe generic Amitiza entered the market the other month. I'm just curious if you could kind of speak to what impact you have seen since it entered the market and has it resulted in any pressure on LINZESS pricing and if so, how does that impact on pricing compared to your expectations coming into the year?

So thanks for the questions, Mark. Gina, can you take the first one and Tom maybe you can pick up the question on Amitiza.

Sure.

Sure, I'm happy to. Thanks Mark. So if I understand correctly, I think you're asking about the decline in revenue despite the fact that -- decline in Ironwood revenue despite the fact that we're guiding to increase LINZESS’s revenues. So maybe just a quick reminder that the Ironwood revenue includes a bit more than the collaboration revenue that we recognized from the LINZESS collaboration with AbbVie. The other revenue, for instance, in 2020 included a small amount of API sales. We had just a wrap up of the API sales to Astellas and AstraZeneca in 2020 from the restructured arrangements in 2019. We actually had significant revenue in 2019 related to those agreements and then a small amount in 2020. That's done now. At this point, it's wrapped up and we're not expecting revenue to continue in 2020, that's one part of it. And the other part of it is related to the 10 million that I called out as part of the guidance. The 10 million is included in the overall Ironwood revenue and it's actually down a bit year-over-year or expected to be in 2021 versus 2020. And that is in part that we mentioned as well. In 2020, we received fixed payment plus royalties and in 2021, going forward, we're expecting to only receive royalties.

Got it.

Tom, go ahead.

So you're absolutely right, generic Amitiza as a single source, generic is now available. I think as far as its impact, it's been -- its market share has been eroding over time. Keep in mind, it was the market leader when we entered the market. And obviously really within the first 18 months, we were able to actually catch it and actually surpass it with regard to market share. And it's important to remember, these are very different molecules and the overall efficacy and tolerability looks quite different. The piece that has been driving LINZESS growth over time has been the high level treatment satisfaction, both on the part of the physician and the patient. As far as pricing pressure, yeah, I think it's important to remember we've been playing in a generic market since we launched with generic and so there's been multiple generic options available to patients. And I think it also is important to note that, the far majority of patients still continue to be treated by OTCs even though they're not satisfied. And that's really where our source of business comes from. We all anticipate further pricing pressure from a variety of areas, including the government. But, as we've mentioned before, this year we guided to a stable price which we realized next year. We did shore up a couple of contracts, so there will be some price erosion that Gina had mentioned. But I think the important thing, the most important thing is how healthy the brand is. And, when you look at its demand growth, it's ongoing demand growth and what we're seeing certainly as we finished last year and we're heading into this year, I think we're very confident in the ongoing viability of the brand in the marketplace.

Great, thanks for taking my question.

Your next question is from Eric Joseph with J.P. Morgan. Your line is open.

Hi, Eric.

Hi, good morning, thanks for taking the questions. I guess, one following up on what really -- I am just thinking potential transactions in the ?

Eric, could you repeat that question, I don't know about the others, but it broke up a little bit and it was hard to hear.

Stuart, can you hear me now? Sorry about that.

That's better, yeah, that's better.

Okay, yeah, just wondering if there's any further color on potential transactions that you're thinking about in the organic GI space, particularly around size of the deal and speed of development in a target asset, and whether the change in leadership will have any impact on timing? Thanks.

So, Tom why don't you take sort of how you're seeing sort of organic opportunities in GI and Gina certainly jump in with any thoughts you have as well? And Tom I think there is a question about the strategic direction at the end. Sorry Tom.

Sure. As Mark, as both Mark and Gina mentioned, we're really focusing on these serious organic diseases. We've identified a number of assets, as Mike mentioned, and most of these are held by fairly small companies with limited development expertise and essentially no commercial expertise. So obviously, we're really focusing on particularly assets that we can leverage our internal expertise to accelerate time to market. So we're really looking for an asset where there's clear incremental value to be created. So, we have a very high bar, we've looked at a number of assets today but, we will continue to strive to make sure that it is the right next move for us as far as where we're going. I mean, obviously, it is built and is very complementary to LINZESS with regard to the commercial model. But obviously, Mike and his team bring very deep scientific and medical expertise to make a good choice. And then obviously working with Gina’s corporate development team to make sure we get the right deal done.

Sure, thanks Tom. I mean, I might just continue to add, I don't expect it to impact -- the leadership change to impact our ability to be able to continue to execute, hopefully, our transactions this year. One, I guess, a lot of confidence in Tom especially working with him over these last seven years plus in addition to the fact, that Julie has stepped up and is giving us additional time as Executive Chair. So I think the combination has put us in great hands. I would also just remind you that, we just talked a little bit on the last question about that small amount of revenue and the fluctuations in API and royalties for instance, our milestone payment. But the core business is strong so the collaboration revenue related to LINZESS is incredibly strong and growing year-over-year and without fundamental for growing revenue of our core business and cash generation, it just positions us in a great place to be able to have the financial capacity to be able to not only afford the up-front related to our development stage asset, but also gives us the ability to continue to fund it through development. And guess the P&L space to maintain profitability at the same time.

Yeah, Eric, I just want to add one more thought about the readiness of the team to continue to execute. I don't think I've seen more ready to keep executing at a high level in the time I've spent. Whether you're talking about driving LINZESS growth, the team -- we've got a fantastic commercial team that Tom has built in strength and actually over the last year, it's executed extremely well. They've got new ideas. They're collaborating well and that's being driven. In the business development standpoint, we've got a fully aligned Board with a fully aligned management team. There are number of strengths in the team. We've got a clear set of targets that Mike and Tom have talked about and we've got the resources to focus on the people and the alignment to move fast on that. And the third is that look, you clearly saw the ability to sort of generate profit and cash in 2020 and that sort of execution and delivery focus is as high as ever. So it is really feeling great to keep executing. I don't think they're going to miss a beat. They might even step up the beat.

Okay, thanks for all the color there, appreciate that. Appreciate you taking the questions, I will move back to the line.

Our final question is from Boris Peaker with Cowen. Your line is open.

Good morning.

Hi Boris, how are you?

Can you talk about the trend in gross to net discounting and the outlook for that over the next several years?

Sure, let's -- I will ask Gina to maybe share her thoughts on that, and Tom may want to add some additional color to that, I'm sure do. Sorry Tina.

Yes, I'm happy to, especially since 2020 was certainly a great year and one we were quite pleased with. Tom mentioned we originally guided the price for the year, we actually did recognize price. If you think about the year-over-year growth in net sales, it wasn't just due to the strong demand, it was also price appreciation as well. That price appreciation was really due to thoughtful plan design changes that we implemented at the beginning of the year, the beginning of 2020 where, for instance, we were no longer exclusive on certain plans, but fortunate for us we didn't see a dip in demand because of those changes. We also had -- and that was the bulk of the change. We also had some small, I would say unfavorable -- small unfavorable adjustments in 2019 related to gross to net, typical adjustments from time to time. But because they weren't repeated in 2020, it did add to some price appreciation for the year. So then looking forward to 2021, we've obviously -- we've guided to mid-single-digit price erosion for the year. That is also due to contract changes that we are aware of. We continue to see pricing pressure, mainly due to some competitive pressures in addition to the fact that Amitiza is going generic. But, our strategy for demand growth hasn't changed. We continue to invest fully behind the brands, believe that it will continue for many years to come through demand. And at the same time we want to focus on broad payer access with an affordable copay, which for most of our patients is $30 or less. So in order to maintain that broad access, there are times year-over-year that we need to make changes to make sure that our patients can still access when that is at an affordable price. So that's the change this year. You have heard me say this before and that I wouldn't expect price appreciation as the norm. I personally am pleased with 2020, but I wouldn't expect it going forward. I do expect continued pressure, even pressure throughout 2021. We've guided to the mid-single-digit price erosion but, payers don't always wait till the contracts expire to knock on the door. So they are just continuing to monitor it and execute according to plan, right. Focus on demand growth and broad payer access at the same time.

Great. Go ahead.

Boris just one last thought. And this was really kind of an awakening for us this year. As you know the far majority of our major plans were preferred and restricted meaning, we're one of one. And we made a couple of decisions last year to forego the exclusivity and move to basically one or two or one or even a non-preferred position. Yet we continue -- in those plans we continue to drive growth like double-digit growth. So, I think it offers us some flexibility, knowing where we are with these plans as far as other options that they wouldn't have normally had. And I think it just speaks to how strong the brand is with regard to the preference that positions the payers. But I completely agree with Gina, as we move forward I think you have to anticipate some price erosion, year-on-year, which is a reason why we have to continue to drive demand.

Got you, that's very helpful. My second question is, I think not so long ago, we're talking about a previously prescription option becoming over the counter and how that was contributing to your price growth. Can you kind of -- is that still out there, is that still helping prescription growth and maybe provide any update on that altogether?

Sure. So I think -- I think specifically you're talking about the removal of generic peg from the prescription market, is that...

Yeah.

Yeah. So there's no question at the end of last year, we saw -- not last year but for 2019, we saw this removal and we saw a bolus, an influx of prescriptions. But I think the big thing that we saw was the dynamic change in the market because you've just eliminated the market leader. It's available by prescription. So if they're going to choose a prescription drug, we just eliminated an option and obviously that had a significant impact in people's choice to LINZESS because when patients are frustrated with OTC, the last thing they want is another OTC walking out the door. So, not only is LINZESS have a great clinical performance profile, a level of satisfaction, but now it's one of actually fewer options with the exception of the recent new entrants into the market, which really are not differentiated at all. And, I have struggled to gain share, as you know. So, we've continued to see LINZESS thrive. The far majority of the business is coming directly from the OTC market, which is where it needs to come from. And we're continuing to increase our overall market share in the marketplace. So I think it's this dynamic change of choice which has also helped fuel the growth of LINZESS.

Got you. Okay, great, thanks for the detailed answers to my questions.

Our final question is from Jacob Hughes with Wells Fargo Securities. Your line is open.

Hey guys, good morning.

Good morning.

Just a follow-up question on your guidance. If I just find your revenue guidance, I just take kind of the midpoint of your revenue guidance and take out the 10 million that you mentioned for other, it kind of implies collaboration revenues lattice are up modestly year-over-year. And I was just wondering, is that going to kind of a reduction on the commercial margin or higher investment or what was the explanation there? Thanks.

Gina, you want to take that.

Sure, of course. So one, we do expect LINZESS revenues to continue to grow. Over time we also expect margin to continue to expand over time, just through growing revenue, thoughtful investments. The investments have been -- we've been investing fully behind the brands. If you see -- if you take a look at the numbers this year, I think they are about $10 million last year-over-year. So I think, we can still fully invest behind the brand and make more thoughtful investments that are higher ROI as well. I would go back to thinking about it as we guided to growing LINZESS sales at 3% to 5% for the year, roughly same level on investment. And just remind you that obviously we get 50% of that increase, right.

Okay. Thank you.

Hopefully that's helpful.

We have no further questions at this time. I turn the call back to presenters for closing remarks.

Well, Tom I just want to -- and entire team again, I just want to thank all of you for great work in 2020. I want to wish you the best of luck Tom, as you move into the Interim CEO and of course, the whole team to continue their great work and success. As I said in my remarks, I am full confident of everything moving forward. And Tom if I give you a chance to have the last word as you're going to be taking over and moving into the Interim CEO role. Thanks a lot to all for over the last two years.

Sure, and Mark I know I speak on behalf of the Board and certainly the management team, it's been a terrific experience with you and we've learned a lot from your leadership. I mean, think about what we've achieved over the last couple of years in really rightsizing the company, getting it focused, making it more profitable. And I think you're leaving it in our hands in very good shape. As the Interim CEO coming in, and I couldn't be more excited about the opportunity here. I think everybody knows I'm a big believer in LINZESS. I think we have a long way to go with it, particularly with a healthy life cycle. And we have a great partner. I mean, AbbVie has turned out to be a tremendous partner and a new kabbalistic that help us think even broader about the brand both in terms of life cycle but also you know some of the innovation in the market -- in the commercial space which we've invested in virtual cellular type of model. The telemedicine area is very exciting particularly in this category for this brand and certainly we have a very strong expert team to move forward. So thank you for everything and I look forward to the upcoming year and making a very good decision with the board on the future CEO. Thank you.

Thanks operator, that’s it for us.

This concludes today's conference call. You may now disconnect.