Ironwood Pharmaceuticals is a bit of throwback in biotech. And this is the year the Cambridge, MA-based company (NASDAQ: IRWD) will find out if some old-school sensibility, combined with new technology, can still pay off.
While many of today’s biotechs aspire to become bite-size entities that are easily absorbed by Big Pharma acquirers, Ironwood has built its own sales force and staffed up to more than 500 people. While many others are focusing on drugs with sky-high prices for narrow patient populations, Ironwood and its partner Forest Laboratories (NYSE: FRX) are planning to spend as much as $300 million this year marketing a new pill for millions of people. While investors fixate on short-term earnings, Ironwood likes to talk about the potential of its golden goose all the way through the end of its patent life in 2026.
“We’ve always talked about two simple, but very hard objectives. We think we can create new medicines and get them to patients. We have one now and it’s pretty amazing,” says Ironwood CEO Peter Hecht. “And we always try to stay focused on generating great returns for our owners. If we can do those things, we’ll earn the right to keep doing it.”
The pressure is on this year for Ironwood to show that its long-term strategy is on the right track.
For those new to the story, Ironwood won FDA approval back in August for an oral capsule called linaclotide (Linzess). It’s a treatment for chronic constipation and irritable bowel syndrome with constipation in adults. Ironwood and Forest estimate there are 10 million adults in the U.S. who suffer from chronic abdominal pain and constipation and see a doctor about their symptoms at least three times a year. Patients with irritable bowel syndrome with constipation and chronic constipation can use laxatives, but they don’t tend to use them chronically, because they tend to make abdominal pain worse. Ironwood’s drug, importantly, has shown that it can both improve bowel movements and relieve abdominal pain.
While Ironwood and Forest essentially have this category to themselves, there is a precedent for it, Novartis’ tegaserod maleate (Zelnorm). That drug reached $561 million in peak sales in 2006, before it was pulled from the market in March 2007 because of cardiovascular risks. The Zelnorm story has long intrigued Ironwood’s investors, because that drug was ramping up with 35 percent annual growth, well on its way to being a blockbuster, even though it didn’t relieve gut pain like Ironwood’s drug has in clinical trials. (Ironwood has spent years trying to understand why its drug works against pain, and now believes it acts on pain fibers in the gut, and stops them from excessively firing, says Ironwood’s chief scientist, Mark Currie. For more on the scientific difference between the drugs, see this Ironwood profile from 2008.)
Given the opportunity in a wide-open field of primary care medicine, Ironwood and Forest are pulling out all the stops. Ironwood has hired 160 sales reps and Forest has deployed another 1,300 people who are charged with selling to a group of 85,000 high-prescribing primary care physicians and gastroenterologists. The marketing budget for the first year will be between $250 million and $300 million, split evenly between the companies, Ironwood commercial chief Tom McCourt said on a Jan. 15 conference call with investors.
It’s still too early to say how well Ironwood and Forest have done in the early days of this product rollout. But here are a few key events that have happened so far:
—The drug was formally introduced for sale in the U.S. on Dec. 17, and racked up $19.2 million in net sales in the final two weeks of the year. Some of the sales are attributed to inventory stockpiling at 44,000 pharmacies around the U.S., though, so that performance isn’t really an indicator yet of what patient demand will look like through the year.
—The price was set at $7.10 a day, or about … Next Page »
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