Ironwood Bucks the Trends, Makes Big Bet on Drug For Millions
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 $220 a month if the patient takes it every day. The price is on the “lower end” when compared with other recently introduced primary care drugs, Hecht says. “At this price, we can assure broad and unrestricted access to patients, with a reasonable co-pay,” Hecht says. “We think we’ll benefit the most, and our shareholders will benefit the most, by helping the most patients.”
—Ironwood hired a chief commercial officer, Thomas McCourt, who led the commercial push for the Novartis predecessor drug for irritable bowel syndrome with constipation and chronic constipation. Most recently, McCourt led the U.S. brand team for Amgen’s osteoporosis drug denosumab.
—Ironwood raised $175 million in a debt financing, at 11 percent annual interest, to help propel the drug to a good start this year. Ironwood has to start paying the money back as soon as March 15, 2014, a little more than 15 months after it started selling the product.
—One of Ironwood and Forest’s key early actions has been to blanket the country with free samples of the drug, providing 300,000 “early access” kits that provide a 30-day supply of the drug, and some information for doctors and patients about the drug.
—Ironwood and Forest have been working on new marketing techniques to reach this large group of patients on the Internet. Instead of running mass-market TV commercials during the Super Bowl, they are taking a more targeted approach. This involves a search-engine optimization strategy that helps direct people to linaclotide information when they search on terms that boil down to ‘my gut hurts.’
“When you say direct-to-consumer ads, most people think of TV ads. We’re not doing TV ads at this time,” Hecht says. “The world had changed a lot since the last primary care drug launch. There’s this thing called the Internet, and people use it a lot.” He adds: “We’re doing a lot of work in the search area so that when people are out looking, they can find us.”
—Ironwood and Forest have been talking with payers to secure reimbursement for the drug with a minimum of hassles. A few payers have classified the drug as one for Tier 3 payment access, which puts patients on the hook for higher co-pays than Tier 2. Ironwood’s goal is to get its drug classified for unrestricted Tier 2 access with as many payers as possible, Hecht says.
Ironwood and Forest aren’t saying a whole lot more about the early days of the marketing push. While many primary care physicians are under immense time pressure, and often have little time for listening to sales reps, Hecht says the Ironwood sales force has gotten attention from its targeted physicians. Many of these physicians want to listen to the Ironwood pitch, he says, because they don’t already have good options for treating many of their patients. It helps that Ironwood has struck a co-promotion deal with AstraZeneca to help pitch esomeprazole (Nexium), the big-selling treatment for heartburn, which afflicts many of the same constipation patients Ironwood is aiming for.
Drugs for rare diseases often prove whether they are going to be hits within a couple of quarters on the market, but because of the nature of primary care marketing, it will probably take nine to 12 months to get an accurate sense of how the Ironwood drug is performing, Hecht says. By then, the first round of free samples will have run out, and data will exist on physician tendencies to write repeat prescriptions, and whether patients stay on the drug long-term and refill their orders.
Since this is Ironwood’s first attempt to switch from an R&D operation into a fully integrated company with a commercial product, it’s hard to overstate the importance of the marketing push to Ironwood’s future.
Mark Currie, the chief scientific officer, and his team have dreams of extending linaclotide into other painful conditions of the gut, including bloating associated with constipation, opioid-induced constipation, functional dyspepsia, and another type of irritable bowel syndrome that causes a mix of constipation of diarrhea. Functional dyspepsia, which causes pain in the upper gastrointestinal tract instead of the lower GI tract, is particularly attractive to Ironwood because it’s another primary care market with millions of patients who currently have no FDA-approved treatment options, Currie says.
If Ironwood is successful in the early days of selling linaclotide, then it’s bound to have resources to pursue a broad clinical development plan that tackles some, or all, of those conditions. If not, then it will probably have to rein in its ambitions, and keep its other molecules in the pipeline on tight budgets.
Ironwood and Forest know there are a lot of variables in this equation, enough that they making a public forecast about how much they’ll generate in 2013 sales. The companies have spent much of the last 18 months trying to understand who its target patients are, how they communicate, and what they want. It’s a challenge that’s both daunting and thrilling, to hear Hecht tell it.
“It’s a really exciting opportunity to build a new category of medicine. But it’s a primary care launch,” Hecht says. “It’s been a while since there’s been a great primary care launch.”